What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-07 compared with 2023-11-07 · 153 added, 253 removed, 418 unchanged (49% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share amounts)

September 30,

2024 December 31,

42 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

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

2023 2022 2023 2022

(Unaudited, dollars in millions, except per share amounts;

shares in thousands)

Three Months Ended March 31,

Revenues $ 717.4 $ 666.2

9 unchanged sentences

Transaction and integration costs 17.4 12.5

Grant funds — ( 0.5 ) ( 1.1 ) ( 1.8 )

Net loss on disposals, consolidations and deconsolidations 1.5 10.5

2 unchanged sentences

Other income, net ( 2.0 ) ( 0.8 )

591.5 546.5 1,781.3 1,581.2

Operating income 76.0 46.4

Interest expense, net ( 47.3 ) ( 46.8 )

Income before income taxes 32.8 13.4 82.3 77.1

Income (loss) before income taxes 28.7 ( 0.4 )

Income tax (expense) benefit ( 4.4 ) 1.6

9 unchanged sentences

125,972 125,206

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

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

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, dollars in millions)

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

2023 2022 2023 2022

Three Months Ended March 31,

Net income $ 24.3 $ 1.2

Other comprehensive income, net of tax:

Other comprehensive income (loss), net of tax:

Derivative activity, net of tax of $ 0

( 5.5 ) ( 11.3 )

Comprehensive income 27.9 44.1 89.4 178.0

Comprehensive income attributable to non-controlling interests ( 34.6 ) ( 30.6 ) ( 99.5 ) ( 94.9 )

Comprehensive (loss) income attributable to Surgery Partners, Inc.

Comprehensive income (loss) 18.8 ( 10.1 )

Comprehensive loss attributable to non-controlling interests ( 36.7 ) ( 26.1 )

Comprehensive loss attributable to Surgery Partners, Inc.

$ ( 17.9 ) $ ( 36.2 )

7 unchanged sentences

Shares Amount

Balance at December 31, 2022 125,961 $ 1.3 $ 2,478.0 $ 76.2 $ ( 557.3 ) $ 942.7 $ 2,940.9

Balance as of December 31, 2022 125,961 $ 1.3 $ 2,478.0 $ 76.2 $ ( 557.3 ) $ 942.7 $ 2,940.9

Net (loss) income — — — — ( 25.0 ) 18.3 ( 6.7 )

3 unchanged sentences

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 30.2 ) ( 30.2 )

Balance at March 31, 2023 126,480 $ 1.3 $ 2,478.1 $ 64.9 $ ( 582.3 ) $ 980.5 $ 2,942.5

Net income — — — — 19.0 27.6 46.6

Equity-based compensation 13 — 4.5 — — — 4.5

Other comprehensive income — — — 13.9 — — 13.9

Acquisition and disposal of shares of non-controlling interests, net — — 18.8 — — ( 19.7 ) ( 0.9 )

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 23.8 ) ( 23.8 )

Balance at June 30, 2023 126,493 $ 1.3 $ 2,501.4 $ 78.8 $ ( 563.3 ) $ 964.6 $ 2,982.8

Balance as of March 31, 2023 126,480 $ 1.3 $ 2,478.1 $ 64.9 $ ( 582.3 ) $ 980.5 $ 2,942.5

Balance as of December 31, 2023 126,594 $ 1.3 $ 2,497.6 $ 57.5 $ ( 569.2 ) $ 1,047.3 $ 3,034.5

Net (loss) income — — — — ( 12.4 ) 29.3 16.9

3 unchanged sentences

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 29.7 ) ( 29.7 )

Balance at September 30, 2023 126,489 $ 1.3 $ 2,494.5 $ 77.0 $ ( 568.2 ) $ 981.9 $ 2,986.5

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, 2021 89,333 $ 0.9 $ 1,622.3 $ ( 31.5 ) $ ( 502.7 ) $ 880.6 $ 1,969.6

Net income — — — — 12.2 20.0 32.2

Equity-based compensation 572 — 7.7 — — — 7.7

Other comprehensive income — — — 56.8 — — 56.8

Acquisition and disposal of shares of non-controlling interests, net — — ( 4.8 ) — — ( 24.3 ) ( 29.1 )

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 24.6 ) ( 24.6 )

Balance at March 31, 2022 89,905 $ 0.9 $ 1,625.2 $ 25.3 $ ( 490.5 ) $ 851.7 $ 2,012.6

Net (loss) income — — — — ( 18.4 ) 22.7 4.3

Equity-based compensation 30 — 4.4 — — — 4.4

Other comprehensive income — — — 19.0 — — 19.0

Acquisition and disposal of shares of non-controlling interests, net — — ( 10.8 ) — — 38.7 27.9

Distributions to non-controlling interests—non-redeemable holders — — — — — ( 27.7 ) ( 27.7 )

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

Balance as of March 31, 2024 127,102 $ 1.3 $ 2,495.6 $ 52.0 $ ( 581.6 ) $ 1,070.6 $ 3,037.9

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Unaudited, dollars in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

10 unchanged sentences

Accounts receivable 5.4 8.8

Medicare accelerated payments and deferred governmental grants ( 1.2 ) ( 53.7 )

Other operating assets and liabilities ( 43.1 ) 2.6

5 unchanged sentences

Purchases of equity investments ( 2.0 ) ( 9.6 )

Proceeds from sales of equity investments 1.0 11.5

Other investing activities ( 7.0 ) ( 4.1 )

5 unchanged sentences

Distributions to non-controlling interest holders ( 40.5 ) ( 41.9 )

Receipts (payments) related to ownership transactions with non-controlling interest holders 0.7 ( 3.9 )

Proceeds related to ownership transactions with non-controlling interest holders 1.4 5.1

Other financing activities ( 1.5 ) ( 3.1 )

Net cash used in financing activities ( 110.6 ) ( 151.0 )

Net cash provided by (used in) financing activities 31.7 ( 41.2 )

Net decrease in cash and cash equivalents ( 10.7 ) ( 37.4 )

6 unchanged sentences

Surgery Partners, Inc., a Delaware corporation, acting through its subsidiaries, owns and operates a national network of surgical facilities and ancillary services.

The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, orthopedics and pain management, gastroenterology, ophthalmology, and general surgery.

The Company's surgical hospitals also provide services such as diagnostic imaging, laboratory, obstetrics, oncology, pharmacy, physical therapy and wound care.

The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including orthopedics and pain management, gastroenterology, ophthalmology, and general surgery.

The Company's surgical hospitals also provide services such as diagnostic imaging, laboratory, oncology, pharmacy, physical therapy and wound care.

Ancillary services are comprised of multi-specialty physician practices, urgent care facilities and anesthesia services.

1 unchanged sentence

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

As of September 30, 2023, the Company owned or operated a portfolio of 154 surgical facilities, comprised of 136 ASCs and 18 surgical hospitals in 31 states.

As of March 31, 2024, the Company owned or operated a portfolio of 165 surgical facilities, comprised of 147 ASCs and 18 surgical hospitals in 33 states.

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

The Company owned a majority interest in 90 of these surgical facilities and consolidated 117 of these facilities for financial reporting purposes.

The Company owned a majority interest in 92 of these surgical facilities and consolidated 124 surgical facilities for financial reporting purposes.

Basis of Presentation

5 unchanged sentences

The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K").

Certain prior year amounts have been reclassified to conform with the current year presentation.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business.

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

2023 2022 2023 2022

The following table presents a summary of revenues by service type as a percentage of total revenues:

Three Months Ended March 31,

Patient service revenues:

Surgical facilities revenues 95.8 % 95.6 % 95.9 % 95.7 %

Ancillary services revenues 2.4 % 2.7 % 2.5 % 2.8 %

Surgical Facility Services 94.9 % 96.0 %

Ancillary Services 3.4 % 2.5 %

Total patient service revenues 98.3 % 98.5 %

10 unchanged sentences

Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services.

As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

Because the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service.

The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments and discounts from third-party payors.

1 unchanged sentence

Changes in estimated contractual adjustments and discounts are recorded in the period of change.

Several states utilize supplemental Medicaid reimbursement programs for the purpose of providing reimbursement to providers to increase base rates to the levels that Medicare would have paid for the same service or for payments that offset a portion of the cost of providing care to Medicaid and indigent patients.

These programs are designed with input from the Centers for Medicare & Medicaid Services (“CMS”) and are funded with a combination of state and federal resources, including, in certain instances, fees or taxes levied on the providers.

We account for payments under these supplemental programs as variable consideration and estimate the amount using the most likely amount method.

Reimbursement under these programs, including the recognition of variable consideration, is reflected in patient service revenues.

Taxes or other program-related costs are reflected in other operating expenses.

Other service revenues.

2 unchanged sentences

The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed.

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 September 30,

Amount % Amount %

Patient service revenues:

Private insurance $ 347.1 52.4 % $ 301.9 49.5 %

Government 271.6 41.0 % 269.5 44.2 %

Self-pay 16.9 2.6 % 16.0 2.6 %

26.7 4.0 % 22.7 3.7 %

Total patient service revenues 662.3 100.0 % 610.1 100.0 %

Other service revenues 11.8 10.5

Total revenues $ 674.1 $ 620.6

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended September 30,

Three Months Ended March 31,

Amount % Amount %

7 unchanged sentences

Total revenues $ 717.4 $ 666.2

(1) Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types.

(1) Other is comprised of automobile liability, letters of protection and other payor types.

Accounts Receivable

29 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company's effective tax rate was ( 7.7 )% for the nine months ended September 30, 2023 compared to 17.4 % for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, 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 (i) $ 1.6 million related to the vesting of restricted stock awards, and (ii) $ 15.8 million related to entity divestitures.

For the nine months ended September 30, 2022, the effective tax rate differed from 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 (i) $ 4.6 million related to the vesting of restricted stock awards, (ii) $ 1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (iii) $ 1.0 million related to entity divestitures.

The Company's effective tax rate was 15.3 % for the three months ended March 31, 2024 compared to 400.0 % for the three months ended March 31, 2023.

For the three months ended March 31, 2024, the effective tax rate differed from the U.S.

federal statutory 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, state tax expense, and a discrete tax expense of $ 0.7 million related to the vesting of restricted stock awards.

For the three months ended March 31, 2023, the effective tax rate differed from the U.S.

federal statutory 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 a discrete tax benefit of $ 1.8 million related to the vesting of restricted stock awards.

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 nine months ended September 30, 2023 is included in Note 2.

A summary of the Company's acquisitions and disposals for the three months ended March 31, 2024 is included in Note 2.

"Acquisitions and Disposals."

A summary of activity related to goodwill for the nine months ended September 30, 2023 is as follows (in millions):

A summary of activity related to goodwill for the three months ended March 31, 2024 is as follows (in millions):

Balance at December 31, 2023 $ 4,326.0

1 unchanged sentence

Disposals ( 6.0 )

Balance at September 30, 2023 $ 4,245.1

A detailed evaluation of potential impairment indicators was performed as of September 30, 2023, which specifically considered recent increases in interest rates, inflation risk and market volatility.

On the basis of available evidence as of September 30, 2023, no indicators of impairment were identified.

Balance at March 31, 2024 $ 4,397.5

A detailed evaluation of potential impairment indicators was performed as of March 31, 2024, which specifically considered recent increases in interest rates, inflation risk and market volatility.

On the basis of available evidence as of March 31, 2024, 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.

9 unchanged sentences

In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility.

Management believes the likelihood of an event occurring that would trigger such purchases was remote as of March 31, 2024.

The non-controlling interests — redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Nine Months Ended September 30,

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

Three Months Ended March 31,

Balance at beginning of period $ 327.4 $ 342.0

Net income attributable to non-controlling interests—redeemable 7.4 7.8

(Disposal) acquisition of shares of non-controlling interests, net—redeemable ( 2.2 ) 11.9

Acquisition and disposal of shares of non-controlling interests, net—redeemable ( 0.3 ) 7.7

Distributions to non-controlling interest —redeemable holders ( 10.8 ) ( 11.7 )

Balance at end of period $ 323.7 $ 345.8

Medicare Accelerated Payments and Deferred Governmental Grants

The Company received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs.

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

During the three months ended September 30, 2023, the Company did no t recognize any grant funds as a reduction in operating expenses.

During the nine months ended September 30, 2023, the Company recognized grant funds as a reduction in operating expenses in the amount of $ 1.1 million.

During the three and nine months ended September 30, 2022, the Company recognized grant funds received as a reduction in operating expenses in the amount of $ 0.5 million and $ 1.8 million, respectively.

There were no remaining unrecognized grant funds as of September 30, 2023.

As of December 31, 2022 approximately $ 3 million of unrecognized grant funds received was reflected as a component of other current liabilities 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.

There were no remaining deferred accelerated payments as of September 30, 2023, and remaining deferred accelerated payments were minimal as of December 31, 2022.

During the three and nine months ended September 30, 2022, approximately $ 13 million and $ 56 million, respectively, was 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.

Fair Value of Financial Instruments

5 unchanged sentences

Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, depending on the nature of the item being valued.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values under Level 3 calculations.

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate their fair values under Level 3 calculations.

A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions):

Carrying Amount Fair Value

September 30,

2024 December 31,

2022 September 30,

2023 March 31,

2024 December 31,

6 unchanged sentences

The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values based on Level 3 inputs.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Variable Interest Entities

2 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 September 30, 2023, the Company's consolidated VIEs consisted of seven 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, 2023 and December 31, 2022 were $ 64.7 million and $ 64.9 million, respectively, and the total liabilities of the consolidated VIEs were $ 38.2 million and $ 40.9 million, respectively.

Acquisitions and Disposals

During the nine months ended September 30, 2023:

• The Company acquired a controlling interest in two surgical facilities and a physician practice for aggregate cash consideration of $ 23.1 million, net of cash acquired, and non-cash consideration of $ 1.3 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities.

As of March 31, 2024, the Company's consolidated VIEs consisted of seven surgical facilities and fourteen 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 March 31, 2024 and December 31, 2023, were $ 67.0 million and $ 65.3 million, respectively, and the total liabilities of the consolidated VIEs were $ 39.1 million and $ 41.2 million, respectively.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures , which requires enhanced disclosures of significant segment expenses.

The ASU is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024.

The amendments in this ASU must be applied retrospectively to all periods presented and early adoption is permitted.

The Company is evaluating the impact of this ASU on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures , which establishes new requirements for the categorization and disaggregation of information in the rate reconciliation as well as for

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

disaggregation of income taxes paid.

The ASU is effective for annual periods beginning after December 15, 2024 and interim periods beginning after December 15, 2025.

The amendments in this ASU may be applied prospectively or retrospectively to all periods presented and early adoption is permitted.

The Company is evaluating the impact of this ASU on its condensed consolidated financial statements.

Acquisitions, Disposals and Deconsolidations

During the three months ended March 31, 2024:

• The Company acquired a controlling interest in two surgical facilities and several physician practices for aggregate cash consideration of $ 66.0 million, net of cash acquired, and non-cash consideration of $ 1.1 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities.

As of March 31, 2024, $ 11.4 million of the cash consideration was deferred and included as a component of current liabilities in the condensed consolidated balance sheets.

In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $ 21.2 million and goodwill of $ 77.2 million.

• The Company acquired a controlling interest in two surgical facilities and an in-development de novo surgical facility, which were previously accounted for as equity method investments, for aggregate cash consideration of $ 26.9 million, net of cash acquired.

The Company also amended the operating agreement of a previously non-controlled surgical facility resulting in the Company obtaining a controlling interest in the facility.

During the three months ended March 31, 2023:

• The Company acquired a controlling interest in one surgical facility and one physician practice for aggregate cash consideration of $ 16.2 million, net of cash acquired and non-cash consideration of $ 1.3 million, which consisted of non-controlling interest in one of the Company's existing surgical facilities.

In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $ 12.0 million and goodwill of $ 25.7 million.

• The Company acquired a controlling interest in two surgical facilities, which were previously accounted for as equity method investments, for aggregate cash consideration of $ 24.5 million, net of cash acquired.

These transactions resulted in the consolidation of the previously non-consolidated entities.

2 unchanged sentences

The acquisition date fair value of the previously held non-controlling interests was $ 8.3 million.

As a result of increasing its ownership interest, the Company recognized a net loss of $ 7.1 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the nine months ended September 30, 2023.

As a result of increasing its ownership interest, the Company recognized a net loss of $ 2.9 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the three months ended March 31, 2023.

The net loss was determined based on the difference between the fair value of the Company's previously held non-controlling interests in the entities and the carrying values immediately prior to the transactions.

In connection with the consolidation of these facilities, the Company preliminarily recognized non-controlling interests of $ 34.2 million and goodwill of $ 65.6 million.

• The Company acquired non-controlling interests in five surgical facilities and two in-development de novo surgical facilities for aggregate cash consideration of $ 50.2 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.

The Company also paid cash consideration of $ 21.0 million to acquire management rights from the prior management service provider related to four of the aforementioned surgical facilities.

Management rights agreements are accounted for and recorded as a component of intangible assets, net in the accompanying condensed consolidated balance sheets.

The cash paid to acquire the management rights is presented as a component of other investing activities on the condensed consolidated statements of cash flows.

During the nine months ended September 30, 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.

• The Company acquired a controlling interest in four other surgical facilities, two of which were merged into existing surgical facilities, and a physician 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.

• The Company acquired non-controlling interests in seven surgical facilities and seven in-development de novo surgical facilities for aggregate cash consideration of $ 95.1 million.

• The Company acquired a non-controlling interest in one existing surgical facility and one in-development de novo surgical facility for aggregate cash consideration of $ 12.4 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 condensed consolidated balance sheets.

During the three months ended March 31, 2024, the Company sold a portion of its interests in a surgical facility for net cash proceeds of $ 1.5 million.

As a result of the transaction, the Company lost control of the previously controlled surgical facility but retains a non-controlling interest, resulting in the deconsolidation of the previously consolidated entity.

This transaction resulted in a pretax net gain on deconsolidation of $ 2.7 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2024.

The net loss was determined based on the difference between the net cash proceeds plus the fair value of the Company’s retained interests in the entity and the carrying values of both the tangible and intangible assets of the entity immediately prior to the transaction.

During the three months ended March 31, 2023, the Company sold its interests in a surgical facility for a cash sales price of $ 8.8 million, a portion of which was held in escrow pursuant to the purchase agreement.

In connection with the sale, the Company recognized a pre-tax loss of $ 0.2 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the three months ended March 31, 2023.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended September 30, 2023:

• The Company sold its interests in six surgical facilities for aggregate net cash proceeds of $ 30.4 million, a portion of which was held in escrow pursuant to the purchase agreements for such transactions.

In connection with these transactions, the Company recognized a pre-tax gain of $ 26.9 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the nine months ended September 30, 2023.

• The Company disposed of its non-controlling interests in a surgical facility and an in-development de novo surgical facility, which were previously accounted for as equity method investments, for cash proceeds of $ 1.5 million.

In connection with these transactions, the Company recognized a pre-tax loss of $ 13.7 million included in net loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the nine months ended September 30, 2023.

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, and recognized a pre-tax loss of $ 0.4 million included in net loss on disposals and consolidations in the condensed consolidated statements of operations for 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 fair value measurement utilizes Level 3 inputs, which includes unobservable data, to measure the fair value of the retained non-controlling interests.

The fair value determination was based on a combination of multiple valuation methods, which included discounted cash flow and market value approach, which incorporates estimates of future earnings and market valuation multiples for certain guideline companies.

The 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 valuation, the transactions resulted in a pretax net loss on deconsolidations of $ 5.6 million, which is included in net loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2022.

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.

Long-Term Debt

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

September 30,

2024 December 31,

1 unchanged sentence

$ 1,398.4 $ 1,398.4

Senior secured revolving credit facility 87.0 —

6.750 % senior unsecured notes due 2025

6 unchanged sentences

Total long-term debt $ 2,793.8 $ 2,701.8

(1) Includes unamortized fair value discount of $ 1.8 million and $ 2.1 million as of September 30, 2023 and December 31, 2022, respectively.

On January 13, 2023, the Company entered into an amendment to its credit agreement, dated as of August 31, 2017 (the "Credit Agreement"), to provide a $ 203.8 million increase in the outstanding commitments under its revolving credit facility (the "Revolver").

As of September 30, 2023, the Company's availability on its Revolver was $ 544.9 million (including outstanding letters of credit of $ 8.9 million).

There were no outstanding borrowings under the Revolver as of both September 30, 2023 and December 31, 2022.

On June 8, 2023, the Company entered into an amendment to the Credit Agreement to transition the interest benchmark from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR") effective July 1, 2023.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Includes unamortized fair value discount of $ 1.6 million as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024, the Company's availability on its Revolver was $ 607.3 million (including letters of credit of $ 9.5 million).

The increase in outstanding borrowings on the Revolver, was primarily due to the timing of acquisitions completed during the first quarter of 2024.

"Subsequent Events" for additional information related to the Company's debt obligations.

The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices.

The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets.

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 September 30, 2023 December 31, 2022

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

Classification in Condensed Consolidated Balance Sheets March 31, 2024 December 31, 2023

Operating lease assets Right-of-use operating lease assets $ 257.7 $ 255.3

10 unchanged sentences

Total lease liabilities $ 992.9 $ 980.1

During the nine months ended September 30, 2023, 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 $ 97.1 million and $ 95.7 million, respectively, including the reclassification of existing operating lease liabilities and assets of $ 38.4 million and $ 36.9 million, respectively.

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

Nine Months Ended September 30,

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended March 31,

Operating lease costs $ 15.9 $ 16.4

5 unchanged sentences

Total lease costs $ 46.5 $ 43.3

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Nine Months Ended September 30,

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

Three Months Ended March 31,

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

10 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

4 unchanged sentences

Interest rate cap September 30, 2021 8.5 Active 8.7 Active March 31, 2025

Pay-fixed swap November 30, 2018 165.0 Active 165.0 Active November 30, 2023

Pay-fixed swap November 30, 2018 120.0 Active 120.0 Active November 30, 2023

Pay-fixed swap June 28, 2019 150.0 Active 150.0 Active November 30, 2023

Receive-fixed swap April 30, 2021 ( 165.0 ) Active ( 165.0 ) Active November 30, 2023

Receive-fixed swap April 30, 2021 ( 120.0 ) Active ( 120.0 ) Active November 30, 2023

Receive-fixed swap April 30, 2021 ( 150.0 ) Active ( 150.0 ) Active November 30, 2023

$ 1,357.9 $ 1,360.1

As of September 30, 2023, the Company had nine interest rate swaps with a total net notional amount of $ 1.2 billion.

Of the nine interest rate swaps, three are pay-fixed, receive 1-Month SOFR (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.

The remaining six interest rate swaps are undesignated and consist of three pay-fixed, receive 1-Month SOFR (subject to a minimum of 1.00 %) interest rate swaps and three pay 1-Month SOFR (subject to a minimum of 1.00 %), receive-fixed interest rate swaps with a termination date of November 30, 2023.

The pay-floating, receive-fixed swaps are designed to economically offset the undesignated pay-fixed, receive-floating swaps.

The Company's interest rate derivative agreements were indexed to LIBOR prior to permanent cessation on June 30, 2023 and automatically transitioned to SOFR in accordance with their respective fallback provisions.

As of September 30, 2023, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $ 162.1 million.

As of March 31, 2024, the Company had three interest rate swaps with a total net notional amount of $ 1.2 billion.

The interest rate swaps are pay-fixed, receive 1-Month Secured Overnight Financing Rate ("SOFR") (subject to a minimum of 0.75 %) designated in cash flow hedging relationships and have a termination date of March 31, 2025.

As of March 31, 2024, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $ 157.9 million.

The interest rate caps each have a termination date of March 31, 2025.

During the nine months ended September 30, 2023, the Company partially terminated a previously undesignated portion of one of its interest rate caps.

In connection with the termination, the Company received $ 8.6 million, which is included as a component of operating activities in the condensed consolidated statements of cash flows for the nine months ended September 30, 2023.

The pay-fixed, receive floating interest rate swaps did not meet the requirements to be considered derivatives in their entirety as a result of the financing component.

Accordingly, the swaps are considered hybrid instruments, consisting of a financing element treated as a debt instrument and an embedded at-market derivative that was designated as a cash flow hedge.

Within the Company’s condensed consolidated balance sheets, the financing elements treated as debt instruments described above are carried at amortized cost and the embedded at-market derivatives and the undesignated swaps are recorded at fair value.

The cash flows

During the three months ended March 31, 2023, the Company partially terminated a previously undesignated portion of one of its interest rate caps.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

related to the portion treated as debt are classified as financing activities in the condensed consolidated statements of cash flows while the portion treated as an at-market derivative are classified as operating activities.

Cash settlements related to the undesignated swaps will offset and are classified as operating activities in the condensed consolidated cash flows.

Within the Company’s condensed consolidated balance sheets, the interest rate caps, including the undesignated portion, are recorded at fair value.

The cash flows related to the interest rate caps, including the undesignated portion, are classified as operating activities in the condensed consolidated statements of cash flows.

The pay-fixed, receive floating interest rate swaps did not meet the requirements to be considered derivatives in their entirety as a result of the financing component.

Accordingly, the swaps are considered hybrid instruments, consisting of a financing element treated as a debt instrument and an embedded at-market derivative that was designated as a cash flow hedge.

The cash flows related to the portion treated as debt are classified as financing activities in the condensed consolidated statements of cash flows while the portion treated as an at-market derivative are classified as operating activities.

Within the Company’s condensed consolidated balance sheets, the interest rate caps are recorded at fair value.

The cash flows related to the interest rate caps are classified as operating activities in the condensed consolidated statements of cash flows.

The Company's interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the condensed consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy.

The fair value of the interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps.

The fair value of the interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps.

The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

4 unchanged sentences

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Location Assets Liabilities Assets Liabilities

Derivatives not designated as hedging instruments

Interest rate caps Other long-term assets $ — $ — $ 9.0 $ —

Interest rate swaps Other long-term assets 2.0 — 8.5 —

Interest rate swaps Other long-term liabilities — 2.0 — 8.5

Derivatives in cash flow hedging relationships

4 unchanged sentences

Total $ 51.8 $ 14.3 $ 57.4 $ 17.8

(1) The balance 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 September 30, Nine Months Ended September 30,

(1) The balance is related to the financing component of the pay-fixed 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 statements of operations (in millions):

Three Months Ended March 31,

Location 2024 2023

2 unchanged sentences

Derivatives in cash flow hedging relationships

Gain recognized in OCI (effective portion) $ 7.4 $ 37.0 $ 24.1 $ 100.1

(Gain) loss reclassified from accumulated OCI into income (effective portion) (1)

Gain (loss) recognized in OCI (effective portion) $ 9.2 $ ( 5.2 )

Gain reclassified from accumulated OCI into income (effective portion) (1)

Interest expense, net $ ( 14.7 ) $ ( 6.1 )

(1) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 5.3 million and $ 5.4 million for the three months ended September 30, 2023 and 2022, respectively.

Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 16.0 million for each of the nine months ended September 30, 2023 and 2022.

(1) Includes amortization of accumulated OCI related to de-designated and terminated interest rate swaps of $ 5.4 million for the three months ended March 31, 2023.

There was no corresponding amount for the three months ended March 31, 2024.

"Subsequent Events" for additional information related to the Company's cash flow hedging relationships.

SURGERY PARTNERS, INC.

4 unchanged sentences

shares in thousands):

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

2023 2022 2023 2022

Three Months Ended March 31,

Net loss attributable to Surgery Partners, Inc.

$ ( 12.4 ) $ ( 24.9 )

Weighted average shares outstanding- basic 125,747 88,907 125,559 88,604

Weighted average shares outstanding- diluted (1)

Weighted average common shares outstanding:

Basic 125,972 125,206

125,972 125,206

Loss per share:

Net loss per share attributable to common stockholders:

Basic $ ( 0.10 ) $ ( 0.20 )

$ ( 0.10 ) $ ( 0.20 )

Dilutive securities outstanding not included in the computation of income (loss) per share as their effect is antidilutive:

Dilutive securities outstanding not included in the computation of diluted loss per share as their effect is antidilutive:

Stock options 1,237 1,338

Restricted shares 148 67

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

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

Other Current Liabilities

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

September 30,

2023 December 31,

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

March 31, 2024 December 31, 2023

Right-of-use operating lease liabilities $ 37.8 $ 37.6

Amounts due to patients and payors 27.1 31.9

Cost report liabilities 24.0 23.9

Amounts due to patients and payors 25.8 23.9

Interest payable 22.3 17.8

Acquisition escrow 17.4 28.8

Accrued expenses and other 93.6 100.9

1 unchanged sentence

Commitments and Contingencies

Professional, General, Workers' Compensation and Cyber Liability Risks

Professional, General and Workers' Compensation, and Cyber Liability Risks

The Company is subject to claims and legal actions in the ordinary course of business, including claims relating to patient treatment, employment practices and personal injuries.

The Company maintains professional, general, workers' compensation and cyber liability insurance in excess of self-insured retentions through third party commercial insurance carriers.

The Company maintains professional, general and workers' compensation and cyber liability insurance in excess of self-insured retentions, through third party commercial insurance carriers.

Although management believes the coverage is sufficient for the Company's operations, some claims may potentially exceed the scope of coverage in effect.

1 unchanged sentence

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 September 30, 2023 and December 31, 2022 were $ 23.6 million and $ 20.8 million, respectively.

Expected insurance recoveries of $ 12.7 million as of both September 30, 2023 and December 31, 2022 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 March 31, 2024 and December 31, 2023 were $ 19.1 million and $ 18.2 million, respectively.

Expected insurance recoveries of $ 10.2 million as of March 31, 2024 and December 31, 2023, respectively, are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In May 2023, we experienced a cybersecurity incident that temporarily disrupted certain facilities in our Idaho market.

We estimate that this incident had an adverse pre-tax impact of approximately $ 7 million during the nine months ended September 30, 2023.

This estimate includes lost revenue from the associated business interruption and other related expenses.

We have filed a claim with the insurance carrier related to this incident.

No insurance recoveries were recognized during the nine months ended September 30, 2023.

Stockholder Litigation

On December 4, 2017, a purported Company stockholder filed an action in the Delaware Court of Chancery (the "Delaware Action").

That action is captioned Witmer v.

Capital, L.L.C., et al., C.A.

The plaintiff in the Delaware Action asserted claims against (i) certain current and former members of the Company’s Board of Directors (together, the "Directors");

Capital, LLC and certain of its affiliates (collectively, "H.I.G.");

and (iii) Bain Capital Private Equity, L.P.

and certain of its affiliates (collectively, "Bain Capital" and, together with the Directors and H.I.G., the "Defendants").

The parties to the Delaware Action negotiated a final stipulation of settlement (the “Settlement Stipulation”), which governs the terms of the settlement of the Delaware Action, and which they filed with the Court of Chancery on November 22, 2021.

On February 11, 2022, the Court of Chancery approved the settlement of the Delaware Action as memorialized in the Settlement Stipulation.

That decision became final and non-appealable on March 14, 2022.

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 nine months ended September 30, 2022.

Segment Reporting

2 unchanged sentences

The Ancillary Services segment consists of multi-specialty physician practices.

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

The "All other" line item 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):

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

2023 2022 2023 2022

Three Months Ended March 31,

Surgical Facility Services $ 692.7 $ 649.0

7 unchanged sentences

Reconciliation of Adjusted EBITDA:

Income before income taxes $ 32.8 $ 13.4 $ 82.3 $ 77.1

Income (loss) before income taxes $ 28.7 $ ( 0.4 )

Net income attributable to non-controlling interests ( 36.7 ) ( 26.1 )

3 unchanged sentences

Transaction, integration and acquisition costs (1)

13.0 13.1 38.8 28.4

Net loss on disposals, consolidations and deconsolidations 1.5 10.5

Litigation settlements and regulatory change impact (2)

4.2 1.5 13.9 ( 27.6 )

Undesignated derivative activity — 0.6

1.2 1.1 7.7 1.1

Adjusted EBITDA $ 97.5 $ 90.1

(1) This amount includes transaction and integration costs of $ 12.8 million and $ 12.5 million for the three months ended September 30, 2023 and 2022, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 0.2 million and $ 0.6 million for the three months ended September 30, 2023 and 2022, respectively.

(1) This amount includes transaction and integration costs of $ 17.4 million and $ 12.5 million for the three months ended March 31, 2024 and 2023, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 1.5 million and $ 0.3 million for the three months ended March 31, 2024 and 2023, respectively.

(2) This amount includes a litigation settlements gain of $ 1.8 million and a loss of $ 3.0 million for the three months ended March 31, 2024 and 2023, respectively.

This amount also includes other litigation costs of $ 0.6 million and $ 0.6 million for the three months ended March 31, 2024 and 2023, respectively.

Additionally, the three months ended March 31, 2023, includes $ 4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

SURGERY PARTNERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

This amount includes transaction and integration costs of $ 37.3 million and $ 27.8 million for the nine months ended September 30, 2023 and 2022, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $ 1.5 million and $ 0.6 million for the nine months ended September 30, 2023 and 2022, respectively.

(2) This amount includes a litigation settlement loss of $ 3.6 million for the three months ended September 30, 2023.

This amount also includes other litigation costs of $ 0.6 million and $ 1.5 million for the three months ended September 30, 2023 and 2022, respectively.

This amount includes a litigation settlement loss of $ 8.1 million and a gain of $ 32.8 million for the nine months ended September 30, 2023 and 2022, respectively.

This amount also includes other litigation costs of $ 1.4 million and $ 5.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Additionally, the nine months ended September 30, 2023, includes $ 4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection.

(3) This amount includes estimates for the net impact of the May 2023 cyber event for the three months ended September 30, 2023.This amount includes estimates for the net impact of a cyber event and losses from a divested business for the nine months ended September 30, 2023.

Amounts presented for the three and nine months ended September 30, 2022 reflect losses incurred, net of insurance proceeds received, related to certain surgical facilities that were closed following Hurricane Ian.

September 30,

2023 December 31,

March 31, 2024 December 31, 2023

Surgical Facility Services $ 6,420.9 $ 6,347.4

2 unchanged sentences

Total assets $ 6,975.6 $ 6,876.7

Nine Months Ended September 30,

Three Months Ended March 31,

Cash purchases of property and equipment:

3 unchanged sentences

Total cash purchases of property and equipment $ 21.0 $ 24.3

Subsequent Events

On April 9, 2024, the Company entered into five deferred premium interest rate cap agreements, each with an effective date of March 31, 2025.

The interest rate caps are designated in cash flow hedging relationships with a total notional amount of $ 1.4 billion.

The interest rate caps each have a termination date of December 31, 2028.

These financial instruments are designed to limit the Company's interest rate exposure on its term loan concurrent with the expected maturity of positions held as of March 31, 2024.

"Derivatives and Hedging Activities" for additional information.

On April 10, 2024, the Company completed the issuance and sale of $ 800.0 million in aggregate principal amount of senior unsecured notes due 2032 (the "2032 Notes").

The 2032 Notes were issued pursuant to an Indenture dated April 10, 2024 among Surgery Center Holdings, Inc., certain subsidiaries of Surgery Center Holdings, Inc., as guarantors, and Wilmington Trust, National Association, as trustee.

The 2032 Notes bear interest at an annual rate of 7.250 % per year, payable semi-annually on April 15 and October 15 of each year, beginning on October 15, 2024.

Proceeds from the sale of the 2032 Notes were used (i) to redeem all of the outstanding 6.750 % senior unsecured notes due 2025 (the "2025 Notes") and the 10.000 % senior unsecured notes due 2027 (the "2027 Notes," together with the 2025 Notes, the "Existing Notes"), (ii) to pay accrued interest on the Existing Notes through, but not including, April 25, 2024, (iii) to pay related fees and expenses in connection with the offering of the 2032 Notes and redemption of the Existing Notes and (iv) for general corporate purposes, including to fund future acquisitions.

On April 30, 2024, the Company purchased a controlling interest in a surgical hospital and two physician practices and a non-controlling interest in an ASC for $ 188.2 million.

The Company funded the cash purchase price with available resources.

As of the date of this filing, the Company has not completed its preliminary estimation of the fair values assigned to the assets acquired and liabilities assumed.

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