What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-02 · 118 added, 84 removed, 588 unchanged (26% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share amounts)

September 30,

2022 December 31,

44 unchanged sentences

(Unaudited, dollars in millions, except per share amounts, shares in thousands)

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

14 unchanged sentences

Litigation settlement — — ( 32.8 ) —

Loss on debt extinguishment — 9.6 — 9.6

(Gain) loss on debt extinguishment — ( 0.5 ) — 9.1

Other income, net ( 2.4 ) ( 0.5 ) ( 7.4 ) ( 3.3 )

21 unchanged sentences

(Unaudited, dollars in millions)

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

15 unchanged sentences

Balance at December 31, 2021 89,333 $ 0.9 $ 1,622.3 $ ( 31.5 ) $ ( 502.7 ) $ 880.6 $ 1,969.6

Net (loss) income — — — — ( 21.0 ) 21.1 0.1

Net income — — — — 12.2 20.0 32.2

Equity-based compensation 572 — 7.7 — — — 7.7

Preferred dividends — — ( 10.3 ) — — — ( 10.3 )

Equity offering 8,625 0.1 248.2 — — — 248.3

Other comprehensive income — — — 56.8 — — 56.8

4 unchanged sentences

Equity-based compensation 30 — 4.4 — — — 4.4

Preferred share conversion 22,609 0.2 439.5 — — — 439.7

Other comprehensive income — — — 19.0 — — 19.0

2 unchanged sentences

Balance at June 30, 2022 89,935 $ 0.9 $ 1,618.8 $ 44.3 $ ( 508.9 ) $ 885.4 $ 2,040.5

Net (loss) income — — — — ( 25.0 ) 22.3 ( 2.7 )

Equity-based compensation 21 — 5.0 — — — 5.0

Other comprehensive income — — — 38.5 — — 38.5

Acquisition and disposal of shares of non-controlling interests, net — — ( 0.7 ) — — 49.8 49.1

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 25.0 ) ( 25.0 )

Balance at September 30, 2022 89,956 $ 0.9 $ 1,623.1 $ 82.8 $ ( 533.9 ) $ 932.5 $ 2,105.4

See notes to unaudited condensed consolidated financial statements.

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, dollars in millions, shares in thousands)

Common Stock Additional

Paid-in Capital Accumulated Other Comprehensive (Loss) Income Retained Deficit Non-Controlling Interests—

Non-Redeemable Total

Shares Amount

Balance at December 31, 2020 50,462 $ 0.5 $ 607.9 $ ( 61.0 ) $ ( 431.8 ) $ 766.5 $ 882.1

Net income — — — — 12.2 20.0 32.2

Net (loss) income — — — — ( 21.0 ) 21.1 0.1

Equity-based compensation 812 — ( 2.8 ) — — — ( 2.8 )

Preferred dividends — — ( 10.3 ) — — — ( 10.3 )

Equity offering 8,625 0.1 248.2 — — — 248.3

Other comprehensive income — — — 6.4 — — 6.4

4 unchanged sentences

Equity-based compensation ( 29 ) — 3.7 — — — 3.7

Preferred share conversion 22,609 0.2 439.5 — — — 439.7

Other comprehensive income — — — 0.2 — — 0.2

2 unchanged sentences

Balance at June 30, 2021 82,479 $ 0.8 $ 1,298.4 $ ( 54.4 ) $ ( 479.7 ) $ 762.2 $ 1,527.3

Net (loss) income — — — — ( 22.9 ) 21.7 ( 1.2 )

Equity-based compensation ( 21 ) — 4.1 — — — 4.1

Other comprehensive income — — — 6.5 — — 6.5

Acquisition and disposal of shares of non-controlling interests, net — — 3.5 — — 33.6 37.1

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 21.8 ) ( 21.8 )

Balance at September 30, 2021 82,458 $ 0.8 $ 1,306.0 $ ( 47.9 ) $ ( 502.6 ) $ 795.7 $ 1,552.0

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, dollars in millions)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

27 unchanged sentences

Payments of debt issuance costs — ( 11.7 )

Payment of premium on debt extinguishment — ( 2.4 )

Proceeds from equity offering — 260.9

18 unchanged sentences

and its subsidiaries are referred to herein as "Surgery Partners," "we," "us," "our" or the "Company."

As of June 30, 2022, the Company owned or operated a portfolio of 133 surgical facilities, comprised of 115 ASCs and 18 surgical hospitals in 32 states.

As of September 30, 2022, the Company owned or operated a portfolio of 145 surgical facilities, comprised of 126 ASCs and 19 surgical hospitals in 32 states.

The Company owns these facilities in partnership with physicians and, in some cases, health care systems in the markets and communities it serves.

21 unchanged sentences

A summary of revenues by service type as a percentage of total revenues follows:

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

23 unchanged sentences

The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in millions):

Three Months Ended June 30,

Three Months Ended September 30,

Amount % Amount %

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % Amount %

39 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company's effective tax rate was 8.8 % for the six months ended June 30, 2022 compared to ( 14.6 )% for the six months ended June 30, 2021.

For the six months ended June 30, 2022, the effective tax rate differed from the federal corporate tax rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (a) $ 4.6 million related to the vesting of restricted stock awards, (b) $ 1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (c) $ 1.0 million related to entity divestitures.

For the six months ended June 30, 2021, the effective tax rate differed from 21% due to tax benefits of $ 4.1 million related to the vesting of restricted stock awards, as well as a $ 3.0 million tax benefit related to entity divestitures.

The Company's effective tax rate was 17.4 % for the nine months ended September 30, 2022 compared to ( 4.9 )% for the nine months ended September 30, 2021.

For the nine months ended September 30, 2022, the effective tax rate differed from the federal corporate tax rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (a) $ 4.6 million related to the vesting of restricted stock awards, (b) $ 1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (c) $ 1.0 million related to entity divestitures.

For the nine months ended September 30, 2021, the effective tax rate differed from 21% primarily due to discrete tax benefits of (a) $ 4.4 million related to the vesting of restricted stock awards and (b) $ 3.0 million related to entity divestitures.

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.

1 unchanged sentence

Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries.

A summary of the Company's acquisitions and disposals for the six months ended June 30, 2022 is included in Note 2.

A summary of the Company's acquisitions and disposals for the nine months ended September 30, 2022 is included in Note 2.

"Acquisitions and Disposals."

A summary of activity related to goodwill for the six months ended June 30, 2022 is as follows (in millions):

A summary of activity related to goodwill for the nine months ended September 30, 2022 is as follows (in millions):

Balance at December 31, 2021 $ 3,911.8

1 unchanged sentence

Disposals and deconsolidations ( 29.4 )

Balance at June 30, 2022 $ 3,993.1

A detailed evaluation of potential impairment indicators was performed as of June 30, 2022, which specifically considered the ongoing impact of the COVID-19 pandemic, recent increases in interest rates, inflation risk and market volatility.

On the basis of available evidence as of June 30, 2022, no indicators of impairment were identified.

Balance at September 30, 2022 $ 4,145.3

A detailed evaluation of potential impairment indicators was performed as of September 30, 2022, which specifically considered the ongoing impact of the COVID-19 pandemic, recent increases in interest rates, inflation risk and market volatility.

On the basis of available evidence as of September 30, 2022, no indicators of impairment were identified.

Future estimates of fair value could be adversely affected if the actual outcome of one or more of the Company's assumptions changes materially in the future, including a material decline in the Company’s stock price and the fair value of its long-term debt, lower than expected surgical case volumes, higher market interest rates or increased operating costs.

13 unchanged sentences

A summary of activity related to non-controlling interests—redeemable is as follows (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Balance at beginning of period $ 330.2 $ 306.8

4 unchanged sentences

Medicare Accelerated Payments and Deferred Governmental Grants

The Company has received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs, including approximately $ 1 million during the six months ended June 30, 2022.

Grant funds received during the three months ended June 30, 2022 were minimal.

During the three and six months ended June 30, 2021, the Company received grant funds of approximately $ 1 million and $ 8 million, respectively.

The Company received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs, including approximately $ 0.6 million and $ 2 million during the three and nine months ended September 30, 2022, respectively.

During nine months ended September 30, 2021, the Company received grant funds of approximately $ 8 million.

The Company did not receive any grant funds during the three months ended September 30, 2021.

The recognition of amounts received is conditioned upon attestation with terms and conditions that funds will be used for COVID-19 related healthcare expenses or lost revenues.

Amounts received, but not recognized as a reduction to operating expenses, are reflected as a component of Medicare accelerated payments and deferred governmental grants in the condensed consolidated balance sheets.

Any unrecognized amounts may be recognized as a reduction in operating expenses in subsequent periods if the underlying conditions for recognition are met.

The Company estimates $ 0.1 million and $ 1.3 million of grant funds received qualified for recognition as a reduction in operating expenses for the three and six months ended June 30, 2022, respectively.

During the three and six months ended June 30, 2021, $ 4.9 million and $ 20.0 million, respectively, was recognized as a reduction in operating expenses.

As of both June 30, 2022 and December 31, 2021, approximately $ 4 million of unrecognized grant funds received was reflected within the condensed consolidated balance sheets.

Any currently unrecognized amounts may be recognized as a reduction in operating expenses in subsequent periods if the underlying conditions for recognition are met.

The Company estimates $ 0.5 million and $ 1.8 million of grant funds received qualified for recognition as a reduction in operating expenses for the three and nine months ended September 30, 2022, respectively.

During the nine months ended September 30, 2021, $ 20.0 million was recognized as a reduction in operating expenses.

During the three months ended September 30, 2021, the Company did not recognize any grant funds.

As of both September 30, 2022 and December 31, 2021, approximately $ 4 million of unrecognized grant funds received was reflected within the condensed consolidated balance sheets.

The Company received accelerated payments under the Medicare Accelerated and Advance Payment Program.

The payments received were deferred and included in the condensed consolidated balance sheets.

During the three and six months ended June 30, 2022, approximately $ 25 million and $ 43 million, respectively, has been repaid in accordance with the terms of the program.

During the three and nine months ended September 30, 2022, approximately $ 13 million and $ 56 million, respectively, has been repaid in accordance with the terms of the program.

These repayments are included as a component of the change in Medicare accelerated payments and deferred government grants in the condensed consolidated statements of cash flows.

As of June 30, 2022 and December 31, 2021, the remaining deferred accelerated payments was approximately $ 17 million and $ 60 million, respectively, which was included as a component of Medicare accelerated payments and deferred governmental grants in the condensed consolidated balance sheets.

As of September 30, 2022 and December 31, 2021, the remaining deferred accelerated payments was approximately $ 4 million and $ 60 million, respectively, which was included as a component of Medicare accelerated payments and deferred governmental grants in the condensed consolidated balance sheets.

The Company does not expect to receive additional Medicare accelerated payments.

12 unchanged sentences

Carrying Amount Fair Value

September 30,

2022 December 31,

2021 June 30,

2021 September 30,

2022 December 31,

10 unchanged sentences

Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur.

As of June 30, 2022, the Company's consolidated VIEs include six surgical facilities and five physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 were $ 69.7 million and $ 48.1 million, respectively, and the total liabilities of the consolidated VIEs were $ 44.0 million and $ 20.1 million, respectively.

As of September 30, 2022, the Company's consolidated VIEs include six surgical facilities and five physician practices.

The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 were $ 67.9 million and $ 48.1 million, respectively, and the total liabilities of the consolidated VIEs were $ 41.9 million and $ 20.1 million, respectively.

Acquisitions and Disposals

During the six months ended June 30, 2022, the Company acquired a controlling interest in four surgical facilities, two of which were merged into existing surgical facilities, for aggregate cash consideration of $ 74.9 million, net of cash acquired, and non-cash consideration of $ 2.6 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities.

During September 2022, the Company acquired a controlling interest in a surgical hospital for cash consideration of $ 64.3 million, net of cash acquired, and assumed debt of $ 39.4 million.

As of September 30, 2022, $ 61.0 million of the cash consideration was deferred and included as a component of other current liabilities in the accompanying condensed consolidated balance sheets.

In connection with the acquisition, the Company preliminarily recognized non-controlling interests of $ 45.3 million and goodwill of $ 146.3 million.

In October 2022, pursuant to the purchase agreement, the Company paid the deferred consideration and the debt previously assumed with available cash resources.

During the nine months ended September 30, 2022, the Company acquired a controlling interest in four other surgical facilities, two of which were merged into existing surgical facilities, and a practice for aggregate cash consideration of $ 79.3 million, net of cash acquired, and non-cash consideration of $ 5.3 million, which consisted of a non-controlling interest in two of the Company's existing surgical facilities.

In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $ 41.5 million and goodwill of $ 121.1 million.

During the six months ended June 30, 2021, the Company acquired a controlling interest in a surgical facility in a new market and two surgical facilities in existing markets that were merged into existing facilities for aggregate cash consideration of $ 15.2 million, net of cash acquired.

During the nine months ended September 30, 2021, the Company acquired controlling interests in four surgical facilities in new markets and two surgical facilities in existing markets that were merged into existing facilities for aggregate cash consideration of $ 101.0 million, net of cash acquired.

In connection with the acquisitions, the Company preliminarily recognized non-controlling interests of $ 46.4 million and goodwill of $ 145.8 million.

During the six months ended June 30, 2022, no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2021.

During the nine months ended September 30, 2022, no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2021.

Other Acquisitions

During the six months ended June 30, 2022, the Company acquired non-controlling interests in five surgical facilities and four in-development de novo surgical facilities for an aggregate cash purchase price of $ 65.8 million.

During the nine months ended September 30, 2022, the Company acquired non-controlling interests in seven surgical facilities and seven in-development de novo surgical facilities for an aggregate cash purchase price of $ 95.1 million.

The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets.

Disposals and Deconsolidations

During the six months ended June 30, 2022, the Company sold its interests in a surgical facility, which was previously accounted for as an equity method investment, for net cash proceeds of $ 11.5 million.

The Company recognized a pre-tax loss on the sale of $ 0.4 million included in loss on disposals and deconsolidations, net in the condensed consolidated statements of operations for the six months ended June 30, 2022.

During the six months ended June 30, 2022, the Company contributed its interests in two surgical facilities as non-cash consideration for non-controlling interests in two new separate entities.

During the nine months ended September 30, 2022, the Company sold its interests in a surgical facility, which was previously accounted for as an equity method investment, for net cash proceeds of $ 11.5 million.

During the nine months ended September 30, 2022, the Company contributed its interests in two surgical facilities as non-cash consideration for non-controlling interests in two new separate entities.

As a result of these transactions, the Company lost control of the previously controlled surgical facilities but retains a non-controlling interest in each, resulting in the deconsolidation of the previously consolidated entities.

The remaining non-controlling interests were accounted for as equity method investments, and initially measured and recorded at fair value as of the dates of the transactions.

The remaining non-controlling interests were accounted for as equity method investments, and initially measured and

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

recorded at fair value as of the dates of the transactions.

The fair value measurement utilizes Level 3 inputs, which includes unobservable data, to measure the fair value of the retained non-controlling interests.

1 unchanged sentence

The preliminary fair value of the investments of $ 9.8 million was recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets.

Further, based on the preliminary valuation, the transactions resulted in a pretax net loss on deconsolidations of $ 5.6 million, which is included in loss on disposals and deconsolidations, net, in the accompanying condensed consolidated statement of operations for the six months ended June 30,

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The net loss was determined based on the difference between the fair value of the Company's retained interests in the entities and the carrying values of both the tangible and intangible assets of the entities immediately prior to the transactions.

1 unchanged sentence

A summary of long-term debt follows (in millions):

September 30,

2022 December 31,

9 unchanged sentences

Total long-term debt $ 3,102.6 $ 2,878.4

(1) Includes unamortized fair value discount of $ 2.7 million and $ 3.0 million as of June 30, 2022 and December 31, 2021, respectively.

The increase in finance lease obligations is a result of the modification of certain existing facility real estate leases that were previously classified as operating leases.

(1) Includes unamortized fair value discount of $ 2.5 million and $ 3.0 million as of September 30, 2022 and December 31, 2021, respectively.

The increase in finance lease obligations is primarily a result of the modification of certain existing facility real estate leases that were previously classified as operating leases.

"Leases" for further discussion.

The increase in notes payable and other secured loans as well as current maturities includes certain debt assumed as part of the purchase price for a surgical hospital in September 2022.

"Acquisitions and Disposals" for further discussion.

Revolving Credit Facility

As of June 30, 2022, the Company's availability on its revolving credit facility (the "Revolver") was $ 203.0 million (including outstanding letters of credit of $ 7.0 million).

There were no outstanding borrowings under the Revolver as of both June 30, 2022 and December 31, 2021 .

On August 18, 2022, the Company entered into an amendment to the credit agreement governing its revolving credit facility (the "Revolver"), which amended and supplemented the credit agreement, dated as of August 31, 2017 (the "Credit Agreement"), to provide a $ 140.0 million increase in the outstanding commitments under the Revolver.

As of September 30, 2022, the Company's availability on its Revolver was $ 342.0 million (including outstanding letters of credit of $ 8.0 million).

There were no outstanding borrowings under the Revolver as of both September 30, 2022 and December 31, 2021.

SURGERY PARTNERS, INC.

3 unchanged sentences

The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions):

Classification in Consolidated Balance Sheets June 30, 2022 December 31, 2021

Classification in Consolidated Balance Sheets September 30, 2022 December 31, 2021

Operating lease assets Right-of-use operating lease assets $ 277.0 $ 324.1

10 unchanged sentences

Total lease liabilities $ 890.6 $ 720.3

During the six months ended June 30, 2022, the Company extended certain existing facility real estate leases, resulting in the reclassification of the leases from operating to finance.

During the nine months ended September 30, 2022, the Company extended certain existing facility real estate leases, resulting in the reclassification of the leases from operating to finance.

The modifications resulted in an increase to finance lease liabilities and assets of $ 170.6 million and $ 169.1 million, respectively, including the reclassification of existing operating lease liabilities and assets of $ 65.7 million and $ 64.2 million, respectively.

The following table presents the components of the Company's lease expense and their classification in the condensed consolidated statement of operations (in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Operating lease costs $ 49.5 $ 56.6

8 unchanged sentences

The following table presents supplemental cash flow information (dollars in millions):

Six Months Ended June 30,

Nine Months Ended September 30,

Cash paid for amounts included in the measurement of lease liabilities:

12 unchanged sentences

Over the next 12 months, the Company estimates that an additional $ 25.2 million will be reclassified as a decrease to interest expense.

As of June 30, 2022, the Company had nine interest rate swaps with a total net hedged notional amount of $ 1.2 billion and two interest rate caps with a total hedged notional amount of $ 325.9 million.

As of September 30, 2022, the Company had nine interest rate swaps with a total net hedged notional amount of $ 1.2 billion and two interest rate caps with a total hedged notional amount of $ 322.0 million.

Of the nine interest rate swaps, three are pay-fixed, receive 1-Month LIBOR (subject to a minimum of 0.75 %) interest rate swaps designated in cash flow hedging relationships with a total notional amount of $ 1.2 billion and a termination date of March 31, 2025.

12 unchanged sentences

The key terms of interest rate swaps and interest rate caps outstanding are presented below:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Description Effective Date Notional Amount (in millions) Status Notional Amount (in millions) Status Maturity Date

16 unchanged sentences

The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Location Assets Liabilities Assets Liabilities

8 unchanged sentences

Total $ 117.2 $ 43.5 $ 23.6 $ 58.2

(1) The balance as of June 30, 2022 and December 31, 2021 is related to the financing component of the pay-fixed, receive floating interest rate swaps.

(1) The balance as of September 30, 2022 and December 31, 2021 is related to the financing component of the pay-fixed, receive floating interest rate swaps.

The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statement of operations (in millions):

Three Months Ended June 30, Six Months Ended June 30,

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

Location 2022 2021 2022 2021

Derivatives not designated as hedging instruments

(Gain) loss recognized in income Other income, net $ — $ ( 0.2 ) $ 0.1 $ ( 0.2 )

Loss recognized in income Other income, net $ 0.1 $ — $ 0.2 $ 0.2

Derivatives in cash flow hedging relationships

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 5.3 million and $ 3.2 million for the three months ended June 30, 2022 and 2021, respectively.

Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 10.6 million and $ 3.2 million for the six months ended June 30, 2022 and 2021, respectively.

(1) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 5.4 million for the three months ended September 30, 2022 and 2021.

Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 16.0 million and $ 8.6 million for the nine months ended September 30, 2022 and 2021, respectively.

Earnings Per Share

4 unchanged sentences

shares in thousands):

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

13 unchanged sentences

Restricted shares 604 1,461 669 1,444

(1) Includes dividends accrued for the Series A Preferred Stock for the six months ended June 30, 2021.

(1) Includes dividends accrued for the Series A Preferred Stock for the nine months ended September 30, 2021.

The Series A Preferred Stock did not participate in undistributed losses and was converted to common stock during the second quarter of 2021.

There were no participating securities for the three and six months ended June 30, 2022 and the three months ended June 30, 2021.

There were no participating securities for the three and nine months ended September 30, 2022 and the three months ended Septemberer 30, 2021.

(2) The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive.

1 unchanged sentence

A summary of other current liabilities is as follows (in millions):

September 30,

2022 December 31,

Deferred consideration payable $ 61.0 $ —

Right-of-use operating lease liabilities 36.8 40.1

14 unchanged sentences

The Company is not aware of any such proceedings that are reasonably possible to have a material adverse effect on the Company's business, financial position, results of operations or liquidity.

Total professional, general and workers' compensation claim liabilities as of June 30, 2022 and December 31, 2021 were $ 18.2 million and $ 19.8 million, respectively.

Expected insurance recoveries of $ 8.7 million as of both June 30, 2022 and December 31, 2021 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

Total professional, general and workers' compensation claim liabilities as of September 30, 2022 and December 31, 2021 were $ 16.7 million and $ 19.8 million, respectively.

Expected insurance recoveries of $ 8.7 million as of both September 30, 2022 and December 31, 2021 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

Laws and Regulations

16 unchanged sentences

The case is now closed.

Pursuant to the settlement, the Company received $ 32.8 million in March 2022, which was included in litigation settlement in the condensed consolidated statements of operations for the six months ended June 30, 2022.

Acquired Facilities

21 unchanged sentences

If the terms of credit agreements and other debt documents cause the Company to be unable to make payments under the TRA and such terms are not materially more restrictive than those existing as of September 30, 2015, such payments will be deferred and will accrue interest at a rate of LIBOR plus 300 basis points until paid.

Assuming the Company's tax rate is 24 %, calculated as the maximum corporate federal tax rate plus three percent, throughout the remaining term of the TRA, the Company estimates the total remaining amounts payable under the TRA was approximately $ 22.0 million as of both June 30, 2022 and December 31, 2021.

As a result of the amendment to the TRA, the Company was required to value the liability under the TRA by discounting the fixed payment schedule using the Company’s incremental borrowing rate.

The carrying value of the liability under the TRA, reflecting the discount, was $ 20.7 million and $ 19.7 million as of June 30, 2022 and December 31, 2021, respectively.

The current portion of the liability was $ 20.2 million and $ 19.7 million as of June 30, 2022 and December 31, 2021, respectively, and is included as a component of other current liabilities in the condensed consolidated balance sheets.

The carrying value of the liability under the TRA, reflecting the discount, was $ 21.3 million and $ 19.7 million as of September 30, 2022 and December 31, 2021, respectively.

The current portion of the liability was $ 20.2 million and $ 19.7 million as of September 30, 2022 and December 31, 2021, respectively, and is included as a component of other current liabilities in the condensed consolidated balance sheets.

The long-term portion is included as a component of other long-term liabilities in the condensed consolidated balance sheets.

7 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

18 unchanged sentences

1.5 2.5 ( 27.6 ) 4.3

Loss on debt extinguishment — 9.6 — 9.6

(Gain) loss on debt extinguishment — ( 0.5 ) — 9.1

Hurricane-related impacts (3)

1.1 0.5 1.1 0.5

Adjusted EBITDA $ 96.2 $ 76.4 $ 259.4 $ 225.2

(1) This amount includes transaction and integration costs of $ 8.2 million and $ 9.2 million for the three months ended June 30, 2022 and 2021, respectively.

This amount further includes start-up costs related to a de novo surgical hospital of $ 2.2 million for the three months ended June 30, 2021.

This amount includes transaction and integration costs of $ 15.3 million and $ 14.5 million for the six months ended June 30, 2022 and 2021, respectively.

This amount further includes start-up costs related to a de novo surgical hospital of $ 6.3 million for the six months ended June 30, 2021.

(2) This amount includes other litigation costs of $ 1.7 million and $ 0.8 million for the three months ended June 30, 2022 and 2021, respectively.

This amount includes other litigation costs of $ 3.7 million and $ 1.8 million for the six months ended June 30, 2022 and 2021, respectively.

This amount also includes gain on litigation settlement of $ 32.8 million for the six months ended June 30, 2022.

(1) This amount includes transaction and integration costs of $ 12.5 million and $ 10.2 million for the three months ended September 30, 2022 and 2021, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 0.6 million for the three months ended September 30, 2022.

This amount includes transaction and integration costs of $ 27.8 million and $ 24.7 million for the nine months ended September 30, 2022 and 2021, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 0.6 million and $ 6.3 million for the nine months ended September 30, 2022 and 2021, respectively.

(2) This amount includes other litigation costs of $ 1.5 million and $ 2.5 million for the three months ended September 30, 2022 and 2021, respectively.

This amount includes other litigation costs of $ 5.2 million and $ 4.3 million for the nine months ended September 30, 2022 and 2021, respectively.

This amount also includes gain on litigation settlement of $ 32.8 million for the nine months ended September 30, 2022.

(3) Reflects losses incurred, net of insurance proceeds received at certain surgical facilities that were closed following Hurricane Ida in September 2021 and Hurricane Ian in September 2022.

September 30,

2022 December 31,

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash purchases of property and equipment:

3 unchanged sentences

Total cash purchases of property and equipment $ 57.9 $ 43.5

Subsequent Events

In July 2022, the Company acquired non-controlling interests in two surgical facilities and three in-development de novo surgical facilities for a combined purchase price of $ 29.3 million.

The non-controlling interests will be accounted for as equity method investments.

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 1. Financial Statements