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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-07 · 139 added, 59 removed, 160 unchanged (55% of the section changed)

37 unchanged sentences

Executive Overview

As of March 31, 2024, we owned or operated, primarily in partnership with physicians, a portfolio of 165 surgical facilities comprised of 147 ASCs and 18 surgical hospitals across 33 states.

As of June 30, 2024, we owned or operated, primarily in partnership with physicians, a portfolio of 167 surgical facilities comprised of 148 ASCs and 19 surgical hospitals across 33 states.

We owned a majority interest in 92 of the surgical facilities and consolidated 127 of these facilities for financial reporting purposes.

Total revenues for the first quarter of 2024 increased 7.7% to $717.4 million from $666.2 million for the first quarter of 2023.

The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed during the last twelve months ended March 31, 2024.

Days adjusted same-facility revenues for the first quarter of 2024 increased 10.2% from the first quarter of 2023, with an 8.8% increase in revenue per case and a 1.3% increase in same-facility cases.

Additionally, for the first quarter of 2024, Adjusted EBITDA increased 8.2% to $97.5 million compared to $90.1 million for the same period in 2023.

Total revenues for the second quarter of 2024 increased 14.2% to $762.1 million from $667.6 million for the second quarter of 2023.

The increase in revenues was attributable to same-facility revenue growth and the net impact from acquisitions and divestitures completed during the twelve months ended June 30, 2024.

Days adjusted same-facility revenues for the second quarter of 2024 increased 9.9% from the second quarter of 2023, with an 5.7% increase in revenue per case and a 3.9% increase in same-facility cases.

Additionally, for the second quarter of 2024, Adjusted EBITDA increased 18.1% to $118.3 million compared to $100.2 million for the same period in 2023.

The increase in Adjusted EBITDA was primarily attributable to revenue growth, continued cost management initiatives and acquisitions completed since the prior year period.

For the first quarter of 2024, net loss attributable to common stockholders was $12.4 million compared to $24.9 million for the same period in 2023.

For the second quarter of 2024, net loss attributable to common stockholders was $15.5 million compared to net income attributable to common stockholders of $18.9 million for the same period in 2023.

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

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

During the first quarter of 2024 we completed the following:

• We 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.

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.

During the second quarter of 2024, we completed the following:

• We acquired a controlling interest in six surgical facilities and several physician practices for aggregate cash consideration of $264.6 million, net of cash acquired, and non-cash consideration of $1.1 million.

• We sold a non-controlling interest in a surgical facility for net cash proceeds of $2.0 million.

• We sold a portion of our interests in a surgical facility for net cash proceeds of $2.5 million.

As a result of the transaction, we no longer control the previously controlled surgical facility but retain a non-controlling interest, resulting in the deconsolidation of the previously consolidated entity.

We had cash and cash equivalents of $185.2 million and $607.3 million of borrowing capacity under our Revolver as of March 31, 2024.

In connection with this transaction, we no longer hold a controlling interest in the surgical facility but did retain a non-controlling interest, which resulted in the deconsolidation of the previously consolidated entity.

We had cash and cash equivalents of $213.5 million and $647.8 million of borrowing capacity under the Revolver as of June 30, 2024.

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

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Patient service revenues:

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Private insurance payors 53.2 % 51.9 % 52.2 % 51.5 %

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Other payors (1)

2.5 % 3.2 % 2.8 % 2.9 %

Total 100.0 % 100.0 % 100.0 % 100.0 %

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Orthopedics and pain management 39.9 % 34.7 % 40.0 % 35.2 %

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Results of Operations

Comparison of Operating Results for the Three Months Ended March 31,2024 to the Three Months Ended March 31, 2023

Comparison of Operating Results for the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023

The following tables summarize certain results from the statements of operations for the periods indicated (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

Revenues $ 762.1 $ 667.6

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Transaction and integration costs 19.3 12.0

Net loss (gain) on disposals, consolidations and deconsolidations 5.3 (8.8)

Equity in earnings of unconsolidated affiliates (4.4) (2.6)

Litigation settlements 0.5 1.5

Loss on debt extinguishment 5.1 —

Other income, net (6.5) (1.2)

Operating income 84.8 97.6

Interest expense, net (51.5) (47.7)

Income before income taxes 33.3 49.9

Income tax (expense) benefit (4.9) 7.8

Net income 28.4 57.7

Net income attributable to non-controlling interests (43.9) (38.8)

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

$ (15.5) $ 18.9

The following table sets forth patient service revenues (in millions):

Three Months Ended June 30,

Patient service revenues $ 748.1 $ 658.0

Other service revenues 14.0 9.6

Total revenues $ 762.1 $ 667.6

Patient service revenues increased 13.7% to $748.1 million for the three months ended June 30, 2024 compared to $658.0 million for the three months ended June 30, 2023.

The increase was primarily driven by a 9.9% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the twelve months ended June 30, 2024.

The increase in days adjusted same-facility revenues was attributable to a 3.9% increase in same-facility case volumes and a 5.7% increase in same-facility revenue per case.

Cost of Revenues.

Cost of revenues was $582.9 million for the three months ended June 30, 2024 compared to $513.5 million for the three months ended June 30, 2023.

The increase was primarily driven by increased performance of high acuity procedures and acquisitions completed during the twelve months ended June 30, 2024.

As a percentage of revenues, cost of revenues was 76.5% and 76.9% for the three months ended June 30, 2024 and 2023, respectively.

General and Administrative Expenses.

General and administrative expenses were $40.3 million and $31.2 million for the three months ended June 30, 2024 and 2023, respectively.

As a percentage of revenues, general and administrative expenses were 5.3% and 4.7% for the three months ended June 30, 2024 and 2023, respectively.

Depreciation and Amortization.

Depreciation and amortization expenses were $34.8 million and $24.4 million for the three months ended June 30, 2024 and 2023, respectively.

As a percentage of revenues, depreciation and amortization expenses were 4.6% and 3.7% for the three months ended June 30, 2024 and 2023, respectively.

Transaction and Integration Costs.

The Company incurred $19.3 million of transaction and integration costs for the three months ended June 30, 2024 compared to $12.0 million for the three months ended June 30, 2023.

The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions.

Net Loss (Gain) on Disposals, Consolidations and Deconsolidations.

The net loss (gain) on disposals, consolidations and deconsolidations for the three months ended June 30, 2024 and 2023 includes activity discussed in Note 2.

"Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the condensed consolidated financial statements.

The remaining net loss (gain) in both periods was primarily attributable to sales and disposals of other assets.

Interest Expense, Net.

Interest expense, net was $51.5 million for the three months ended June 30, 2024 compared to $47.7 million for the three months ended June 30, 2023.

As a percentage of revenues, interest expense, net was 6.8% and 7.1% for the three months ended June 30, 2024 and 2023, respectively.

Income Tax (Expense) Benefit .

Income tax expense was $4.9 million for the three months ended June 30, 2024 compared to income tax benefit of $7.8 million for the three months ended June 30, 2023.

The effective tax rate was 14.7% and (15.6)% for the three months ended June 30, 2024 and 2023, respectively.

"Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the three months ended June 30, 2024 and June 30, 2023, including why these rates differed from the U.S.

federal statutory rate of 21%.

Net Income Attributable to Non-Controlling Interests.

As a percentage of revenues, net income attributable to non-controlling interests was 5.8% for each of the three months ended June 30, 2024 and 2023.

Comparison of Operating Results for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

The following tables summarize certain results from the statements of operations for the periods indicated (dollars in millions):

Six Months Ended June 30,

Revenues $ 1,479.5 $ 1,333.8

Operating expenses:

Cost of revenues 1,145.0 1,045.7

General and administrative expenses 73.5 63.2

Depreciation and amortization 68.5 58.1

Transaction and integration costs 36.7 24.5

Net loss on disposals, consolidations and deconsolidations 6.8 1.7

1 unchanged sentence

Litigation settlements (1.3) 4.5

Other income (2.0) (0.8)

Loss on debt extinguishment 5.1 —

Other income, net (8.5) (2.0)

1,318.7 1,189.8

Operating income 160.8 144.0

Interest expense, net (98.8) (94.5)

Income (loss) before income taxes 28.7 (0.4)

Income before income taxes 62.0 49.5

Income tax (expense) benefit (9.3) 9.4

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The following table sets forth patient service revenues (in millions):

Three Months Ended March 31,

Six Months Ended June 30,

Patient service revenues $ 1,453.4 $ 1,314.4

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Total revenues $ 1,479.5 $ 1,333.8

Patient service revenues increased 7.4% to $705.3 million for the three months ended March 31, 2024 compared to $656.4 million for the three months ended March 31, 2023.

The increase was primarily driven by a 10.2% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed during the last twelve months ended March 31, 2024.

Patient service revenues increased 10.6% to $1.5 billion for the six months ended June 30, 2024 compared to $1.3 billion for the six months ended June 30, 2023.

The increase was primarily driven by a 10.0% increase in days adjusted same-facility revenues and the net impact from acquisitions and divestitures completed in 2024.

The increase in days adjusted same-facility revenues was attributable to a 2.7% increase in same-facility case volumes and a 7.1% increase in same-facility revenue per case.

Cost of Revenues.

Cost of revenues was $562.1 million for the three months ended March 31, 2024 compared to $532.2 million for the three months ended March 31, 2023.

The increase was primarily driven by increased performance of high acuity procedures and acquisitions completed during the last twelve months ended March 31, 2024.

As a percentage of revenues, cost of revenues was 78.4% and 79.9% for the three months ended March 31, 2024 and 2023, respectively.

Cost of revenues was $1.1 billion for the six months ended June 30, 2024 compared to $1.0 billion for the six months ended June 30, 2023.

The increase was primarily driven by increased performance of high acuity procedures and acquisitions completed in 2024.

As a percentage of revenues, cost of revenues was 77.4% and 78.4% for the six months ended June 30, 2024 and 2023, respectively.

General and Administrative Expenses.

General and administrative expenses were $33.2 million and $32.0 million for the three months ended March 31, 2024 and 2023, respectively.

As a percentage of revenues, general and administrative expenses were 4.6% in the first quarter of 2024 compared to 4.8% in the first quarter of 2023.

General and administrative expenses were $73.5 million and $63.2 million for the six months ended June 30, 2024 and 2023, respectively.

As a percentage of revenues, general and administrative expenses were 5.0% and 4.7% for the six months ended June 30, 2024 and 2023, respectively.

Depreciation and Amortization.

Depreciation and amortization expenses were $33.7 million for each of the three months ended March 31, 2024 and 2023.

As a percentage of revenues, depreciation and amortization expenses were 4.7% and 5.1% for the three months ended March 31, 2024 and 2023, respectively

Depreciation and amortization expenses were $68.5 million and $58.1 million for the six months ended June 30, 2024 and 2023, respectively.

As a percentage of revenues, depreciation and amortization expenses were 4.6% and 4.4% for the six months ended June 30, 2024 and 2023, respectively.

Transaction and Integration Costs.

We incurred $17.4 million of transaction and integration costs for the three months ended March 31, 2024 compared to $12.5 million for the three months ended March 31, 2023.

The Company incurred $36.7 million of transaction and integration costs for the six months ended June 30, 2024 compared to $24.5 million for the six months ended June 30, 2023.

The costs for both periods primarily related to ongoing development initiatives and the integration of acquisitions.

Net Loss on Disposals, Consolidations and Deconsolidations.

The net loss on disposals, consolidations and deconsolidations for the three months ended March 31, 2024 and 2023 includes activity discussed in Note 2.

Net Loss (Gain) on Disposals, Consolidations and Deconsolidations.

The net loss (gain) on disposals, consolidations and deconsolidations for the six months ended June 30, 2024 and 2023 includes activity discussed in Note 2.

"Acquisitions, Disposals and Deconsolidations" of the accompanying notes to the condensed consolidated financial statements.

The remaining net loss in both periods was primarily attributable to sales and disposals of other assets.

The remaining net loss (gain) in both periods was primarily attributable to sales and disposals of other assets.

Interest Expense, Net.

Interest expense, net was $47.3 million for the three months ended March 31, 2024 compared to $46.8 million for the three months ended March 31, 2023.

As a percentage of revenues, interest expense, net was 6.6% and 7.0% for the three months ended March 31, 2024 and 2023, respectively.

Interest expense, net was $98.8 million for the six months ended June 30, 2024 compared to $94.5 million for the six months ended June 30, 2023.

As a percentage of revenues, interest expense, net was 6.7% and 7.1% for the six months ended June 30, 2024 and 2023, respectively.

Income Tax (Expense) Benefit .

Income tax expense was $4.4 million for the three months ended March 31, 2024 as compared to income tax benefit of $1.6 million for the three months ended March 31, 2023.

The effective tax rate was 15.3% and 400.0% for the three months ended March 31, 2024 and 2023, respectively.

"Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the three months ended March 31, 2024 and March 31, 2023, including why these rates differed from the U.S.

Income tax expense was $9.3 million for the six months ended June 30, 2024 compared to income tax benefit of $9.4 million for the six months ended June 30, 2023.

The effective tax rate was 15.0% and (19.0)% for the six months ended June 30, 2024 and 2023, respectively.

"Organization and Summary of Accounting Policies" under the heading Income Taxes for additional information related to the Company's effective tax rates for the six months ended June 30, 2024 and 2023, including why these rates differed from the U.S.

federal statutory rate of 21%.

Net Income Attributable to Non-Controlling Interests.

As a percentage of revenues, net income attributable to non-controlling interests was 5.1% and 3.9% for the three months ended March 31, 2024 and 2023, respectively.

As a percentage of revenues, net income attributable to non-controlling interests was 5.4% and 4.9% for the six months ended June 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

Cash and cash equivalents were $185.2 million at March 31, 2024 compared to $195.9 million at December 31, 2023.

Cash and cash equivalents were $213.5 million at June 30, 2024 compared to $195.9 million at December 31, 2023.

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

Our cash flows provided by operating activities was $40.7 million for the three months ended March 31, 2024 compared to $74.5 million for the three months ended March 31, 2023.

Our cash flows provided by operating activities was $123.5 million for the six months ended June 30, 2024 compared to $126.6 million for the six months ended June 30, 2023.

The $3.1 million decrease was primarily driven by the timing of routine transactions involving working capital and accrued payroll and benefits.

Net cash used in investing activities for the three months ended March 31, 2024 was $83.1 million compared to $70.7 million for the three months ended March 31, 2023.

Net cash used in investing activities for the six months ended June 30, 2024 was $327.2 million compared to $141.9 million for the six months ended June 30, 2023.

The $185.3 million increase was primarily driven by an aggregate net increase of $174.4 million in payments for acquisitions (net of cash acquired) and purchases of equity method investments and a $24.6 million decrease in proceeds from sales of facilities.

Net cash provided by financing activities for the three months ended March 31, 2024 was $31.7 million compared to net cash used of $41.2 million for the three months ended March 31, 2023.

The increase of $72.3 million was primarily driven by net borrowings on the Revolver due to the timing of acquisitions completed during the first quarter of 2024.

On April 10, 2024, we completed the issuance and sale of $800.0 million in aggregate principal amount of 2032 Notes.

Net cash provided by financing activities for the six months ended June 30, 2024 was $221.3 million compared to net cash used of $90.2 million for the six months ended June 30, 2023.

The increase of $311.5 million was primarily driven by net proceeds received from the issuance and sale of $800.0 million in senior unsecured notes, partially offset by the redemption all the Existing Notes (as discussed in the following section).

The remaining increase was due to net borrowings on the Revolver used to fund acquisitions completed during the six months ended June 30, 2024.

On April 10, 2024, we 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 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 sale of the 2032 Notes were used (i) to redeem all of the outstanding 2025 Notes and 2027 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 June 20, 2024, the Company entered into a first amendment to its credit agreement, dated as of December 19, 2023, by and among Surgery Center Holdings, Inc., the Borrower, Jefferies Finance LLC, as administrative agent and collateral agent, and the other financial institutions party thereto from time to time to provide for a new tranche of term loans under the Credit Agreement in an aggregate principal amount of $1.4 billion, which 2024 Refinancing Term Loans replace or refinance in full all of the existing term loans outstanding under the Credit Agreement (as in effect immediately prior to the Amendment), all as further set forth in the Amendment.

The 2024 Refinancing Term Loans mature on December 19, 2030.

The 2024 Refinancing Term Loans shall bear interest at a rate per annum equal to (x) the forward-looking term rate based on Secured Overnight Financing Rate (“Term SOFR”) plus 2.75% per annum or (y) an alternate base rate (which will be the highest of (i) the prime rate plus 0.5% per annum above the federal funds effective rate and (ii) Term SOFR plus 1.00% per annum (which shall not be less than 1.00%) plus 1.75% per annum.

The 2024 Refinancing Term Loans amortize in equal quarterly installments of 0.25% of the aggregate original principal amount of the 2024 Refinancing Term Loans (such amortization payments will commence on or around the last business day of the fiscal quarter ending June 30, 2024).

Voluntary prepayments of the 2024 Refinancing Term Loans are permitted, in whole or in part, with prior notice, without premium or penalty (except a 1.00% call premium in the case of certain repricing events occurring prior to the sixth month anniversary of the Amendment Effective Date).

Capital Resources

Net working capital was approximately $372.5 million at March 31, 2024 compared to $372.0 million at December 31, 2023.

Net working capital was approximately $460.7 million at June 30, 2024 compared to $372.0 million at December 31, 2023.

In addition to cash flows from operations and available cash, other sources of capital include amounts available on our Revolver as well as anticipated continued access to the capital markets.

Material Cash Requirements

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the three months ended March 31, 2024 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.

There have been no material changes outside of the ordinary course of business to our upcoming cash obligations during the six months ended June 30, 2024 from those disclosed under “Material Cash Requirements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.

Broad economic factors, including recent increases in interest rates, inflation and supply chain risks and market volatility, could negatively affect our payor mix, increase the relative proportion of lower margin services we provide and reduce patient volumes, as well as diminish our ability to collect outstanding receivables.

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

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

Three Months Ended March 31,

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

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

2024 2023 2024 2023

Condensed Consolidated Statements of Operations Data:

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

Income before income taxes $ 33.3 $ 49.9 $ 62.0 $ 49.5

Plus (minus):

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Transaction, integration and acquisition costs (1)

Net loss on disposals, consolidations and deconsolidations 1.5 10.5

20.8 13.0 39.7 25.8

Net loss (gain) on disposals, consolidations and deconsolidations 5.3 (8.8) 6.8 1.7

Litigation settlements and regulatory change impact (2)

1.1 1.7 (0.1) 9.7

Loss on debt extinguishment 5.1 — 5.1 —

Undesignated derivative activity — — — 0.6

(4.8) 6.5 (4.4) 6.5

Adjusted EBITDA 118.3 100.2 215.8 190.3

(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.

We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to our New Credit Facilities.

(1) This amount includes transaction and integration costs of $19.3 million and $12.0 million for the three months ended June 30, 2024 and 2023, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $1.5 million and $1.0 million for the three months ended June 30, 2024 and 2023, respectively.

This amount includes transaction and integration costs of $36.7 million and $24.5 million for the six months ended June 30, 2024 and 2023, respectively.

This amount further includes start-up costs related to de novo surgical facilities of $3.0 million and $1.3 million for the six months ended June 30, 2024 and 2023, respectively.

(2) This amount includes a litigation settlement loss of $0.5 million and $1.5 million for the three months ended June 30, 2024 and 2023, respectively.

This amount also includes other litigation costs of $0.6 million and $0.2 million for the three months ended June 30, 2024 and 2023, respectively.

This amount includes a litigation settlements gain of $1.3 million and a loss of $4.5 million for the six months ended June 30, 2024 and 2023, respectively.

This amount also includes other litigation costs of $1.2 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively.

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

(3) For the three and six months ended June 30, 2024, this amount includes insurance proceeds related to cyber event losses predominantly incurred in 2023.

For the three and six months ended June 30, 2023, this amount includes estimates for the net impact of the same cyber event and losses from a divested business.

We use Credit Agreement EBITDA as a measure of liquidity and to determine our compliance under certain covenants pursuant to our Credit Agreement, as amended.

Credit Agreement EBITDA is determined on a trailing twelve-month basis.

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

Twelve Months Ended March 31, 2024

Twelve Months Ended June 30, 2024

Cash flows from operating activities $ 290.7

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(1) This amount includes estimates for the impact of a cyber event and losses from divested business that occurred in 2023.

(2) Represents impact of acquisitions as if each acquisition had occurred on April 1, 2023.

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

(2) Represents impact of acquisitions as if each acquisition had occurred on July 1, 2023.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis