UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021 |
or
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☐ |
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission File Number: 001-40361
AGILITI, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
83-1608463 |
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(State or other jurisdiction of |
(I.R.S. Employer |
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incorporation or organization) |
Identification No.) |
6625 West 78th Street, Suite 300
Minneapolis, Minnesota 55439-2604
(Address of principal executive offices, including zip code)
(952) 893-3200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol |
Name of each exchange on which registered |
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Common Stock, par value $0.0001 |
AGTI |
The New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☒ |
Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding as of August 11, 2021: 130,385,072
Agiliti, Inc. and Subsidiaries
Table of Contents
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Page |
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Condensed Consolidated Balance Sheets —June 30, 2021 and December 31, 2020 |
1 |
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Condensed Consolidated Statements of Operations—Three and Six months ended June 30, 2021 and 2020 |
2 |
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3 |
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Condensed Consolidated Statements of Equity —Three and Six months ended June 30, 2021 and 2020 |
4 |
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Condensed Consolidated Statements of Cash Flows —Three and Six months ended June 30, 2021 and 2020 |
5 |
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6 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 |
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27 |
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28 |
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28 |
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28 |
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29 |
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29 |
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements — Unaudited
Agiliti, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(unaudited)
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June 30, |
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December 31, |
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2021 |
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2020 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
103,670 |
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$ |
206,505 |
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Accounts receivable, less allowance for doubtful accounts of $2,064 at June 30, 2021 and $1,993 at December 31, 2020 |
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164,975 |
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154,625 |
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Inventories |
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32,060 |
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27,062 |
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Other current assets |
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11,378 |
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14,175 |
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Total current assets |
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312,083 |
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402,367 |
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Property and equipment: |
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Medical equipment |
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303,160 |
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285,723 |
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Property and office equipment |
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131,562 |
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112,646 |
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Accumulated depreciation |
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(232,776) |
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(183,953) |
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Total property and equipment, net |
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201,946 |
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214,416 |
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Other long-term assets: |
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Goodwill |
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1,122,530 |
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817,113 |
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Operating lease right-of-use assets |
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55,048 |
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51,214 |
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Other intangibles, net |
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548,716 |
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402,095 |
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Other |
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18,371 |
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16,151 |
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Total assets |
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$ |
2,258,694 |
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$ |
1,903,356 |
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Liabilities and Equity |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
15,421 |
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$ |
16,044 |
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Current portion of operating lease liability |
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15,364 |
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14,155 |
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Current portion of obligation under tax receivable agreement |
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15,613 |
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15,572 |
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Accounts payable |
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49,965 |
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37,215 |
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Accrued compensation |
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33,726 |
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38,671 |
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Accrued interest |
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2,970 |
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6,347 |
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Deferred revenue |
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6,549 |
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8,800 |
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Other accrued expenses |
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25,315 |
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22,727 |
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Total current liabilities |
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164,923 |
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159,531 |
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Long-term debt, less current portion |
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1,028,502 |
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1,145,055 |
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Obligation under tax receivable agreement, pension and other long-term liabilities |
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57,030 |
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53,794 |
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Operating lease liability, less current portion |
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44,130 |
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40,283 |
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Deferred income taxes, net |
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102,110 |
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62,748 |
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Commitments and contingencies (Note 11) |
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Equity |
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Common stock, $0.0001 par value; 350,000,000 shares authorized; 130,356,920 and 98,983,296 shares issued and outstanding at June 30, 2021 and December 31, 2020 |
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13 |
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10 |
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Additional paid-in capital |
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928,623 |
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513,902 |
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Accumulated deficit |
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(64,137) |
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(68,492) |
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Accumulated other comprehensive loss |
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(2,618) |
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(3,619) |
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Total Agiliti, Inc. and Subsidiaries equity |
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861,881 |
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441,801 |
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Noncontrolling interest |
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118 |
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144 |
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Total equity |
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861,999 |
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441,945 |
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Total liabilities and equity |
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$ |
2,258,694 |
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$ |
1,903,356 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
1
Agiliti, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue |
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$ |
250,543 |
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$ |
185,161 |
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$ |
485,788 |
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$ |
364,400 |
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Cost of revenue |
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151,435 |
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117,691 |
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285,358 |
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239,124 |
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Gross margin |
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99,108 |
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67,470 |
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200,430 |
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125,276 |
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Selling, general and administrative |
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81,056 |
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52,540 |
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150,279 |
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109,104 |
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Operating income |
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18,052 |
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14,930 |
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50,151 |
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16,172 |
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Loss on extinguishment of debt |
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10,116 |
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— |
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10,116 |
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— |
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Interest expense |
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11,713 |
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15,156 |
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29,733 |
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32,974 |
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(Loss) income before income taxes and noncontrolling interest |
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(3,777) |
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(226) |
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10,302 |
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(16,802) |
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Income tax expense (benefit) |
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1,394 |
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(1,077) |
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5,890 |
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(5,105) |
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Consolidated net (loss) income |
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(5,171) |
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851 |
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4,412 |
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(11,697) |
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Net income attributable to noncontrolling interest |
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27 |
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29 |
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57 |
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103 |
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Net (loss) income attributable to Agiliti, Inc. and Subsidiaries |
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$ |
(5,198) |
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$ |
822 |
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$ |
4,355 |
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$ |
(11,800) |
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Basic (loss) income per share |
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$ |
(0.04) |
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$ |
0.01 |
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$ |
0.04 |
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$ |
(0.12) |
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Diluted (loss) income per share |
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$ |
(0.04) |
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$ |
0.01 |
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$ |
0.04 |
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$ |
(0.12) |
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Weighted-average common shares outstanding: |
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Basic |
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122,908,065 |
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98,983,296 |
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111,071,756 |
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98,969,079 |
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Diluted |
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122,908,065 |
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103,694,384 |
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118,760,837 |
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98,969,079 |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
2
Agiliti, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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Consolidated net (loss) income |
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$ |
(5,171) |
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$ |
851 |
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$ |
4,412 |
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$ |
(11,697) |
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Other comprehensive income (loss): |
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Gain on minimum pension liability, net of tax of $19, $0, $37 and $0 |
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54 |
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20 |
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109 |
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24 |
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Gain (loss) on cash flow hedge, net of tax of $32, $0, $303 and $0 |
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96 |
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(1,582) |
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892 |
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(1,582) |
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Total other comprehensive income (loss) |
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150 |
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(1,562) |
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1,001 |
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(1,558) |
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Comprehensive (loss) income |
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(5,021) |
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(711) |
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5,413 |
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(13,255) |
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Comprehensive income attributable to noncontrolling interest |
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27 |
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29 |
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57 |
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103 |
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Comprehensive (loss) income attributable to Agiliti, Inc. and Subsidiaries |
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$ |
(5,048) |
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$ |
(740) |
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$ |
5,356 |
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$ |
(13,358) |
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The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
3
Agiliti, Inc. and Subsidiaries
Condensed Consolidated Statements of Equity
(in thousands)
(unaudited)
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Accumulated |
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Additional |
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Other |
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Common |
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Paid-in |
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Accumulated |
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Comprehensive |
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Noncontrolling |
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Total |
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(in thousands) |
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Stock |
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Capital |
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Deficit |
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Loss |
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Interests |
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Equity |
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Balance at March 31, 2021 |
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$ |
10 |
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$ |
527,626 |
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$ |
(58,939) |
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$ |
(2,768) |
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$ |
124 |
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$ |
466,053 |
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Net (loss) income |
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— |
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— |
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(5,198) |
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— |
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27 |
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(5,171) |
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Other comprehensive income |
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— |
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— |
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— |
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150 |
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— |
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150 |
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Share-based compensation |
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— |
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3,270 |
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— |
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— |
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— |
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3,270 |
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Stock options exercised |
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— |
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373 |
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— |
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— |
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— |
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373 |
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Issuance of common stock |
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3 |
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401,438 |
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— |
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— |
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— |
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401,441 |
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Stock issuance costs |
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— |
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(4,084) |
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— |
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— |
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— |
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(4,084) |
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Cash distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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(33) |
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(33) |
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Balance at June 30, 2021 |
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$ |
13 |
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$ |
928,623 |
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$ |
(64,137) |
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$ |
(2,618) |
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$ |
118 |
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$ |
861,999 |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
4
Agiliti, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended |
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June 30, |
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2021 |
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2020 |
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Cash flows from operating activities: |
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Consolidated net income (loss) |
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$ |
4,412 |
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$ |
(11,697) |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation |
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52,884 |
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47,916 |
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Amortization |
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40,955 |
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36,025 |
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Remeasurement of tax receivable agreement |
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4,345 |
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— |
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Loss on extinguishment of debt |
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7,716 |
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— |
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Provision for doubtful accounts |
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|
573 |
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1,179 |
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Provision for inventory obsolescence |
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2,226 |
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|
382 |
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Non-cash share-based compensation expense |
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5,766 |
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4,451 |
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Gain on sales and disposals of equipment |
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(840) |
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(448) |
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Deferred income taxes |
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4,694 |
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(5,297) |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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6,047 |
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(19,805) |
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Inventories |
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(1,414) |
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(2,748) |
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Other operating assets |
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(412) |
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|
342 |
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Accounts payable |
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5,352 |
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(125) |
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Other operating liabilities |
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(24,796) |
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|
10,271 |
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Net cash provided by operating activities |
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107,508 |
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|
60,446 |
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Cash flows from investing activities: |
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Medical equipment purchases |
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(16,269) |
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(16,557) |
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Property and office equipment purchases |
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(10,612) |
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(8,511) |
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Proceeds from disposition of property and equipment |
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|
2,013 |
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|
1,011 |
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Acquisitions, net of cash acquired |
|
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(450,198) |
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(89,706) |
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Net cash used in investing activities |
|
|
(475,066) |
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|
(113,763) |
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Cash flows from financing activities: |
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Proceeds under revolver |
|
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35,000 |
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|
189,500 |
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Payments under revolver |
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(35,000) |
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(173,000) |
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Proceeds under term loan |
|
|
198,052 |
|
|
124,844 |
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Payments under term loan |
|
|
(324,805) |
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(3,930) |
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Payments of principal under finance lease liability |
|
|
(4,270) |
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|
(3,813) |
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|
|
Payments of deferred financing costs |
|
|
(229) |
|
|
(199) |
|
|
|
Payments under tax receivable agreement |
|
|
(748) |
|
|
— |
|
|
|
Distributions to noncontrolling interests |
|
|
(83) |
|
|
(206) |
|
|
|
Proceeds from exercise of stock options |
|
|
373 |
|
|
— |
|
|
|
Dividend and equity distribution payment |
|
|
(924) |
|
|
(1,132) |
|
|
|
Proceeds from issuance of common stock |
|
|
401,441 |
|
|
— |
|
|
|
Stock issuance costs |
|
|
(4,084) |
|
|
— |
|
|
|
Shares forfeited for taxes |
|
|
— |
|
|
(145) |
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|
|
Change in book overdrafts |
|
|
— |
|
|
(1,771) |
|
|
|
Net cash provided by financing activities |
|
|
264,723 |
|
|
130,148 |
|
|
|
Net change in cash and cash equivalents |
|
|
(102,835) |
|
|
76,831 |
|
|
|
Cash and cash equivalents at the beginning of period |
|
|
206,505 |
|
|
— |
|
|
|
Cash and cash equivalents at the end of period |
|
$ |
103,670 |
|
$ |
76,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
31,017 |
|
$ |
27,884 |
|
|
|
Income taxes paid |
|
|
1,541 |
|
|
415 |
|
|
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
5
Agiliti, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.Basis of Presentation
Description of Business
Agiliti, Inc. (individually and together with its consolidated subsidiaries (Federal Street Acquisition Corp (“FSAC”), Agiliti Holdco, Inc. and Agiliti Health, Inc. and subsidiaries) (“we”, “our”, “us”, the “Company” or “Agiliti”)) is a nationwide provider of healthcare technology management and service solutions to the United States healthcare industry. Agiliti, Inc. owns 100% of FSAC. FSAC owns 100% of Agiliti Holdco, Inc. Agiliti Holdco, Inc. owns 100% of Agiliti Health, Inc. Agiliti Health, Inc. owns 100% of Agiliti Surgical, Inc., Agiliti Imaging, Inc. and Northfield Medical, Inc. (effective March 19, 2021). Agiliti Health, Inc. and subsidiaries is the only company with operations. All other entities have no material assets, liabilities, cash flows or operations other than their investment and ownership of Agiliti Health, Inc. and subsidiaries.
Initial Public Offering
On April 27, 2021, the Company closed its initial public offering (“IPO”), in which it issued and sold 30,263,157 shares of its common stock. The price was $14.00 per share. The Company received net proceeds of approximately $397.4 million from the IPO after deducting underwriting discounts and commissions of $22.2 million and offering expenses. Immediately after our IPO, funds controlled by principal stockholder, Thomas H. Lee Partners, L.P., own approximately 76.0% of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange (“NYSE”).
Basis of Presentation
The interim condensed consolidated financial statements have been prepared by the Company without audit. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2020, included in the Company’s final prospectus filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (“the Securities Act”), on April 26, 2021 (“the Prospectus”).
The interim condensed consolidated financial statements presented herein as of June 30, 2021, reflect, in the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, comprehensive income (loss), equity and cash flows for the periods presented. These adjustments are all of a normal, recurring nature. The results of operations for any interim period are not necessarily indicative of results for the full year.
We are required to make estimates and assumptions about future events in preparing condensed consolidated financial statements in conformity with GAAP. These estimates and assumptions affect the amounts of assets, liabilities, revenue and expenses at the date of the unaudited condensed consolidated financial statements. While we believe that our past estimates and assumptions have been materially accurate, our current estimates are subject to change if different assumptions as to the outcome of future events are made. We evaluate our estimates and judgments on an ongoing basis and predicate those estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. We make adjustments to our assumptions and judgments when facts and circumstances dictate. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanying unaudited condensed consolidated financial statements.
A description of our significant accounting policies is included in the Prospectus. There have been no material changes to these policies for the quarter ended June 30, 2021.
6
2.Recent Accounting Pronouncements
Standards Adopted
In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and recognition of deferred tax liabilities. This standard also simplifies the accounting for franchise taxes and enacted change in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the basis of goodwill. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. We adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
Standards Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and 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 December 31, 2022. We are beginning to evaluate the impact of ASU 2020-04 on our consolidated financial statements.
3.Revenue Recognition
In the following table, revenue is disaggregated by service solution.
The Company capitalizes contract costs incurred in obtaining new contracts. The contract asset included in other long-term assets in the Condensed Consolidated Balance Sheet at June 30, 2021 and December 31, 2020 was $14.5 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 $0.2 and $0.1 million for the three months ended June 30, 2021 and 2020, respectively and $0.3 and $0.2 million for the six months ended June 30, 2021 and 2020, respectively. The amount of amortization included in selling, general and administrative expense was $0.8 and $0.4 million for the three months ended June 30, 2021 and 2020, respectively, and $1.4 and $0.8 million for the six months ended June 30, 2021 and 2020, respectively. There was no impairment loss in relation to the costs capitalized during three and six months ended 2021 and 2020.
During the three and six months ended June 30, 2021, $2.8 and $6.1 million of revenue was recognized that was included in deferred revenue at the beginning of the period.
4.Acquisitions
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 $475 million (“Northfield Acquisition”). The consideration consisted of $461.0 million of cash paid at closing, $11.3 million in issuance of 752,328 shares of common stock and a $2.7 million of net working capital adjustment. The results of Northfield’s operations have been included in the condensed consolidated financial statements since March 19, 2021.
7
The following summarizes the preliminary fair values of assets acquired and liabilities assumed at the date of the Northfield Acquisition within our condensed consolidated balance sheet:
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.
Due to the recent closing of the transaction, the purchase price allocation was 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 are not yet finalized include income tax related matters. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.
The Northfield Acquisition was funded with additional borrowings under our first lien term loan, revolving loan and cash.
The following unaudited pro forma condensed consolidated results of operations assume the Northfield Acquisition had occurred on January 1, 2020. The unaudited pro forma condensed consolidated financial information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the acquisition had actually closed on that date, nor the results that may be obtained in the future.
Included in the determination of pro forma net income (loss) for the three and six months ended June 30, 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 condensed 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 condensed consolidated financial statements since that date.
8
The following summarizes the fair values of assets acquired and liabilities assumed of the January 31, 2020 acquisition within our condensed consolidated balance sheet:
The acquired intangible assets, all of which are 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 June 30, 2021 and December 31, 2020 are summarized in the following table by type of inputs applicable to the fair value measurements:
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.
Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves that are observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 — Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to
9
be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.
The deferred compensation assets are held in mutual funds. The fair value of the deferred compensation assets and liabilities is based on the quoted market prices for the mutual funds and thus represents a Level 1 fair value measurement.
On January 4, 2019, we entered into a tax receivable agreement (“TRA”) with our former owners. The fair value of the obligation under the TRA was estimated using company specific assumptions that are not observable in the market and thus represents a Level 3 fair value measurement. Management’s estimate of the valuation of the obligation under the TRA is based on a Monte Carlo model which involves the use of projected cash flows of the Company, a discount rate, and historical deferred tax assets subject to the agreement. We made a remeasurement adjustment to increase the liability by $0.2 and $0 million during the three months ended June 30, 2021 and 2020, respectively. We made a remeasurement adjustment to increase the liability by $4.3 and $0 million during the six months ended June 30, 2021 and 2020, respectively. We made no payments under TRA during the three months ended June 30, 2021 and 2020. We made $0.7 million in payments under TRA during the six months ended June 30, 2021 and no payment for the six months ended June 30, 2020.
In May 2020, we entered into an interest rate swap agreement to manage our interest rate exposure, see Note 8, Long-Term Debt. The carrying value of interest rate swap contracts is at fair value, which is determined based on current interest rate and forward interest rates as of the balance sheet date and is classified within Level 2.
Fair Value of Other Financial Instruments
The Company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable and accrued liabilities approximates fair value due to their short maturities. The fair value of our outstanding First Lien Term Loan and Second Lien Term Loan (each as defined in Note 8, Long-Term Debt) as of June 30, 2021 and December 31, 2020, based on the quoted market price for the same or similar issues of debt, which represents a Level 2 fair value measurement, is approximately:
| (1) | The carrying value of the First Lien Term Loan is net of unamortized deferred financing costs of $11.6 and $12.8 million and unamortized debt discount of $4.4 and $2.8 million as of June 30, 2021 and December 31, 2020, respectively. |
| (2) | The carrying value of the Second Lien Term Loan was net of unamortized deferred financing costs of $0.8 million and unamortized debt discount of $6.8 million as of December 31, 2020. The Second Lien Term Loan was paid off on April 27, 2021. |
6.Selected Financial Statement Information
Goodwill and Other Intangible Assets
Our goodwill as of June 30, 2021 and December 31, 2020 consist of the following:
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Balance at December 31, 2020 |
|
$ |
817,113 |
|
Acquisition |
|
|
305,417 |
|
Balance at June 30, 2021 |
|
$ |
1,122,530 |
There were no impairment losses recorded on goodwill through June 30, 2021.
10
Our other intangible assets as of June 30, 2021 and December 31, 2020 consist of the following:
Total amortization expense related to intangible assets was $20.6 and $16.7 million for the three months ended June 30, 2021 and 2020, respectively, and $37.1 and $33.1 million for the six months ended June 30, 2021 and 2020, respectively.
There were no impairment charges during three and six months ended 2021 and 2020 with respect to other intangible assets.
The estimated future amortization expense for identifiable intangible assets during the remainder of 2021 and the next five years is as follows:
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Remainder of 2021 |
|
$ |
41,189 |
|
2022 |
|
|
75,225 |
|
2023 |
|
|
68,090 |
|
2024 |
|
|
62,229 |
|
2025 |
|
|
56,367 |
|
2026 |
|
|
50,495 |
Supplementary Cash Flow Information
Supplementary cash flow information are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
||||
|
|
|
2021 |
|
2020 |
||
|
Non-cash activities: |
|
|
|
|
|
|
|
Property and equipment purchases included in accounts payable (at end of period) |
|
$ |
2,672 |
|
$ |
3,079 |
|
Finance lease additions |
|
|
1,644 |
|
|
3,957 |
|
Operating lease right-of-use assets and operating lease liability additions |
|
|
5,543 |
|
|
2,050 |
|
Issuance of common stock related to acquisition |
|
|
11,300 |
|
|
— |
7.Share-Based Compensation
The 2018 Omnibus Incentive Plan (“2018 Plan”) provides for issuance of 16.7 million nonqualified stock options, restricted stock units and performance restricted stock units to any of the Company’s executives, other key employees and certain non-employee directors. The stock options allow for the purchase of shares of common stock of the Company at prices equal to the stock’s fair market value at the date of grant. Options granted had a ten-year contractual term and vest over one to four years. The restricted stock units vest over one to four years. The performance restricted stock units vest over three years upon achievement of established performance targets as defined in the respective award agreements.
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, restricted stock units and performance restricted stock units are available for future issue.
11
We determine the fair value of stock options using the Black-Scholes option pricing model. The estimated fair value of options, including the effect of estimated forfeitures, is recognized as an expense on a straight-line basis over the options’ expected vesting periods.
In connection with our IPO, we granted certain of our employees, including our named executive officers, restricted stock units, performance restricted stock units, and stock options under the 2018 Plan with respect to approximately 1.6 million shares of the Company’s common stock.
In connection with the IPO, we adopted an Employee Stock Purchase Plan (“ESPP”). A total of two million shares of our common stock are reserved for issuance under the ESPP. Employees are permitted to purchase the Company’s common stock at 85% of market value at the end of the six-month offering period ending on April 30 and October 31 each year. The Company recognizes share-based compensation expense for the discount received by participating employees. No shares were issued under the ESPP as of June 30, 2021.
Remaining authorized options, restricted stock units and performance restricted stock units available for future issuance was 8.4 million shares at June 30, 2021.
8.Long-Term Debt
Long-term debt consists of the following:
| (1) | The carrying value of the First Lien Term Loan is net of unamortized deferred financing costs of $11.6 and $12.8 million and unamortized debt discount of $4.4 and $2.8 million as of June 30, 2021 and December 31, 2020, respectively. |
| (2) | The carrying value of the Second Lien Term Loan was net of unamortized deferred financing costs of $0.8 million and unamortized debt discount of $6.8 million as of December 31, 2020. The Second Lien Term Loan was paid off on April 27, 2021. |
| (3) | The carrying value of the Revolving Loan is net of unamortized deferred financing costs of $2.0 and $2.5 million as of June 30, 2021 and December 31, 2020, respectively. |
First Lien Credit Facilities. On January 4, 2019, in connection with and substantially concurrent with the closing of the business combination, Agiliti Health, Inc. entered into a credit agreement (the “First Lien Credit Facilities”) with JPMorgan Chase Bank, N.A. as administrative agent, collateral agent, and letter of credit issuer, Agiliti Holdco, Inc., certain subsidiaries of Agiliti Health, Inc. acting as guarantors (the “Guarantors”), and the lenders from time to time party thereto.
The First Lien Credit Facilities originally provided for a seven-year senior secured delayed draw term loan facility in an aggregate principal amount of $660 million (the “First Lien Term Loan”) and a five-year senior secured revolving credit facility in an aggregate principal amount of $150 million (the “Revolving Loan”). In February 2020, we increased our principal First Lien Term Loan facility by $125 million and the revolving loan facility by $40 million. In October 2020 and March 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%.
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.
Borrowings under the First Lien Credit Facilities bear interest, at Agiliti Health, Inc.’s option, at a rate per annum equal to an applicable margin (the “Applicable Margin”) over either (a) a base rate determined by reference to the highest of (1) the prime lending
12
rate published in the Wall Street Journal, (2) the federal funds effective rate plus 1/2 of 1% and (3) the LIBOR rate for a one-month interest period, plus 1.00%, or (b) a LIBOR rate determined by reference to the LIBOR rate as set forth by the ICE Benchmark Administration for the interest period relevant to such borrowing, in each case, subject to interest rate floors.
The First Lien Credit Facilities contain a number of negative covenants that, among other things, restrict, subject to certain exceptions, the ability of Agiliti Health, Inc. and the guarantors thereunder to incur additional indebtedness and guarantee indebtedness; create or incur liens; engage in mergers or consolidations; sell, transfer or otherwise dispose of assets; pay dividends and distributions or repurchase capital stock; prepay, redeem or repurchase certain indebtedness; make investments, loans and advances; enter into agreements which limit the ability of Agiliti Health, Inc. and the guarantors thereunder to incur liens on assets; and enter into amendments to certain junior lien and subordinated indebtedness in a manner materially adverse to the lenders.
Solely with respect to the Revolving Loan, commencing with the fiscal quarter ending June 30, 2019, the Company is required to maintain a leverage ratio not to exceed 7:1, when the aggregate principal amount of outstanding Revolving Loans and drawn Letters of Credit, on the last day of the most recent fiscal quarter, exceeds 35% of the total revolving credit commitments.
On April 27, 2021, the Company entered into Amendment No. 4 (the “Amendment”) to the First Lien Credit Agreement. Pursuant to the Amendment, (i) the existing Revolving Loan was terminated and a new revolving credit facility was incurred under the First Lien Credit Agreement in an aggregate principle amount of $250.0 million (the “New Revolving Credit Facility”); (ii) the interest rate margin for borrowings under the New Revolving Credit Facility was set at LIBOR plus 2.75%, with stepdowns to (A) LIBOR plus 2.50% if the first lien leverage ratio (as calculated thereunder) is less than or equal to 3.75:1.00 and (B) LIBOR plus 2.25% if the first lien leverage ratio is less than or equal to 3.25:1.00; (iii) the commitment fee on the average daily undrawn portion of the New Revolving Credit Facility was reduced to 0.3750% per annum if the first lien leverage ratio is greater than 3.25:1.00 and 0.250% if the first lien leverage ratio is less than or equal to 3.25:1.00 and (iv) borrowings under the New Revolving Credit Facility mature the earlier of (x) six months prior to the then-existing final maturity date of the related term loans and (y) January 4, 2026.
In connection with the Amendment No. 4 above, the Company incurred loss on extinguishment of debt of $0.3 million related to the write-off of unamortized deferred financing cost on the revolving credit facility.
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.
Second Lien Term Loan. The Second Lien Term Loan provided for an eight-year term loan facility in an aggregate principal amount of $240 million (the “Second Lien Term Loan”). The proceeds of the Second Lien Term Loan were drawn on November 15, 2019 and used to return capital to shareholders.
Borrowings under the Second Lien Term Loan bore interest, at Agiliti Health, Inc.’s option, at a rate per annum equal to an applicable margin over either (a) a base rate determined by reference to the highest of (1) the prime lending rate published in the Wall Street Journal, (2) the federal funds effective rate plus 1/2 of 1% and (3) the LIBOR rate for a one-month interest period, plus 1.00%, or (b) a LIBOR rate determined by reference to the LIBOR rate as set forth by the ICE 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 used the proceeds from the IPO to repay $240.0 million in aggregate principal amount of our Second Lien Term Loan, $80.0 million of our First Lien Term Loan and $10.0 million of our Revolving Loan facility.
In connection with the repayment of our Second Lien Term Loan in April 2021, we 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.
Interest Rate Swap. In May 2020, we entered into an interest rate swap agreement for a total notional amount of $500.0 million, which has the effect of converting a portion of our First Lien Term Loan to fixed interest rates. The effective date for the interest rate swap agreement was June 2020 and the expiration date is June 2023.
The interest rate swap agreement qualifies for cash flow hedge accounting under ASC Topic 815, “Derivatives and 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 at June
13
30, 2021 was $0.7 million, of which $1.0 million is included in other accrued expenses and $0.3 million is included in other long-term assets on our condensed consolidated balance sheet. The change in fair value was recorded as a component of accumulated other comprehensive loss on our condensed consolidated balance sheet, net of tax, since the instrument was determined to be an effective hedge at June 30, 2021. We have not recorded any amounts due to ineffectiveness for any periods presented.
As a result of our interest rate swap agreement, we expect the effective interest rate on $350.0 million and $150.0 million of our First Lien Term Loan to be 0.3396% and 0.3290%, respectively, plus the Applicable Margin through June 2023.
We were in compliance with all financial debt covenants for all periods presented.
9.Leases
We lease facilities under operating lease agreements, which include both monthly and longer-term arrangements. Our finance leases consist primarily of leased vehicles.
The lease assets and liabilities are as follows:
| (a) | Finance lease assets are recorded net of accumulated depreciation of $16,778 and $13,096 as of June 30, 2021 and December 31, 2020, respectively. |
The lease cost for the three and six months ended June 30, 2021 and 2020 was as follows:
14
The maturity of lease liabilities at June 30, 2021 was as follows:
The lease term and discount rate at June 30, 2021 were as follows:
Other information related to cash paid related to lease liabilities and lease assets obtained for the six months ended June 30, 2021 and 2020 was as follows:
10.Dividend
In November 2019, the Company declared a $2.23 dividend per share that was paid to holders of common stock and is paid upon vesting to holders of restricted stock units and performance restricted stock units. Dividends paid during the three months ended June 30, 2021 and 2020 were $0.02 and $0.02 million, respectively. Dividends paid during the six months ended June 30, 2021 and 2020 were $0.9 and $1.1 million, respectively.
Dividend payable was $1.2 and $2.2 million as of June 30, 2021 and December 31, 2020, respectively, of which $0.9 and $0.9 million was included in accounts payable and $0.3 and $1.3 million was included in other long-term liabilities.
11.Commitments and Contingencies
The Company, in the ordinary course of business, is subject to liability claims related to employees and the equipment that it rents and services. Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable. For certain claims where the loss is probable, a provision is recorded based on the Company’s best estimate. While the ultimate resolution of these actions may have an impact on the Company’s financial results for a particular reporting period, management believes that any such
15
resolution would not have a material adverse effect on the financial position, results of operations or cash flows of the Company and the chance of a negative outcome on outstanding litigation is considered remote.
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.
12.Related Party Transaction
On January 4, 2019, the Company entered into an advisory services agreement (the “Advisory Services Agreement”) with Agiliti Holdco, Inc., Agiliti Health, Inc. and THL Managers VIII, LLC (the “Advisor”). Pursuant to the Advisory Services Agreement, the Advisor provided management, consulting and other advisory services to the Company. In consideration for these services, the Company paid to the Advisor (i) a non-refundable periodic retainer fee in an aggregate amount per fiscal quarter equal to the greater of (a) $375,000 or (b) 1% of the consolidated Adjusted EBITDA (as defined in the Advisory Services Agreement) for the immediately preceding fiscal quarter or such other amount as may be mutually agreed, with the first such payment to be made on April 15, 2019, (ii) fees in amounts to be mutually agreed in connection with any financing or refinancing, dividend, recapitalization, acquisition, disposition and spin-off or split-off transaction, (iii) in the case of an initial public offering (“IPO”), in addition to the fees under clauses (i) and (ii), an amount equal to the net present value of the higher periodic fee that would have been payable from the date of such IPO until the scheduled termination date of the Advisory Services Agreement, and (iv) fees for other management, consulting and other advisory services to be discussed in good faith among the parties. The companies also paid expenses incurred by the Advisor, its consultants and certain other parties affiliated with Advisor. Total professional services fees incurred to the Advisor were $0 and $0.6 million for the three months ended June 30, 2021 and 2020, respectively, and $0.6 and $1.1 million for the six months ended June 30, 2021 and 2020, respectively.
The Advisory Services Agreement was terminated upon the completion of the IPO. In connection with the termination of the Advisory Services Agreement, we were required to pay to the Advisor a buyout fee of approximately $7.0 million, which was expensed immediately in the second quarter.
13.Limited Liability Companies
We participate with others in 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. At June 30, 2021, the LLCs had approximately $0.5 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 its corporate guarantee. Additionally, we provide operational and administrative support to the LLCs in which it is a partner. As of June 30, 2021, we held interests in two 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.Employee Benefit Plans
Pension plan benefits are to be paid to eligible employees after retirement based primarily on years of credited service and participants’ compensation. The Company uses a December 31 measurement date. Effective December 31, 2002, the Company froze the benefits under the pension plan.
16
The components of net periodic benefit cost are as follows:
The Company made $0.2 and $0.2 million contribution to the pension plan during the three and six months ended June 30, 2021. The Company expects to make additional contributions of approximately $0.5 million for the remaining of 2021.
15.Income Taxes
For the three and six months ended June 30, 2021, the Company recorded income tax expense of $1.4 million and $5.9 million, respectively. For the three and six months ended June 30, 2020, the Company recorded income tax benefit of $1.1 million and $5.1 million, respectively. The income tax expense for the three and six months ended June 30, 2021 is primarily due to the tax-effect of pre-tax income from operations plus addbacks for non-deductible transaction costs, nondeductible expenses related to executive compensation disallowed under Internal Revenue Code Section 162(m) and the remeasurement of the tax receivable agreement. The income tax benefit for the three and six months ended June 30, 2020 was due to the tax-effect of pre-tax loss from operations for the period and amended state income tax filings.
16.Concentration
For the six months ended June 30, 2021, approximately 18% of total revenue related to various contracts with the U.S. Department of Health and Human Services and the Assistant Secretary of Preparedness and Response.
On July 21, 2020, we entered into a one-year agreement with the U.S. Department of Health and Human Services and the Assistant Secretary for Preparedness and Response for the comprehensive maintenance and management services of medical ventilator equipment in exchange for up to $193 million in consideration throughout the duration of the agreement. On August 10, 2021, the agreement was extended and will now expire on September 27, 2021. See Note 18, Subsequent Event.
17
17.Earnings (Loss) Per Share
The following is a reconciliation of the basic and diluted number of shares used in computing earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
June 30, |
|
June 30, |
||||||||
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||
|
Basic weighted average shares outstanding |
|
|
122,908,065 |
|
|
98,983,296 |
|
|
111,071,756 |
|
|
98,969,079 |
|
Net effect of dilutive stock awards based upon the treasury stock method |
|
|
- |
|
|
4,711,088 |
|
|
7,689,081 |
|
|
- |
|
Dilutive weighted average shares outstanding |
|
|
122,908,065 |
|
|
103,694,384 |
|
|
118,760,837 |
|
|
98,969,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
(0.04) |
|
$ |
0.01 |
|
$ |
0.04 |
|
$ |
(0.12) |
|
Diluted earnings (loss) per share |
|
$ |
(0.04) |
|
$ |
0.01 |
|
$ |
0.04 |
|
$ |
(0.12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive share-based awards excluded from the calculation of |
|
|
|
|
|
|
|
|
|
|
|
|
|
dilutive earnings per share |
|
|
7,790,523 |
|
|
— |
|
|
— |
|
|
4,711,088 |
18.Subsequent Event
On August 10, 2021, Agiliti and the U.S. Department of Health and Human Services (“HHS”) and the Assistant Secretary for Preparedness and Response extended Agiliti’s agreement for the comprehensive maintenance and management services of medical ventilator equipment for a period of 60 days from the initial contract expiration date of July 27, 2021. The Company expects that HHS will issue a public request for proposal and make a new contract award prior to the September 27, 2021 expiration of the extension period. Agiliti intends to compete for the new contract award.
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our final prospectus filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on April 26, 2021 (“the Prospectus”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled “Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements as well as in Part II, Item 1A, “Risk Factors” and the section entitled “Risk Factors” in the Prospectus 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 Quarterly Report on Form 10-Q and in our Prospectus.
BUSINESS OVERVIEW
Our Company
Unless otherwise specified, the terms “we”, “our”, “us” and the “Company” refer to Agiliti, Inc. and, where appropriate, its consolidated subsidiaries. The term “THL” refers to Thomas H. Lee Partners, L.P., our principal stockholder, and the term “THL Stockholder” refers to THL Agiliti LLC, an affiliate of Thomas H. Lee Partners, L.P.
We believe we are one of the leading experts in the management, maintenance and mobilization of mission-critical, regulated, reusable medical devices. We offer healthcare providers a comprehensive suite of medical equipment management and service solutions that help reduce capital and operating expenses, optimize medical equipment utilization, reduce waste, enhance staff productivity and bolster patient safety.
We commenced operations in 1939, originally incorporated in Minnesota in 1954 and reincorporated in Delaware in 2001. Since January 2019, we have been controlled by the THL Stockholder.
In our more than 80 years serving healthcare providers, we have built an at-scale, strong nationwide operating footprint allowing us to reach customers across the entire healthcare continuum—from individual facilities to the largest and most complex healthcare systems. Our ability to rapidly mobilize, track, repair and redeploy equipment during times of peak need or emergent events has made us a service provider of choice for city, state and federal governments to manage emergency equipment stockpiles.
Our diverse customer base includes over 7,000 active national, regional and local acute care hospitals, health system integrated delivery networks and alternate site providers (such as surgery centers, specialty hospitals, home care providers, long-term acute care hospitals and skilled nursing facilities). We serve the federal government as well as a number of city and state governments providing management and maintenance of emergency equipment stockpiles, and we are an outsourced service provider to medical device manufacturers supporting critical device remediation and repair services. We deliver our solutions through our nationwide network of over 100 service centers and seven Centers of Excellence, among which we employ a team of more than 700 specialized biomed repair technicians, more than 3,000 field-based service operators who work onsite within customer facilities or in our local service centers, and over 200 field sales and account managers. Our fees are paid directly by our customers rather than by direct reimbursement from third-party payors, such as private insurers, Medicare or Medicaid.
We deploy our solution offering across three primary service lines:
Equipment Solutions: Supplemental, peak need and per-case rental of general biomedical, specialty, and surgical equipment, contracted directly with customers at approximately 7,000 U.S. acute care hospitals and alternate site facilities. We consistently achieve high customer satisfaction ratings by delivering patient-ready equipment within our contracted equipment delivery times and in response to our technical support and educational in-servicing for equipment within clinical departments, including the emergency room, operating room, intensive care, rehabilitation and general patient care areas. We are committed to providing the highest quality of equipment to our customers, supported by our comprehensive QMS which is based on the quality standards recognized worldwide for medical devices: 21 CFR 820 and ISO 13485:2016. Revenue attributable to Equipment Solutions represented 29% and 40% of our total revenue for the three months ended June 30, 2021 and 2020, respectively, and 32% and 39% of our total revenue for the six months ended June 30, 2021 and 2020, respectively.
19
Clinical Engineering Services: Maintenance, repair and remediation solutions for all types of medical equipment, including general biomedical equipment and diagnostic imaging technology, through supplemental and fully 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. Our more than 700 technical repair staff flex in and out of customer facilities on an as-needed basis. We contract our Clinical Engineering Services with acute care and alternate 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. Revenue attributable to Clinical Engineering Services represented 40% and 36% of our total revenue for the three months ended June 30, 2021 and 2020, respectively, and 36% and 36% of our total revenue for the six months ended June 30, 2021 and 2020, respectively.
Onsite Managed Services: Comprehensive programs that assume full responsibility for the management, reprocessing and logistics of medical equipment at individual facilities and IDNs. Our more than 1,700 onsite employees work 24/7 in customer facilities, augmenting clinical support by integrating proven equipment management processes, utilizing our proprietary management software and conducting daily rounds and unit based training to ensure equipment is used and managed properly, overall helping to optimize day-to-day operations, adjust for fluctuations in patient census and acuity and support better care outcomes. Revenue attributable to Onsite Managed Services represented 31% and 24% of our total revenue for the three months ended June 30, 2021 and 2020, respectively, and 32% and 24% of our total revenue for the six months ended June 30, 2021 and 2020, respectively.
Many of our customers have multiple contracts and have revenue reported in multiple service lines. Our contracts vary based upon service offering, including with respect to term (with most being multi-year contracts), pricing (daily, monthly and fixed fee arrangements) and termination (termination for convenience to termination for cause only). Many of our contracts contain customer commitment guarantees and annual price increases tied to the consumer price index. Standard contract terms include payment terms, limitation of liability, force majeure provisions and choice of law/venue.
Impact of COVID-19 on our Business
We have taken proactive action to protect the health and safety of our employees, customers, partners and suppliers. There continues to be uncertainty related to the full extent of the impact of the COVID-19 outbreak on our future results, but we believe our business model and our available borrowings under our Revolving Credit Facility position us well to continue to manage our business through this crisis.
We continue to monitor the 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 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.
Initial Public Offering
On April 22, 2021, our registration statement on Form S-1 (File No. 333-253947) related to our initial public offering (“IPO”) was declared effective by the SEC, and our common stock began trading on the New York Stock Exchange (“NYSE”) on April 23, 2021. Our IPO closed on April 27, 2021.
RESULTS OF OPERATIONS
The following discussion addresses:
| ● | our financial condition as of June 30, 2021; and |
| ● | the results of operations for the three and six-month periods ended June 30, 2021 and 2020. |
This discussion should be read in conjunction with the consolidated condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q and the Management’s Discussion and Analysis of Financial Condition and Results of Operations section included in the Prospectus.
20
The following table provides information on the percentages of certain items of selected financial data compared to total revenue for the three and six-month periods ended June 30, 2021 and 2020.
Consolidated Results of Operations for the three months ended June 30, 2021 compared to the three months ended June 30, 2020
Total Revenue
The following table presents revenue by service solution for the three months ended June 30, 2021 and 2020 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
||||
|
|
|
June 30, |
|
|
|
|
||||
|
|
|
2021 |
|
2020 |
|
|
% Change |
|
||
|
Equipment Solutions |
|
$ |
72,140 |
|
$ |
73,710 |
|
|
(2.1) |
% |
|
Clinical Engineering |
|
|
101,141 |
|
|
67,027 |
|
|
50.9 |
|
|
Onsite Managed Services |
|
|
77,262 |
|
|
44,424 |
|
|
73.9 |
|
|
Total Revenue |
|
$ |
250,543 |
|
$ |
185,161 |
|
|
35.3 |
% |
Total revenue for the three months ended June 30, 2021 was $250.5 million, compared to $185.2 million for the three months ended June 30, 2020, an increase of $65.3 million or 35.3%. Equipment Solutions revenue decreased 2.1% primarily driven by decreased demand for equipment needed to fight the COVID-19 pandemic. Although difficult to determine, we have estimated that in the second quarter of 2020, the overall favorable impact from COVID-19 was approximately $8 million to $10 million. In the second quarter of 2021, we estimate that the overall favorable impact from COVID-19 was less than $3 million. Clinical Engineering revenue increased 50.9% due to continued strong growth as a result of our success in signing and implementing new business contracts over the last several quarters and due to the Northfield acquisition completed on March 19, 2021. Finally, our Onsite Managed Services revenue increased 73.9% with the majority of growth coming from a new contract signed in the third quarter of 2020 for the comprehensive maintenance and management services of medical ventilator equipment.
Cost of Revenue
Total cost of revenue for the three months ended June 30, 2021 was $151.4 million compared to $117.7 million for the three months ended June 30, 2020, an increase of $33.7 million or 28.6%. On a percentage of revenue basis, cost of revenue decreased from 63.6% of revenue in 2020 to 60.4% in 2021. The decline as a percentage of revenue was driven primarily from revenue growth as we were able to leverage our fixed cost infrastructure resulting in our expenses growing at a lower rate than revenue growth.
Gross Margin
Total gross margin for the three months ended June 30, 2021 was $99.1 million, or 39.6% of total revenue, compared to $67.5 million, or 36.4% of total revenue, for the three months ended June 30, 2020, an increase of $31.6 million or 46.8%. The increase in gross margin as a percentage of revenue was primarily impacted by favorable leverage from volume growth.
21
Selling, General and Administrative, Loss on Extinguishment of Debt and Interest Expense
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
||||
|
|
|
June 30, |
|
|
|
|
|
|
||||
|
|
|
2021 |
|
2020 |
|
Change |
|
% Change |
|
|||
|
Selling, general and administrative |
|
$ |
81,056 |
|
$ |
52,540 |
|
$ |
28,516 |
|
54.3 |
% |
|
Loss on extinguishment of debt |
|
|
10,116 |
|
|
— |
|
|
10,116 |
|
* |
|
|
Interest expense |
|
|
11,713 |
|
|
15,156 |
|
|
(3,443) |
|
(22.7) |
|
Selling, General and Administrative
Selling, general and administrative expense increased $28.5 million, or 54.3%, to $81.1 million for the quarter ended June 30, 2021 as compared to the same period of 2020. Selling, general and administrative expense as a percentage of total revenue was 32.4% and 28.4% for the quarter ended June 30, 2021 and 2020, respectively. The increase of $28.5 million was primarily due to the buyout fee related to the termination of the Advisory Service Agreement of $7.0 million, increases in costs and amortization expense related to the Northfield acquisition and an increase in payroll related costs associated with the growth of our business.
Loss on Extinguishment of Debt
Loss on extinguishment of debt for the quarter ended June 30, 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 repayment of our Second Lien Term Loan in April 2021 and the write-off of the unamortized deferred financing cost of $0.3 million related to the amendment of our Revolving Credit Facility.
Interest Expense
Interest expense decreased $3.4 million to $11.7 million for the second quarter of 2021 as compared to the same period of 2020 primarily due to the repayment of our Second Lien Term Loan from the proceeds of the IPO.
Income Taxes
Income taxes were an expense of $1.4 million and a benefit of $1.1 million for the three months ended June 30, 2021 and 2020, respectively. The income tax expense for the three months ended June 30, 2021 was primarily related to nondeductible expenses related to executive compensation disallowed under Internal Revenue Code Section 162(m). The income tax benefit for the three months ended June 30, 2020 was due to the tax-effect of pre-tax loss from operations for the period and amended state income tax filings.
Consolidated Net (Loss) Income
Consolidated net loss increased $6.0 million to $5.2 million in the second quarter of 2021 as compared to the same period of 2020. The increase in net loss was primarily a result of the loss on extinguishment of debt.
22
Consolidated Results of Operations for the six months ended June 30, 2021 compared to the six months ended June 30, 2020
Total Revenue
The following table presents revenue by service solution for the six months ended June 30, 2021 and 2020 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
||||
|
|
|
June 30, |
|
|
|
|
||||
|
|
|
2021 |
|
2020 |
|
|
% Change |
|
||
|
Equipment Solutions |
|
$ |
154,611 |
|
$ |
142,115 |
|
|
8.8 |
% |
|
Clinical Engineering |
|
|
176,247 |
|
|
133,040 |
|
|
32.5 |
|
|
Onsite Managed Services |
|
|
154,930 |
|
|
89,245 |
|
|
73.6 |
|
|
Total Revenue |
|
$ |
485,788 |
|
$ |
364,400 |
|
|
33.3 |
% |
Total revenue for the six months ended June 30, 2021 was $485.8 million, compared to $364.4 million for the six months ended June 30, 2020, an increase of $121.4 million or 33.3%. Equipment Solutions revenue increased 8.8% primarily driven by increased demand for equipment needed to fight COVID-19. Although difficult to determine, we have estimated that for the first six months of 2020, the overall favorable impact from COVID-19 was approximately $8 million to $10 million. In the first six months of 2021, we estimate that the overall favorable impact from COVID-19 was $12 million to $15 million. Clinical Engineering revenue increased 32.5% due to continued strong growth as a result of our success in signing and implementing new business contracts over the last several quarters and due to the Northfield acquisition completed on March 19, 2021. Finally, our Onsite Managed Services revenue increased 73.6% with the majority of growth coming from a new contract signed in the third quarter of 2020 for the comprehensive maintenance and management services of medical ventilator equipment.
Cost of Revenue
Total cost of revenue for the six months ended June 30, 2021 was $285.4 million compared to $239.1 million for the six months ended June 30, 2020, an increase of $46.3 million or 19.4%. On a percentage of revenue basis, cost of revenue decreased from 65.6% of revenue in 2020 to 58.7% in 2021. The decline as a percentage of revenue was driven primarily from revenue growth as we were able to leverage our fixed cost infrastructure resulting in our expenses growing at a lower rate than revenue growth.
Gross Margin
Total gross margin for the six months ended June 30, 2021 was $200.4 million, or 41.3% of total revenue, compared to $125.3 million, or 34.4% of total revenue, for the six months ended June 30, 2020, an increase of $75.1 million or 59.9%. The increase in gross margin as a percentage of revenue was primarily impacted by favorable leverage from volume growth.
Selling, General and Administrative, Loss on Extinguishment of Debt and Interest Expense
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
||||
|
|
|
June 30, |
|
|
|
|
|
|
||||
|
|
|
2021 |
|
2020 |
|
Change |
|
% Change |
|
|||
|
Selling, general and administrative |
|
$ |
150,279 |
|
$ |
109,104 |
|
$ |
41,175 |
|
37.7 |
% |
|
Loss on extinguishment of debt |
|
|
10,116 |
|
|
— |
|
|
10,116 |
|
* |
|
|
Interest expense |
|
|
29,733 |
|
|
32,974 |
|
|
(3,241) |
|
(9.8) |
|
Selling, General and Administrative
Selling, general and administrative expense increased $41.2 million, or 37.7%, to $150.3 million for the six months ended June 30, 2021 as compared to the same period of 2020. Selling, general and administrative expense as a percentage of total revenue was 30.9% and 29.9% for the six months ended June 30, 2021 and 2020, respectively. The increase of $41.2 million was primarily due to the buyout fee related to the termination of the Advisory Service Agreement of $7.0 million, increases in costs and amortization expense related to the Northfield acquisition and an increase in payroll related costs associated with the growth of our business.
23
Loss on Extinguishment of Debt
Loss on extinguishment of debt for the six months ended June 30, 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 repayment of our Second Lien Term Loan in April 2021 with proceeds from the IPO and the write-off of the unamortized deferred financing cost of $0.3 million related to the amendment of our Revolving Credit Facility.
Interest Expense
Interest expense decreased $3.2 million to $29.7 million for the six months ended 2021 as compared to the same period of 2020 primarily due to the repayment of our Second Lien Term Loan with proceeds from the IPO.
Income Taxes
Income taxes were an expense of $5.9 million and a benefit of $5.1 million for the six months ended June 30, 2021 and 2020, respectively. The income tax expense for the six months ended June 30, 2021 is primarily due to the tax-effect of pre-tax income from operations plus addbacks for non-deductible transaction costs, nondeductible expenses related to executive compensation disallowed under Internal Revenue Code Section 162(m) and the remeasurement of the tax receivable agreement. The income tax benefit for the six months ended June 30, 2020 was due to the tax-effect of pre-tax loss from operations for the period and amended state income tax filings.
Consolidated Net Income
Consolidated net income increased $16.1 million to $4.4 million in the six ended June 30 2021 as compared to the same period of 2020. The increase in net income was impacted primarily by the increase in revenue.
Adjusted EBITDA
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was $163.9 million and $106.2 million for the six months ended June 30, 2021 and 2020, respectively. Adjusted EBITDA for the six months ended June 30, 2021 was higher than 2020 primarily due to the increase in revenue.
EBITDA is defined as earnings attributable to Agiliti, Inc. before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding, non-cash share-based compensation expense, management fees and other non-recurring gains, expenses or losses, transaction costs, remeasurement of tax receivable agreement and loss on extinguishment of debt. In addition to using EBITDA and Adjusted EBITDA internally as measures of operational performance, we disclose them externally to assist analysts, investors and lenders in their comparisons of operational performance, valuation and debt capacity across companies with differing capital, tax and legal structures. We believe the investment community frequently uses EBITDA and Adjusted EBITDA in the evaluation of similarly situated companies. Adjusted EBITDA is also used by the Company as a factor to determine the total amount of incentive compensation to be awarded to executive officers and other employees. EBITDA and Adjusted EBITDA, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (“GAAP”) and should not be considered as alternatives to, or more meaningful than, net income as measures of operating performance or to cash flows from operating, investing or financing activities or as measures of liquidity. Since EBITDA and Adjusted EBITDA are not measures determined in accordance with GAAP and are thus susceptible to varying interpretations and calculations, EBITDA and Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. EBITDA and Adjusted EBITDA do not represent amounts of funds that are available for management’s discretionary use. EBITDA and Adjusted EBITDA presented below may not be the same as EBITDA and Adjusted EBITDA calculations as defined in the First Lien Credit Facilities. A reconciliation of net income (loss) attributable to Agiliti, Inc. to Adjusted EBITDA is included below:
24
| (1) | 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. |
| (2) | Transaction costs represent costs associated with potential mergers and acquisitions and are primarily related to the Northfield Acquisition for the six months ended June 30, 2021. |
| (3) | Loss on extinguishment of debt 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. |
SEASONALITY
Quarterly operating results are typically affected by seasonal factors. Historically, our first and fourth quarters are the strongest, reflecting increased customer utilization during the fall and winter months. COVID-19 has impacted the seasonality of our business and the annual flu season.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are cash flows from operating activities and borrowings under our Revolving Credit Facility, which provides for loans in an amount of up to $250 million. Our principal uses of liquidity are to fund capital expenditures related to purchases of medical equipment, provide working capital, meet debt service requirements and finance our strategic plans.
We believe our existing balances of cash and cash equivalents, our currently anticipated operating cash flows and availability under our Revolving Credit Facility will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months. If new financing is necessary, there can be no assurance that any such financing would be available on commercially acceptable terms, or at all. To date, we have not experienced difficulty accessing the credit market; however, future volatility in the credit market may increase costs associated with issuing debt instruments or affect our ability to access those markets. In addition, it is possible that our ability to access the credit market could be limited at a time when we would like, or need to do so, which could have an adverse impact on our ability to refinance debt and/or react to changing economic and business conditions.
Net cash provided by operating activities was $107.5 and $60.4 million for the six months ended June 30, 2021 and 2020, respectively. Net cash provided by operating activities during 2021 was favorably impacted by our improved financial performance and the timing of accounts receivable collections. Partially offsetting the increase were the use of cash to pay accrued compensation related to our strong 2020 operating results and a reduction in accrued interest related to our lower debt and interest rates.
Net cash used in investing activities was $475.1 and $113.8 million for the six months ended June 30, 2021 and 2020, respectively. The increase in net cash used in investing activities was primarily due to the Northfield Acquisition completed in March 2021.
25
Net cash provided by financing activities was $264.7 and $130.1 million for the six months ended June 30, 2021 and 2020, respectively. The increase in net cash provided by financing activities during 2021 was primarily due to proceeds from issuance of common stock from the IPO, partially offset by repayment of the Second Lien Term Loan.
RECENT ACCOUNTING PRONOUNCEMENT
See Note 2, Recent Accounting Pronouncements, to the condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.
OFF-BALANCE SHEET ARRANGEMENTS
As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of June 30, 2021, we did not have any unconsolidated SPEs.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “believe”, “may”, “will”, “should”, “can have”, “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:
| ● | effects from political and policy changes that could limit our growth opportunities; |
| ● | effects from the continued COVID-19 pandemic on our business and the economy; |
| ● | our potential inability to maintain existing contracts or contract terms with, or enter into new contracts with, our customers; |
| ● | cancellations by or disputes with customers; |
| ● | our potential failure to maintain our reputation, including by protecting intellectual property; |
| ● | effects of a global economic downturn on our customers and suppliers; |
| ● | a decrease in our customers’ patient census or services; |
| ● | competitive practices by our competitors that could cause us to lose market share, reduce our prices or increase our expenditures; |
| ● | the bundling of products and services by our competitors, some of which we do not offer; |
| ● | consolidation in the healthcare industry, which may lead to a reduction in the prices we charge; |
| ● | adverse developments with supplier relationships; |
| ● | the potential inability to change the manner in which healthcare providers traditionally procure medical equipment; |
| ● | our potential inability to attract and retain key personnel; |
| ● | our potential inability to make attractive acquisitions or successfully integrate acquire businesses; |
| ● | an increase in expenses related to our pension plan; |
| ● | the fluctuation of our cash flow; |
| ● | credit risks relating to home care providers and nursing homes; |
| ● | potential claims related to the medical equipment that we outsource and service; |
| ● | the incurrence of costs that we cannot pass through to our customers; |
| ● | a failure of our management information systems; |
| ● | limitations inherent in all internal controls systems over financial reporting; |
| ● | social unrest; |
| ● | our failure to keep up with technological changes; |
| ● | our failure to coordinate the management of our equipment; |
| ● | challenges to our tax positions or changes in taxation laws; |
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| ● | litigation that may be costly to defend; |
| ● | uncertainty surrounding healthcare reform initiatives; |
| ● | federal privacy laws that may subject us to more stringent penalties; |
| ● | our relationship with healthcare facilities and marketing practices that are subject to federal Anti-Kickback Statute and similar state laws; |
| ● | our contracts with the federal government that subject us to additional oversight; |
| ● | the impact of changes in third-party payor reimbursement for healthcare items and services on our customers’ ability to pay for our services; |
| ● | the highly regulated environment our customers operate in; |
| ● | potential recall or obsolescence of our large fleet of medical equipment; and |
| ● | other factors disclosed in the section entitled “Risk Factors” in this Form 10-Q, in our Prospectus, and elsewhere in our filings with the SEC. |
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Form 10-Q are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk arising from adverse changes in interest rates, fuel costs and pension valuation. We do not enter into derivatives or other financial instruments for speculative purposes.
Interest Rates
We use both fixed and variable rate debt as sources of financing. As of June 30, 2021, we had approximately $1,061.9 million of total debt outstanding before netting with deferred financing costs and unamortized debt discount, of which $537.4 million was bearing interest at variable rates. Based on variable debt levels at June 30, 2021, a 1.0 percentage point change in interest rates on variable rate debt would have resulted in annual interest expense fluctuating by approximately $5.4 million.
Fuel Costs
We are exposed to market risks related to changes in the price of gasoline used to fuel our fleet of delivery and sales vehicles. A hypothetical 10% increase in the first six months of 2021 average price of unleaded gasoline, assuming gasoline usage levels for the six months ended June 30, 2021, would lead to an annual increase in fuel costs of approximately $0.5 million.
Pension
Our pension plan assets, which were approximately $24.6 million at December 31, 2020, are subject to volatility that can be caused by fluctuations in general economic conditions. Continued market volatility and disruption could cause declines in asset values, and if this occurs, we may need to make additional pension plan contributions and our pension expense in future years may increase. A hypothetical 10% decrease in the fair value of plan assets at December 31, 2020 would lead to a decrease in the funded status of the plan of approximately $2.5 million.
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Other Market Risk
As of June 30, 2021, we have no other material exposure to market risk.
Item 4. Controls and Procedures
| (a) | Evaluation of disclosure controls and procedures |
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2021.
| (b) | Changes in internal control over financial reporting |
There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
The Company, in the ordinary course of business, is subject to liability claims related to employees and the equipment that it rents and services. Asserted claims are subject to many uncertainties and the outcome of individual matters is not predictable. While the ultimate resolution of these actions may have an impact on the Company’s financial results for a particular reporting period, management believes that any such resolution would not have a material adverse effect on the financial position, results of operations or cash flows of the Company and the chance of a negative outcome on outstanding litigation is considered remote. See the additional information in Note 11, Commitments and Contingencies, to the condensed consolidated financial statements included in Part I, Item 1 of the Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our Prospectus and under Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, other than:
We may be unable to maintain existing contracts or contract terms or enter into new contracts with our customers.
Our revenue maintenance and growth depend, in part, on continuing contracts with customers, including through GPOs and IDNs, with which certain of our customers are affiliated. In the past, we have been able to maintain and renew the majority of such contracts and expand the solutions we offer under such contracts. If we are unable to maintain our contracts, or if the GPOs or IDNs seek additional discounts or other more beneficial terms on behalf of their members, we may lose a portion or all of existing business with, or revenues from, customers that are members of such GPOs and IDNs. In addition, certain of our customers account for large portions of our revenue. From time to time, a single customer, depending on the current status and volumes of a number of separate contracts, may account for 10% or more of our total revenue. As a result, the actions of even a single customer can expose our business and operating results to greater volatility.
On July 21, 2020, we entered into a one-year agreement with the U.S. Department of Health and Human Services (“HHS”) and the Assistant Secretary for Preparedness and Response (the “HHS Agreement”) for the comprehensive maintenance and management services of medical ventilator equipment in exchange for up to $193.0 million. On August 10, 2021, the HHS Agreement, which was originally set to expire on July 27, 2021, was extended for an additional period of 60 days. The Company expects that HHS will issue a public request for proposal and make a new contract award prior to the September 27, 2021 expiration of the extension period. Agiliti intends to compete for the new contract award. As a result, we expect that the U.S. Department of Health and Human Services and the Assistant Secretary of Preparedness and Response will continue to be our largest customer during the duration of the HHS Agreement. Although we expect to have the opportunity to complete a request for proposal for continuing contracts with HHS
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following the expiration of the HHS Agreement, to the extent the HHS Agreement or other contracts with significant customers are not renewed or are terminated, our revenue and operating results would be significantly impacted.
For the six months ended June 30, 2021, approximately 18% of total revenue related to various contracts with HHS and the Assistant Secretary of Preparedness and Response.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
Set forth below is information regarding securities issued by us during the period covered by this Quarterly Report on Form 10-Q that were not registered under the Securities Act. Also included is the consideration, if any, received by us for such securities and information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
Since March 31, 2021, we have issued the following unregistered securities:
| ● | On May 4, 2021, we issued 175,000 shares of common stock in connection with the exercise of stock options by a former employee. The offers and sales of the above securities were deemed to be exempt from registration under the Securities Act of 1933 in reliance upon Section 4(a)(2) of the Securities Act of 1933 or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. |
| ● | In June 2021, we issued 75,428 shares of common stock in connection with the exercise of warrants. The issuance of these securities were exempt from registration in reliance upon Section 3(a)(9) of the Securities Act of 1933. |
Use of Proceeds
On April 27, 2021, we completed our IPO, in which we sold 30,263,157 shares of common stock at price to the public of $14.00 per share. The offer and sale of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-253947), which was declared effective by the SEC on April 22, 2021.
As of June 30, 2021, all proceeds from the IPO have been applied as described in our final prospectus filed with the SEC on April 26, 2021, pursuant to Rule 424(b) of the Securities Act.
Item 6.Exhibits
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Exhibit
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Description |
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3.1 |
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Second Amended and Restated Certificate of Incorporation of Agiliti, Inc. |
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3.2 |
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4.1 |
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10.1 |
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10.2 |
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10.3 |
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10.4 |
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31.1 |
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31.2 |
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32.1* |
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2* |
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS |
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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. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101. |
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* |
Furnished, not filed. |
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SIGNATURES
Pursuant to the requirements 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.
Date: August 12, 2021
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Agiliti, Inc. |
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By |
/s/ Thomas J. Leonard |
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Thomas J. Leonard |
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Chief Executive Officer |
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(Principal Executive Officer and Duly Authorized Officer) |
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By |
/s/ James B. Pekarek |
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James B. Pekarek |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial Officer) |
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31
EXECUTION
Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AGILITI, INC.
Agiliti, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:
The name of the corporation is Agiliti, Inc.
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, Wilmington, County of New Castle, State of Delaware, 19808, and the name of the Corporation’s registered agent at such address is Corporation Service Company.
The Preferred Stock and the Common Stock shall have the designations, rights, powers and preferences and the qualifications, restrictions and limitations thereof, if any, set forth below.
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and authority expressly conferred upon the Board by statute, this Certificate or the Bylaws of the Corporation (as amended and/or restated, the “Bylaws”), the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Certificate, and any Bylaws; provided, however, that no Bylaws hereafter adopted shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted. Notwithstanding the foregoing, for so long as THL Agiliti LLC (“THL”) beneficially owns in the aggregate (directly or indirectly) at least 30% or more of the voting power of the then outstanding shares of capital stock of the Corporation then entitled to vote generally in the election of directors, the Chair of the Board of Directors may only be designated by a majority of the directors nominated or designated for nomination by THL.
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may only be removed for cause and only upon the affirmative vote of stockholders representing at least sixty-six and two-thirds percent (662/3%) of the voting power of the then outstanding shares of Voting Stock. Any director may resign at any time upon notice in writing or by electronic transmission to the Corporation.
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(a) prior to such time, the Board approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; or
(b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
(c) at or subsequent to such time, the business combination is approved by the Board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66⅔% of the outstanding voting stock of the Corporation which is not owned by the interested stockholder.
(a) “Affiliate” means, with respect to any person, any other person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with such person.
(b) “associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.
(c) “business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:
(i) any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (A) with the interested stockholder, or (B) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section 9.2 is not applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation
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determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;
(iii) any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (A) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (B) pursuant to a merger under Section 251(g) of the DGCL; (C) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (D) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (E) any issuance or transfer of stock by the Corporation; provided, however, that in no case under items (C)-(E) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);
(iv) any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or
(v) any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.
(d) “Control,” including the terms “Controlling,” “Controlled by” and “under common Control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article IX, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.
(e) “Exempted Holders” means THL or any of its Affiliated Companies or associates including investment funds managed by Thomas H. Lee Partners, L.P., or any other Person with whom any of the foregoing are acting as a group or in concert for the purpose of acquiring, holding, voting or disposing of shares of voting stock of the Corporation.
(f) “interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an Affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder, or (iii) an Affiliate or associate of any such person described in clauses (i) and (ii); provided, however, that the term “interested stockholder” shall not include (A) the Exempted Holders, (B) any person who would otherwise be an interested stockholder because of a transfer, sale, assignment, conveyance, hypothecation, encumbrance, or other disposition of five percent (5%) or more of the outstanding voting stock of the Corporation (in one transaction or a series of transactions) by an Exempted Holder to such person, or (C) any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation; provided, that such person specified in this clause (C) shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the Corporation,
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except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
(g) “owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its Affiliates or associates:
(i) beneficially owns such stock, directly or indirectly; or
(ii) has (A) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s Affiliates or associates until such tendered stock is accepted for purchase or exchange; or (B) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (B) of subsection (ii) above), or disposing of such stock with any other person that beneficially owns, or whose Affiliates or associates beneficially own, directly or indirectly, such stock.
(h) “person” means any individual, corporation, partnership, unincorporated association or other entity.
(i) “stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.
(j) “voting stock” means stock of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of such entity. Every reference to a percentage of voting stock shall refer to such percentages of the votes of such voting stock.
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(a) Unless the Corporation consents in writing to the selection of an alternative forum, (A) the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by, or other wrongdoing by, any current or former director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, or a claim of aiding and abetting any such breach of fiduciary duty, (iii) any action asserting a claim against the Corporation or any director, officer, employee or agent of the Corporation arising pursuant to any provision of the DGCL, the Certificate or the Bylaws of the Corporation (as either may be amended, restated, modified, supplemented or waived from time to time), or (iv) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws of the Corporation (as either may be amended), (v) any action asserting a claim against the corporation or any director, officer, employee or agent of the Corporation governed by the internal affairs doctrine or (vi) any action asserting an "internal corporate claim" as that term is defined in Section 115 of the DGCL. For the avoidance of doubt, this Section 11.1 of ARTICLE XI shall not apply to any action or proceeding asserting a claim under the Securities Act of 1933 or the Exchange Act of 1934.
(b) Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933 against the Corporation or any director, officer, employee or agent of the Corporation.
If any provision or provisions of this Certificate shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate (including, without limitation, each portion of any paragraph of this Certificate containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by applicable law, in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, Agiliti, Inc. has caused this Certificate to be duly executed and acknowledged in its name and on its behalf by an authorized officer as of the date first set forth above.
AGILITI, INC.
By:_/s/ Thomas J. Leonard
Name: Thomas J. Leonard
Title: Chief Executive Officer
[Signature Page to Second Amended and Restated Certificate of Incorporation]
FINAL
Exhibit 3.2
THIRD AMENDED AND RESTATED BYLAWS
OF
AGILITI, INC.
A Delaware corporation
Adopted as of April 26, 2021
OFFICES
STOCKHOLDERS’ MEETINGS
or rescheduled, and any meeting of stockholders as to which notice has been given may be cancelled, by the Board upon Public Announcement (as defined in Section 2.7(c)(iv)) given before the date previously scheduled for such meeting.
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Any copy, facsimile telecommunication or other reliable reproduction of the document (including any electronic transmission) authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original document for any and all purposes for which the original writing or transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original document.
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Section 9.2, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
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or refusal to act) of the Secretary and all Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.
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DIRECTORS
BOARD MEETINGS
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purpose of, any special meeting need be specified in the notice or waiver of notice of such meeting. A special meeting may be held at any time without notice if notice of the meeting is waived in accordance with Section 9.4.
COMMITTEES OF DIRECTORS
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OFFICERS
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as the case may be, unless the Board then determines that such office shall thereupon be appointed by the Board, in which case the Board shall appoint such officer.
SHARES
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INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
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fees and related disbursements, judgments, fines, excise taxes and penalties under the Employee Retirement Income Security Act of 1974, as amended from time to time (“ERISA”) and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection with such proceeding and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators; provided, however, that, except as provided in Section 8.3 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify an Indemnitee in connection with a proceeding (or part thereof) initiated by such Indemnitee only if such proceeding (or part thereof) was authorized in the specific case by the Board.
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the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation.
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MISCELLANEOUS
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Whenever notice is required to be given by the Corporation, under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, to any stockholder to whom (1) notice of two consecutive annual meetings of stockholders and all notices of stockholder meetings or of the taking of action by written consent of stockholders
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without a meeting to such stockholder during the period between such two consecutive annual meetings, or (2) all, and at least two payments (if sent by first-class mail) of dividends or interest on securities during a 12-month period, have been mailed addressed to such stockholder at such stockholder’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting that shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth such stockholder’s then current address, the requirement that notice be given to such stockholder shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to Section 230 (b) of the DGCL. The exception in subsection (1) of the first sentence of this paragraph to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.
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EXECUTION
Exhibit 4.1
EXECUTION
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of April 27, 2021, is made and entered into by and among Agiliti, Inc., a Delaware corporation (the “Company”), THL Agiliti LLC, a Delaware limited liability company (“THL Agiliti”), Thomas J. Leonard (the “Executive”), and the individuals listed as Other Holders on the signature pages hereto (the “Other Holders” and, together with THL Agiliti, the Executive and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, a “Holder” and collectively the “Holders”).
RECITALS
WHEREAS, the Company and the Holders are parties to a Registration Rights Agreement, dated as of January 4, 2019 (the “Existing Registration Rights Agreement”);
WHEREAS, in connection with the planned initial public offering of the Company’s Common Stock (as defined below), the parties to the Existing Registration Rights Agreement wish to amend and restate such agreement with respect to the Common Stock and Warrants to purchase Common Stock (“Warrants”); and
NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
“Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Board, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.
WEIL:\96667532\6\78688.0010
“Affiliate” of any Person shall mean any other Person controlled by, controlling or under common control with such Person and, in the case of an individual, also includes any member of such individual’s Family Group; provided that (i) the Company and its Subsidiaries shall not be deemed to be Affiliates of any Holder and (ii) no Holder shall be deemed to be an Affiliate of any other Holder by reason of an investment in, or holding of Common Stock (or securities convertible or exchangeable for shares of Common Stock) or Warrants of, the Company. As used in this definition, “control” (including, with its correlative meanings, “controlling,” “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities, by contract or otherwise).
“Agreement” shall have the meaning given in the Preamble hereto.
“Automatic Shelf Registration Statement” shall have the meaning given in subsection 2.3.1.
“Beneficially Own” and correlative terms such as “Beneficial Ownership” shall have the meaning set forth in Rule 13d-3 under the Exchange Act and shall be calculated in accordance therewith.
“Board” shall mean the Board of Directors of the Company.
“Block Trade” shall mean an offering and/or sale of Registrable Securities by any Holder on a block trade basis (whether underwritten or otherwise) effected without substantial marketing efforts prior to the pricing, including, without limitation, a same day trade, overnight trade or similar transaction.
“Business Day” shall mean a day that is not a Saturday or Sunday or a day on which banks in New York City are authorized or requested by law to close.
“Charitable Gifting Event” shall mean any transfer by THL Agiliti, or any subsequent transfer by THL Agiliti’s members, partners or other employees, in connection with a bona fide gift to any Charitable Organization on the date of, but prior to, the execution of the underwriting agreement entered into in connection with any underwritten offering.
“Charitable Organization” shall mean a charitable organization described by Section 501(c)(3) of the Internal Revenue Code of 1986, as in effect from time to time.
“Commission” or “SEC” shall mean the Securities and Exchange Commission.
“Common Stock” shall mean the Company’s common stock, par value $0.0001 per share.
“Company” shall have the meaning given in the Preamble hereto and shall include its successor(s).
“Demand Registration” shall have the meaning given in subsection 2.1.1.
“Demanding THL Holders” shall have the meaning given in subsection 2.1.1.
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“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Executive” shall have the meaning given in the Preamble hereto.
“Executive Registrable Securities” shall mean (i) all shares of Common Stock (including any shares of Common Stock issued or issuable upon exercise of Rollover Options (as defined in the Merger Agreement) or pursuant to awards granted under the Company's incentive plans) whether now held or hereafter acquired and (ii) any other equity security of the Company issued or issuable with respect to any such share of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization, in each case held by the Executive.
“Existing Registration Rights Agreement” shall have the meaning given in the Recitals hereto.
“Family Group” means with respect to any individual, such individual’s current or former spouse, their respective parents, descendants of such parents (whether natural or adopted) and the spouses of such descendants, any trust, limited partnership, corporation or limited liability company established solely for the benefit of such individual or such individual’s current or former spouse, their respective parents, descendants of such parents (whether natural or adopted) or the spouses of such descendants.
“FINRA” shall mean the Financial Industry Regulatory Authority.
“Free Writing Prospectus” means a free-writing prospectus, as defined in Rule 405.
“Holdback Period” shall have the meaning given in subsection 3.4.1.
“Holders” shall have the meaning given in the Preamble hereto.
“Indemnified Parties” shall have the meaning given in subsection 4.1.1.
“Joinder” shall have the meaning given in subsection 5.2.1.
“Long-Form Registrations” shall have the meaning given in subsection 2.1.1.
“Losses” shall have the meaning given in subsection 4.1.1.
“Maximum Number of Securities” shall have the meaning given in subsection 2.1.4.
“Misstatement” shall mean an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus, or necessary to make the statements in a Registration Statement or Prospectus in the light of the circumstances under which they were made not misleading.
“Other Holders” shall have the meaning given in the Preamble hereto.
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“Other Registrable Securities” shall mean (i) all shares of Common Stock held (directly or indirectly) by any Other Holders or any of their Affiliates, and (ii) any other equity security of the Company or any Subsidiary issued or issuable with respect to any such share of Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization.
“Person” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“Piggyback Registration” shall have the meaning given in subsection 2.2.1.
“Prospectus” shall mean the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Pro Rata” shall have the meaning given in subsection 2.1.4.
“Public Offering” shall mean any sale or distribution by the Company, one of its Subsidiaries and/or Holders to the public of Common Stock or other securities convertible into or exchangeable for Common Stock pursuant to an offering registered under the Securities Act.
“Registrable Securities” shall mean the THL Registrable Securities, the Executive Registrable Securities and the Other Registrable Securities; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act; (C) such securities shall have ceased to be outstanding; (D) such securities may be sold without registration pursuant to Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereunder by the Commission) (but with no volume or other restrictions or limitations) and represent beneficial ownership of less than 2.5% of the outstanding Common Stock; or (E) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction. Notwithstanding the foregoing, following the consummation of an initial Public Offering, any Registrable Securities held by any Person (other than THL Agiliti or its Affiliates) that may be sold under Rule 144(b)(1)(i) without limitation under any of the other requirements of Rule 144 will be deemed not to be Registrable Securities.
“Registration” shall mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
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“Registration Expenses” shall mean any and all expenses of a Registration, regardless of whether the applicable Registration Statement is declared effective, including, without limitation, the following:
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“Registration Statement” shall mean any registration statement that covers the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Holder” shall have the meaning given in subsection 2.1.1.
“Rule 144”, “Rule 158”, “Rule 405”, “Rule 415”, “Rule 403B” and “Rule 462” shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision) by the SEC, as the same will be amended from time to time, or any successor rule then in force.
“Sale of the Company” shall mean any transaction or series of transactions pursuant to which any Person(s) or group of related Persons (other than THL Agiliti and/or its Affiliates) in the aggregate acquires: (i) Common Stock of the Company entitled to vote (other than voting rights accruing only in the event of a default, breach, event of noncompliance or other contingency) to elect directors with a majority of the voting power of the Company’s board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company’s Common Stock) or (ii) all or substantially all of the Company’s and its Subsidiaries’ assets determined on a consolidated basis; provided that a Public Offering will not constitute a Sale of the Company.
“Sale Transaction” shall have the meaning given in subsection 3.4.1.
“Securities” shall have the meaning given in subsection 3.4.1.
“Shelf Offering” shall have the meaning given in subsection 2.3.2.
“Shelf Offering Notice” shall have the meaning given in subsection 2.3.2.
“Shelf Registrable Securities” shall have the meaning given in subsection 2.3.2.
“Shelf Registration Statement” shall have the meaning given in subsection 2.3.2.
“Shelf Registration” shall have the meaning given in subsection 2.3.1.
“Short-Form Registrations” shall have the meaning given in subsection 2.1.1.
“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.
“Special Registration Statement” shall mean a Registration Statement (i) filed in connection with any employee stock option or other benefit plan, (ii) for an exchange offer or offering of securities solely to the Company’s existing securityholders, (iii) for an offering of debt
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that is convertible into equity securities of the Company, (iv) for the registration of shares of Common Stock issuable upon exercise of securities exercisable or convertible into Common Stock, or (iv) for a dividend reinvestment plan.
“Subsidiary” shall mean, with respect to the Company, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned and controlled, directly or indirectly, by the Company or one or more of the other Subsidiaries of the Company or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by the Company or one or more Subsidiaries of the Company or a combination thereof. For purposes hereof, a Person or Persons will be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons will be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or will be or control the managing director or general partner of such limited liability company, partnership, association or other business entity.
“THL Agiliti” shall have the meaning given in the Preamble hereto.
“THL Registrable Securities” shall mean (i) all shares of Common Stock (including any shares of Common Stock issued or issuable upon exercise of Warrants) whether now held or hereafter acquired, (ii) all Warrants whether now held or hereafter acquired, and (iii) any other equity security of the Company issued or issuable with respect to any such share of Common Stock or Warrants by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization, in each case held by THL Agiliti or any of its Affiliates.
“Underwriter” shall mean a securities dealer who purchases any Registrable Securities as principal in an Underwritten Offering and not as part of such dealer’s market-making activities.
“Underwritten Registration” or “Underwritten Offering” shall mean a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
“Violation” shall have the meaning given in subsection 4.1.1.
“Warrants” shall have the meaning given in the Recitals hereto.
“WKSI” means a “well-known seasoned issuer” as defined under Rule 405 of the Securities Act.
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make an Adverse Disclosure or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than sixty (60) days, determined in good faith by the Board to be necessary for such purpose, or more than once in any 12-month period. In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.5 and shall not make use of the rights under this Section 3.5 more than once in any 12-month period.
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS SET FORTH IN A REGISTRATION RIGHTS AGREEMENT DATED AS OF APRIL 27, 2021 AMONG THE ISSUER OF SUCH SECURITIES (THE “COMPANY”) AND CERTAIN OF THE COMPANY’S EQUITYHOLDERS, AS AMENDED. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”
The Company will imprint such legend on certificates evidencing Registrable Securities outstanding prior to the date hereof. The legend set forth above will be removed from the certificates evidencing any securities that have ceased to be Registrable Securities.
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hours of the recipient; but if not, then on the next Business Day. Such notices, demands and other communications will be sent to the Company at the address specified on the signature page hereto or any Joinder and to any Holder, or at such address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party. Any party may change such party’s address for receipt of notice by giving prior written notice of the change to the sending party as provided herein. The Company’s address is:
Agiliti, Inc.
6625 West 78th Street, Suite 300
Minneapolis, Minnesota 55439
Attention: Lee Neumann
Email: lee.neumann@agilitihealth.com
with a copy to (which shall not constitute notice):
Kirkland & Ellis LLP
300 North LaSalle St.
Chicago, Illinois 60654
Attention: Robert M. Hayward, P.C.
Alexander M. Schwartz
Email: robert.hayward@kirkland.com
alexander.schwartz@kirkland.com
or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.
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PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION.
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[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
COMPANY:
AGILITI, INC.,
a Delaware corporation
By: /s/ Thomas J. Leonard
Name: Thomas J. Leonard
Title: Chief Executive Officer
Address: 6625 West 78th Street, Suite 300
Minneapolis, Minnesota 55439
Attention: Lee Neumann
Email: lee.neumann@agilitihealth.com
[Signature Page to Registration Rights Agreement]
THL AGILITI LLC
a Delaware limited liability company
By: /s/ Joshua M. Nelson
Name: Joshua M. Nelson
Title: Managing Director
Address: c/o THL Agiliti LLC
100 Federal Street, 25th Floor
Boston, Massachusetts 02110
Attention: Shari H. Wolkon
Arthur Price
Email: swolkon@thl.com
aprice@thl.com
[Signature Page to Registration Rights Agreement]
EXECUTIVE:
/s/ Thomas J. Leonard
Thomas J. Leonard
6625 West 78th Street, Suite 300
Minneapolis, Minnesota 55439
Email: tom.leonard@agilitihealth.com
[Signature Page to Registration Rights Agreement]
OTHER HOLDERS:
/s/ Michael A. Bell
Michael A. Bell
100 Federal Street, 35th Floor
Boston, Massachussetts 02110
[Signature Page to Registration Rights Agreement]
/s/ Gary L. Gottlieb
Gary L. Gottlieb
185 Dartmouth Street, Suite 1002
Boston, Massachusetts 02199
[Signature Page to Registration Rights Agreement]
/s/ Henry A. McKinnell
Henry A. McKinnell
Address:
[Signature Page to Registration Rights Agreement]
/s/ Paul M. Montrone
Paul M. Montrone
Address:
[Signature Page to Registration Rights Agreement]
EXHIBIT A
The undersigned is executing and delivering this Joinder pursuant to the Registration Rights Agreement dated as of __________________, 20__ (as amended, modified and waived from time to time, the “Registration Agreement”), among ____________________, a [Delaware][corporation//limited liability company//limited partnership] (the “Company”), and the other persons named as parties therein (including pursuant to other Joinders). Capitalized terms used herein have the meaning set forth in the Registration Agreement.
By executing and delivering this Joinder to the Company, the undersigned hereby agrees to become a party to, to be bound by, and to comply with the provisions of, the Registration Agreement as a Holder in the same manner as if the undersigned were an original signatory to the Registration Agreement, and the undersigned will be deemed for all purposes to be a Holder, an [Other Holder // Executive] thereunder and the undersigned’s ____ [shares of Common Stock // Warrants] will be deemed for all purposes to be [Other // Executive] Registrable Securities under the Registration Agreement.
Accordingly, the undersigned has executed and delivered this Joinder as of the ___ day of ____________, 20___.
____________________________________
Signature
____________________________________
Print Name
Address:
Agreed and Accepted as of
________________, 20___:
AGILITI, INC.
By: ________________________
Its: ________________________
Execution Version
Exhibit 10.1
Execution Version
Amended and RESTATED
Director NOMINATION Agreement
THIS AMENDED AND RESTATED Director NOMINATION Agreement (this “Agreement”) is made and entered into as of April 26, 2021, by and among Agiliti, Inc., a Delaware corporation (the “Company”), and THL Agiliti LLC, a Delaware limited liability company (“THL Stockholder”). This Agreement shall become effective (the “Effective Date”) upon the closing of the Company’s initial public offering (the “IPO”) of shares of its common stock, par value $0.0001 per share (the “Common Stock”).
WHEREAS, as of the date hereof, THL Stockholder and the Company are parties to that certain Director Nomination Agreement, dated as of January 4, 2019 (the “Existing Agreement”);
WHEREAS, as of the date hereof, THL Stockholder owns more than 99% of the Common Stock of the Company;
WHEREAS, THL Stockholder is contemplating causing the Company to effect the IPO;
WHEREAS, in consideration of THL Stockholder agreeing to undertake the IPO, the Company has agreed to continue to permit THL Stockholder to designate persons for nomination for election to the board of directors of the Company (the “Board”) following the Effective Date on the terms and conditions set forth herein; and
WHEREAS, in connection with, and effective upon, the consummation of the IPO, the Company and THL Stockholder wish to amend and restate the Existing Agreement in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the parties to this Agreement agrees as follows:
| 1. | Board Nomination Rights. |
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2.Company Obligations. The Company agrees to use its reasonable best efforts to ensure that prior to the date that THL Stockholder ceases to Beneficially Own shares of Common Stock representing at least 5% of the total voting power of the then outstanding Common Stock, (i) each Nominee is included in the Board’s slate of nominees to the stockholders (the “Board’s Slate”) for each election of directors; and (ii) each Nominee is included in the proxy statement prepared by management of the Company in connection with soliciting proxies for every meeting of the stockholders of the Company called with respect to the election of members of the Board (each, a “Director Election Proxy Statement”), and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of the Company or the Board with respect to the election of members of the Board. THL Stockholder will promptly provide reporting to the Company after THL Stockholder ceases to Beneficially Own shares of Common Stock representing at least 5% of the total voting power of the then outstanding Common Stock, such that Company is informed of when this obligation terminates. The calculation of the number of Nominees that THL Stockholder is entitled to nominate to the Board’s Slate for any election of directors shall be based on the percentage of the total voting power of the then outstanding Common Stock then Beneficially Owned by THL Stockholder (“THL Stockholder Voting Control”) immediately prior to the mailing to shareholders of the Director Election Proxy Statement relating to such election (or, if earlier, the filing of the definitive Director Election Proxy Statement with the U.S. Securities and Exchange Commission). Unless THL Stockholder notifies the Company otherwise prior to the mailing to shareholders of the Director Election Proxy
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Statement relating to an election of directors, the Nominees for such election shall be presumed to be the same Nominees currently serving on the Board, and no further action shall be required of THL Stockholder for the Board to include such Nominees on the Board’s Slate; provided, that, in the event THL Stockholder is no longer entitled to nominate the full number of Nominees then serving on the Board, THL Stockholder shall provide advance written notice to the Company, of which currently servicing Nominee(s) shall be excluded from the Board Slate, and of any other changes to the list of Nominees. If THL Stockholder fails to provide such notice prior to the mailing to shareholders of the Director Election Proxy Statement relating to such election (or, if earlier, the filing of the definitive Director Election Proxy Statement with the U.S. Securities and Exchange Commission), a majority of the independent directors then serving on the Board shall determine which of the Nominees of THL Stockholder then serving on the Board will be included in the Board’s Slate. Furthermore, the Company agrees for so long as the Company qualifies as a “controlled company” under the rules of the Exchange the Company will elect to be a “controlled company” for purposes of the Exchange and will disclose in its annual meeting proxy statement that it is a “controlled company” and the basis for that determination. The Company and THL Stockholder acknowledge and agree that, as of the Effective Date, the Company is a “controlled company.”
3.Committees. From and after the Effective Date hereof until such time as THL Stockholder ceases to Beneficially Own shares of Common Stock representing at least 5% of the total voting power of the then outstanding Common Stock, THL Stockholder shall have the right to designate a number of members of each committee of the Board equal to the nearest whole number greater than the product obtained by multiplying (a) the percentage of the total voting power of the then outstanding Common Stock then Beneficially Owned by THL Stockholder and (b) the number of positions, including any vacancies, on the applicable committee, provided that any such designee shall be a director and shall be eligible to serve on the applicable committee under applicable law or listing standards of the Exchange, including any applicable independence requirements (subject in each case to any applicable exceptions, including those for newly public companies and for “controlled companies,” and any applicable phase-in periods). Any additional members shall be determined by the Board. Nominees designated to serve on a Board committee shall have the right to remain on such committee until the next election of directors, regardless of the level of THL Stockholder Voting Control following such designation. Unless THL Stockholder notifies the Company otherwise prior to the time the Board takes action to change the composition of a Board committee, and to the extent THL Stockholder has the requisite THL Stockholder Voting Control for THL Stockholder to nominate a Board committee member at the time the Board takes action to change the composition of any such Board committee, any Nominee currently designated by THL Stockholder to serve on a committee shall be presumed to be re-designated for such committee.
4.Amendment and Waiver. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Company and THL Stockholder, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any
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rights or remedies provided by law. THL Stockholder shall not be obligated to nominate all (or any) of the Nominees it is entitled to nominate pursuant to this Agreement for any election of directors but the failure to do so shall not constitute a waiver of its rights hereunder with respect to future elections; provided, however, that in the event THL Stockholder fails to nominate all (or any) of the Nominees it is entitled to nominate pursuant to this Agreement prior to the mailing to shareholders of the Director Election Proxy Statement relating to such election (or, if earlier, the filing of the definitive Director Election Proxy Statement with the U.S. Securities and Exchange Commission), the Compensation and Governance Committee of the Board shall be entitled to nominate individuals in lieu of such Nominees for inclusion in the Board’s Slate and the applicable Director Election Proxy Statement with respect to the election for which such failure occurred and THL Stockholder shall be deemed to have waived its rights hereunder with respect to such election. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
| 7. | Indemnity. |
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If to the Company:
6625 West 78th Street, Suite 300
Minneapolis, Minnesota 55439-2604
Attention: General Counsel and Secretary
Facsimile: (952) 893-3200
If to THL Stockholder or any Nominee:
100 Federal Street, 35th Floor
Boston, Massachusetts 02110
Attention: Arthur B. Price
Facsimile: (612) 227-3514
With a copy to (which shall not constitute notice):
Kirkland & Ellis LLP
300 N. LaSalle
Chicago, IL 60654
Attention: Robert M. Hayward, P.C.
Alexander M. Schwartz
Facsimile: (312) 862-2200
or to such other address or telecopier number as such party or the Company may hereafter specify for the purpose by notice to the other parties and the Company. Each such notice, request or other communication shall be effective when delivered at the address specified in this Section 16 during regular business hours.
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* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.
AGILITI, INC.
By:/s/ Thomas J. Leonard__________________
Name: Thomas J. Leonard
Title: Chief Executive Officer
A&R Director Nomination Agreement - Agiliti
THL AGILITI, LLC
By: /s/ Joshua M. Nelson________________________
Name: Joshua M. Nelson
Title: Managing Director
A&R Director Nomination Agreement - Agiliti
Exhibit 31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Thomas J. Leonard, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Agiliti, Inc. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 12, 2021 |
/s/ Thomas J. Leonard |
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Thomas J. Leonard |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, James B. Pekarek, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Agiliti, Inc. (the “registrant”);
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 12, 2021 |
/s/ James B. Pekarek |
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James B. Pekarek |
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Executive Vice President and |
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Chief Financial Officer |
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(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Agiliti, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas J. Leonard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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ugust ugust12 |
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Date: August 12, 2021 |
/s/ Thomas J. Leonard |
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Thomas J. Leonard |
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Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Agiliti, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission (the “Report”), I, James B. Pekarek, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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2 |
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Date: August 12, 2021 |
/s/ James B. Pekarek |
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James B. Pekarek |
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Executive Vice President and |
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Chief Financial Officer |