effectivecost-effective way. In our experience, providers are increasingly seeking partners that provide comprehensive services and that can quickly adapt to changing health system infrastructure and growth. Working with one vendor that can operate at a nationwide and system-wide scale is attractive to cities, states, and IDNs who operate, manage, and maintain equipment inventories across multiple locations.
Our Solutions
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Clinical Engineering Services: Clinical Engineering Services provides maintenance, repair and remediation solutions for all types of medical equipment, including general biomedical equipment, diagnostic imaging equipment and surgical equipment through supplemental and outsourced offerings. Our supplemental offering helps customers manage their equipment repair and maintenance backlog, assist with remediation and regulatory reporting and temporarily fill open biotechnical positions. With our outsourced offering, we assume full management, staffing and clinical engineering service responsibilities for individual or system-wide customer sites. The outsourced model deploys a dedicated, on-site team to coordinate the management of customer-owned equipment utilizing our proprietary information systems, third party vendors of services and parts, and a broad range of professional services for capital equipment planning and regulatory
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Competitive Strengths
13485:2016.
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worldwide for medical devices: 21 CFR 820 and ISO 13485:2016. This commitment to quality ensures that patient safety and risk management are at the center of every product decision, and that our equipment is serviced to the highest standards in the industry. Over 90We have elected to have independent accredited registrars certify our robust QMS at over 110 of our local market service centers, eight government service centers, and seven Centers of Excellence follow anto ISO 13485:2016 ccertified QMS, and we have elected to hire outside independent accredited registrars to audit our quality system.2015. British Standards Institute (“BSI”) has certified over 90110 of our local market service centers, eight government service centers, and five of our Centers of Excellence to ISO 13485:2016, the remaining two2016. The Surgical Equipment Repair and Imaging Centers of Excellence are certified by Deutscher Kraftfahrzeug-Überwachungs-Verein e.V. (“Dekra”) and National Quality Assurance (“NQA”). Our manufacturing facilities are certified by Intertek. We believe that ISO 13485:2016 provides the stringent guidelines specific to medical devices to ensure that our fleet of equipment, as well as the equipment we service, is maintained to the highest quality standards. Our commitment to quality extends to our exclusive use of OEM parts to repair FDA 510(k) registered medical devices that we own, whenever available. Implementing optimal maintenance intervals and parts replacement extends equipment use life, thereby reducing waste and lowering risk of obsolescence. We believe that our robust QMS policies set us apart in our industry from those who may use less stringent quality practices on the equipment they own or maintain.
2022.
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Highly engaged team. We believe a strong and sustainable company begins with an engaged and empowered team. We are committed to investing in our team’s development and to fostering a culture of diversity, inclusion, trust and transparency. Approximately 41% of our total work force is comprised of minorities and approximately 29% of our team members are female. Since 2018, we have consistently had an annual internal promotion rate of approximately 29%, compared to the national average of 8.9%, as reported by ADP Research Institute. We offer competitive compensation and benefits programs, and we ensure our team members share in the success of our business with a companywidecompany wide annual bonus program and an Employee Stock Purchase Plan. We strive to ensure Agiliti is a place where our people are proud to work, and we achieve that by listening to feedback and taking active steps to improve. In 2021,2022, we achieved a 7772 employee engagement score rating, which places us nearing the extraordinary company benchmark according to third-party engagement indices.
rating.
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Recent Acquisitions
Northfield Acquisition
On October 28, 2020, we entered into a stock purchase agreement to acquire 100% of the issued and outstanding capital stock of Northfield Medical (“Northfield Medical”) a nationwide provider of surgical equipment repair services for $475.0 million, subject to adjustments (the “Northfield Acquisition”). Northfield Medical provides service and repair of medical devices, specializing in the repair of endoscopes, surgical instruments and other operating room equipment. The acquisition closed on March 19, 2021.
Sizewise Acquisition
On September 14, 2021, we entered into a definitive agreement to acquire Sizewise Rentals, LLC (“Sizewise”), a privately held manufacturer and distributor of specialty patient handling equipment, in a stock purchase transaction valued at $230 million. (the “Sizewise Acquisition”). Sizewise is a leading manufacturer and provider of specialized bed frames, therapeutic surfaces and mobility equipment serving customers in the acute and post-acute care markets with products that address the needs of bariatric, geriatric, pediatric and standard patient populations. The Company completed the acquisition on October 1, 2021.
COVID-19 Update
COVID-19 has placed our customers, business, teams and communities in uncharted waters. We consider the impact of the pandemic on our business by evaluating the health of our operations, changes to our revenue outlook, and the degree to which perceptions of and need for Agiliti solutions have evolved during this unprecedented time. As demand for emergent acute care increases around the country and as the global pandemic highlights the importance of resilient supply chains and service networks, the importance of our services has been magnified. We are proud to have rapidly developed and deployed a response plan to ensure the safety of our team, while continuing to meet our customers’ evolving needs for patient-ready medical equipment when and where it was needed; notably, doing so without service interruptions.
We believe our value proposition now resonates with an even broader audience of customers as providers, IDNs and governments prepare for potential future surges in demand for acute care and the required equipment necessary to care for patients.
Specifically, during the COVID-19 pandemic, we have:
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Business Operations
customers.
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In 2021,2022, our ten largest manufacturers of medical equipment supplied approximately 72%55% (measured in dollars spent) of our direct medical equipment purchases. In 2021,2022, three of our largest medical equipment suppliers accounted for approximately 35%32% of our medical equipment purchases (measured in dollars spent).
Motivated by
In 2021, we continued
For more information, please visit the ESG section of our Investor Relations site:investor relations website at https://investors.agilitihealth.com/esg/corporate-citizenship/default.aspx.
default.aspx
rating.
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Intellectual Property
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receive a higher percentage of variable incentive pay. The actual variable incentive pay received by an individual is based on his or her achievement of certain performance metrics, including revenue, earnings and/or new business milestones.
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systems are in compliance with these regulations, these regulations are subject to change and such changes could have an impact on how we conduct our business.
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Third-Party Reimbursement
Wisconsin
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lasting value in partnership with company management. Since 1974, THL has raised more than $25$35 billion of equity capital, invested in over 150more than 170 companies and completed more than 400600 add-on acquisitions representingthat represent an aggregate enterprise value at acquisition of over $200$250 billion.
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Risk Factor Summary
• |
Risks Related to Our Business and Industry
Political and policy changes could materially limit our growth opportunities.
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anticipates that the healthcare reform legislation will further reduce Medicare spending on services provided by hospitals and other providers and further forms of sales or excise tax on the medical device sector. Various healthcare reform proposals have also emerged at the federal and state level. We cannot predict what healthcare initiatives, if any, will be implemented at the federal or state level, or the effect any future legislation or regulation will have on the Company. However, an expansion in government’s role in the U.S. healthcare industry may lower reimbursements for the Company’s products, reduce medical procedure volumes and may thereby materially adversely affect the Company’s business, financial condition and results of operations.
our suppliers, customers or vendors.
While we have taken steps to minimize the potential for COVID-19 exposure in the workplace, the potential for a COVID-19 outbreak within our facilities occurring and significantly disrupting operations remains possible. Increased infection rates in geographic locations in which we operate have the potential to result in disruptions to our operations at a greater rate than we currently experience.
The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings (including in-person sales activities), events and conferences and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, which could have an adverse effect on our operations. Similarly, work-from-home and other measures may lead to increased absenteeism or cause workplace disruption. There is no certainty that such measures will be sufficient to mitigate the risks posed by the COVID-19 virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.
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to offset such increases. There may also be further impacts on our operational and financial performance if such trends continue.
On February 28, 2022, the Company entered into a new 12-month sole source agreement (the “Agreement”) with HHS and ASPR to provide comprehensive ventilator and powered air purifying respirator (“PAPR”) systems managementsystems. The Agreement’s performance period commences on August 28, 2023 and maintenance services in connection with ongoing supportis anticipated to have a period of performance of four years and maintenancesix months, consisting of a base period of twelve months, three one-year option periods and an additional six-month option period. The Agreement is valued at up to $491 million over its expected term. Additionally on December 14, 2022, the national stockpile. This Agreement replacesCompany received a modification to the Company’s prior agreements withcurrent HHS/ASPR agreement that ran from July 21, 2020, toexpires on February 27, 2022, and is comprised of an initial 6-month base term, running from the period of February 28, 2022, to August 27, 2022, with a 6-month option term that will expire February 27, 2023.
The term of this new Agreement will allow adequate time for HHS/ASPR to compete a longer-term agreement for comprehensive ventilator and PAPR systems management and maintenance services without having a lapse in critical COVID-19 pandemic response needs. HHS/ASPR solicited, negotiated and awarded the Agreement to the Company pursuant to2023 incorporating Federal Acquisition Regulation (“FAR”) 6.302-2 Unusual and Compelling Urgency. Due52.217-8, which allows the government to ext
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irreparable harm to the government and therefore that the Agreement is necessary. We expect that HHS and ASPR will continue to be our largest customer throughout the duration of the Agreement.
The term of the Agreement will allow for transition to the competitive contract when awarded. Agiliti fully intends to compete for such future contract award. Although we expect to have the opportunity to complete a request for proposal for continuing contracts with HHS following the expiration of the Agreement or any extension thereto, the federal government follows a comprehensive competitive bid process that can lengthen the time period for renewals or contract awards and we have no visibility into the the expected timing of any future requests for proposal or contract awards.ASPR. To the extent the Agreement or other contracts with significant customers are not renewed or are terminated, or the timing of any such renewal is substantially delayed, our revenue and operating results would be significantly impacted.
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their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property of any third parties, including such individual’s former employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending
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Consolidation in the healthcare industry may lead to a reduction in the prices we charge, thereby decreasing our revenue.
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We may be unable to make attractive acquisitions or successfully integrate acquired businesses, and any inability to do so may disrupt our business and hinder our ability to grow.
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share, decrease or delay the expected accretive effect of the transaction and negatively impact the price of shares of our common stock. As a result, it cannot be assured that our recent acquisitions will result in the realization of the anticipated benefits and potential synergies.
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Our business entails the risk of claims related to the medical equipment that we outsource and service. We may not have adequate insurance to cover a claim, and it may be more expensive or difficult for us to obtain adequate insurance in the future.
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Social unrest may materially and adversely impact our business.
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Risks Related to HealthCareHealthcare and Other Legal Regulation Affecting Us
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Many states in which we operate also have state laws that protect the privacy and security of confidential, protected health information or other personal information that have similar or even more protection than the federal provisions. State attorneys general are also authorized to enforce federal HIPAA privacy and security rules. Furthermore, state data breach notification laws continue to expand the type of protected health information and other personal information they encompass, and in many cases are more burdensome than the HIPAA/HITECH breach reporting requirements. Some state laws impose fines and penalties upon violators in addition to allowing a private right of action to sue for damages for those who believe their protected health information or other personal information has been misused.
On July 21, 2020 we entered
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Additionally, the U.S. government may not exercise an option period for various reasons, or, alternatively, the U.S. government may exercise option periods, even for contracts for which it is expected that our costs may exceed the contract price or ceiling.
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In addition to the FDCA, FDARA and state licensing requirements, we are impacted by federal and state laws and regulations aimed at protecting the privacy of individually identifiable protected health information, among other things, and detecting and preventing fraud, abuse and waste with respect to federal and state healthcare programs. Some of these laws and regulations apply directly to us. Additionally, many of our customers require us to abide by their policies relating to patient privacy, state and federal anti-kickback acts, and state and federal false claim acts and whistleblower protections. Since the Affordable Care Act provides for further oversight over and detection of fraud and abuse activities, we expect many of our customers to continue to require us to abide by such policies.
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Risks Related to Our Indebtedness
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We may not be able to obtain funding on acceptable terms or at all as a result of the credit and capital markets. Thus, we may be unable to expand our business or to service our debt.
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THL may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.
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compliance costs, and increase demand on our systems. In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management and impact the manner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in filings required of a public company, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors.
Our current controls
We expect our independent registered public accounting firm will be required to formally attest to the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.
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Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.
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provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.
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addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur, including under the credit agreements governing our credit facilities. Therefore, any return on investment in our common stock is solely dependent upon the appreciation of the price of our common stock on the open market, which may not occur.
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Stock Performance Graph
| | | | | | | | | | | | |
| | 2021 | ||||||||||
Index | | | Apr. 23 | | | Jun. 30 | | | Sep. 30 | | | Dec. 31 |
Agiliti, Inc. |
| $ | 100 |
| $ | 156 | | $ | 136 | | $ | 165 |
S&P 500 Health Care (Sector) | | | 100 | | | 103 | | | 104 | | | 115 |
S&P Mid Cap 400 | | | 100 | | | 100 | | | 98 | | | 105 |
| 2022 | ||||||||||||||||||||||||||
| Index | Mar 31. | Jun 30. | Sep 30. | Dec 31. | ||||||||||||||||||||||
| Agiliti, Inc. | $ | 151 | $ | 147 | $ | 102 | $ | 117 | ||||||||||||||||||
| S&P 500 Health Care (Sector) | 111 | 104 | 99 | 111 | ||||||||||||||||||||||
| S&P Mid Cap 400 | 100 | 84 | 82 | 90 | ||||||||||||||||||||||
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sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements as well as in Part I, Item 1A, “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Annual Report on Form 10-K. Unless otherwise specified, the terms “we”, “our”, “us” and the “Company” refer to Agiliti, Inc. and, where appropriate, its consolidated subsidiaries.
Impact of COVID-19 on our Business
Health and Safety
From the earliest signs of the outbreak, we have taken proactive action to protect the health and safety of our employees, customers, partners and suppliers. We enacted safety measures in all of our sites, including implementing social distancing protocols, requiring working from home for those employees that do not need to be physically present to perform their work, suspending travel, implementing temperature checks at the entrances to our facilities, extensively and
46
frequently disinfecting our workspaces and providing masksEconomic conditions remain uncertain, particularly due to those employees who must be physically present. We expect to continue to implement these measures until we determine that the COVID-19 pandemic is adequately contained for purposes of our business, and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers.
Operations
As a resulteffects of the COVID-19 pandemic, governmental authoritiesglobal supply chain disruptions, and increased inflation. Economic and capital market conditions both in the U.S. and worldwide, have implementedbeen volatile in the past and are continuingat times have adversely affected our access to implement numerouscapital and constantly evolving measuresincreased the cost of capital. The capital and credit markets may not be available to trysupport future capital raising activity on favorable terms. If economic conditions decline, our future cost of equity or debt capital and access to contain the virus, such as travel banscapital markets could be adversely affected. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, and restrictions, limits on gatherings, quarantines, shelter-in-place orderssteps taken by governments and business shutdowns. Measures providing for business shutdowns generally exclude certain essential services, and those essential services commonly include critical infrastructure andcentral banks, particularly in response to the businesses that support that critical infrastructure. While all of our facilities currently remain operational, these measures have impacted and may further impact our workforce and operations,COVID-19 pandemic as well as those of our customers, vendorsother stimulus and suppliers. In connection with the COVID-19 pandemic, wespending programs, have experienced limited absenteeism from those employees who are requiredled to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates. Our operating results could be on-site to perform their jobs, and we do not currently expect that our operations will be adversely affectedmaterially impacted by significant absenteeism.
Liquidity
Although there is uncertainty relatedfurther changes to the impact of the recent COVID-19, including new variants, on our future results, we believe our business model, our current cash reservesmacroeconomic environment and available borrowings under our Revolving Credit Facility leave us well-positioned to manage our business through this crisis. We believe our existing balances of cash and cash equivalents and our currently anticipated operating cash flows will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months and the foreseeable future.
We continue to monitor the rapidly evolving situation and guidance from federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future.
resulting economic conditions.
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assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (ii) different estimates reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period may have a material impact on the presentation of our financial condition, changes in financial condition or results of operations. Our most critical accounting policies and estimates include the following:
Customer arrangements typically have multiple To determine this amount, we apply the following five-step model:
liabilities.
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and do not aggregate any components into our one reporting unit. There are no known trends or uncertainties that we reasonably expect will have an unfavorable impact on revenue or income from operations. We have not performed a quantitative impairment test since January 4, 2019, the date of the Business Combination, in which the balance sheet was fair valued.
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Results of Operations
The following table presents our results of operations for the periods indicated:
| | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | ||||||||||
| | December 31, | | Change | ||||||||||||||
(in thousands) |
| 2021 |
| 2020 | | $ | | % | | |||||||||
| | (Successor) | | (Successor) | | | | | | | ||||||||
Consolidated Statement of Operations Data: | | | | | % of total revenue | | | | | % of total revenue | | | | | | | ||
Revenue | | $ | 1,038,690 | | 100.0 | % | | $ | 773,312 | | 100.0 | % | | $ | 265,378 | | 34.3 | % |
Cost of revenue | |
| 614,073 | | 59.1 | | |
| 486,965 | | 63.0 | | |
| 127,108 | | 26.1 | |
Gross margin | |
| 424,617 | | 40.9 | | |
| 286,347 | | 37.0 | | |
| 138,270 | | 48.3 | |
Selling, general and administrative | |
| 320,387 | | 30.8 | | |
| 250,289 | | 32.4 | | |
| 70,098 | | 28.0 | |
Operating income | |
| 104,230 | | 10.1 | | |
| 36,058 | | 4.6 | | |
| 68,172 | | 189.1 | |
Loss on the extinguishment of debt | |
| 10,116 | | 1.0 | | |
| — | | — | | |
| 10,116 | | — | |
Interest expense | |
| 53,514 | | 5.2 | | |
| 61,530 | | 8.0 | | |
| (8,016) | | (13.0) | |
Income (loss) before income taxes and noncontrolling interest | |
| 40,600 | | 3.9 | | |
| (25,472) | | (3.4) | | |
| 76,188 | | * | |
Income tax expense (benefit) | |
| 16,433 | | 1.6 | | |
| (3,234) | | (0.4) | | |
| 19,667 | | * | |
Consolidated net income (loss) | | $ | 24,167 | | 2.3 | | |
| (22,238) | | (3.0) | | | $ | 56,521 | | * | |
* not meaningful | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | Change | |||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||
| Consolidated Statement of Operations | % of Total Revenue | % of Total Revenue | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,121,292 | 100.0 | % | $ | 1,038,690 | 100.0 | % | $ | 82,602 | 8.0 | % | ||||||||||||||||||||||||||
| Cost of revenue | 690,318 | 61.6 | 614,073 | 59.1 | 76,245 | 12.4 | % | |||||||||||||||||||||||||||||||
| Gross margin | 430,974 | 38.4 | 424,617 | 40.9 | 6,357 | 1.5 | % | |||||||||||||||||||||||||||||||
| Selling, general and administrative expense | 338,988 | 30.2 | 320,387 | 30.8 | 18,601 | 5.8 | % | |||||||||||||||||||||||||||||||
| Operating income | 91,986 | 8.2 | 104,230 | 10.1 | (12,244) | (11.7) | % | |||||||||||||||||||||||||||||||
| Loss on extinguishment of debt | 1,418 | 0.1 | 10,116 | 1.0 | (8,698) | (86.0) | % | |||||||||||||||||||||||||||||||
| Interest expense | 49,439 | 4.4 | 53,514 | 5.2 | (4,075) | (7.6) | % | |||||||||||||||||||||||||||||||
| Tax indemnification expense | 11,918 | 1.1 | — | — | 11,918 | 100.0 | % | |||||||||||||||||||||||||||||||
| Income (loss) before income taxes and noncontrolling interest | 29,211 | 2.6 | 40,600 | 3.9 | (11,389) | (28.1) | % | |||||||||||||||||||||||||||||||
| Income tax (benefit) expense | (1,232) | (0.1) | 16,433 | 1.6 | (17,665) | (107.5) | % | |||||||||||||||||||||||||||||||
| Consolidated net income | 30,443 | 2.7 | 24,167 | 2.3 | 6,276 | 26.0 | % | |||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest | 231 | — | 161 | — | 70 | 43.5 | % | |||||||||||||||||||||||||||||||
| Net income attributable to Agiliti, Inc. and Subsidiaries | $ | 30,212 | 2.7 | $ | 24,006 | 2.3 | $ | 6,206 | 25.9 | % | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |
| | Year Ended | | | | | | | ||||||||||
| | December 31, | | Change | ||||||||||||||
(in thousands) |
| 2021 |
| 2020 | | $ | | % | | |||||||||
| | (Successor) | | (Successor) | | | | | | | ||||||||
Disaggregated Revenue: | | | | | % of total revenue | | | | | % of total revenue | | | | | | | ||
Equipment Solutions | | $ | 352,094 | | 33.9 | % | | $ | 296,267 | | 38.3 | % | | $ | 55,827 | | 18.8 | % |
Clinical Engineering | |
| 384,147 | | 37.0 | | |
| 256,874 | | 33.2 | | |
| 127,273 | | 49.5 | |
Onsite Managed Services | |
| 302,449 | | 29.1 | | |
| 220,171 | | 28.5 | | |
| 82,278 | | 37.4 | |
Total revenue | | $ | 1,038,690 | | 100.0 | | | $ | 773,312 | | 100.0 | | | $ | 265,378 | | 34.3 | |
2021:
| Year Ended December 31, | Change | |||||||||||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||
| Disaggregated Revenue: | % of Total Revenue | % of Total Revenue | ||||||||||||||||||||||||||||||||||||
| Equipment Solutions | $ | 438,682 | 39.1 | % | $ | 352,094 | 33.9 | % | $ | 86,588 | 24.6 | % | ||||||||||||||||||||||||||
| Clinical Engineering | 420,685 | 37.5 | % | 384,147 | 37.0 | % | $ | 36,538 | 9.5 | % | ||||||||||||||||||||||||||||
| Onsite Managed Services | 261,925 | 23.4 | % | 302,449 | 29.1 | % | $ | (40,524) | (13.4) | % | ||||||||||||||||||||||||||||
| Total revenue | $ | 1,121,292 | 100.0 | % | $ | 1,038,690 | 100.0 | % | $ | 82,602 | 8.0 | % | ||||||||||||||||||||||||||
Total revenue for the year ended December 31, 20212022 was $1,038.7$1,121.3 million, compared with $773.3$1,038.7 million for the year ended December 31, 2020,2021, an increase of $265.4$82.6 million or 34.3%8.0%. Equipment Solutions revenue increased 18.8%24.6% primarily driven by the October 2021 acquisition of Sizewise acquisition completed on October 1, 2021Rentals, LLC ("Sizewise Acquisition") which generated 42.0$117.0 million in incremental revenue, and the increased demand for surgicalwhich was partially offset by lower utilization of our medical equipment procedures. Although difficult to determine, we estimate that the overall
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favorable impact from COVID-19 within Equipment Solutions was $30 million to $40 million for the year ended December 31, 2021, and $30 million to $40 million for the year ended December 31, 2020.post-COVID. Clinical Engineering revenue increased 49.5%9.5% due to continued strong growth as a result of the March 2021 acquisition of Northfield acquisition completed on March 19, 2021 and supplemental clinical engineering work related to theMedical ("Northfield Acquisition") partially offset by lower federal government contract entered into in the third quarter of 2020.revenue. Onsite Managed Services revenue increased 37.4%decreased 13.4% primarily driven by lower revenue associated with the majority of growth coming therenewed federal government contract related to the comprehensive maintenance and management services of medical ventilator equipment.
contract.
depreciation expense of $23.2 million.
the federal government contract renewal, lower utilization of our equipment and the acquisitions completed in the prior year.
amortization expense related to the acquisition of Northfield and Sizewise in 2021, partially offset by the elimination of the management services agreement with our majority owner and lower incentive expense.
the write-off of unamortized debt discount related to the paydown of our term loan. Loss on extinguishment of debt for the year ended December 31, 2021 consisted of the write-off of the unamortized deferred financing cost and debt discount of $7.4 million and an additional 1% redemption price or $2.4 million related to the
Interestst expense decreased $8.0$4.1 million to $53.549.4 million for the year ended December 31, 20212022 as compared to the same period of 20202021 primarily due to the repayment of our Second Lien Term Loan with proceeds from the IPO.
IPO as well as the prepayment of $119.1 million on our First Lien Term Loan during the first half of 2022, partially offset by rising interest rates.
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Consolidated Net Income (Loss)
2022.
federal government contract renewal and lower utilization of our equipment.
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
(in thousands) |
| 2021 | | 2020 | ||
| | (Successor) | | (Successor) | ||
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries | | $ | 24,006 | | $ | (22,478) |
Interest expense | |
| 53,514 | |
| 61,530 |
Income tax expense (benefit) | |
| 16,433 | |
| (3,234) |
Depreciation and amortization | |
| 187,963 | |
| 169,241 |
EBITDA | | | 281,916 | | | 205,059 |
Non-cash share-based compensation expense | | | 13,960 | | | 10,334 |
Management and other expenses (1) | | | 7,926 | | | 671 |
Transaction costs (2) | | | 12,222 | | | 3,837 |
Tax receivable agreement remeasurement | | | 4,542 | | | 14,300 |
Loss on extinguishment of debt (3) | | | 10,116 | | | — |
Adjusted EBITDA | | $ | 330,682 | | $ | 234,201 |
| | | | | | |
Other Financial Data: | | | | | | |
Net cash provided by operating activities | | $ | 210,317 | | $ | 137,927 |
Net cash used in investing activities | |
| (734,134) | |
| (151,732) |
Net cash provided by financing activities | |
| 391,637 | |
| 220,310 |
| Year Ended December 31, | ||||||||||||||
| (in thousands) | 2022 | 2021 | ||||||||||||
| Net income attributable to Agiliti, Inc. and Subsidiaries | $ | 30,212 | $ | 24,006 | ||||||||||
| Interest expense | 49,439 | 53,514 | ||||||||||||
| Income tax (benefit) expense (1) | (1,232) | 16,433 | ||||||||||||
| Depreciation and amortization | 175,764 | 187,963 | ||||||||||||
| EBITDA | 254,183 | 281,916 | ||||||||||||
| Non-cash share-based compensation expense | 18,775 | 13,960 | ||||||||||||
| Tax indemnification expense | 11,918 | — | ||||||||||||
| Management and other expenses (2) | 2,411 | 7,926 | ||||||||||||
| Transaction costs (3) | 9,984 | 12,222 | ||||||||||||
| Tax receivable agreement remeasurement | (2,124) | 4,542 | ||||||||||||
| Loss on extinguishment of debt (4) | 1,418 | 10,116 | ||||||||||||
| Adjusted EBITDA | $ | 296,565 | $ | 330,682 | ||||||||||
| Income tax (benefit) expense includes the $11.9 million tax benefit due to the release of the reserve and associated interest and penalties related to the Sizewise Acquisition offset in tax indemnification expense. 47 (2)Management and other expenses represent (a) management fees and buyout termination fee under the Advisory Services Agreement, which was terminated in connection with the initial public offering and (b) employee related non-recurring expenses. (3)Transaction costs represent costs associated with potential and completed mergers and acquisitions and are primarily related to the Northfield and Sizewise Acquisitions. (4) |
| Loss on extinguishment of debt for 2022 consists of the write-off of the unamortized debt discount related to the partial prepayment of the First Lien Term Loan. Loss on extinguishment of debt for 2021 consists of the write-off of the unamortized deferred financing costs and debt discount and an additional 1% redemption price related to the repayment of our Second Lien Term Loan and the write-off of the unamortized deferred financing cost related to the amendment of our Revolving Credit Facility. |
52
Liquidity and Capital Resources
raw materials at our manufacturing plants.
Restricted stock units and performance restricted stock units are not taxable toIPO in 2021. In 2022, the employee until they have settled and underlying shares have been delivered. In connection with the IPO, settlement of vested restricted stock unit and performance restricted stock unit awards granted prior to 2021 were deferred until one year following our IPO as permitted under the 2018 Plan andnet cash used in accordance with the termsfinancing activities was driven by prepayment of the grant agreements. As a result, shares underlying these vested restricted stock unit and performance restricted stock unit awards will be delivered on April 23, 2022 and will become taxable to the employees on that date. Upon settlement, the Company will reduce the numberFirst Lien Term Loan of shares that the employee is entitled to receive to cover the estimated income taxes and other payroll taxes. The Company will then pay the outstanding tax liability. The amount of the tax liability is dependent upon the share price at the date of settlement and, although difficult to quantify, is currently estimated to be between $15 million and $20$119.1 million. This liability will be paid in the second quarter of 2022.
53
our principal First Lien Term Loan facility by $125 million and the revolving loan facility by $40 million. In October 2021 and April 2021, we further increased our principal First Lien Term Loan facility by $150 million and $200 million, respectively. All terms to the First Lien Term Loan remained the same, except these additional loans are subject to an interest rate floor of 0.75%.
facility for the year ended December 31, 2021.
Except as described above, the Amendment has substantially the same terms as the First Lien Credit Agreement, and amendments thereto, including customary covenants and events of default.
54
Second Lien Credit Facilities
to step downs to
3.50:1.00 and
participation fee equal to the applicable margin for Eurodollar revolving loans on the actual daily
amount of the letter of credit exposure
55
The interest rate swap agreement qualifies for cash flow hedge accounting under ASC Topic 815, “DerivativesDerivatives and Hedging.”Hedging. Both at inception and on an on-going basis, we must perform an effectiveness test. The fair value of the interest rate swap agreement atas of December 31, 20212022 was $2.1$9.2 million, all of which $0.4 million is included in other current assets and $1.7 million is included in other long-term assets on our consolidated balance sheet. The change in fair value was recorded as a component of accumulated other comprehensive loss on our consolidated balance sheet, net of tax, since the instrument was determined to be an effective hedge at December 31, 2021.2022. We have not recorded any amounts due to ineffectiveness for any periods presented.
The following table is a summary,
payments for financing obligations are $1,360.2 million, of which $95.0 million is payable within 12 months. Additionally, we expect future payments for tax obligations
| | | | | | | | | | | | | | | |
| | Payments due by period | |||||||||||||
| | | | | | | | | | | | | | 2027 and | |
(in thousands) |
| Total |
| 2022 |
| 2023 - 2024 |
| 2025 - 2026 |
| beyond | |||||
Other financial data: | | | | | | | | | | | | | | | |
Long-term debt principal obligations | | $ | 1,183,071 | | $ | 9,398 | | $ | 18,796 | | $ | 1,154,877 | | $ | — |
Interest on notes | | | 141,528 | | | 35,695 | | | 70,580 | | | 35,253 | | | — |
Principal and interest on finance leases | | | 28,789 | | | 8,746 | | | 10,401 | | | 5,112 | | | 4,530 |
Principal and interest on operating leases | | | 89,898 | | | 24,399 | | | 38,959 | | | 24,883 | | | 1,657 |
Pension obligations (1) | | | 650 | | | 650 | | | — | | | — | | | — |
Tax receivable obligations | | | 39,880 | | | 29,187 | | | 10,693 | | | — | | | — |
Unrecognized tax positions (2) | | | 10,111 | | | — | | | — | | | — | | | — |
Total contractual obligations | | $ | 1,493,927 | | $ | 108,075 | | $ | 149,429 | | $ | 1,220,125 | | $ | 6,187 |
Other commercial commitments: | | | | | | | | | | | | | | | |
Stand by letter of credit | | $ | 8,005 | | $ | — | | $ | — | | $ | — | | $ | — |
ayable within 12 months.
56
Due to the expiration of our interest rate swaps in June 2023, an additional $500.0 million debt will bear variable interest rates. We estimate we will incur an additional $30.0 million of interest expense in 2023 as a result of the expiration of our swap, high interest rates, and increased indebtedness from 2022 acquisitions.
57
The following tables set forth certain unaudited supplementary quarterly financial data of Agiliti Health for 2021 and 2020. In our opinion, this unaudited information has been prepared on the same basis as the audited information and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the information set forth therein. The operating results for any one quarter are not necessarily indicative of results for any future period.
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2021 | ||||||||||||||
| | Quarter Ended | ||||||||||||||
(unaudited, in thousands) |
| March 31 |
| June 30 |
| September 30 |
| December 31 | ||||||||
| | (Successor) | | (Successor) | | (Successor) | | (Successor) | ||||||||
Selected Quarterly Financial Information | | | | | | | | | | | | | | | | |
Total revenue | | $ | 235,245 | | | $ | 250,543 | | | $ | 262,424 | | | $ | 290,478 | |
Gross margin | | $ | 101,323 | | | $ | 99,108 | | | $ | 103,434 | | | $ | 120,752 | |
Gross margin % | | | 43.1 | % | | | 39.6 | % | | | 39.4 | % | | | 41.6 | % |
Consolidated net income (loss) | | $ | 9,583 | | | $ | (5,171) | | | $ | 9,728 | | | $ | 10,027 | |
Net cash provided by operating activities | | $ | 62,909 | | | $ | 44,599 | | | $ | 30,905 | | | $ | 71,904 | |
Net cash used in investing activities | | $ | (457,525) | | | $ | (17,541) | | | $ | (6,396) | | | $ | (252,672) | |
Net cash provided by (used in) financing activities | | $ | 201,439 | | | $ | 63,284 | | | $ | (4,466) | | | $ | 131,380 | |
| | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2020 | ||||||||||||||
| | Quarter Ended | ||||||||||||||
(unaudited, in thousands) |
| March 31 |
| June 30 |
| September 30 |
| December 31 | ||||||||
| | (Successor) | | (Successor) | | (Successor) | | (Successor) | ||||||||
Selected Quarterly Financial Information | | | | | | | | | | | | | | | | |
Total revenue | | $ | 179,240 | | | $ | 185,161 | | | $ | 194,721 | | | $ | 214,190 | |
Gross margin | | $ | 57,807 | | | $ | 67,470 | | | $ | 74,606 | | | $ | 86,464 | |
Gross margin % | | | 32.3 | % | | | 36.4 | % | | | 38.3 | % | | | 40.4 | % |
Consolidated net (loss) income | | $ | (12,548) | | | $ | 851 | | | $ | (10,113) | | | $ | (428) | |
Net cash provided by operating activities | | $ | 27,679 | | | $ | 32,767 | | | $ | 39,280 | | | $ | 38,201 | |
Net cash used in investing activities | | $ | (101,139) | | | $ | (12,624) | | | $ | (12,057) | | | $ | (25,912) | |
Net cash provided by (used in) financing activities | | $ | 134,483 | | | $ | (4,335) | | | $ | (54,586) | | | $ | 144,748 | |
ITEM 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). As of the end of the period covered by this report, we performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of Agiliti Health’s disclosure controls and procedures. Based upon, and as of the date of, that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that Agiliti Health’s disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that our Company files or submits to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that
58
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
ITEM 9B: Other Information
None.
PART III
ITEM 10: Directors, Executive Officers and Corporate Governance
The information required by this Item 10 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
ITEM 11: Executive Compensation
The information required by this Item 11 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
ITEM 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
ITEM 13: Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
ITEM 14: Principal Accounting Fees and Services
Our independent registered public accounting firm is KPMG LLP, Minneapolis, MN, Auditor Firm ID: 185
The information required by this Item 14 will be contained in the Definitive Proxy Statement and is incorporated herein by reference.
59
PART IV
ITEM 15: Exhibits and Financial Statement Schedules
We have filed the following documents as part of this Annual Report on Form 10-K:
1. Consolidated Financial Statements
Our consolidated financial statements are listed in the "Index to Consolidated Financial Statements" immediately following the signature pages of this Annual Report on Form 10-K.
2. Consolidated Financial Statement Schedules
Supplemental financial schedules are omitted as not applicable or not required under the rules of Regulation S-X or the information is presented in the financial statements or notes thereto.
3. Exhibits
The documents listed in the Exhibit Index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K)
EXHIBIT INDEX
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+ Indicates a management contract or compensatory plan or arrangement.
* Furnished, not filed.
ITEM 16: 10-K Summary
None.
63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on March 8, 2022.
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on March 8, 2022.
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65
reporting.
Acquisition date fair value
audit evidence
66
We identified the evaluation of acquisition-date fair valuethe sufficiency of customer relationship intangible assetsaudit evidence as a critical audit matter. There was a high degreeEvaluating the sufficiency of audit evidence obtained required especially subjective auditor judgment in evaluating certain assumptions included in the discounted cash flow models used to estimate the acquisition-date fair value of customer relationship intangible assets. Specifically, there was limited observable market information for the forecasted revenue growth assumptions, and evaluationbecause of the discount rate assumptions used required valuation professionals with specialized skills and knowledge.
pervasiveness of the material weaknesses noted above.
such evidence.
67
| | | | | | |
Agiliti, Inc. and Subsidiaries | | | | | | |
Consolidated Balance Sheets | | | | | | |
|
| December 31, |
| December 31, | ||
(in thousands, except share and per share information) | | 2021 | | 2020 | ||
| | (Successor) | | (Successor) | ||
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 74,325 | | $ | 206,505 |
Accounts receivable, less allowance for credit losses of $2,902 at December 31, 2021 and $1,993 at December 31, 2020 | | | 209,308 | | | 154,625 |
Inventories | |
| 55,307 | |
| 27,062 |
Prepaid expenses | |
| 18,549 | |
| 13,549 |
Other current assets | |
| 395 | |
| 626 |
Total current assets | |
| 357,884 | |
| 402,367 |
Property and equipment: | | | | | | |
Medical equipment | |
| 359,284 | |
| 285,723 |
Property and office equipment | |
| 174,669 | |
| 112,646 |
Accumulated depreciation | |
| (275,583) | |
| (183,953) |
Total property and equipment, net | |
| 258,370 | |
| 214,416 |
Other long-term assets: | | | | | | |
Goodwill | |
| 1,213,121 | |
| 817,113 |
Operating lease right-of-use assets | | | 80,676 | | | 51,214 |
Other intangibles, net | |
| 573,159 | |
| 402,095 |
Other | |
| 32,537 | |
| 16,151 |
Total assets | | $ | 2,515,747 | | $ | 1,903,356 |
Liabilities and Equity | | | | | | |
Current liabilities: | | | | | | |
Current portion of long-term debt | | $ | 17,534 | | $ | 16,044 |
Current portion of operating lease liability | | | 22,826 | | | 14,155 |
Current portion of obligation under tax receivable agreement | | | 29,187 | | | 15,572 |
Accounts payable | |
| 53,851 | |
| 37,215 |
Accrued compensation | |
| 47,951 | |
| 38,671 |
Accrued interest | |
| 3,473 | |
| 6,347 |
Deferred revenue | | | 5,808 | | | 8,800 |
Other accrued expenses | |
| 27,900 | |
| 22,727 |
Total current liabilities | |
| 208,530 | |
| 159,531 |
Long-term debt, less current portion | |
| 1,174,968 | |
| 1,145,055 |
Obligation under tax receivable agreement, pension and other long-term liabilities | |
| 29,629 | |
| 53,794 |
Operating lease liability, less current portion | | | 63,241 | | | 40,283 |
Deferred income taxes, net | |
| 143,307 | |
| 62,748 |
Commitments and contingencies (Note 11) | | | | | | |
Equity: | | | | | | |
Common stock, $0.0001 par value; 350,000,000 shares authorized; 130,950,061 and 98,983,296 shares issued and outstanding at December 31, 2021 and December 31, 2020 | |
| 13 | |
| 10 |
Additional paid-in capital | |
| 938,888 | |
| 513,902 |
Accumulated deficit | |
| (44,486) | |
| (68,492) |
Accumulated other comprehensive income (loss) | |
| 1,537 | |
| (3,619) |
Total Agiliti, Inc. and Subsidiaries equity | |
| 895,952 | |
| 441,801 |
Noncontrolling interest | |
| 120 | |
| 144 |
Total equity | |
| 896,072 | |
| 441,945 |
Total liabilities and equity | | $ | 2,515,747 | | $ | 1,903,356 |
| | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | ||||||
68
| | | | | | | | | | | | | |
Agiliti, Inc. and Subsidiaries | | | | | | From | | | From | ||||
Consolidated Statements of Operations | | | | | | January 4 | | | January 1 | ||||
| | Year Ended | | through | | | through | ||||||
| | December 31, | | December 31, | | | January 3, | ||||||
(in thousands, except share and per share information) |
| 2021 |
| 2020 | | 2019 | |
| 2019 | ||||
| | (Successor) | | (Successor) | | (Successor) | | | (Predecessor) | ||||
Revenue | | $ | 1,038,690 | | $ | 773,312 | | $ | 613,073 | | | $ | — |
Cost of revenue | |
| 614,073 | |
| 486,965 | |
| 423,812 | | |
| — |
Gross margin | |
| 424,617 | |
| 286,347 | |
| 189,261 | | |
| — |
Selling, general and administrative | |
| 320,387 | |
| 250,289 | |
| 187,156 | | |
| 17,147 |
Operating income | |
| 104,230 | |
| 36,058 | |
| 2,105 | | |
| (17,147) |
Loss on extinguishment of debt | | | 10,116 | | | — | | | — | | | | — |
Interest expense | |
| 53,514 | |
| 61,530 | |
| 48,199 | | |
| — |
Income (loss) before income taxes and noncontrolling interest | |
| 40,600 | |
| (25,472) | |
| (46,094) | | |
| (17,147) |
Income tax expense (benefit) | |
| 16,433 | |
| (3,234) | |
| (14,857) | | |
| (13,281) |
Consolidated net income (loss) | |
| 24,167 | |
| (22,238) | |
| (31,237) | | |
| (3,866) |
Net income attributable to noncontrolling interest | |
| 161 | |
| 240 | |
| 171 | | |
| — |
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries | | $ | 24,006 | | $ | (22,478) | | $ | (31,408) | | | $ | (3,866) |
| | | | | | | | | | | | | |
Basic income (loss) per share | | $ | 0.20 | | $ | (0.23) | | $ | (0.32) | | | | |
Diluted income (loss) per share | | $ | 0.19 | | $ | (0.23) | | $ | (0.32) | | | | |
| | | | | | | | | | | | | |
Weighted-average common shares outstanding: | | | | | | | | | | | | | |
Basic | | | 120,877,480 | | | 98,976,226 | | | 98,942,437 | | | | |
Diluted | | | 128,497,220 | | | 98,976,226 | | | 98,942,437 | | | | |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | |||||||||||||
| Agiliti, Inc. and Subsidiaries | ||||||||||||||
| Consolidated Balance Sheets | ||||||||||||||
| (in thousands, except share and per share information) | December 31, 2022 | December 31, 2021 | ||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 5,577 | $ | 74,325 | ||||||||||
| Accounts receivable, less allowance for credit losses of $4,182 as of December 31, 2022 and $2,902 as of December 31, 2021 | 207,753 | 209,308 | ||||||||||||
| Inventories | 70,132 | 55,307 | ||||||||||||
| Prepaid expenses | 23,458 | 18,549 | ||||||||||||
| Other current assets | 9,393 | 395 | ||||||||||||
| Total current assets | 316,313 | 357,884 | ||||||||||||
| Property and equipment, net | 273,958 | 258,370 | ||||||||||||
| Goodwill | 1,239,106 | 1,213,121 | ||||||||||||
| Operating lease right-of-use assets | 79,975 | 80,676 | ||||||||||||
| Other intangibles, net | 512,020 | 573,159 | ||||||||||||
| Other | 22,735 | 32,537 | ||||||||||||
| Total assets | $ | 2,444,107 | $ | 2,515,747 | ||||||||||
| Liabilities and Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Current portion of long-term debt | $ | 17,752 | $ | 17,534 | ||||||||||
| Current portion of operating lease liability | 23,607 | 22,826 | ||||||||||||
| Current portion of obligation under tax receivable agreement | 34,694 | 29,187 | ||||||||||||
| Accounts payable | 59,163 | 53,851 | ||||||||||||
| Accrued compensation | 25,928 | 47,951 | ||||||||||||
| Accrued interest | 5,039 | 3,473 | ||||||||||||
| Other current liabilities | 31,198 | 33,708 | ||||||||||||
| Total current liabilities | 197,381 | 208,530 | ||||||||||||
| Long-term debt, less current portion | 1,077,293 | 1,174,968 | ||||||||||||
| Obligation under tax receivable agreement, pension and other long-term liabilities | 9,161 | 29,629 | ||||||||||||
| Operating lease liability, less current portion | 67,332 | 63,241 | ||||||||||||
| Deferred income taxes, net | 146,615 | 143,307 | ||||||||||||
| Commitments and contingencies (Note 11) | ||||||||||||||
| Equity: | ||||||||||||||
| Common stock, $0.0001 par value; 500,000,000 shares authorized; 133,608,495 and 130,950,061 shares issued and outstanding as of December 31, 2022 and December 31, 2021 | 13 | 13 | ||||||||||||
| Additional paid-in capital | 953,046 | 938,888 | ||||||||||||
| Accumulated deficit | (14,274) | (44,486) | ||||||||||||
| Accumulated other comprehensive income | 7,343 | 1,537 | ||||||||||||
| Total Agiliti, Inc. and Subsidiaries equity | 946,128 | 895,952 | ||||||||||||
| Noncontrolling interest | 197 | 120 | ||||||||||||
| Total equity | 946,325 | 896,072 | ||||||||||||
| Total liabilities and equity | $ | 2,444,107 | $ | 2,515,747 | ||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||
69
| | | | | | | | | | | | | |
Agiliti, Inc. and Subsidiaries | | | | | | From | | | From | ||||
Consolidated Statements of Comprehensive Income (Loss) | | | | | | January 4 | | | January 1 | ||||
| | Year Ended | | through | | | through | ||||||
| | December 31, | | December 31, | | | January 3, | ||||||
(in thousands) |
| 2021 |
| 2020 |
| 2019 | |
| 2019 | ||||
| | (Successor) | | (Successor) | | (Successor) | | | (Predecessor) | ||||
Consolidated net income (loss) | | $ | 24,167 | | $ | (22,238) | | $ | (31,237) | | | $ | (3,866) |
Other comprehensive income (loss): | | | | | | | | | | | | | |
Gain (loss) on minimum pension liability, net of tax of $747, $435, $320 and $0 | | | 2,195 | | | (1,275) | | | (940) | | | | — |
Gain (loss) on cash flow hedge, net of (benefit) tax of $1015, $478, $0 and $0 | | | 2,961 | | | (1,404) | | | — | | | | — |
Total other comprehensive income (loss) | |
| 5,156 | |
| (2,679) | |
| (940) | | |
| — |
Comprehensive income (loss) | |
| 29,323 | |
| (24,917) | |
| (32,177) | | |
| (3,866) |
Comprehensive income attributable to noncontrolling interest | |
| 161 | |
| 240 | |
| 171 | | |
| — |
Comprehensive income (loss) attributable to Agiliti, Inc. and Subsidiaries | | $ | 29,162 | | $ | (25,157) | | $ | (32,348) | | | $ | (3,866) |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | |||||||||||||
| Agiliti, Inc. and Subsidiaries | ||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands, except share and per share information) | 2022 | 2021 | 2020 | |||||||||||||||||
| Revenue | $ | 1,121,292 | $ | 1,038,690 | $ | 773,312 | ||||||||||||||
| Cost of revenue | 690,318 | 614,073 | 486,965 | |||||||||||||||||
| Gross margin | 430,974 | 424,617 | 286,347 | |||||||||||||||||
| Selling, general and administrative expense | 338,988 | 320,387 | 250,289 | |||||||||||||||||
| Operating income | 91,986 | 104,230 | 36,058 | |||||||||||||||||
| Loss on extinguishment of debt | 1,418 | 10,116 | — | |||||||||||||||||
| Interest expense | 49,439 | 53,514 | 61,530 | |||||||||||||||||
| Tax indemnification expense | 11,918 | — | — | |||||||||||||||||
| Income (loss) before income taxes and noncontrolling interest | 29,211 | 40,600 | (25,472) | |||||||||||||||||
| Income tax (benefit) expense | (1,232) | 16,433 | (3,234) | |||||||||||||||||
| Consolidated net income (loss) | 30,443 | 24,167 | (22,238) | |||||||||||||||||
| Net income attributable to noncontrolling interest | 231 | 161 | 240 | |||||||||||||||||
| Net income (loss) attributable to Agiliti, Inc. and Subsidiaries | $ | 30,212 | $ | 24,006 | $ | (22,478) | ||||||||||||||
| Basic income (loss) per share | $ | 0.23 | $ | 0.20 | $ | (0.23) | ||||||||||||||
| Diluted income (loss) per share | $ | 0.22 | $ | 0.19 | $ | (0.23) | ||||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||
| Basic | 132,602,747 | 120,877,480 | 98,976,226 | |||||||||||||||||
| Diluted | 138,381,295 | 128,497,220 | 98,976,226 | |||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||
70
| | | | | | | | | | | | | | | | | | | | | |
Agiliti, Inc. and Subsidiaries |
|
| |
|
| |
|
| |
| Accumulated |
| Total |
|
| |
|
| | ||
Consolidated Statements of Equity (Deficit) | | | | Additional | | | | | Other | | Agiliti, Inc. | | | | | Total | |||||
| | Common | | Paid-in | | Accumulated | | Comprehensive | | and | | Noncontrolling | | Equity | |||||||
(in thousands) | | Stock | | Capital | | Deficit | | Loss | | Subsidiaries | | Interests | | (Deficit) | |||||||
Balance at December 31, 2018 (Predecessor) | | $ | — | | $ | 252,439 | | $ | (313,656) | | $ | (6,633) | | $ | (67,850) | | $ | 191 | | $ | (67,659) |
Net loss | |
| — | |
| — | |
| (3,866) | |
| — | |
| (3,866) | |
| — | |
| (3,866) |
Share-based compensation expense | | | — | | | 5,900 | | | — | |
| — | |
| 5,900 | |
| — | |
| 5,900 |
Balance at January 3, 2019 (Predecessor) | | $ | — | | $ | 258,339 | | $ | (317,522) | | $ | (6,633) | | $ | (65,816) | | $ | 191 | | $ | (65,625) |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Balance at January 4, 2019 (Successor) | | $ | 10 | | $ | 764,582 | | $ | (14,606) | | | — | | | 749,986 | | | 191 | | | 750,177 |
Net (loss) income | |
| — | |
| — | |
| (31,408) | |
| — | |
| (31,408) | |
| 171 | |
| (31,237) |
Other comprehensive loss | |
| — | |
| — | |
| — | |
| (940) | |
| (940) | |
| — | |
| (940) |
Share-based compensation expense | | | — | | | 6,011 | | | — | |
| — | |
| 6,011 | |
| — | |
| 6,011 |
Stock options exercised | | | — | | | 193 | | | — | |
| — | |
| 193 | |
| — | |
| 193 |
Shares repurchased | | | — | | | (775) | | | — | |
| — | |
| (775) | |
| — | |
| (775) |
Redemption of warrants | | | — | | | (35,872) | | | — | |
| — | |
| (35,872) | |
| — | |
| (35,872) |
Dividend and equity distribution | | | — | | | (230,502) | | | — | | | — | | | (230,502) | | | — | | | (230,502) |
Contributions from new members to limited liability company | | | — | | | — | | | — | | | — | | | — | | | 140 | | | 140 |
Cash distributions to noncontrolling interests | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (226) | |
| (226) |
Balance at December 31, 2019 (Successor) | | $ | 10 | | $ | 503,637 | | $ | (46,014) | | $ | (940) | | $ | 456,693 | | $ | 276 | | $ | 456,969 |
Net (loss) income | |
| — | |
| — | |
| (22,478) | |
| — | |
| (22,478) | |
| 240 | |
| (22,238) |
Other comprehensive loss | |
| — | |
| — | |
| — | |
| (2,679) | |
| (2,679) | |
| — | |
| (2,679) |
Share-based compensation expense | | | — | | | 10,334 | | | — | |
| — | |
| 10,334 | |
| — | |
| 10,334 |
Shares forfeited for taxes | | | — | | | (145) | | | — | |
| — | |
| (145) | |
| — | |
| (145) |
Dividend forfeited, net of payable | | | — | | | 76 | | | — | |
| — | |
| 76 | |
| — | |
| 76 |
Contributions from members to limited liability company | | | — | | | — | | | — | | | — | | | — | | | 25 | | | 25 |
Cash distributions to noncontrolling interests | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (397) | |
| (397) |
Balance at December 31, 2020 (Successor) | | $ | 10 | | $ | 513,902 | | $ | (68,492) | | $ | (3,619) | | $ | 441,801 | | $ | 144 | | $ | 441,945 |
Net income | |
| — | |
| — | |
| 24,006 | |
| — | |
| 24,006 | |
| 161 | |
| 24,167 |
Other comprehensive income | |
| — | |
| — | |
| — | |
| 5,156 | |
| 5,156 | |
| — | |
| 5,156 |
Proceeds from issuance of common stock | | | 3 | | | 414,112 | | | — | |
| — | |
| 414,115 | |
| — | |
| 414,115 |
Stock issue costs | | | — | | | (4,379) | | | — | |
| — | |
| (4,379) | |
| — | |
| (4,379) |
Share-based compensation expense | | | — | | | 13,818 | | | — | |
| — | |
| 13,818 | |
| — | |
| 13,818 |
Stock options exercised | | | — | | | 1,409 | | | — | |
| — | |
| 1,409 | |
| — | |
| 1,409 |
Dividend forfeited, net of payable | | | — | | | 26 | | | — | |
| — | |
| 26 | |
| — | |
| 26 |
Cash distributions to noncontrolling interests | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (185) | |
| (185) |
Balance at December 31, 2021 (Successor) | | $ | 13 | | $ | 938,888 | | $ | (44,486) | | $ | 1,537 | | $ | 895,952 | | $ | 120 | | $ | 896,072 |
| | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | |||||||||||||||||||||
| Agiliti, Inc. and Subsidiaries | ||||||||||||||||||||
| Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Consolidated net income (loss) | $ | 30,443 | $ | 24,167 | $ | (22,238) | ||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Gain (loss) on minimum pension liability, net of tax of $181, $747, and $435 | 522 | 2,195 | (1,275) | |||||||||||||||||
| Gain (loss) on cash flow hedge, net of (benefit) tax of $1,835, $1,015, and $478 | 5,284 | 2,961 | (1,404) | |||||||||||||||||
| Total other comprehensive income (loss) | 5,806 | 5,156 | (2,679) | |||||||||||||||||
| Comprehensive income (loss) | 36,249 | 29,323 | (24,917) | |||||||||||||||||
| Comprehensive income attributable to noncontrolling interest | 231 | 161 | 240 | |||||||||||||||||
| Comprehensive income (loss) attributable to Agiliti, Inc. and Subsidiaries | $ | 36,018 | $ | 29,162 | $ | (25,157) | ||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||
71
| | | | | | | | | | | | | |
Agiliti, Inc. and Subsidiaries | | | | | | From | | | From | ||||
Consolidated Statements of Cash Flows | | | | | | January 4 | | | January 1 | ||||
| | Year Ended | | through | | | through | ||||||
| | December 31, | | December 31, | | | January 3, | ||||||
(in thousands) |
| 2021 |
| 2020 |
| 2019 | | | 2019 | ||||
| | (Successor) | | (Successor) | | (Successor) | | | (Predecessor) | ||||
Cash flows from operating activities: | | | | | | | | | | | | | |
Consolidated net income (loss) | | $ | 24,167 | | $ | (22,238) | | $ | (31,237) | | | $ | (3,866) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | | | | | |
Depreciation | |
| 103,805 | |
| 99,638 | |
| 96,486 | | |
| — |
Amortization | |
| 88,240 | |
| 73,456 | |
| 68,357 | | |
| — |
Remeasurement of tax receivable agreement and contingent consideration | | | 4,542 | |
| 12,931 | |
| (8,586) | | |
| — |
Loss on extinguishment of debt | | | 7,716 | | | — | | | — | | | | — |
Provision for credit losses | |
| 2,023 | |
| 1,959 | |
| 1,031 | | |
| — |
Provision for inventory obsolescence | |
| 2,424 | |
| 722 | |
| 455 | | |
| — |
Non-cash share-based compensation expense | |
| 13,960 | |
| 10,334 | |
| 6,011 | | |
| 5,900 |
Gain on sales and disposals of equipment | |
| (3,735) | |
| (1,191) | |
| (1,715) | | |
| — |
Deferred income taxes | |
| 12,004 | |
| (4,944) | |
| (15,302) | | |
| (13,281) |
Changes in operating assets and liabilities: | | | | | | | | | | | | | |
Accounts receivable | |
| (8,915) | |
| (39,763) | |
| (827) | | |
| — |
Inventories | |
| 3,052 | |
| (9,712) | |
| (1,325) | | |
| — |
Other operating assets | |
| (9,044) | |
| (13,597) | |
| (7,397) | | |
| — |
Accounts payable | |
| 718 | |
| 552 | |
| 1,661 | | |
| — |
Other operating liabilities | |
| (30,640) | |
| 29,780 | |
| (37,614) | | |
| 11,247 |
Net cash provided by operating activities | |
| 210,317 | |
| 137,927 | |
| 69,998 | | |
| — |
Cash flows from investing activities: | | | | | | | | | | | | | |
Medical equipment purchases | |
| (37,377) | |
| (31,668) | |
| (45,768) | | |
| — |
Property and office equipment purchases | |
| (29,121) | |
| (27,597) | |
| (9,974) | | |
| — |
Proceeds from disposition of property and equipment | |
| 9,242 | |
| 3,486 | |
| 3,583 | | |
| — |
Collection of note receivable from officer | | | — | | | — | | | 2,585 | | | | — |
Acquisition of Agiliti Health, Inc. by THL Shareholders | | | — | | | — | | | (702,139) | | | | — |
Acquisitions, net of cash acquired | | | (676,878) | | | (95,953) | | | (10,260) | | | | — |
Net cash used in investing activities | |
| (734,134) | |
| (151,732) | |
| (761,973) | | |
| — |
Cash flows from financing activities: | | | | | | | | | | | | | |
Proceeds under revolver | | | 35,000 | | | 199,500 | | | 207,100 | | | | — |
Payments under revolver | | | (35,000) | | | (233,000) | | | (173,600) | | | | — |
Proceeds under term loan | | | 346,927 | | | 273,344 | | | 890,775 | | | | — |
Payments under term loan | | | (329,119) | | | (7,860) | | | (4,950) | | | | — |
Payments of principal under finance lease liability | |
| (9,097) | |
| (8,024) | |
| (7,609) | | |
| — |
Payments under senior secured credit facility | | | — | | | — | | | (25,933) | | | | — |
Repayments of 2012 Notes | | | — | | | — | | | (645,000) | | | | — |
Payments of deferred financing costs | | | (229) | | | (199) | | | (21,836) | | | | — |
Payments under tax receivable agreement | | | (15,577) | | | — | | | — | | | | |
Distributions to noncontrolling interests | |
| (185) | |
| (397) | |
| (226) | | |
| — |
Proceeds from exercise of stock options | | | 1,409 | | | — | | | 193 | | | | — |
Shares repurchased | | | — | | | — | | | (775) | | | | — |
Redemption of warrants | | | — | | | — | | | (35,872) | | | | — |
Dividend and equity distribution payment | | | (928) | | | (1,138) | | | (227,065) | | | | — |
Contribution from new members to limited liability company | | | — | | | — | | | 140 | | | | |
Proceeds from issuance of common stock | | | 402,815 | | | — | | | — | | | | — |
Stock issuance costs | | | (4,379) | | | — | | | — | | | | |
Shares forfeited for taxes | | | — | | | (145) | | | — | | | | — |
Change in book overdrafts | |
| — | |
| (1,771) | |
| 1,771 | | |
| — |
Net cash provided by (used in) financing activities | |
| 391,637 | |
| 220,310 | |
| (42,887) | | |
| — |
Net change in cash and cash equivalents | |
| (132,180) | |
| 206,505 | |
| (734,862) | | |
| — |
Cash and cash equivalents at the beginning of period | |
| 206,505 | |
| — | |
| 734,862 | | |
| 7,340 |
Cash and cash equivalents at the end of period | | $ | 74,325 | | $ | 206,505 | | $ | — | | | $ | 7,340 |
| | | | | | | | | | | | | |
Supplemental cash flow information: | | | | | | | | | | | | | |
Interest paid | | $ | 52,341 | | $ | 55,161 | | $ | 59,737 | | | $ | — |
Income taxes paid | |
| 3,214 | |
| 1,260 | |
| 1,564 | | |
| — |
| | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. | | | | | | | | | | | | | |
| Agiliti, Inc. and Subsidiaries | Accumulated Other Comprehensive Income (Loss) | Total Agiliti, Inc. and Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||
| Consolidated Statements of Equity | Additional Paid-in Capital | Accumulated Deficit | Total Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||
| Common Stock | Noncontrolling Interests | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | 10 | $ | 503,637 | $ | (46,014) | $ | (940) | $ | 456,693 | $ | 276 | $ | 456,969 | ||||||||||||||||||||||||||||||
| Net (loss) income | — | — | (22,478) | — | (22,478) | 240 | (22,238) | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (2,679) | (2,679) | — | (2,679) | |||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | 10,334 | — | — | 10,334 | — | 10,334 | |||||||||||||||||||||||||||||||||||||
| Shares forfeited for taxes | — | (145) | — | — | (145) | — | (145) | |||||||||||||||||||||||||||||||||||||
| Dividend forfeited, net of payable | — | 76 | — | — | 76 | — | 76 | |||||||||||||||||||||||||||||||||||||
| Contributions from members to limited liability company | — | — | — | — | — | 25 | 25 | |||||||||||||||||||||||||||||||||||||
| Cash distributions to noncontrolling interests | — | — | — | — | — | (397) | (397) | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 10 | $ | 513,902 | $ | (68,492) | $ | (3,619) | $ | 441,801 | $ | 144 | $ | 441,945 | ||||||||||||||||||||||||||||||
| Net income | — | — | 24,006 | — | 24,006 | 161 | 24,167 | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 5,156 | 5,156 | — | 5,156 | |||||||||||||||||||||||||||||||||||||
| Proceeds from issuance of common stock | 3 | 414,112 | — | . | 414,115 | — | 414,115 | |||||||||||||||||||||||||||||||||||||
| Stock issue costs | — | (4,379) | — | — | (4,379) | — | (4,379) | |||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | 13,818 | — | — | 13,818 | — | 13,818 | |||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | 1,409 | — | — | 1,409 | — | 1,409 | |||||||||||||||||||||||||||||||||||||
| Dividend forfeited, net of payable | — | 26 | — | — | 26 | — | 26 | |||||||||||||||||||||||||||||||||||||
| Cash distributions to noncontrolling interests | — | — | — | — | — | (185) | (185) | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | 13 | $ | 938,888 | $ | (44,486) | $ | 1,537 | $ | 895,952 | $ | 120 | $ | 896,072 | ||||||||||||||||||||||||||||||
| Net income | — | — | 30,212 | — | 30,212 | 231 | 30,443 | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 5,806 | 5,806 | — | 5,806 | |||||||||||||||||||||||||||||||||||||
| Proceeds from issuance of common stock | — | 3,809 | — | — | 3,809 | — | 3,809 | |||||||||||||||||||||||||||||||||||||
| Acquisition consideration paid in equity | — | 2,928 | — | — | 2,928 | 2,928 | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | 18,845 | — | — | 18,845 | — | 18,845 | |||||||||||||||||||||||||||||||||||||
| Shares forfeited for taxes | — | (14,547) | — | — | (14,547) | (14,547) | ||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | 3,101 | — | — | 3,101 | — | 3,101 | |||||||||||||||||||||||||||||||||||||
| Dividend forfeited, net of payable | — | 22 | — | — | 22 | — | 22 | |||||||||||||||||||||||||||||||||||||
| Cash distributions to noncontrolling interests | — | — | — | — | — | (154) | (154) | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | 13 | $ | 953,046 | $ | (14,274) | $ | 7,343 | $ | 946,128 | $ | 197 | $ | 946,325 | ||||||||||||||||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||
72
| Agiliti, Inc. and Subsidiaries | ||||||||||||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Consolidated net income (loss) | $ | 30,443 | $ | 24,167 | $ | (22,238) | ||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation | 84,331 | 103,805 | 99,638 | |||||||||||||||||
| Amortization | 95,452 | 88,240 | 73,456 | |||||||||||||||||
| Remeasurement of tax receivable agreement | (2,124) | 4,542 | 12,931 | |||||||||||||||||
| Loss on extinguishment of debt | 1,418 | 7,716 | — | |||||||||||||||||
| Provision for credit losses | 3,903 | 2,023 | 1,959 | |||||||||||||||||
| Provision for inventory obsolescence | 1,034 | 2,424 | 722 | |||||||||||||||||
| Non-cash share-based compensation expense | 18,775 | 13,960 | 10,334 | |||||||||||||||||
| Gain on sales and disposals of equipment | (1,101) | (3,735) | (1,191) | |||||||||||||||||
| Deferred income taxes | 1,292 | 12,004 | (4,944) | |||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | (3,976) | (8,915) | (39,763) | |||||||||||||||||
| Inventories | (12,188) | 3,052 | (9,712) | |||||||||||||||||
| Other operating assets | (10,144) | (9,044) | (13,597) | |||||||||||||||||
| Accounts payable | 15,753 | 718 | (1,219) | |||||||||||||||||
| Accrued and other operating liabilities | (23,092) | (30,640) | 29,780 | |||||||||||||||||
| Net cash provided by operating activities | 199,776 | 210,317 | 136,156 | |||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Medical equipment purchases | (55,864) | (37,377) | (31,668) | |||||||||||||||||
| Property and office equipment purchases | (31,600) | (29,121) | (27,597) | |||||||||||||||||
| Proceeds from disposition of property and equipment | 2,963 | 9,242 | 3,486 | |||||||||||||||||
| Acquisitions, net of cash acquired | (62,339) | (676,878) | (95,953) | |||||||||||||||||
| Intangible asset purchases | (20) | — | — | |||||||||||||||||
| Net cash used in investing activities | (146,860) | (734,134) | (151,732) | |||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds under debt arrangements | 60,000 | 381,927 | 472,844 | |||||||||||||||||
| Payments under debt arrangements | (160,023) | (364,119) | (240,860) | |||||||||||||||||
| Payments of principal under finance lease liability | (8,812) | (9,097) | (8,024) | |||||||||||||||||
| Payments of deferred financing costs | — | (229) | (199) | |||||||||||||||||
| Payments under tax receivable agreement | — | (15,577) | — | |||||||||||||||||
| Distributions to noncontrolling interests | (154) | (185) | (397) | |||||||||||||||||
| Proceeds from exercise of stock options | 3,101 | 1,409 | — | |||||||||||||||||
| Dividend and equity distribution payment | (908) | (928) | (1,138) | |||||||||||||||||
| Proceeds from issuance of common stock | — | 402,815 | — | |||||||||||||||||
| Stock issuance costs | — | (4,379) | — | |||||||||||||||||
| Shares forfeited for taxes | (14,547) | — | (145) | |||||||||||||||||
| Payments of contingent consideration | (321) | — | — | |||||||||||||||||
| Net cash (used in) provided by financing activities | (121,664) | 391,637 | 222,081 | |||||||||||||||||
| Net change in cash and cash equivalents | (68,748) | (132,180) | 206,505 | |||||||||||||||||
| Cash and cash equivalents at the beginning of period | 74,325 | 206,505 | — | |||||||||||||||||
| Cash and cash equivalents at the end of period | $ | 5,577 | $ | 74,325 | $ | 206,505 | ||||||||||||||
| Supplemental cash flow information: | ||||||||||||||||||||
| Interest paid | $ | 42,773 | $ | 52,341 | $ | 55,161 | ||||||||||||||
| Income taxes paid | 14,843 | 3,214 | 1,260 | |||||||||||||||||
| The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||
The successor period reflected the financial position and result of operations of Agiliti, Inc and its consolidated subsidiaries as of December 31, 2021 and 2020 and the period from January 4 through December 31, 2019. The predecessor period reflected the financial position and result of operations of Agiliti Health, Inc. and its consolidated subsidiaries for the period from January 1 through January 3, 2019. Disclosures in our Notes to Consolidated Financial Statements related to the stub period are only included in instances where there is material activity.
Our
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site facilities across the U.S., as well as with the federal government and any medical device manufacturers that require a broad logistical footprint to support their large-scale service needs.
Changes Book overdrafts, if any, are included in book overdrafts are considered financingaccounts payable in the consolidated balance sheets and in operating activities in the consolidated statements of cash flows.
Medical
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Property and Office Equipment
Property and office equipment includes property, leasehold improvements, vehicles, computer software and hardware, and office equipment. Depreciation and amortization of property and office equipment is provided on the straight-line method over the lesser of the remaining useful life or lease term for leasehold improvements and 3three to 10ten years for office equipment. The cost and accumulated depreciation or amortization of property and equipment retired or sold is eliminated from their respective accounts and the resulting gain or loss is recorded in selling, general and administrative expense in the period the asset is retired or sold.
Goodwill
Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased.
For the periods presented, we reported 1 reporting segment which is equal to our 1 reporting unit for purposes of evaluating goodwill. NaN goodwill impairments have been recognized in 2021, 2020, or 2019.
Other Intangible Assets
Other intangible assets primarily include customer relationships, trade names and non-compete agreements. Our other intangible assets are amortized over their estimated economic lives of three to fifteen years. The straight-line method of amortization generally reflects an appropriate allocation of the cost of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. However, for certain of our customer relationships, we use the sum-of-the-years-digits amortization method to more appropriately allocate the cost to earnings in proportion to the estimated amount of economic benefit obtained.
Intangible assets with indefinite lives were tested for impairment on an annual basis and more frequently if events or changes in circumstances indicated that the asset might be impaired. We reviewed indefinite-lived intangible assets for impairment by first assessing qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then we take no further action.
Long-Lived Assets
The Company periodically reviews its long-lived assetsproperty and equipment for impairment and assesses whenever significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. A recoverability
and Debt Discount
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Acquisitions
We accountThe Company accounts for business acquisitions in accordance with ASC 805, Business Combinations.Combinations. This standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard prescribe, among other things, the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition accounting.
Customer arrangements typically have multiple
From time to time the Company receives both non-monetarygoods. As such, management has made an accounting policy election and cash refunds on equipment recalled by manufacturers. It is the Company’s practice to record such recall gainswill not treat shipping and handling as a reduction in cost of revenue.
separate performance obligation and has elected to accrue for shipping and handling as a fulfillment cost.
Leases
At inception, we determine whether an arrangement isproduction which the Company estimates to be a lease and the appropriate lease classification. Operating leases with terms greater than twelve months are included as operating lease right-of-use (“ROU”) assets, and lease liabilities within current portionperiod of operating lease liability and operating lease liability less current portion on our consolidated balance sheets. Finance leases with terms greater than twelve months are included as finance ROU assets within property and office equipment, and finance lease liabilities within current portion of long-term debt and long-term debt, less current portion on our consolidated balance sheets. Leases with terms of less than twelve months, referred to as short-term leases, dofive years. The Company does not create a ROU asset or lease liability on the balance sheet.
ROU assets represent our right to use an underlying asset for the lease term. Lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease, based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. For both operating and finance leases, the initial ROU asset equals the lease liability, plus initial direct costs, plus favorable lease commitments, less lease incentives received. Our lease agreements may include options to extend or terminate the lease, which are included in the lease term at the commencement date when it is reasonably certain that we will exercise that option. In general, we do not consider optional periods included in our lease agreements as reasonably certain of exercise at inception.
We have lease agreements with lease and non-lease components, which are generally accounted for separately. Variable lease payments (for example, common area maintenance and real estate tax charges) are recorded separately from the determination of the ROU asset and lease liability.
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| | | | | | | | | | | | |
| | December 31, 2021 | | December 31, 2020 | ||||||||
| | (Successor) | | (Successor) | ||||||||
|
| Carrying |
| Fair |
| Carrying |
| Fair | ||||
(in thousands) | | Value | | Value | | Value | | Value | ||||
First Lien Term Loan (1) | | $ | 1,167,649 | | $ | 1,174,871 | | $ | 906,624 | | $ | 911,788 |
Second Lien Term Loan (2) | | | — | | | — | | | 232,361 | | | 240,000 |
Share-Based Compensation
Share-based compensation expense related to stock options is measured by the fair value of the stock options on the date of grant, net of the estimated forfeiture rate. We determine the fair value of options using the Black-Scholes option pricing model. The estimated fair value of options is recognized as expense on a straight-line basis over the options’ vesting periods. The fair value of the stock options contain certain assumptions, such as the risk-free interest rate, expected volatility, dividend yield and expected option life.
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Share-based compensation expense related to restricted stock units and performance restricted stock units is recorded based on the market value of our common stock on the date of grant, net of the estimated forfeiture rate. The expense is recognized over the requisite service period.
Our performance restricted stock units award have a graded vesting schedule. The expense is recognized for each separately vesting tranche as though each tranche of the award is, in substance, a separate award. The amount of compensation expense recognized for performance restricted stock units is dependent upon an assessment of the likelihood of achieving the performance conditions and is subject to adjustment based on management’s assessment of the Company’s performance relative to the target number of shares performance criteria.
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes minimum pension liability adjustments and cash flow hedge. These amounts are presented in the consolidated statements of comprehensive income (loss) net of reclassification adjustments to earnings.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples include, but are not limited to, estimates for fair value measurements in business combinations, valuation of long-lived assets, including goodwill and definite-lived intangible assets and valuation of obligation under the tax receivable agreement. Actual results could differ from those estimatesTax Receivable Agreement ("TRA").
Recent Accounting Pronouncements
Standards Adopted
In December 2019,
Standards Not Yet Adopted
In October 2021, the FASB issued ASU No. 2021-08 Business Combinations (Topic 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 improves the accounting for acquired revenue contracts with customers in a business combination. The amendments in this ASU require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606principal or most advantageous market as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendmentsmeasurement
In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848) Facilitationcomposed of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and
78
exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The ASU may be applied through December31, 2022. We will continue to evaluate the phase out of LIBOR but do not expect the adoption will have a material impact on our consolidated financial statements.
3. Revenue Recognition
In the following table, revenue is disaggregated by service solution:
| | | | | | | | | |
| | | | | | From | |||
| | | | | | January 4 | |||
| | Year Ended | | through | |||||
| | December 31, | | December 31, | |||||
(in thousands) | | 2021 | | 2020 | | 2019 | |||
| | (Successor) | | (Successor) | | (Successor) | |||
Disaggregated Revenue | | | | | | | | | |
Equipment Solutions | | $ | 352,094 | | $ | 296,267 | | $ | 253,597 |
Clinical Engineering | | | 384,147 | | | 256,874 | | | 188,752 |
Onsite Managed Services | | | 302,449 | | | 220,171 | | | 170,724 |
Total revenue | | $ | 1,038,690 | | $ | 773,312 | | $ | 613,073 |
The Company capitalizes contract costs incurred in obtaining new contracts. The contract asset included in other long-term assets in the Consolidated Balance Sheet at December 31, 2021 and December 31, 2020 was $15.9 million and $13.4 million, respectively. Capitalized costs are amortized over the expected life of the related contracts, which is estimated to be five years. Amortization is computed on a straight-line basis, which coincides with the predominant expected life of the underlying contracts. Amortization costs are reflected in cost of revenue and selling, general and administrative expenses. The amount of amortization included in cost of revenue was $0.7 million, $0.4 million and $0.1 million for the years ended December 31, 2021 and 2020, and for the period from January 4 through December 31, 2019, respectively. The amount of amortization included in selling, general and administrative expense was $3.1 million, $2.0 million and $0.5 million for the years ended December 31, 2021 and 2020, and for the period from January 4 through December 31, 2019, respectively. There was 0 impairment loss in relation to the costs capitalized during the years ended December 31, 2021 and 2020, and for the period from January 4 through December 31, 2019.
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4. Acquisitions
On October 1, 2021, we completed a stock purchase agreement to purchase all of the outstanding capital stock of Sizewise Rentals, LLC (“Sizewise”), a privately held manufacturer and distributor of specialty patient handling equipment, for a total consideration of approximately $234.8 million (“Sizewise Acquisition”). The results of Sizewise’s operations have been included in the consolidated financial statements since October 1, 2021.
The following summarizes the preliminary fair values of assets acquired and liabilities assumed at the date of the Sizewise Acquisition within our consolidated balance sheet:
| | | |
(in thousands) |
|
| |
Cash | | $ | 9,977 |
Accounts receivable | | | 31,005 |
Inventories | | | 27,911 |
Other current assets | | | 2,968 |
Property and equipment | | | 59,042 |
Goodwill | | | 87,867 |
Operating lease right-of-use assets | | | 16,754 |
Other intangibles | | | 67,700 |
Other long-term assets | | | 10,368 |
Accounts payable | | | (3,362) |
Accrued compensation | | | (12,576) |
Other accrued expenses | | | (4,525) |
Operating lease liability | | | (16,953) |
Other long-term liabilities | | | (9,924) |
Deferred income taxes | | | (31,470) |
Total purchase price | | $ | 234,782 |
The acquired intangible assets, all of which are finite-life, are comprised of trade name, developed technology and customer relationships, have a weighted average useful life of approximately 14.4 years. The total amount of goodwill that is deductible for tax purposes is $1.4 million.
Due to the recent closing of the transaction, the purchase price allocation is preliminary and will be finalized when final assessments of the fair value of acquired assets and assumed liabilities are completed. The area of the purchase price allocation that is not yet finalized includes income tax related matters. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.
This Sizewise Acquisition was funded from additional borrowing under our first lien term loan and cash. Transaction costs of $3.2 million for legal and other related costs incurred in connection with the acquisition of Sizewise were expensed as incurred for the year ended December 31, 2021.
On March 19, 2021, we completed a stock purchase agreement to purchase all of the outstanding capital stock of Northfield Medical, Inc. (“Northfield”), a company specializing in the service and repair of medical equipment and instruments for a total consideration of approximately $472.3 million (“Northfield Acquisition”). The consideration consisted of $461.0 million of cash paid and $11.3 million in issuance of 752,328 shares of common stock. The results of Northfield’s operations have been included in the consolidated financial statements since March 19, 2021. During the year ended December 31, 2021, adjustments affecting the fair values of assets acquired and liabilities assumed decreased accounts receivable $0.2 million, increased goodwill $1.3 million, increased accounts payable $0.1 million, and increased deferred income taxes $1.0 million. All adjustments net to 0.
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The following summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition within our consolidated balance sheet:
| | | |
(in thousands) |
|
| |
Cash | | $ | 10,767 |
Accounts receivable | | | 16,786 |
Inventories | | | 5,810 |
Other current assets | | | 502 |
Property and equipment | | | 11,713 |
Goodwill | | | 306,678 |
Operating lease right-of-use assets | | | 4,815 |
Other intangibles | | | 183,700 |
Accounts payable | | | (7,412) |
Accrued compensation | | | (7,948) |
Other accrued expenses | | | (9,620) |
Finance lease liability | | | (2,340) |
Operating lease liability | | | (5,025) |
Other long-term liabilities | | | (837) |
Deferred income taxes | | | (35,324) |
Total purchase price | | $ | 472,265 |
The Other intangibles represent acquired finite-life customer relationships, which is amortized over 15 years using the sum of the years’ digits method. The total amount of goodwill that is deductible for tax purposes is $68.2 million.
The Northfield Acquisition was funded with additional borrowings under our first lien term loan, revolving loan and cash. Transaction costs of $4.2 million for legal and other related costs incurred in connection with the acquisition of Northfield were expensed as incurred for the year ended December 31, 2021.
The following unaudited pro forma consolidated results of operations assume the Sizewise and Northfield acquisitions had occurred on January 1, 2020. The unaudited pro forma consolidated financial information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisitions had actually closed on that date, nor the results that may be obtained in the future:
| | | | | | |
| | Year Ended | ||||
| | December 31, | ||||
(unaudited, in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Revenue | | $ | 1,186,472 | | $ | 1,035,181 |
Net income (loss) attributable to Agiliti, Inc. and Subsidiaries | | | 28,493 | | | (31,375) |
Included in the determination of pro forma net income (loss) for the years ended December 31, 2021 and 2020 are pro forma charges for various purchase accounting adjustments. These pro forma adjustments included depreciation and amortization of assets acquired and interest expense on additional debt to finance the acquisition. Income taxes are provided at the estimated statutory rate.
On December 11, 2020, we completed the acquisition of certain assets of a surgical laser equipment solutions provider for total consideration of approximately $8.9 million. The result of the acquired company’s operations have been included in the consolidated financial statements since that date.
On January 31, 2020, we completed the acquisition of certain assets of a surgical equipment repair and maintenance service provider for total consideration of approximately $88.3 million. The result of the acquired company’s operations have been included in the consolidated financial statements since that date.
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The following summarized the fair value of assets acquired and liabilities assumed at the date of acquisition within our consolidated balance sheet:
| | | |
(in thousands) |
|
| |
Cash | | $ | 51 |
Accounts receivable | | | 10,447 |
Inventories | | | 4,591 |
Other current assets | | | 208 |
Property and equipment | | | 3,534 |
Goodwill | | | 35,554 |
Operating lease right-of-use assets | | | 2,422 |
Other intangibles | | | 34,714 |
Accounts payable | | | (1,333) |
Accrued compensation | | | (494) |
Other accrued expenses | | | (275) |
Operating lease liability | | | (1,142) |
Total purchase price | | $ | 88,277 |
The acquired intangible assets, all of which are of finite-life, are comprised of trade name and customer relationships and have a weighted average useful life of approximately 14.5 years. The total amount of goodwill that is deductible for tax purposes is $35.4 million.
This acquisition was funded from the revolving loan.
5. Fair Value Measurements
Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020 are summarized in the following tables by type of inputs applicable to the fair value measurements:
| | | | | | | | | | | | |
| | Fair Value at December 31, 2021 | ||||||||||
| | (Successor) | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets: | | | | | | | | | | | | |
Deferred compensation assets | | $ | 2,452 | | $ | — | | $ | — | | $ | 2,452 |
Interest rate swap | | | — | | | 2,093 | | | — | | | 2,093 |
Liabilities: | | | | | | | | | | | | |
Contingent consideration | | $ | — | | $ | — | | $ | 500 | | $ | 500 |
Obligation under tax receivable agreement | | | — | | | — | | | 39,880 | | | 39,880 |
Interest rate swap | | | — | | | — | | | — | | | — |
Deferred compensation liabilities | | | 2,452 | | | — | | | — | | | 2,452 |
| | | | | | | | | | | | |
| | Fair Value at December 31, 2020 | ||||||||||
| | (Successor) | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Assets: | | | | | | | | | | | | |
Deferred compensation assets | | $ | 1,104 | | $ | — | | $ | — | | $ | 1,104 |
Liabilities: | | | | | | | | | | | | |
Contingent consideration | | $ | — | | $ | — | | $ | 321 | | $ | 321 |
Obligation under tax receivable agreement | | | — | | | — | | | 50,600 | | | 50,600 |
Interest rate swap | | | — | | | 1,883 | | | — | | | 1,883 |
Deferred compensation liabilities | | | 1,104 | | | — | | | — | | | 1,104 |
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A description of the inputs used in the valuation of assets and liabilities is summarized as follows:
Level 1 — Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Disaggregated Revenue | ||||||||||||||||||||
| Equipment Solutions | $ | 438,682 | $ | 352,094 | $ | 296,267 | ||||||||||||||
| Clinical Engineering | 420,685 | 384,147 | 256,874 | |||||||||||||||||
| Onsite Managed Services | 261,925 | 302,449 | 220,171 | |||||||||||||||||
| Total revenue | $ | 1,121,292 | $ | 1,038,690 | $ | 773,312 | ||||||||||||||
| (in thousands) | |||||
| Accounts receivable | $ | 372 | |||
| Prepaid expenses | 80 | ||||
| Inventories | 3,671 | ||||
| Property and equipment | 9,001 | ||||
| Goodwill | 25,985 | ||||
| Operating lease right-of-use assets | 215 | ||||
| Other non-current assets | 6 | ||||
| Other intangibles | 24,980 | ||||
| Accrued expenses | (296) | ||||
| Operating lease liability | (209) | ||||
| Total purchase price | $ | 63,805 | |||
| (in thousands) | |||||
| Cash | $ | 9,977 | |||
| Accounts receivable | 31,005 | ||||
| Inventories | 27,911 | ||||
| Other current assets | 2,968 | ||||
| Property and equipment | 59,042 | ||||
| Goodwill | 87,867 | ||||
| Operating lease right-of-use assets | 16,754 | ||||
| Other intangibles | 67,700 | ||||
| Other long-term assets | 10,368 | ||||
| Accounts payable | (3,362) | ||||
| Accrued compensation | (12,576) | ||||
| Other accrued expenses | (4,525) | ||||
| Operating lease liability | (16,953) | ||||
| Other long-term liabilities | (9,924) | ||||
| Deferred income taxes | (31,470) | ||||
| Total purchase price | $ | 234,782 | |||
| (in thousands) | |||||
| Cash | $ | 10,767 | |||
| Accounts receivable | 16,786 | ||||
| Inventories | 5,810 | ||||
| Other current assets | 502 | ||||
| Property and equipment | 11,713 | ||||
| Goodwill | 306,678 | ||||
| Operating lease right-of-use assets | 4,815 | ||||
| Other intangibles | 183,700 | ||||
| Accounts payable | (7,412) | ||||
| Accrued compensation | (7,948) | ||||
| Other accrued expenses | (9,620) | ||||
| Finance lease liability | (2,340) | ||||
| Operating lease liability | (5,025) | ||||
| Other long-term liabilities | (837) | ||||
| Deferred income taxes | (35,324) | ||||
| Total purchase price | $ | 472,265 | |||
Year Ended December 31, | ||||||||||||||
| (unaudited, in thousands) | 2022 | 2021 | ||||||||||||
| Revenue | $ | 1,121,292 | $ | 1,186,472 | ||||||||||
| Net income (loss) attributable to Agiliti, Inc. and Subsidiaries | 30,212 | 28,493 | ||||||||||||
| (in thousands) | |||||
| Cash | $ | 51 | |||
| Accounts receivable | 10,447 | ||||
| Inventories | 4,591 | ||||
| Other current assets | 208 | ||||
| Property and equipment | 3,534 | ||||
| Goodwill | 35,554 | ||||
| Operating lease right-of-use assets | 2,422 | ||||
| Other intangibles | 34,714 | ||||
| Accounts payable | (1,333) | ||||
| Accrued compensation | (494) | ||||
| Other accrued expenses | (275) | ||||
| Operating lease liability | (1,142) | ||||
| Total purchase price | $ | 88,277 | |||
| Fair Value at December 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Deferred compensation assets | $ | 2,681 | $ | — | $ | — | $ | 2,681 | ||||||||||||||||||
| Interest rate swap | — | 9,212 | — | 9,212 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Contingent compensation | $ | — | $ | — | $ | 1,898 | $ | 1,898 | ||||||||||||||||||
| Contingent consideration | — | — | 248 | $ | 248 | |||||||||||||||||||||
| Obligation under tax receivable agreement | — | — | 38,714 | 38,714 | ||||||||||||||||||||||
| Deferred compensation liabilities | 2,674 | — | — | 2,674 | ||||||||||||||||||||||
| Fair Value at December 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Deferred compensation assets | $ | 2,452 | $ | — | $ | — | $ | 2,452 | ||||||||||||||||||
| Interest rate swap | — | 2,093 | — | 2,093 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Contingent consideration | $ | — | $ | — | $ | 500 | $ | 500 | ||||||||||||||||||
| Obligation under tax receivable agreement | — | — | 39,880 | 39,880 | ||||||||||||||||||||||
| Deferred compensation liabilities | 2,452 | — | — | 2,452 | ||||||||||||||||||||||
In May 2020, we entered into an interest rate swap agreement to manage our interest rate exposure, see Note 7, Long-Term Debt. The carrying value2021.
The assumptions used in preparing the discounted cash flow analyses included estimates of interest rates and the timing and amount of incremental cash flows.
Contents
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A reconciliation of the beginning and ending balance for the Level 3 measurement are as follows:
| | | |
(in thousands) |
|
| |
Balance at December 31, 2019 (Successor) | | $ | 37,669 |
Addition | |
| 321 |
Remeasurement adjustment (1) | | | 12,931 |
Balance at December 31, 2020 (Successor) | | $ | 50,921 |
Addition | |
| 494 |
Payments | | | (15,577) |
Remeasurement adjustment (1) | | | 4,542 |
Balance at December 31, 2021 (Successor) | | $ | 40,380 |
| (in thousands) | |||||||||||
| Balance at December 31, 2020 | $ | 50,921 | |||||||||
| Additions | 1,244 | ||||||||||
| Payments | (15,577) | ||||||||||
Remeasurement | 4,542 | ||||||||||
| Balance at December 31, 2021 | $ | 41,130 | |||||||||
| Additions | 3,255 | ||||||||||
| Payments | (1,428) | ||||||||||
Remeasurement adjustment (1) | (2,097) | ||||||||||
| Balance at December 31, 2022 | $ | 40,860 | |||||||||
| December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||||
| (in thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||
First Lien Term Loan (1) | $ | 1,043,915 | $ | 1,030,072 | $ | 1,167,649 | $ | 1,174,871 | ||||||||||||||||||
| (1) | The carrying value of the First Lien Term Loan is net of unamortized deferred financing costs of $8.0 million and $10.4 million and unamortized debt discount of $2.6 million and $5.0 million as of December 31, 2022 and 2021, respectively. | ||||
| (in thousands) | December 31, 2022 | December 31, 2021 | ||||||||||||
| Raw materials | $ | 14,575 | $ | 8,710 | ||||||||||
| Work-in-process | 692 | 610 | ||||||||||||
| Finished goods | 54,865 | 45,987 | ||||||||||||
| Total inventories | $ | 70,132 | $ | 55,307 | ||||||||||
Our
| | | | | | |
| | December 31, | | December 31, | ||
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Medical Equipment | | $ | 359,284 | | $ | 285,723 |
Less: Accumulated depreciation | |
| (209,516) | |
| (145,645) |
Medical equipment, net | |
| 149,768 | |
| 140,078 |
Leasehold improvements | |
| 39,026 | |
| 28,415 |
Office equipment and vehicles | |
| 135,643 | |
| 84,231 |
| |
| 174,669 | |
| 112,646 |
Less: Accumulated depreciation and amortization | |
| (66,067) | |
| (38,308) |
Property and office equipment, net | |
| 108,602 | |
| 74,338 |
Total property and equipment, net | | $ | 258,370 | | $ | 214,416 |
| (in thousands) | December 31, 2022 | December 31, 2021 | ||||||||||||
| Medical equipment | $ | 405,149 | $ | 359,284 | ||||||||||
| Less: Accumulated depreciation | (250,620) | (209,516) | ||||||||||||
| Medical equipment, net | 154,529 | 149,768 | ||||||||||||
| Leasehold improvements | 52,046 | 39,026 | ||||||||||||
| Property and office equipment | 165,737 | 135,643 | ||||||||||||
| 217,783 | 174,669 | |||||||||||||
| Less: Accumulated depreciation | (98,354) | (66,067) | ||||||||||||
| Property and office equipment, net | 119,429 | 108,602 | ||||||||||||
| Total property and equipment, net | $ | 273,958 | $ | 258,370 | ||||||||||
2020.
Our
| | | |
(in thousands) | | | |
Balance at December 31, 2020 (Successor) | | $ | 817,113 |
Acquisitions | | | 396,008 |
Balance at December 31, 2021 (Successor) | | $ | 1,213,121 |
84
| (in thousands) | |||||
| Balance at December 31, 2021 | $ | 1,213,121 | |||
| Acquisitions | 25,985 | ||||
| Balance at December 31, 2022 | $ | 1,239,106 | |||
OurThe Company's other intangible assets as of December 31, 20212022 and 20202021 consist of the following:
| December 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | Cost | Accumulated Amortization | Impairment | Net | ||||||||||||||||||||||
| Finite-life intangibles | ||||||||||||||||||||||||||
| Customer relationships | $ | 780,806 | $ | (275,522) | $ | — | $ | 505,284 | ||||||||||||||||||
| Non-compete agreements | 6,225 | (5,096) | — | 1,129 | ||||||||||||||||||||||
| Trade names | 7,826 | (3,311) | — | 4,515 | ||||||||||||||||||||||
| Developed technology | 2,300 | (1,208) | — | 1,093 | ||||||||||||||||||||||
| Total intangible assets | $ | 797,157 | $ | (285,137) | $ | — | $ | 512,020 | ||||||||||||||||||
| | | | | | | | | | | | |
| | December 31, 2021 | ||||||||||
| | (Successor) | ||||||||||
|
|
|
| Accumulated |
| |
|
| ||||
(in thousands) | | Cost | | Amortization | | Impairment | | Net | ||||
Finite-life intangibles | | | | | | | | | | | | |
Customer relationships | | $ | 756,889 | | $ | (194,312) | | $ | — | | $ | 562,577 |
Non-compete agreements | | | 14,613 | | | (13,222) | | | — | | | 1,391 |
Trade names | | | 9,179 | | | (2,230) | | | — | | | 6,949 |
Developed technology | | | 2,300 | | | (58) | | | — | | | 2,242 |
Total intangible assets | | $ | 782,981 | | $ | (209,822) | | $ | — | | $ | 573,159 |
| | | | | | | | | | | | |
| | December 31, 2020 | ||||||||||
| | (Successor) | ||||||||||
|
|
|
| Accumulated |
| |
|
| ||||
(in thousands) | | Cost | | Amortization | | Impairment | | Net | ||||
Finite-life intangibles | | | | | | | | | | | | |
Customer relationships | | $ | 513,189 | | $ | (118,172) | | $ | — | | $ | 395,017 |
Non-compete agreements | | | 14,613 | | | (9,647) | | | — | | | 4,966 |
Trade names | | | 3,779 | | | (1,667) | | | — | | | 2,112 |
Total intangible assets | | $ | 531,581 | | $ | (129,486) | | $ | — | | $ | 402,095 |
| December 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | Cost | Accumulated Amortization | Impairment | Net | ||||||||||||||||||||||
| Finite-life intangibles | ||||||||||||||||||||||||||
| Customer relationships | $ | 756,889 | $ | (194,312) | $ | — | $ | 562,577 | ||||||||||||||||||
| Non-compete agreements | 14,613 | (13,222) | — | 1,391 | ||||||||||||||||||||||
| Trade names | 9,179 | (2,230) | — | 6,949 | ||||||||||||||||||||||
| Developed technology | 2,300 | (58) | — | 2,242 | ||||||||||||||||||||||
| Total intangible assets | $ | 782,981 | $ | (209,822) | $ | — | $ | 573,159 | ||||||||||||||||||
| | | |
(in thousands) |
|
| |
2022 | | $ | 83,370 |
2023 | |
| 75,735 |
2024 | |
| 69,374 |
2025 | |
| 63,012 |
2026 | |
| 56,640 |
| (in thousands) | |||||
| 2023 | $ | 82,301 | |||
| 2024 | 71,598 | ||||
| 2025 | 65,036 | ||||
| 2026 | 58,464 | ||||
| 2027 | 51,900 | ||||
| Thereafter | 182,721 | ||||
| $ | 512,020 | ||||
85
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Non-cash activities: | ||||||||||||||||||||
| Property and equipment purchases included in accounts payable (at end of period) | $ | 2,241 | $ | 7,633 | $ | 3,141 | ||||||||||||||
| Finance lease assets and liability additions | 7,117 | 8,783 | 10,286 | |||||||||||||||||
| Operating lease right-of-use assets and operating lease liability additions | 22,501 | 27,660 | 29,577 | |||||||||||||||||
| Issuance of common stock related to acquisition | 2,000 | 11,300 | — | |||||||||||||||||
| Dividend and equity distribution (forfeited) payable | (23) | (26) | — | |||||||||||||||||
| Software service contract additions | — | 94 | — | |||||||||||||||||
| | | | | ��� | | | | | | | | |
| | | | | | From | | | From | ||||
| | | | | | January 4 | | | January 1 | ||||
| | Year Ended | | through | | | through | ||||||
| | December 31, | | December 31, | | | January 3, | ||||||
(in thousands) | | 2021 |
| 2020 |
| 2019 | | | 2019 | ||||
|
| (Successor) | | (Successor) | | (Successor) | | | (Predecessor) | ||||
Non-cash activities: | | | | | | | | | | | | | |
Property and equipment purchases included in accounts payable (at end of period) | | $ | 7,633 | | $ | 3,141 | | $ | 7,842 | | | $ | — |
Finance lease assets and liability additions | |
| 8,783 | |
| 10,286 | |
| 9,968 | | |
| — |
Operating lease right-of-use assets and operating lease liability additions | | | 27,660 | | | 29,577 | | | 9,674 | | | | 30,426 |
Non-cash equity contribution | | | — | | | — | | | 22,464 | | | | — |
Issuance of common stock related to acquisition | | | 11,300 | | | — | | | — | | | | — |
Dividend and equity distribution (forfeited) payable | | | (26) | | | — | | | 3,437 | | | | — |
Software service contract additions | | | 94 | | | — | | | 4,637 | | | | — |
| | | | | | |
|
| December 31, |
| December 31, | ||
(in thousands) | | 2021 | | 2020 | ||
| | (Successor) | | (Successor) | ||
First Lien Term Loan | | $ | 1,183,071 | | $ | 922,191 |
Second Lien Term Loan | | | — | | | 240,000 |
Revolving Loan | | | — | | | — |
Finance lease liability | |
| 26,621 | |
| 24,595 |
| |
| 1,209,692 | |
| 1,186,786 |
Less: unamortized deferred financing costs and debt discount | | | (17,190) | | | (25,687) |
| | | 1,192,502 | | | 1,161,099 |
Less: Current portion of long-term debt | |
| (17,534) | |
| (16,044) |
Total long-term debt | | $ | 1,174,968 | | $ | 1,145,055 |
| (in thousands) | December 31, 2022 | December 31, 2021 | ||||||||||||
| First Lien Term Loan | $ | 1,054,549 | $ | 1,183,071 | ||||||||||
| Revolving Loan | 28,500 | — | ||||||||||||
| Finance lease liability | 23,892 | 26,621 | ||||||||||||
| 1,106,941 | 1,209,692 | |||||||||||||
| Less: unamortized deferred financing costs and debt discount | (11,896) | (17,190) | ||||||||||||
| 1,095,045 | 1,192,502 | |||||||||||||
| Less: Current portion of long-term debt | (17,752) | (17,534) | ||||||||||||
| Total long-term debt | $ | 1,077,293 | $ | 1,174,968 | ||||||||||
86
The First Lien Term Loan amortizes in equal quarterly installments, commencing on June 30, 2019, in an aggregate annual amount equal to 1.00% of the original principal amount of such term loan, with the balance due and payable at maturity unless prepaid prior thereto.
Infacility during the year ended December 31, 2021.
Except as described above, the Amendment has substantially the same terms as the First Lien Credit Agreement, and amendments thereto, including customary covenants and events of default.
87
Benchmark Administration for the interest period relevant to such borrowing, in each case, subject to interest rate floors. The interest rate on the Second Lien Term Loan was LIBOR rate plus 7.75% at the end of the first quarter.
We
In connection with the repayment of ourthe Second Lien Term Loan in April 2021, wethe Company incurred loss on extinguishment of debt of $9.8 million which consisted of the write-off of unamortized deferred financing costs and debt discount of $7.4 million and an additional 1% redemption price or $2.4 million.
We were in compliance with all financial debt covenants for all periods presented.
| | | | |
(in thousands) |
|
| |
|
2022 | | $ | 17,534 | |
2023 | |
| 15,028 | |
2024 | |
| 13,301 | |
2025 | |
| 12,109 | |
2026 | |
| 1,147,364 | |
Thereafter | |
| 4,356 | |
Total | |
| 1,209,692 | |
Unamortized deferred financing costs | | | (12,208) | |
Unamortized debt discount | |
| (4,982) | |
| | $ | 1,192,502 | |
88
| (in thousands) | |||||
| 2023 | $ | 17,752 | |||
| 2024 | 14,695 | ||||
| 2025 | 12,836 | ||||
| 2026 | 1,057,117 | ||||
| 2027 | 1,501 | ||||
| Thereafter | 3,040 | ||||
| Total | 1,106,941 | ||||
| Unamortized deferred financing costs | (9,278) | ||||
| Unamortized debt discount | (2,618) | ||||
| $ | 1,095,045 | ||||
| | | | | | | | |
| | | | December 31, | | December 31, | ||
(in thousands) | | | | 2021 | | 2020 | ||
| | | | (Successor) | | (Successor) | ||
Lease Assets | | Classification | | | | | | |
Operating lease assets | | Operating lease right-of-use assets | | $ | 80,676 | | $ | 51,214 |
Finance lease assets | | Property and equipment (1) | | | 26,098 | | | 23,513 |
Total leased assets | | | | $ | 106,774 | | $ | 74,727 |
Lease Liabilities | | | | | | | | |
Current: | | | | | | | | |
Operating | | Current portion of operating lease liability | | $ | 22,826 | | $ | 14,155 |
Finance | | Current portion of long-term debt | | | 8,136 | | | 6,694 |
Noncurrent: | | | | | | | | |
Operating | | Operating lease liability, less current portion | | | 63,241 | | | 40,283 |
Finance | | Long-term debt, less current portion | | | 18,485 | | | 17,901 |
Total lease liabilities | | | | $ | 112,688 | | $ | 79,033 |
| (in thousands) | December 31, 2022 | December 31, 2021 | |||||||||||||||
| Lease Assets | Classification | ||||||||||||||||
| Operating lease assets | Operating lease right-of-use assets | $ | 79,975 | $ | 80,676 | ||||||||||||
| Finance lease assets | Property and equipment (1) | 23,231 | 26,098 | ||||||||||||||
| Total leased assets | $ | 103,206 | $ | 106,774 | |||||||||||||
| Lease Liabilities | |||||||||||||||||
| Current: | |||||||||||||||||
| Operating | Current portion of operating lease liability | $ | 23,607 | $ | 22,826 | ||||||||||||
| Finance | Current portion of long-term debt | 8,354 | 8,136 | ||||||||||||||
| Noncurrent: | |||||||||||||||||
| Operating | Operating lease liability, less current portion | 67,332 | 63,241 | ||||||||||||||
| Finance | Long-term debt, less current portion | 15,538 | 18,485 | ||||||||||||||
| Total lease liabilities | $ | 114,831 | $ | 112,688 | |||||||||||||
| (1) | Finance lease assets are recorded net of accumulated depreciation of | ||||
| | | | | | | | | |
| | | | | | From | |||
| | | | | | January 4 | |||
| | Year Ended | | through | |||||
| | December 31, | | December 31, | |||||
(in thousands) | | 2021 | | 2020 | | 2019 | |||
| | (Successor) | | (Successor) | | (Successor) | |||
Lease Cost | | | | | | | |||
Finance lease cost: | | | | | | | | | |
Amortization of right-of-use assets | | $ | 8,657 | | $ | 9,531 | | $ | 9,058 |
Interest on lease liabilities | | | 738 | | | 781 | | | 658 |
Operating lease cost | | | 19,547 | | | 12,706 | | | 10,547 |
Short-term lease cost | | | 791 | | | 715 | | | 41 |
Variable lease cost | | | 5,641 | | | 4,388 | | | 3,397 |
Total lease cost | | $ | 35,374 | | $ | 28,121 | | $ | 23,701 |
89
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Lease Cost | ||||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||
| Amortization of right-of-use assets | $ | 8,659 | $ | 8,657 | $ | 9,531 | ||||||||||||||
| Interest on lease liabilities | 648 | 738 | 781 | |||||||||||||||||
| Operating lease cost | 29,044 | 19,547 | 12,706 | |||||||||||||||||
| Short-term lease cost | 878 | 791 | 715 | |||||||||||||||||
| Variable lease cost | 6,293 | 5,641 | 4,388 | |||||||||||||||||
| Total lease cost | $ | 45,522 | $ | 35,374 | $ | 28,121 | ||||||||||||||
The maturity of lease liabilities at December 31, 20212022 was as follows:
| | | | | | | | | |
| | | Operating | | | Finance | | | |
(in thousands) | | | Leases | | | Leases | | | Total |
2022 | | $ | 24,399 | | $ | 8,746 | | $ | 33,145 |
2023 | | | 21,000 | | | 6,116 | | | 27,116 |
2024 | | | 17,959 | �� | | 4,285 | | | 22,244 |
2025 | | | 14,379 | | | 3,015 | | | 17,394 |
2026 | | | 10,504 | | | 2,097 | | | 12,601 |
Thereafter | | | 1,657 | | | 4,530 | | | 6,187 |
Total lease payments | | $ | 89,898 | | $ | 28,789 | | $ | 118,687 |
Less: Interest | | | 3,831 | | | 2,168 | | | 5,999 |
Present value of lease liabilities | | $ | 86,067 | | $ | 26,621 | | $ | 112,688 |
| (in thousands) | Operating Leases | Finance Leases | Total | |||||||||||||||||
| 2023 | $ | 25,495 | $ | 8,965 | $ | 34,460 | ||||||||||||||
| 2024 | 22,671 | 5,696 | 28,367 | |||||||||||||||||
| 2025 | 18,321 | 3,736 | 22,057 | |||||||||||||||||
| 2026 | 13,963 | 2,461 | 16,424 | |||||||||||||||||
| 2027 | 4,434 | 1,634 | 6,068 | |||||||||||||||||
| Thereafter | 11,491 | 3,147 | 14,638 | |||||||||||||||||
| Total lease payments | $ | 96,375 | $ | 25,639 | $ | 122,014 | ||||||||||||||
| Less: Interest | 5,436 | 1,747 | 7,183 | |||||||||||||||||
| Present value of lease liabilities | $ | 90,939 | $ | 23,892 | $ | 114,831 | ||||||||||||||
|
|
|
|
| ||||||
|
|
| December 31, 2022 | |||||||
|
|
|
| |||||||
Lease Term and Discount Rate |
|
|
|
| ||||||
Weighted-average remaining lease term (years) |
|
|
|
| ||||||
Operating leases |
|
|
|
| ||||||
Finance leases |
|
|
|
| ||||||
Weighted-average discount rate |
|
|
|
| ||||||
Operating leases |
|
|
|
| ||||||
Finance leases |
|
|
|
| ||||||
| | | | | | | | | |
| | | | | | From | |||
| | | | | | January 4 | |||
| | Year Ended | | through | |||||
| | December 31, | | December 31, | |||||
(in thousands) | | 2021 | | 2020 | | 2019 | |||
| | (Successor) | | (Successor) | | (Successor) | |||
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | | | |
Operating cash flows for finance leases | | $ | 738 | | $ | 781 | | $ | 658 |
Operating cash flows for operating leases | | | 19,569 | | | 12,733 | | | 10,028 |
Financing cash flows for finance leases | | | 9,097 | | | 8,024 | | | 7,609 |
| | | | | | | | | |
Lease asset obtained in exchange for new finance lease liabilities | | | 8,783 | | | 10,286 | | | 9,968 |
Lease asset obtained in exchange for new operating lease liabilities | | | 27,660 | | | 29,577 | | | 9,674 |
Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||
| Operating cash flows for finance leases | $ | 648 | $ | 738 | $ | 781 | ||||||||||||||
| Operating cash flows for operating leases | 25,878 | 19,569 | 12,733 | |||||||||||||||||
| Financing cash flows for finance leases | 8,812 | 9,097 | 8,024 | |||||||||||||||||
| Lease asset obtained in exchange for new finance lease liabilities | 7,117 | 8,783 | 10,286 | |||||||||||||||||
| Lease asset obtained in exchange for new operating lease liabilities | 22,501 | 27,660 | 29,577 | |||||||||||||||||
90
DividendDividends payable was $1.2$0.3 million as of December 31, 2022, all of which was included in accounts payable, and $2.2$1.2 million as of December 31, 2021, and 2020, respectively, of which $0.9 million and $0.9 million was included in accounts payable and $0.3 million and $1.3 million was included in other long-term liabilities, respectively.
| | | | | | | |
|
| December 31, |
| December 31, |
| ||
(in thousands) | | 2021 | | 2020 |
| ||
| | (Successor) | | (Successor) | | ||
Unrealized loss on minimum pension liability adjustment, net of tax | | $ | (20) | | $ | (2,215) | |
Unrealized loss on cash flow hedge, net of tax | | | 1,557 | | | (1,404) | |
| | $ | 1,537 | | $ | (3,619) | |
| (in thousands) | December 31, 2022 | December 31, 2021 | ||||||||||||
| Unrealized gain (loss) on minimum pension liability adjustment, net of tax | $ | 502 | $ | (20) | ||||||||||
| Unrealized gain on cash flow hedge, net of tax | 6,841 | 1,557 | ||||||||||||
| $ | 7,343 | $ | 1,537 | |||||||||||
| | | | |
(in thousands) |
|
| |
|
Minimum pension liability - balance at December 31, 2020 (Successor) | | $ | (2,215) | |
Net actuarial gain | |
| 2,649 | |
Reclassification for amortization of net gain | |
| 293 | |
Income tax expense related to pension | | | (747) | |
Net current year other comprehensive income | |
| 2,195 | |
Minimum pension liability - balance at December 31, 2021 (Successor) | | $ | (20) | |
| | | | |
Cash flow hedge - balance at December 31, 2020 (Successor) | | $ | (1,404) | |
Changes in the effective portion of the fair value of cash flow hedge | |
| 3,976 | |
Income tax expense related to cash flow hedge | | | (1,015) | |
Net current year other comprehensive income | |
| 2,961 | |
Cash flow hedge - balance at December 31, 2021 (Successor) | | $ | 1,557 | |
| | | | |
Net current year other comprehensive income | | $ | 5,156 | |
Amount reclassified from accumulated other comprehensive loss is included in the selling, general and administrative expense in the Consolidated Statements of Operations.
| (in thousands) | |||||
| Minimum pension liability - balance as of December 31, 2021 | $ | (20) | |||
| Net actuarial gain | 703 | ||||
| Income tax expense related to pension | (181) | ||||
| Net current year other comprehensive income | 522 | ||||
| Minimum pension liability - balance as of December 31, 2022 | $ | 502 | |||
| Cash flow hedge - balance as of December 31, 2021 | $ | 1,557 | |||
| Changes in the effective portion of the fair value of cash flow hedge | 7,119 | ||||
| Income tax expense related to cash flow hedge | (1,835) | ||||
| Net current year other comprehensive income | 5,284 | ||||
| Cash flow hedge - balance as of December 31, 2022 | $ | 6,841 | |||
| Net current year other comprehensive income | $ | 5,806 | |||
91
The shares issued to a grantee upon the exercise of such grantee’s options will be subject to certain restrictions on transferability as provided in the 2018 Plan. Grantees are subject to non-competition, non-solicitation and confidentiality requirements as set forth in their respective stock option grant agreements. Forfeited options are available for future issue.
issuance.
2022.
| | | | | | | | | | |
|
| |
| | |
| | |
| Weighted |
| | | | | | | | | | average |
| | | | Weighted | | Aggregate | | remaining | ||
| | Number of | | average | | intrinsic | | contractual | ||
(in thousands, except exercise price and years) | | options | | exercise price | | value | | term (years) | ||
Outstanding at January 4, 2019 (Successor) | | — | | $ | — | | $ | — |
| — |
Granted | | 6,023 | |
| 4.22 | | | | | |
Exercised | | (91) | |
| 2.13 | | | 580 | | |
Forfeited or expired | | (10) | |
| 6.27 | | | | | |
Outstanding at December 31, 2019 (Successor) | | 5,922 | | $ | 4.25 | | $ | 23,669 |
| 7.1 |
Granted | | 1,274 | |
| 8.25 | | | | | |
Exercised | | (239) | |
| 6.27 | | | 473 | | |
Forfeited or expired | | (267) | |
| 6.38 | | | | | |
Outstanding at December 31, 2020 (Successor) | | 6,690 | | $ | 4.86 | | $ | 81,235 |
| 6.5 |
Granted |
| 710 | |
| 14.09 | | | | | |
Exercised |
| (651) | |
| 2.22 | | | 11,939 | | |
Forfeited or expired |
| — | |
| | | | | | |
Outstanding at December 31, 2021 (Successor) |
| 6,749 | | $ | 6.08 | | $ | 114,095 |
| 6.1 |
Exercisable at December 31, 2021 (Successor) |
| 4,190 | | $ | 4.28 | | $ | 77,948 |
| 5.0 |
Remaining authorized option available for issue | | 8,392 | | | | | | | | |
| (in thousands, except exercise price and years) | Number of options | Weighted average exercise price | Aggregate intrinsic value | Weighted average remaining contractual term (years) | ||||||||||||||||||||||
| Outstanding as of December 31, 2019 | 5,922 | $ | — | $ | — | 7.10 | ||||||||||||||||||||
| Granted | 1,274 | 8.25 | ||||||||||||||||||||||||
| Exercised | (239) | 6.27 | 473 | |||||||||||||||||||||||
| Forfeited or expired | (267) | 6.38 | ||||||||||||||||||||||||
| Outstanding as of December 31, 2020 | 6,690 | $ | 4.25 | $ | 81,235 | 6.5 | ||||||||||||||||||||
| Granted | 710 | 14.09 | ||||||||||||||||||||||||
| Exercised | (651) | 2.22 | 11,939 | |||||||||||||||||||||||
| Forfeited or expired | — | |||||||||||||||||||||||||
| Outstanding as of December 31, 2021 | 6,749 | $ | 6.08 | $ | 114,095 | 6.1 | ||||||||||||||||||||
| Granted | 555 | 18.45 | ||||||||||||||||||||||||
| Exercised | (820) | 3.67 | 12,332 | |||||||||||||||||||||||
| Forfeited or expired | (85) | |||||||||||||||||||||||||
| Outstanding as of December 31, 2022 | 6,399 | $ | 7.36 | $ | 58,449 | 5.7 | ||||||||||||||||||||
| Exercisable as of December 31, 2022 | 4,591 | $ | 5.46 | $ | 49,812 | 4.9 | ||||||||||||||||||||
Compensation Committee.
We determine
92
The assumptions in the table below were used to determine the Black-Scholes fair value of stock options granted for the years ended December 31, 2022, 2021, and 2020, and the period from January 4 through December 31, 2019.
| | | | | | | | | | | |
| | | | | | | | | From | ||
| | | | | | | | | January 4 | ||
| | | | | | | | | through | ||
| Year Ended December 31, | | December 31, | ||||||||
| 2021 | | 2020 | | 2019 | ||||||
| (Successor) | | (Successor) | | (Successor) | ||||||
Risk-free interest rate | | 0.94 | % | | | 0.51 | % | | | 2.50 | % |
Expected volatility | | 34.05 | % | | | 33.95 | % | | | 34.13 | % |
Dividend yield | | N/A | | | | N/A | | | | N/A | |
Expected option life (years) | | 5.92 | | | | 3.03 | | | | 3.57 | |
Black-Scholes Value of options | $ | 4.83 | | | $ | 1.94 | | | $ | 2.42 | |
2020.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Risk-free interest rate | 1.76 % | 0.94 % | 0.51 % | ||||||||||||||
| Expected volatility | 33.36 % | 34.05 % | 33.95 % | ||||||||||||||
| Dividend yield | N/A | N/A | N/A | ||||||||||||||
| Expected option life (years) | 6.00 | 5.92 | 3.03 | ||||||||||||||
| Black-Scholes Value of options | $ | 6.53 | $ | 4.83 | $ | 1.94 | |||||||||||
| (in thousands, except grant date fair values) | Number of units | Weighted average grant date fair value | |||||||||
| Nonvested as of December 31, 2019 | 1,546 | $ | 8.50 | ||||||||
| Granted | 1,057 | 8.25 | |||||||||
| Vested | (512) | 8.50 | |||||||||
| Forfeited | (147) | 8.45 | |||||||||
| Nonvested as of December 31, 2020 | 1,944 | $ | 8.37 | ||||||||
| Granted | 1,180 | 14.69 | |||||||||
| Vested | (817) | 8.58 | |||||||||
| Forfeited | (135) | 11.55 | |||||||||
| Nonvested as of December 31, 2021 | 2,172 | $ | 11.26 | ||||||||
| Granted | 1,620 | 18.40 | |||||||||
| Vested | (1,021) | 10.03 | |||||||||
| Forfeited | (398) | 15.58 | |||||||||
| Nonvested as of December 31, 2022 | 2,373 | $ | 15.55 | ||||||||
| | | | | | |
| | | | | Weighted | |
| | | | | average | |
| | Number of | | | grant date | |
| | units | | | fair value | |
Nonvested at January 4, 2019 (Successor) | | — | | $ | — | |
Granted | | 1,575 | | | 8.50 | |
Vested | | — | | | — | |
Forfeited | | (29) | | | 8.50 | |
Nonvested at December 31, 2019 (Successor) | | 1,546 | | $ | 8.50 | |
Granted | | 1,057 | | | 8.25 | |
Vested | | (512) | | | 8.50 | |
Forfeited | | (147) | | | 8.45 | |
Nonvested at December 31, 2020 (Successor) | | 1,944 | | $ | 8.37 | |
Granted | | 1,180 | | | 14.69 | |
Vested | | (817) | | | 8.58 | |
Forfeited | | (135) | | | 11.55 | |
Nonvested at December 31, 2021 (Successor) | | 2,173 | | $ | 11.26 | |
Future expense related to restricted stock units and performance restricted stock units that we expectthe Company expects to recognize as expense over a weighted average period of 2.0 years totals approximately $14.8approximately $22.1 million, net of ourthe estimated forfeiture rate of 2.0%.
93
| Year Ended December 31, 2022 | ||||||||
| Risk-free interest rate | 1.65% | |||||||
| Expected dividend yield | — % | |||||||
| Average expected volatility of peer companies in the S&P 500 Index | 52.10% | |||||||
| Expected volatility of the Company | 52.50% | |||||||
| Expected term (years) | 2.83 | |||||||
For the years ended December 31, 2022, 2021, and 2020, and for the periods from January 4 through December 31, 2019 and from January 1 through January 3, 2019, weCompany recognized non-cash share-based compensation expense of $18.8, $14.0, million,and $10.3 million, $5.8respectively. For year ended December 31, 2022, $16.4 million and $5.9 million, respectively, whichof non-cash share-based compensation expense is primarily included in selling, general and administrative expenses.
Restricted stock unitsexpenses and performance restricted stock units are not taxable$2.3 million is included
respectively.
2022.
On July 29, 2019, the Company entered into a memorandum of understanding to settle all claims in an employee related class action litigation brought in California. The Company received a release in exchange for a payment of $3.5 million. Payment of the settlement amount was made in February 2020.
94
13. Limited Liability Companies
We participate with others inAdvisor were $0.6 and $2.3 million for the formation of LLCs in which the Company becomes a partner and shares the financial interest with the other investors. The Company is the primary beneficiary of these LLCs. These LLCs acquire certain medical equipment for use in their respective business activities, which generally focus on surgical procedures. The LLCs will acquire medical equipment for rental purposes under equipment financing leases. Atyears ended December 31, 2021 the LLCs had approximately $0.4 million of total assets. The third-party investors in each respective LLC generally provide the lease financing company with individual proportionate lease guarantees based on their respective ownership percentages in the LLCs. In addition, the Company will provide such financing companies with its corporate guarantee based on its respective ownership interest in each LLC. In certain instances, the Company has provided such financing companies with an overall corporate guarantee in connection with equipment financing transactions. In such instances, the individual investors in each respective LLC will generally indemnify us against losses, if any, incurred in connection with the Company’s corporate guarantee. Additionally, we provide operational and administrative support to the LLCs in which it is a partner. As of December 31, 2021, we held interests in 2 active LLCs.
In accordance with guidance issued by the FASB, we account for equity investments in LLCs (in which we are the primary beneficiary) under the full consolidation method whereby transactions between the Company and the LLCs have been eliminated through consolidation.
14.2020, respectively.
| (in thousands) | 2022 | 2021 | ||||||||||||
| Benefit obligations at beginning of year | $ | 31,150 | $ | 33,007 | ||||||||||
| Interest cost | 847 | 785 | ||||||||||||
| Actuarial (gain) loss | (6,451) | (1,260) | ||||||||||||
| Benefits paid | (1,417) | (1,382) | ||||||||||||
| Benefit obligations at end of year | $ | 24,129 | $ | 31,150 | ||||||||||
| | | | | | |
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Benefit obligations at beginning of year | | $ | 33,007 | | $ | 30,514 |
Interest cost | |
| 785 | |
| 955 |
Actuarial (gain) loss | |
| (1,260) | |
| 2,877 |
Benefit paid | |
| (1,382) | |
| (1,339) |
Benefit obligations at end of year | | $ | 31,150 | | $ | 33,007 |
| | | | | | |
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Fair value of plan assets at beginning of year | | $ | 24,630 | | $ | 22,616 |
Actual return on plan assets | |
| 2,495 | |
| 2,228 |
Employer contributions | |
| 650 | |
| 1,125 |
Benefits paid | |
| (1,382) | |
| (1,339) |
Fair value of plan assets at end of year | | $ | 26,393 | | $ | 24,630 |
95
| (in thousands) | 2022 | 2021 | ||||||||||||
| Fair value of plan assets at beginning of year | $ | 26,393 | $ | 24,630 | ||||||||||
| Actual return on plan assets | (4,610) | 2,495 | ||||||||||||
| Employer contributions | 650 | 650 | ||||||||||||
| Benefits paid | (1,417) | (1,382) | ||||||||||||
| Fair value of plan assets at end of year | $ | 21,016 | $ | 26,393 | ||||||||||
Funded Status
| | | | | | |
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Funded status | | $ | (4,757) | | $ | (8,377) |
Unrecognized net actuarial loss/accumulated other comprehensive loss | |
| 28 | |
| 2,969 |
Net amount recognized | | $ | (4,729) | | $ | (5,408) |
| (in thousands) | 2022 | 2021 | ||||||||||||
| Funded status | $ | (3,113) | $ | (4,757) | ||||||||||
| Unrecognized net actuarial (gain) loss / accumulated other comprehensive (gain) loss | (675) | 28 | ||||||||||||
| Net amount recognized | $ | (3,788) | $ | (4,729) | ||||||||||
| | | | | | |
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Projected benefit obligation | | $ | 31,150 | | $ | 33,007 |
Accumulated benefit obligation (“ABO”) | |
| 31,150 | |
| 33,007 |
Fair value of plan assets | |
| 26,393 | |
| 24,630 |
ABO less fair value of plan assets | |
| 4,757 | |
| 8,377 |
| (in thousands) | 2022 | 2021 | ||||||||||||
| Projected benefit obligation | $ | 24,129 | $ | 31,150 | ||||||||||
| Accumulated benefit obligation (“ABO”) | 24,129 | 31,150 | ||||||||||||
| Fair value of plan assets | 21,016 | 26,393 | ||||||||||||
| ABO less fair value of plan assets | $ | 3,113 | $ | 4,757 | ||||||||||
| | | | | | |
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Current liabilities | | $ | 650 | | $ | 650 |
Noncurrent liabilities | |
| 4,107 | |
| 7,727 |
Total amount recognized | | $ | 4,757 | | $ | 8,377 |
| (in thousands) | 2022 | 2021 | ||||||||||||
| Current liabilities | $ | 650 | $ | 650 | ||||||||||
| Noncurrent liabilities | 2,463 | 4,107 | ||||||||||||
| Total amount recognized | $ | 3,113 | $ | 4,757 | ||||||||||
| | | | | | | | | | |
| | | | | | | | From | ||
| | | | | | | | January 4 | ||
| | Year Ended | | | through | |||||
| | December 31, | | | December 31, | |||||
(in thousands) |
| 2021 |
| 2020 | | | 2019 | |||
| | (Successor) | | (Successor) | | | (Successor) | |||
Interest cost | | $ | 785 | | $ | 955 | | | $ | 1,132 |
Expected return on plan assets | |
| (1,107) | |
| (1,110) | | |
| (1,073) |
Recognized net actuarial loss | |
| 293 | |
| 49 | | |
| — |
Net periodic benefit cost | | $ | (29) | | $ | (106) | | | $ | 59 |
96
| (in thousands) | Year Ended December 31, | |||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Interest cost | $ | 847 | $ | 785 | $ | 955 | ||||||||||||||
| Expected return on plan assets | (1,139) | (1,107) | (1,110) | |||||||||||||||||
| Recognized net actuarial loss | — | 293 | 49 | |||||||||||||||||
| Net periodic benefit cost | $ | (292) | $ | (29) | $ | (106) | ||||||||||||||
Change in Accumulated Other Comprehensive Loss
| | | | | | | | | | |
| | | | | | | | From | ||
| | | | | | | | January 4 | ||
| | Year Ended | | | through | |||||
| | December 31, | | | December 31, | |||||
(in thousands) |
| 2021 |
| 2020 | | | 2019 | |||
| | (Successor) | | (Successor) | | | (Successor) | |||
Beginning of year | | $ | (2,215) | | $ | (940) | | | $ | (9,059) |
Net actuarial gain (loss) | |
| 2,649 | |
| (1,759) | | |
| (1,259) |
Impact of reflecting purchase accounting | | | — | | | — | | | | 9,059 |
Amortization of net gain | |
| 293 | |
| 49 | | |
| — |
Income tax expense related to pension | | | (747) | | | 435 | | | | 319 |
End of year | | $ | (20) | | $ | (2,215) | | | $ | (940) |
| (in thousands) | Year Ended December 31, | |||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Beginning of year | $ | (20) | $ | (2,215) | $ | (940) | ||||||||||||||
| Net actuarial gain (loss) | 703 | 2,649 | (1,759) | |||||||||||||||||
| Impact of reflecting purchase accounting | — | — | — | |||||||||||||||||
| Amortization of net gain | — | 293 | 49 | |||||||||||||||||
| Income tax expense related to pension | (181) | (747) | 435 | |||||||||||||||||
| End of year | $ | 502 | $ | (20) | $ | (2,215) | ||||||||||||||
Our
| | | | | | | | | |
|
| Target | |
|
| |
|
| |
Asset Category | | Allocation | | 2021 | | 2020 | |||
| | | | | (Successor) | | (Successor) | ||
Equity securities |
| 65 | % | | 67 | % | | 80 | % |
Debt securities and cash |
| 35 | | | 33 | | | 20 | |
|
| 100 | % | | 100 | % | | 100 | % |
| Asset Category | Target Allocation | 2022 | 2021 | |||||||||||||||||
| Equity securities | 65 | % | 69 | % | 67 | % | ||||||||||||||
| Debt securities and cash | 35 | 31 | 33 | |||||||||||||||||
| 100 | % | 100 | % | 100 | % | |||||||||||||||
| | | | | | | | | | | | |
| | Assets at Fair Value as of December 31, 2021 | ||||||||||
| | (Successor) | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash and cash equivalents | | $ | — | | $ | — | | $ | — | | $ | — |
Registered investment companies: | | | | | | | | | | | | |
Total international stock index fund | |
| 8,525 | |
| — | |
| — | |
| 8,525 |
Total stock market index fund | |
| 9,127 | |
| — | |
| — | |
| 9,127 |
Total return fund | |
| 8,625 | |
| — | |
| — | |
| 8,625 |
Pending trades | | | 116 | | | — | | | — | | | 116 |
Total assets at fair value | | $ | 26,393 | | $ | — | | $ | — | | $ | 26,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
97
| Assets at Fair Value as of December 31, 2022 | ||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 121 | $ | — | $ | — | $ | 121 | ||||||||||||||||||
| Registered investment companies: | ||||||||||||||||||||||||||
| Total international stock index fund | 7,163 | — | — | 7,163 | ||||||||||||||||||||||
| Total stock market index fund | 7,346 | — | — | 7,346 | ||||||||||||||||||||||
| Total return fund | 6,386 | — | — | 6,386 | ||||||||||||||||||||||
| Pending trades | — | — | — | — | ||||||||||||||||||||||
| Total assets at fair value | $ | 21,016 | $ | — | $ | — | $ | 21,016 | ||||||||||||||||||
| Assets at Fair Value as of December 31, 2021 | ||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| Registered investment companies: | ||||||||||||||||||||||||||
| Total international stock index fund | 8,525 | — | — | 8,525 | ||||||||||||||||||||||
| Total stock market index fund | 9,127 | — | — | 9,127 | ||||||||||||||||||||||
| Total return fund | 8,625 | — | — | 8,625 | ||||||||||||||||||||||
| Pending trades | 116 | — | — | 116 | ||||||||||||||||||||||
| Total assets at fair value | $ | 26,393 | $ | — | $ | — | $ | 26,393 | ||||||||||||||||||
| | Assets at Fair Value as of December 31, 2020 | ||||||||||
| | (Successor) | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash and cash equivalents | | $ | 660 | | $ | — | | $ | — | | $ | 660 |
Registered investment companies: | | | | | | | | | | | | |
Total international stock index fund | |
| 9,533 | |
| — | |
| — | |
| 9,533 |
Total stock market index fund | |
| 6,400 | |
| — | |
| — | |
| 6,400 |
Total return fund | |
| 4,150 | |
| — | |
| — | |
| 4,150 |
Volatility risk premium defensive fund | | | 3,887 | | | — | | | — | | | 3,887 |
Total assets at fair value | | $ | 24,630 | | $ | — | | $ | — | | $ | 24,630 |
Investments in Equity and Debt Securities are valued at the net asset value of units held at the end of the period based upon the value of the underlying investments as determined by quoted market prices. These investments are classified as Level 1.
| | | |
(in thousands) |
|
| |
2022 | | $ | 1,449 |
2023 | |
| 1,555 |
2024 | |
| 1,599 |
2025 | |
| 1,638 |
2026 | |
| 1,703 |
2027 - 2032 | |
| 8,895 |
| (in thousands) | |||||
| 2023 | $ | 1,553 | |||
| 2024 | 1,606 | ||||
| 2025 | 1,645 | ||||
| 2026 | 1,697 | ||||
| 2027 | 1,797 | ||||
| 2028 - 2032 | 8,842 | ||||
| | | | | | | | | |
|
| 2021 | | 2020 | | 2019 | |||
| | (Successor) | | (Successor) | | (Successor) | |||
Weighted-average actuarial assumptions used to determine benefit obligations: | | | | | | | | | |
Discount rate |
| 2.77 | % | | 2.43 | % | | 3.17 | % |
Expected return on assets |
| 5.05 | % | | 5.40 | % | | 5.50 | % |
Weighted-average actuarial assumptions used to determine net periodic benefit cost: | | | | | | | | | |
Discount rate |
| 2.43 | % | | 3.17 | % | | 4.26 | % |
Expected return on assets |
| 5.05 | % | | 5.40 | % | | 5.50 | % |
Rate of compensation increase |
| N/A | | | N/A | | | N/A | |
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Weighted-average actuarial assumptions used to determine benefit obligations: | ||||||||||||||||||||
| Discount rate | 5.01 % | 2.77 % | 2.43 % | |||||||||||||||||
| Expected return on assets | 4.90 % | 5.05 % | 5.40 % | |||||||||||||||||
| Weighted-average actuarial assumptions used to determine net periodic benefit cost: | ||||||||||||||||||||
| Discount rate | 2.77 % | 2.43 % | 3.17 % | |||||||||||||||||
| Expected return on assets | 5.05 % | 5.05 % | 5.40 % | |||||||||||||||||
| Rate of compensation increase | N/A | N/A | N/A | |||||||||||||||||
98
returns earned by the pension plan, the mix of investments that comprise pension plan assets and forecasts of future long-term investment returns.
15.
| | | | | | | | | | | | | |
| | | | | | From | | | From | ||||
| | | | | | January 4 | | | January 1 | ||||
| | Year Ended | | through | | | through | ||||||
| | December 31, | | December 31, | | | January 3, | ||||||
(in thousands) |
| 2021 |
| 2020 | | 2019 |
| | 2019 | ||||
| | (Successor) | | (Successor) | | (Successor) | | | (Predecessor) | ||||
Federal Current | | $ | 223 | | $ | — | | $ | — | | | $ | — |
State Current | | | 4,206 | | | 1,710 | | | 445 | | | | — |
Total Current | | | 4,429 | | | 1,710 | | | 445 | | | | — |
Federal Deferred | | | 11,823 | | | (3,351) | | | (11,802) | | | | (11,130) |
State Deferred | | | 181 | | | (1,593) | | | (3,500) | | | | (2,151) |
Total Deferred | |
| 12,004 | |
| (4,944) | |
| (15,302) | | |
| (13,281) |
| | $ | 16,433 | | $ | (3,234) | | $ | (14,857) | | | $ | (13,281) |
99
| Year Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2020 | |||||||||||||||||
| Federal Current | $ | (6,555) | $ | 223 | $ | — | ||||||||||||||
| State Current | 3,697 | 4,206 | 1,710 | |||||||||||||||||
| Total Current | (2,858) | 4,429 | 1,710 | |||||||||||||||||
| Federal Deferred | 1,730 | 11,823 | (3,351) | |||||||||||||||||
| State Deferred | (104) | 181 | (1,593) | |||||||||||||||||
| Total Deferred | 1,626 | 12,004 | (4,944) | |||||||||||||||||
| $ | (1,232) | $ | 16,433 | $ | (3,234) | |||||||||||||||
Reconciliations between the Company’s effective income tax rate and the U.S. statutory rate are as follow:
| | | | | | | | | | | | | |
| | | | | | | | From | | | From | ||
| | | | | | | | January 4 | | | January 1 | ||
| | Year Ended | | through | | | through | ||||||
| | December 31, | | December 31, | | | January 3, | ||||||
|
| 2021 | | 2020 | | 2019 | | | 2019 | ||||
| | (Successor) | | (Successor) | | (Successor) | | | (Predecessor) | ||||
Statutory U.S. Federal income tax rate |
| 21.0 | % | | (21.0) | % | | (21.0) | % | | | (21.0) | % |
State income taxes, net of U.S. Federal income tax |
| 4.8 | | | (6.3) |
| | (3.5) |
| | | (2.2) |
|
Permanent items |
| 0.5 | | | 2.0 |
| | 0.9 |
| | | 1.7 |
|
Deferred rate change | | 1.8 | | | 0.2 | | | (1.0) | | | | (0.6) | |
Share-based compensation | | (5.2) | | | (1.4) | | | (3.5) | | | | (58.2) | |
TRA fair value adjustment | | 2.9 | | | 14.1 | | | (4.4) | | | | — | |
Transaction costs |
| 2.3 | | | — |
| | — |
| | | 2.7 |
|
Valuation allowance |
| — | | | — |
| | — |
| | | — |
|
Executive compensation disallowed |
| 11.1 | | | — |
| | — |
| | | — |
|
Other | | 1.4 | | | (0.2) | | | 0.4 | | | | 0.1 | |
Effective income tax rate |
| 40.6 | % | | (12.6) | % | | (32.1) | % | | | (77.5) | % |
Ourfollows:
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Statutory U.S. Federal income tax rate | 21.0% | 21.0% | (21.0) | % | |||||||||||||
| State income taxes, net of U.S. Federal income tax | 10.9 | 4.8 | (6.3) | ||||||||||||||
| Permanent items | (0.5) | 0.5 | 2.0 | ||||||||||||||
| Deferred rate change | 2.1 | 1.8 | 0.2 | ||||||||||||||
| Share-based compensation | (30.0) | (5.2) | (1.4) | ||||||||||||||
| Executive compensation disallowed | 23.5 | 11.1 | — | ||||||||||||||
| TRA fair value adjustment | (1.9) | 2.9 | 14.1 | ||||||||||||||
| Release of Sizewise reserve | (30.4) | — | — | ||||||||||||||
| Transaction costs | — | 2.3 | — | ||||||||||||||
| Other | 1.0 | 1.4 | (0.2) | ||||||||||||||
| Effective income tax rate | (4.3)% | 40.6% | (12.6)% | ||||||||||||||
fiscal year ended December 31, 2022, as seen within the table above.
100
The components of the Company’s overall deferred tax assets and liabilities are as follows:
| | | | | | |
| | December 31, | | December 31, | ||
(in thousands) |
| 2021 |
| 2020 | ||
| | (Successor) | | (Successor) | ||
Deferred tax assets: | | | | | | |
Accounts receivable | | $ | 797 | | $ | 507 |
Accrued compensation and pension | |
| 17,063 | |
| 19,190 |
Inventories | |
| 1,942 | |
| 616 |
Other assets | |
| 2,924 | |
| 3,574 |
Unrealized loss on pension | |
| 7 | |
| 754 |
Operating lease liability | | | 22,120 | | | 13,826 |
Unrealized (gain) loss on cash flow hedge | | | (536) | | | 478 |
Net operating loss carryforwards | |
| 30,660 | |
| 44,819 |
Total deferred tax assets | |
| 74,977 | |
| 83,764 |
Deferred tax liabilities: | | | | | | |
Other liabilities | |
| (3,545) | |
| (3,056) |
Accelerated depreciation and amortization | |
| (191,461) | |
| (128,518) |
Prepaid assets | | | (2,683) | | | (1,931) |
Operating lease right-of-use assets | |
| (20,595) | |
| (13,007) |
Total deferred tax liabilities | |
| (218,284) | |
| (146,512) |
Net deferred tax asset (liabilities) | | $ | (143,307) | | $ | (62,748) |
At
| (in thousands) | December 31, 2022 | December 31, 2021 | |||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Accounts receivable | $ | 1,079 | $ | 797 | |||||||||||||
| Accrued compensation and pension | 9,901 | 17,063 | |||||||||||||||
| Inventories | 1,468 | 1,942 | |||||||||||||||
| Other assets | 3,847 | 2,924 | |||||||||||||||
| Unrealized (gain) loss on pension | — | 7 | |||||||||||||||
| Operating lease liability | 23,407 | 22,120 | |||||||||||||||
| Section 163(j) capitalized interest | 4,975 | — | |||||||||||||||
| Section 174 capitalized R&D costs | 2,901 | — | |||||||||||||||
| Net operating loss carryforwards | 17,146 | 30,660 | |||||||||||||||
| Total deferred tax assets | 64,724 | 75,513 | |||||||||||||||
| Deferred tax liabilities: | |||||||||||||||||
| Deferred contract costs | (3,850) | (3,545) | |||||||||||||||
| Unrealized (gain) loss on pension | (174) | — | |||||||||||||||
| Unrealized (gain) loss on cash flow hedge | (2,370) | (536) | |||||||||||||||
| Accelerated depreciation and amortization | (180,934) | (191,461) | |||||||||||||||
| Prepaid assets | (3,537) | (2,683) | |||||||||||||||
| Operating lease right-of-use assets | (20,474) | (20,595) | |||||||||||||||
| Total deferred tax liabilities | (211,339) | (218,820) | |||||||||||||||
| Net deferred tax asset (liabilities) | $ | (146,615) | $ | (143,307) | |||||||||||||
2020.
101
A reconciliation of the beginning and ending amount of unrecognized tax benefit for the years ended December 31, 2022, 2021 2020 and 20192020 is as follows:
| | | |
(in thousands) |
|
| |
Unrecognized tax benefits balance at January 1, 2019 (Predecessor) | | $ | 1,365 |
Gross decreases for tax positions in 2019 | |
| (25) |
Unrecognized tax benefits balance at December 31, 2019 (Successor) | |
| 1,340 |
Gross decreases for rate change in 2020 | |
| — |
Unrecognized tax benefits balance at December 31, 2020 (Successor) | |
| 1,340 |
Gross increase for tax positions in 2021 | |
| 8,771 |
Unrecognized tax benefits balance at December 31, 2021 (Successor) | | $ | 10,111 |
| (in thousands) | |||||
| Unrecognized tax benefits balance at December 31, 2019 | $ | 1,340 | |||
| Gross decreases for tax positions in 2020 | — | ||||
| Unrecognized tax benefits balance at December 31, 2020 | 1,340 | ||||
| Gross increase for rate change in 2021 | 8,771 | ||||
| Unrecognized tax benefits balance at December 31, 2021 | 10,111 | ||||
| Gross decrease for tax positions in 2022 | (8,753) | ||||
| Unrecognized tax benefits balance at December 31, 2022 | $ | 1,358 | |||
16.
17.
| | | | | | | | | |
| | | | | | | | From | |
| | | | | | | | January 4 | |
| | Year Ended | | through | |||||
| | December 31, | | December 31, | |||||
|
| 2021 |
| 2020 |
| 2019 | |||
| | (Successor) | | (Successor) | | (Successor) | |||
Basic weighted average shares outstanding | | | 120,877,480 | | | 98,976,226 | | | 98,942,437 |
Net effect of dilutive stock awards based upon the treasury stock method | | | 7,619,740 | | | — | | | — |
Dilutive weighted average shares outstanding | | | 128,497,220 | | | 98,976,226 | | | 98,942,437 |
| | | | | | | | | |
Basic earnings (loss) per share | | $ | 0.20 | | $ | (0.23) | | $ | (0.32) |
Diluted earnings (loss) per share | | $ | 0.19 | | $ | (0.23) | | $ | (0.32) |
| | | | | | | | | |
Anti-dilutive share-based awards excluded from the calculation of dilutive earnings per share | | | — | | | 7,108,088 | | | 3,686,255 |
102
| Year Ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Basic weighted average shares outstanding | 132,602,747 | 120,877,480 | 98,976,226 | |||||||||||||||||
| Net effect of dilutive stock awards based upon the treasury stock method | 5,778,548 | 7,619,740 | — | |||||||||||||||||
| Dilutive weighted average shares outstanding | 138,381,295 | 128,497,220 | 98,976,226 | |||||||||||||||||
| Basic earnings (loss) per share | $ | 0.23 | $ | 0.20 | $ | (0.23) | ||||||||||||||
| Diluted earnings (loss) per share | $ | 0.22 | $ | 0.19 | $ | (0.23) | ||||||||||||||
| Anti-dilutive share-based awards excluded from the calculation of dilutive earnings per share | 9,203 | — | 7,108,088 | |||||||||||||||||
18. Subsequent Events
On February 28, 2022, we entered intoble of Contents
| Exhibit Number | Description | |||||||
| 2.1 | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.1 | ||||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 10.3 | ||||||||
| 10.4 | ||||||||
| 10.5+ | ||||||||
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| 10.25 | ||||||||
| 10.26 | ||||||||
| 10.27 | ||||||||
| 10.28 | ||||||||
| 10.29 | ||||||||
| 10.30+ | ||||||||
| 10.31+ | ||||||||
| 10.32+ | ||||||||
| 21.1 | ||||||||
| 23.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1* | ||||||||
| 32.2* | ||||||||
| 101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | The cover page for the Company’s Annual Report on Form 10-K has been formatted in Inline XBRL and contained in Exhibit 101. | |||||||
| AGILITI, INC. | ||||||||
| By | /s/ Thomas J. Leonard | |||||||
| Thomas J. Leonard | ||||||||
| Chief Executive Officer and Director | ||||||||
103
| /s/ Thomas J. Leonard | Chief Executive Officer and Director (Principal Executive Officer) | ||||
| Thomas J. Leonard | |||||
| /s/ James B. Pekarek | Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||
| James B. Pekarek | |||||
| /s/ Scott A. Christensen | Senior Vice President, Controller, and Chief Accounting Officer (Principal Accounting Officer) | ||||
| Scott A. Christensen | |||||
| /s/ John L. Workman | Director | ||||
| John L. Workman | |||||
| /s/ Michael A. Bell | Director | ||||
| Michael A. Bell | |||||
| /s/ Darren Friedman | Director | ||||
| Darren Friedman | |||||
| /s/ Gary L. Gottlieb | Director | ||||
| Gary L. Gottlieb | |||||
| /s/ Joshua M. Nelson | Director | ||||
| Joshua M. Nelson | |||||
| /s/ Megan M. Preiner | Director | ||||
| Megan M. Preiner | |||||
| /s/ Scott M. Sperling | Director | ||||
| Scott M. Sperling | |||||
| /s/ Diane B. Patrick | Director | ||||
| Diane B. Patrick | |||||
| /s/ C. Martin Harris | Director | ||||
| C. Martin Harris | |||||