What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-03-10 · 145 added, 180 removed, 288 unchanged (53% of the section changed)

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Total revenues for 2021 increased 19.6% to $2.2 billion from $1.9 billion in 2020.

Same-facility revenues for 2020 decreased 1.1% from 2019, with a 14.1% increase in revenue per case and a 13.3% 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 fourth quarter.

Same-facility revenue per case growth was driven by a favorable surgical case mix as we experienced a faster recovery of higher acuity cases as states began to re-open and allow for non-emergent procedures.

Days adjusted same-facility revenues for 2021 increased 18.1% from 2020, with a 0.5% increase in revenue per case and a 17.6% increase in same-facility cases.

Additionally, for 2021, Adjusted EBITDA increased 32.3% to $339.6 million compared to $256.6 million for 2020.

The increase in days adjusted same-facility revenues and Adjusted EBITDA is primarily attributable to the Company's recovery from the negative impacts of the COVID-19 pandemic that the Company began experiencing in the first quarter of 2020 and acquisitions completed in 2021 and 2020.

For 2021, the net loss attributable to common stockholders was $81.2 million compared to $155.6 million for 2020.

Additionally, for 2020, Adjusted EBITDA decreased 0.8% to $256.6 million compared to $258.6 million for 2019.

A reconciliation of non-GAAP financial measures appears below under "Certain Non-GAAP Measures."

We continue to focus on improving our same-facility performance, selectively acquiring established facilities and developing new facilities.

During the year ended December 31, 2020, we acquired a controlling interest in three surgical facilities, including a surgical hospital, a controlling interest in five surgical facilities in existing markets, that were merged into existing facilities and a physician practice for total aggregate consideration of $120.1 million, including cash consideration of $104.6 million, net of cash acquired, non-cash consideration of $8.7 million and contingent consideration of $0.7 million.

The non-cash consideration consisted of non-controlling interests in the Company's existing surgical facilities.

The cash consideration was funded through cash from operations, proceeds from our recent divestitures and other available resources.

During 2020, we sold our interests in three surgery centers, one of which was previously accounted for as an equity method investment, sold certain assets related to our anesthesia business, certain imaging assets and our optical products purchasing organization for combined net cash proceeds of $59.0 million.

Additionally, we closed our diagnostic laboratory in 2020.

During 2021, we acquired controlling interests in eight surgical facilities, including a surgical hospital, and two physician practices for aggregate cash consideration of $285.8 million, net of cash acquired.

Two of the surgical facilities were in existing markets and were merged into existing facilities.

The cash consideration was funded through available resources.

During 2021, we sold our interests in three surgery centers, one physician practice and certain other assets for combined net cash proceeds of $6.0 million.

We had cash and cash equivalents of $389.9 million and $203.0 million of borrowing capacity under our revolving credit facility at December 31, 2021.

Operating cash flows were $246.9 million in 2020, an increase of $117.4 million compared to the prior year, 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.

Net operating cash inflows, including operating cash flows less distributions to non-controlling interests, were $137.3 million for 2020.

Operating cash flows were $87.1 million in 2021, a decrease of $159.8 million compared to the prior year, primarily attributable to Medicare accelerated payments and other funds received under the CARES Act and actions taken to significantly reduce operating expenses and defer non-essential capital expenditures during 2020 and the repayment of Medicare accelerated payments in 2021.

Net operating cash outflows, including operating cash flows less distributions to non-controlling interests, were $43.9 million for 2021.

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 U.S.

The COVID-19 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.

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

We continue to take or support 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, surgical case volumes across most of our surgical facilities were significantly impacted in the second quarter of 2020.

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

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 improved in the second half of 2020 as states began to re-open and allow for non-emergent procedures.

Our 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, we 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.

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 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 year ended December 31, 2020, the Company received approximately $59 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 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 resulted in materially higher losses and material decreases in Adjusted EBITDA during 2020, and may potentially continue to do so for subsequent quarters.

Although we cannot provide any certainty regarding the length and severity of the impact of the COVID-19 pandemic, which is difficult to predict and is dependent on factors beyond our control, we saw improvement in surgical case volumes as states re-opened and allowed 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.

Executive Order

On July 9, 2021, President Biden issued an executive order that is intended to promote competition in the U.S.

Among other things, the executive order encourages the Federal Trade Commission (“FTC”) to ban or limit non-compete agreements, encourages the DOJ and the FTC to review and revise their merger guidelines to ensure that patients are not harmed by healthcare mergers, and instructs HHS to support existing price transparency rules and implement the legislation that was recently adopted to address surprise billing.

We cannot predict how, if at all, the various initiatives set forth in the executive order will be implemented by the regulatory agencies involved or the impact that the executive order will have on operations.

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

Patient service revenues consist of revenue from our Surgical Facility Services and Ancillary Services segments.

Specifically, patient service revenues include fees for surgical or diagnostic procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians.

Specifically, patient service revenues include fees for surgical or diagnostic

procedures performed at surgical facilities that we consolidate for financial reporting purposes, as well as for patient visits to our physician practices, anesthesia services, pharmacy services and diagnostic screens ordered by our physicians.

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 years ended December 31, 2020 and 2019, 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 revenues by service type as a percentage of total revenues:

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Ancillary services revenues 3.0 % 3.4 % 4.3 %

98.7 % 98.4 % 98.1 %

Total patient service revenues 98.7 % 98.7 % 98.4 %

Other service revenues 1.3 % 1.3 % 1.6 %

Optical services revenues 0.2 % 0.2 % 0.5 %

Other 1.1 % 1.4 % 1.4 %

1.3 % 1.6 % 1.9 %

Total revenues 100.0 % 100.0 % 100.0 %

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We believe this diversification helps to protect us from adverse pricing and utilization trends in any individual procedure type and results in greater consistency in our case volume.

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

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

Year Ended December 31,

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Segment Information

Our business is comprised of three segments:

(1) Surgical Facility Services, (2) Ancillary Services and (3) Optical Services.

Our business is currently comprised of two segments:

(1) Surgical Facility Services and (2) Ancillary Services.

On December 31, 2020, we sold the remaining assets of the Optical Services segment.

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Business-Operations included elsewhere in this Annual Report.

"All other" primarily consists of the Company's corporate general and administrative functions.

The "All other" line item below primarily consists of amounts attributable to the Company's corporate general and administrative functions.

The following tables present financial information for each reportable segment (in millions):

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Ancillary Services 47.5 35.0

Optical Services — 17.7

All other 517.3 415.8

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We recognize other service revenues in the period in which services are rendered.

There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to revenue recognition during the years ended December 31, 2021, 2020 and 2019.

Accounts Receivable

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Collection efforts include direct contact with insurance carriers or patients, written correspondence and the use of legal or collection agency assistance, as required.

Our days sales outstanding was 69 days for the year ended December 31, 2020 and 64 days for the year ended December 31, 2019.

Our average days sales outstanding was 67 and 69 days for the years ended December 31, 2021 and 2020, respectively.

We recognize that final reimbursement of outstanding accounts receivable is subject to final approval by each third-party payor.

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Because our services are primarily non-emergency, our surgical facilities have the ability to control these procedures.

There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to accounts receivable during the years ended December 31, 2021, 2020 and 2019.

We use the asset and liability method to account for income taxes.

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We recorded a valuation allowance against our deferred tax assets at December 31, 2021 and 2020 totaling $113.0 million and $91.1 million, respectively.

The valuation allowance has been established for certain deferred tax assets for which we believe it is more likely than not that the tax benefits will not be realized, which are primarily Section 163(j) interest carryforwards, certain state net operating losses and capital loss carryforwards.

If our expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets.

The valuation allowance has been established for certain deferred tax assets for which we believe it is more likely than not that the tax benefits will not be realized, which are primarily Section 163(j) interest carryforwards and certain state net operating losses and state credit carryforwards.

If our expectations for future operating results on a consolidated basis or at the state jurisdiction level

vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets.

Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs.

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As a result of the acquisition of NSH, approximately $24.7 million in NOL carryforwards are subject to an annual Section 382 base limitation of $2.8 million.

The Private Sale resulted in an ownership change as defined in Section 382.

The acquisition of shares of the Company by Bain Capital in 2017 to become the controlling stockholder resulted in an ownership change as defined in Section 382.

As a result, approximately $448.0 million in NOL carryforwards are subject to an annual Section 382 base limitation of $14.2 million.

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If our ability to utilize our NOLs to offset taxable income generated in the future is subject to this limitation, it could have an adverse effect on our business, prospects, results of operations and financial condition.

There were no material impacts on our financial condition or results of operations due to changes in assumptions or conditions related to income taxes during the years ended December 31, 2021, 2020 and 2019.

Impairment of Goodwill

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Our judgments regarding the existence of impairment indicators are based on market conditions and operational performance of each reporting unit.

During 2020, the Company had identified three reporting units, which include the following:

1) Surgical Facilities, 2) Ancillary Services, and 3) Alliance, which is a component of the Optical Services operating segment.

During 2021, the Company had identified two reporting units, which include the following:

1) Surgical Facilities and 2) Ancillary Services.

Prior to 2021, the Company had a third reporting unit, Alliance, which was a component of the Optical Services operating segment.

The Company tests its goodwill and indefinite-lived intangible assets for impairment at least annually, as of October 1, or more frequently if certain indicators arise.

A detailed evaluation of potential impairment indicators was performed, which specifically considered the volatility observed in the prices of the Company’s outstanding debt securities and common stock, as well as the decline in surgical case volumes following the emergence of the COVID-19 pandemic, all of which improved in the second half of 2020 as states began to re-open and allow for non-emergent procedures.

On the basis of available evidence as of August 31, 2020, we identified indicators of impairment related to the Ancillary Services and Alliance reporting units, including the impacts of the COVID-19 pandemic and the closure of our diagnostic laboratory.

No indicators of impairment were identified for the Surgical Facilities reporting unit.

Based on the impairment indicators noted, we performed an impairment analysis for the Ancillary Services and Alliance reporting units as of August 31, 2020.

As of the August 31, 2020 valuation, the carrying value for both the Ancillary Services and Alliance reporting units exceeded the fair value, resulting in non-cash impairment charges of $28.6 million and $4.9 million, respectively.

As of October 1, 2020, prior to its annual impairment testing, the Company's three reporting units with allocated goodwill were as follows:

1) Surgical Facilities - $3.3 billion, 2) Ancillary Services - no remaining goodwill after the August 31 impairment discussed above, and 3) Alliance - $4.2 million.

As of the October 1, 2020 valuation, the fair value for the Surgical Facilities reporting unit was substantially in excess of its carrying value, and there were no additional indicators of impairment related to the other reporting units.

A detailed evaluation of potential impairment indicators was performed, which specifically considered the volatility observed in the prices of the Company’s outstanding debt securities and common stock, as well as the decline in surgical case volumes following the emergence of the COVID-19 pandemic, all of which improved in the second half of 2020 and throughout 2021 as states re-opened and allowed for non-emergent procedures.

As of October 1, 2021, all of the Company's goodwill was allocated to the Surgical Facilities reporting unit.

As of the October 1, 2021 valuation, the fair value for the Surgical Facilities reporting unit was substantially in excess of its carrying value.

Subsequent to the date of our annual impairment test, the Company considered its operating results for the fourth quarter of 2021, macroeconomic, industry and market conditions, and other market indicators including its market capitalization.

Based on its evaluation of all such factors, the Company concluded that an event had not occurred or circumstances had not changed that would more likely than not reduce the fair value of its reporting units below their carrying values.

On December 31, 2020, the Company disposed of the Alliance reporting unit with the sale of its optical products purchasing organization.

During the year ended December 31, 2019, as a result of its impairment testing, the Company recorded non-cash impairment charges of $2.5 million related to the Alliance reporting unit.

In 2021 there were no non-cash impairment charges.

During the year ended December 31, 2020, as a result of its impairment testing, the Company recorded non-cash impairment charges of $28.6 million and $4.9 million related to the Ancillary Services and Alliance reporting units, respectively.

During the year ended December 31, 2019, as a result of its impairment testing, the Company recorded non-cash impairment charges of $2.5 million related to the Alliance reporting unit.

"Goodwill and Intangible Assets" to the consolidated financial statements elsewhere in this Annual Report for additional disclosure related to goodwill.

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Income from equity investments (11.3) (10.8) (10.2)

Loss (gain) on disposals and deconsolidations, net 5.7 (4.4) 31.8

Loss (gain) on disposals, net 2.2 5.7 (4.4)

Transaction and integration costs 39.8 23.2 19.0

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Interest expense, net (221.0) (201.8) (178.9)

(Loss) income before income taxes (18.8) 54.6 (69.2)

Income tax (benefit) expense (20.1) 9.5 26.4

Net income (loss) 1.3 45.1 (95.6)

Income (loss) before income taxes 81.2 (18.8) 54.6

Income tax expense (benefit) 10.5 (20.1) 9.5

Net income 70.7 1.3 45.1

Net income attributable to non-controlling interests (141.6) (117.4) (119.9)

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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

During 2020, our revenues increased 1.6% to $1.9 billion from $1.8 billion in 2019.

We incurred net loss attributable to Surgery Partners, Inc.

in 2020 of $116.1 million, compared to net loss of $74.8 million in 2019, primarily attributable to the impairment charges taken during 2020 and the continued impact of the COVID-19 pandemic on surgical case volumes.

During 2021, our revenues increased 19.6% to $2.2 billion compared to $1.9 billion in 2020.

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

of $70.9 million in 2021, compared to $116.1 million in 2020.

The increase in revenues was primarily attributable to increases in surgical case volumes as the Company recovered from the COVID-19 pandemic that began in the first quarter of 2020 and acquisitions completed in 2021 and 2020.

Revenues for 2021 and 2020 were as follows (dollars in millions):

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Patient service revenues $ 2,195.0 $ 1,836.1

Optical service revenues 3.0 3.8

Other service revenues 30.1 24.0

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Patient service revenues increased 19.5% to $2.2 billion in 2021 compared to $1.8 billion in 2020.

The increase in patient service revenues was primarily attributable to a de novo hospital completed in 2019 and acquisitions completed in 2020 and 2019.

Same-facility revenues for 2020 decreased 1.1% from 2019, with a 14.1% increase in same-facility revenue per case, and a 13.3% decrease in the 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 higher acuity cases were some of the first to recover when elective procedures returned in the second quarter of 2020.

The increase was driven by a 17.6% increase in days adjusted same-facility case volume, a 0.5% increase in same-facility revenue per case and acquisitions completed in 2021 and 2020.

The increase in same-facility revenues was primarily driven by case count 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 $1.7 billion in 2021 compared to $1.5 billion in 2020.

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 was 79.6% and 76.9% for 2020 and 2019, respectively.

The increase as a percentage of revenues is primarily the result of the decreased revenues in 2020 driven by the decline in surgical case volume that began in mid-March due to the COVID-19 pandemic.

The increase was primarily driven by case count recovery from the impacts of the COVID-19 pandemic that the Company began experiencing in the first quarter of 2020 and acquisitions completed in 2021 and 2020.

As a percentage of revenues, cost of revenues was 77.9% and 79.6% for 2021 and 2020, respectively, as lower acuity procedures with lower cost of sales returned from COVID-19 pandemic-related lows experienced in 2020.

General and Administrative Expenses.

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As a percentage of revenues, general and administrative expenses were 4.7% in 2021 compared to 5.2% in 2020.

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.

as a percentage of revenues is primarily the result of increased revenues driven by the recovery in surgical case volume from the impacts of the COVID-19 pandemic that the Company began experiencing in the first quarter of 2020.

Depreciation and Amortization.

Depreciation and amortization was $98.8 million and $94.8 million in 2021 and 2020, 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.

The increase is primarily due to acquisitions completed in 2021 and 2020.

As a percentage of revenues, depreciation and amortization expenses were 4.4% in 2021 and 5.1% in 2020.

Income from Equity Investments.

Income from equity investments was $10.8 million and $10.2 million in 2020 and 2019, respectively.

As a percentage of revenues, income from equity investments was 0.6% for both 2020 and 2019.

Loss (gain) on Disposals and Deconsolidations, Net.

The net loss on disposals and deconsolidations was $5.7 million in 2020, including a $2.5 million net gain on the sale of three surgical facilities, certain assets related to its anesthesia business, certain imaging assets, its optical products purchasing organization and the closure of a diagnostic laboratory and $8.2 million primarily related to disposals of other long-lived assets.

The net gain on disposals and deconsolidations was $4.4 million in 2019, 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 $6.5 million of disposals of other long-lived assets.

Loss (gain) on Disposals, Net.

The net loss on disposals was $2.2 million in 2021, including a $4.0 million net gain on the sale of three surgery centers, a physician practice and certain other assets, offset by a net loss of $6.2 million related to disposals of other long-lived assets.

The net loss on disposals was $5.7 million in 2020, including a $2.5 million net gain on the sale of three surgical facilities, certain assets related to the Company's anesthesia business, certain imaging assets, the Company's optical products purchasing organization and the closure of a diagnostic laboratory, offset by a net loss of $8.2 million primarily related to disposals of other long-lived assets.

Transaction and Integration Costs.

We incurred $39.8 million of transaction and integration costs in 2021 compared to $23.2 million in 2020.

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.

The increase primarily relates to costs for ongoing development initiatives and the integration of acquisitions we completed in 2021 and 2020.

Impairment Charges.

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"Goodwill and Intangibles" to our consolidated financial statements included elsewhere in this report for further discussion.

In 2019 we recorded non-cash impairment charges of $2.5 million for goodwill assigned to the Alliance reporting unit and $5.4 million related to a management rights agreement intangible asset.

The impairment of the management rights agreement is related to our 2019 acquisition of a clinic that we previously managed.

As a result of the transaction, we determined the management rights agreement related to the acquired clinic no longer provided a future benefit.

We recognized $46.2 million in grant funds in 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.

There were no impairment charges in 2021.

During 2021, the Company received approximately $27.0 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 $37.9 million during 2021.

Grant funds recognized were $46.2 million in 2020.

For further discussion, see Note 1.

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

There were no grant funds received in 2019.

Loss on Debt Extinguishment.

In 2019, we incurred a debt extinguishment loss of $11.7 million in connection with issuance of the 2027 Unsecured Notes, effective April 11, 2019.

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.

Litigation Settlement.

We incurred a loss in the amount of $1.2 million and $0.2 million in 2020 and 2019, respectively, related to the potential resolution of the government investigation discussed in Note 14.

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

The net loss on debt extinguishment was $9.1 million for 2021.

"Long-Term Debt" to our consolidated financial statements included elsewhere in this report.

Interest Expense, Net.

Interest expense, net, was $221.0 million in 2021 compared to $201.8 million in 2020.

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.

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 9.9% in 2021 compared to 10.8% in 2020.

Income Tax (Benefit) Expense .

The income tax benefit was $20.1 million and income tax expense was $9.5 million in 2020 and 2019, respectively.

Income Tax Expense (Benefit) .

The income tax expense was $10.5 million and income tax benefit was $20.1 million in 2021 and 2020, respectively.

The effective tax rate was 12.9% for 2021 compared to 106.9% in 2020.

New reconciling items in the 2020 effective tax rate include (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;

The decrease from 2020 primarily relates to discrete items occurring in 2020.

In 2020, the Company's effective tax rate was impacted by (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;

(ii) the release of federal and state valuation allowances on the Company’s deferred tax assets related to debt financing costs as a result of the finalization of the Internal Revenue Code Section 163(j) interest regulations, for which the deductions of such debt financing costs that are incurred in years 2021 and forward are not considered interest expense for income tax purposes;

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

For 2021, the effective tax rate is primarily impacted by income tax benefits related to (i) the 2021 vesting of certain restricted stock awards, and (ii) certain 2021 entity divestitures.

Net Income Attributable to Non-Controlling Interests.

Net income attributable to non-controlling interests was $141.6 million and $117.4 million in 2021 and 2020, respectively.

As a percentage of revenues, net income attributable to non-controlling interests was 6.3% in the 2020 period and 6.5% for the 2019 period.

As a percentage of revenues, net income attributable to non-controlling interests was 6.4% in 2021 and 6.3% for 2020.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

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Cash flow provided by operating activities was $87.1 million and $246.9 million in 2021 and 2020, respectively.

The increase in operating cash flow in 2020 is primarily attributable to Medicare accelerated payments and other funds received under the CARES Act, discussed further below under the heading "Capital Resources," as well as actions taken to significantly reduce operating expenses and defer non-essential capital expenditures at the height of the crisis.

The decrease is primarily due to the final DOJ settlement payment in the second quarter of 2021, receipts of government grants and Medicare advance payments provided through the CARES Act, as well as actions taken

to significantly reduce cash operating expenses and defer non-essential expenditures during 2020 and the repayment of Medicare advance payments during 2021.

Investing Activities

Net cash used in investing activities in 2021 was $331.7 million, which included $57.6 million related to purchases of property and equipment.

We paid $285.8 million in cash for acquisitions (net of cash acquired) which included a controlling interest in eight surgical facilities, including a surgical hospital, and two physician practices.

Additionally, we received cash proceeds of $6.0 million related to the sale of interests in three surgery centers, a physician practice and certain other assets.

Further, we received cash proceeds of $5.4 million related to the sale of interests in a non-consolidated surgical facility accounted for as an equity method investment.

Net cash used in investing activities in 2020 was $88.4 million, which included $42.9 million related to purchases of property and equipment.

We paid $104.6 million in cash for acquisitions (net of cash acquired), which included a controlling interest in three surgical facilities, including a surgical hospital, a controlling interest in five surgical facilities in existing markets that were merged into existing facilities and a physician practice.

Additionally, we received cash proceeds of $58.5 million related to the sale of interests in three surgery centers, certain assets related to our anesthesia business, certain imaging assets and an optical products purchasing organization

Net cash used in investing activities in 2019 was $85.2 million, which included $73.6 million related to purchases of property and equipment.

We paid $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.

Financing Activities

Net cash provided by financing activities in 2021 was $316.3 million.

During the year, we made distributions to non-controlling interest holders of $109.6 million and payments related to ownership transactions with consolidated affiliates of $27.4 million.

During the year ended December 31, 2021, we made distributions to non-controlling interest holders of $131.0 million and payments related to ownership transactions with consolidated affiliates of $28.4 million.

Further, we made repayments on our long-term debt of $343.2 million and paid debt issuance costs of $11.7 million, which were partially offset by borrowings of $299.4 million.

We also received net proceeds of $554.2 million from two equity offerings during the year and paid a cash dividend of $5.1 million related to the Series A Preferred Stock.

On May 17, 2021, we issued 22.609 million shares of our common stock, $0.01 par value per share, to Bain Capital, as a result of the conversion of all outstanding shares of our Series A Preferred Stock at a conversion price of $19.00 per share.

As a result of such conversion, we currently have no shares of Series A Preferred Stock issued or outstanding.

Net cash provided by financing activities in 2020 was $66.7 million.

During the year ended December 31, 2020, we made distributions to non-controlling interest holders of $109.6 million and payments related to ownership transactions with consolidated affiliates of $27.4 million.

Further, we made repayments on our long-term debt of $216.3 million, which was offset by borrowings of $429.4 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 $8.5 million.

Net cash used in financing activities in 2019 was $135.9 million.

During this period, we made distributions to non-controlling interest holders of $121.2 million and payments related to ownership transactions with consolidated affiliates of $3.2 million.

Further, we made repayments on our long-term debt of $490.8 million, which was offset by borrowings of $506.9 million.

In connection with the issuance of the 2027 Unsecured Notes and redemption of the then existing 2021 Unsecured Notes, we paid debt issuance costs of $8.9 million and paid a redemption premium of $17.8 million.

Discussion of the operating, investing and financing activities for the year ended December 31, 2019 was previously disclosed beginning on page 49 in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed on March 10, 2021, under "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and is hereby incorporated herein by reference.

Long-Term Debt

As of December 31, 2020, the carrying value of our total indebtedness, including finance leases, was $2.857 billion, which includes unamortized fair value discount of $3.7 million and unamortized deferred financing costs of $16.3 million.

As of December 31, 2021, the carrying value of our total indebtedness was $2.939 billion, which includes unamortized fair value discount of $3.0 million and unamortized deferred financing costs and issuance discount of $16.5 million.

Term Loan and Revolving Credit Facility

As of December 31, 2021, we had term loan borrowings with a carrying value of $1.531 billion, consisting of outstanding aggregate principal of $1.534 billion and unamortized fair value discount of $3.0 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.

The Term Loan matures on August 31, 2026 (or, if at least $185 million of the Borrower’s 6.750% senior unsecured notes due 2025 shall have not either been repaid, repurchased or redeemed or refinanced with indebtedness having a maturity date not earlier than 91 days after August 31, 2026 by no later than April 1, 2025, then April 1, 2025) and amortizes in equal quarterly installments of 0.25% of the aggregate original principal amount.

We have a revolving credit facility providing for revolving borrowings of up to $210.0 million (the "Revolver" and, together with the Term Loan, the "Senior Secured Credit Facilities").

The Revolver will mature on August 31, 2022.

The Revolver will mature on February 1, 2026.

As of December 31, 2021, our availability on the Revolver was $203.0 million (including outstanding letters of credit of $7.0 million).

On January 27, 2021, the Company entered into an amendment to the Senior Secured Credit Facilities, which amended and

supplemented the credit agreement 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.

"Subsequent Events" to our consolidated financial statements included elsewhere in this Annual Report for a further discussion of the amendment.

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 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.

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.

The incremental term loans bear interest at a rate per annum equal to (x) LIBOR plus a margin of 8.00% per annum 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, (iii) one-month LIBOR plus 1.00% per annum and (iv) 2.00% per annum) plus a margin of 7.00% per annum.

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 was 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.

The Senior Secured Credit Facilities bear interest at a rate per annum equal to (x) LIBOR plus a margin of 3.75% per annum (LIBOR with respect to the Term Loan shall be subject to a floor of 0.75%) 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 (the alternate base rate with respect to the Term Loan shall be subject to a floor of 1.75%)) plus a margin of 2.75% per annum.

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

"Long-Term Debt" to our consolidated financial statements included elsewhere in this report for a further discussion of the Senior Secured Credit Facilities.

Senior Unsecured Notes

We have $545.0 million aggregate principal amount of senior unsecured notes due April 15, 2027 (the "2027 Unsecured Notes").

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.

We have $545.0 million aggregate principal amount of senior unsecured notes due April 15, 2027, which bear interest at the rate of 10.000% per year, payable semi-annually on April 15 and October 15 of each year.

We have $370.0 million aggregate principal amount of senior unsecured notes due July 1, 2025, which bear interest at the rate of 6.750% per year, payable semi-annually on January 1 and July 1 of each year.

"Long-Term Debt" to our 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").

The 2025 Unsecured Notes bear interest at the rate of 6.750% per year, payable semi-annually on January 1 and July 1 of each year.

We and certain of our subsidiaries have other debt consisting of outstanding bank indebtedness of $145.0 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 $364.6 million for which we are liable to various vendors for several property and equipment leases classified as finance leases.

Material Cash Requirements

The following table summarizes our material cash requirements by period as of December 31, 2021 (in millions):

Payments Due by Period

Total Less than 1 year 1-3 years 4-5 years More than 5 years

Long-term debt obligations, including interest (1)

$ 4,035.3 $ 244.1 $ 470.9 $ 2,214.9 $ 1,105.4

Operating lease obligations, including interest (2)

532.3 71.5 133.0 109.1 218.7

Tax receivable agreement (3)

22.0 20.2 1.8 — —

Total contractual obligations $ 4,589.6 $ 335.8 $ 605.7 $ 2,324.0 $ 1,324.1

(1) Included in long-term debt obligations are principal and interest owed on our outstanding debt obligations.

These amounts exclude our unamortized fair value adjustments related non-cash amortization for the Term Loan.

These obligations are explained further in Note 5.

"Long-Term Debt" to our consolidated financial statements included elsewhere in this Annual Report.

We used the applicable annual interest rate as of December 31, 2021 of 4.50%, based on LIBOR plus the applicable margin, for our $1.5 billion outstanding Term Loan to estimate interest payments on this variable rate debt instrument.

(2) This reflects our future operating lease payments.

We enter into operating leases in the normal course of business.

Substantially all of our operating lease agreements have fixed payment terms based on the passage of time.

Some lease agreements provide us with the option to renew the lease.

Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease agreements.

These obligations are explained further in Note 6.

"Leases" to our consolidated financial statements included elsewhere in this Annual Report.

Operating lease obligations do not include common area maintenance, insurance or tax payments for which we are also obligated to pay.

(3) This reflects payments made pursuant to the terms of the TRA, as described further in Note 14 to the consolidated financial statements included elsewhere in this report.

In addition to the cash requirements above, pursuant to the CARES Act, repayment of certain advanced payments and other deferrals received as part of relief during 2020 began in 2021.

We received approximately $120 million of accelerated payments during the year ended December 31, 2020.

During the year ended December 31, 2021, approximately $60 million was repaid.

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

In addition to the continued repayment of the advanced payments received under the CARES Act, we anticipate additional cash outflows during 2022 for the repayment of the remaining payroll taxes deferred in 2020 pursuant to the CARES Act (see Note 1.

"Organization and Summary of Accounting Policies" for further discussion of the amounts deferred and repayment terms).

Capital Resources

In addition to cash flows from operations, available cash and capacity on our Revolver, other sources of capital include funds we have received under the CARES Act as well as continued access to the capital markets.

In addition to cash flows from operations, available cash and capacity on our Revolver, other sources of capital available to the Company include funds received under the CARES Act and continued access to the capital markets.

As previously noted in Note 9.

"Earning Per Share" to our consolidated financial statements included elsewhere in this report, in 2021, we completed two public offerings pursuant to which the Company sold 15,525,000 shares of common stock, resulting in net proceeds of $554.2 million.

As noted in Note 1.

"Organization and Summary of Accounting Policies" to our consolidated financial statements included elsewhere in this report, as of December 31, 2020, we received relief via the CARES Act, including approximately $59 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.

As of December 31, 2020, approximately $95 million of accelerated payments are reflected as a component of Medicare accelerated payments and deferred governmental grants in the consolidated balance sheets while the remaining payments are included within other long-term liabilities.

Based on the repayment terms, we expect recoupment of these funds to begin in 2021 under the repayment framework more specifically described in Note 1.

"Organization and Summary of Accounting Policies."

Additionally, the CARES Act permitted the deferral of payment of the social security payroll tax between March 27, 2020 and December 31, 2020, with half of the deferred amount due December 2021 and the other half due December 2022.

As of December 31, 2020, we have deferred approximately $16.9 million.

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.

"Organization and Summary of Accounting Policies" to our consolidated financial statements included elsewhere in this report, the Company received approximately $27 million of the grant funds distributed under the CARES Act and other governmental assistance programs during the year ended December 31, 2021, 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.

Additionally, while we have received grants and accelerated payments under the CARES Act and other government assistance programs and may receive additional amounts in the future, there is no assurance regarding the extent to which anticipated negative impacts arising from the COVID-19 pandemic will be offset by amounts and benefits received under the CARES Act or future legislation.

Although we have seen continued improvement in surgical case volumes as states begin to re-open and allow for non-emergent procedures, broad economic factors resulting from the current COVID-19 pandemic, including increased unemployment rates and reduced consumer spending, could negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables.

Although we have seen continued improvement in surgical case volumes as states re-opened and allowed for non-emergent procedures, broad economic factors resulting from the current COVID-19 pandemic, including increased unemployment rates and reduced consumer spending, could negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables.

Business closings and layoffs in the areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of payors to pay for services as rendered.

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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) and long-term (beyond 12 months) liquidity needs.

Based on our current level of operations, we believe cash flows 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 Measures

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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 (loss) income before income taxes, adjusted for net income attributable to non-controlling interests, depreciation and amortization, net interest expense, equity-based compensation expense, transaction, integration and acquisition costs, impairment charges, net loss (gain) on disposals and deconsolidations, litigation settlements and other litigation costs, reserve adjustments, contingent acquisition compensation expense, gain on escrow release, loss on debt extinguishment and tax receivable agreement expense.

When we use “Adjusted EBITDA excluding grant funds,” we are referring to Adjusted EBITDA less the impact of grant funds.

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 (loss) income before income taxes, the most directly comparable GAAP financial measure (in millions and unaudited):

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

Year Ended December 31,

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Consolidated Statements of Operations Data:

(Loss) income before income taxes $ (18.8) $ 54.6 $ (69.2)

Income (loss) before income taxes $ 81.2 $ (18.8) $ 54.6

Plus (minus):

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Equity-based compensation expense 17.4 13.2 10.2

Transaction, integration and acquisition costs (1)

Transaction and integration related costs (1)

46.1 38.2 36.1

Impairment charges — 33.5 7.9

Loss (gain) on disposals and deconsolidations, net 5.7 (4.4) 31.8

Loss (gain) on disposals, net 2.2 5.7 (4.4)

Litigation settlement and other litigation costs (2)

Reserve adjustments (3)

Contingent acquisition compensation expense — — 1.5

Gain on escrow release (3)

Loss on debt extinguishment 9.1 — 11.7

Hurricane-related impacts (4)

Tax receivable agreement expense — — 2.4

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Impact of grant funds (5)

(25.3) (31.1) —

Adjusted EBITDA excluding grant funds $ 314.3 $ 225.5 $ 258.6

(1) For the year ended December 31, 2020, this amount includes transaction and integration costs of $23.2 million, of which $6.6 million were acquisition related costs, and includes start-up costs related to a de novo surgical hospital of $15.0 million.

For the year ended December 31, 2019, this amount includes transaction and integration costs of $19.0 million, and further includes other acquisition costs and start-up costs related to a de novo surgical hospital of $17.1 million.

For the year ended December 31, 2018, this amount includes transaction and integration costs of $31.7 million, and further includes other acquisition costs of $2.3 million.

(2) This amount includes litigation settlement costs of $1.2 million, $0.2 million and $46.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

This amount also includes other litigation costs of $5.2 million and $4.4 million for the years ended December 31, 2020 and 2019, respectively, with no comparable costs in 2018.

(3) This amount represents adjustments to revenue in order to apply consistent policies to businesses acquired by Surgery Partners in prior periods.

(1) For the year ended December 31, 2021, this amount includes transaction and integration costs of $39.8 million and start-up costs related to a de novo surgical hospital of $6.3 million.

For the year ended December 31, 2020, this amount includes transaction and integration costs of $23.2 million and start-up costs related to a de novo surgical hospital of $15.0 million.

For the year ended December 31, 2019, this amount includes transaction and integration costs of $19.0 million and other acquisition costs and start-up costs related to a de novo surgical hospital of $17.1 million.

(2) This amount includes litigation settlement costs of $1.2 million and $0.2 million for the years ended December 31, 2020 and 2019, respectively, with no comparable costs in 2021.

This amount also includes other litigation costs of $5.6 million, $5.2 million and $4.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(3) Included in other income in the consolidated statement of operations for the year ended December 31, 2020, with no comparable gain in 2021 and 2019.

(4) Reflects the impact of insurance proceeds received net of operating losses incurred in the six months ended December 31, 2021, at a surgical facility that was closed following Hurricane Ida.

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

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Interest expense, net 221.0

Transaction, integration and acquisition costs 38.2

Transaction and integration related costs 46.1

Litigation settlement and other litigation costs 5.6

Gain on escrow release (0.8)

DOJ settlement payment 32.2

Hurricane-related impacts (0.2)

Acquisitions and synergies (1)

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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.

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations by period as of December 31, 2020 (in millions):

Payments Due by Period

Total Less than 1 year 1-3 years 4-5 years More than 5 years

Long-term debt obligations, including interest (1)

$ 3,760.8 $ 233.2 $ 439.9 $ 2,041.9 $ 1,045.8

Operating lease obligations, including interest (2)

526.4 70.7 128.2 108.4 219.1

Tax receivable agreement (3)

43.2 21.2 21.5 0.5 —

Total contractual obligations $ 4,330.4 $ 325.1 $ 589.6 $ 2,150.8 $ 1,264.9

(1) Included in long-term debt obligations are principal and interest owed on our outstanding debt obligations.

These amounts exclude our unamortized fair value adjustments related non-cash amortization for the Term Loan.

These obligations are explained further in Note 5.

"Long-Term Debt" to our consolidated financial statements included elsewhere in this Annual Report.

We used the applicable annual interest rate as of December 31, 2020 of 4.25%, based on LIBOR plus the applicable margin, for our $1.4 billion outstanding Term Loan to estimate interest payments on this variable rate debt instrument.

(2) This reflects our future operating lease payments.

We enter into operating leases in the normal course of business.

Substantially all of our operating lease agreements have fixed payment terms based on the passage of time.

Some lease agreements provide us with the option to renew the lease.

Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease agreements.

These obligations are explained further in Note 6.

"Leases" to our consolidated financial statements included elsewhere in this Annual Report.

Operating lease obligations do not include common area maintenance, insurance or tax payments for which we are also obligated to pay.

(3) This reflects payments made pursuant to the terms of the TRA, as described further in "Critical Accounting Policies and Tax Receivable Agreement."

Inflation and changing prices have not significantly affected our operating results or the markets in which we operate.

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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-K

Item 7. Management’s Discussion and Analysis