AGILITI, INC. DE : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

The following discussion and analysis summarizes the significant factors
affecting the consolidated operating results, financial condition, liquidity and
cash flows of our company as of and for the periods presented below. The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto included
elsewhere in this Annual Report on Form 10-K. 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

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sections titled "Note Regarding Forward-Looking Statements" for a discussion of
forward-looking statements as well as in Part I, Item 1A, "Risk Factors" for a
discussion of factors that could cause actual results to differ materially from
the results described in or implied by the forward-looking statements contained
in the following discussion and analysis and elsewhere in this Annual Report on
Form 10-K. Unless otherwise specified, the terms "we", "our", "us" and the
"Company" refer to Agiliti, Inc. and, where appropriate, its consolidated
subsidiaries.

Overview

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.

In our more than 80 years of experience ensuring healthcare providers have
high-quality, expertly maintained equipment to serve their patients, we've built
an at-scale, strong nationwide operating footprint. This service and logistics
infrastructure positions us to reach customers across the entire healthcare
continuum-from individual facilities to the largest and most complex healthcare
systems. Likewise, 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.

Trends and Uncertainties Affecting our Business

Our expected results may not be achieved and actual results may differ
materially from our expectations. This may be a result of various trends and
uncertainties, including, but not limited to:

? the status of the economy, including supply chain delays affecting our medical

equipment manufacturers and the labor shortage?

? the status of capital markets, including prevailing interest rates?

? changes in financing terms?

? fluctuating census and patient acuity;

promulgation of new safety laws and regulations, or changes in or

? re-interpretations of existing safety laws and regulations with respect to the

medical equipment our customers use;

? acquisitions, both the successful integration of recent acquisitions and

completion of future attractive acquisitions;

? re-negotiations of contracts critical to our revenue;

? changes in federal, state and local legislation, including healthcare and tax

reformation? and

? the duration, spread and severity of the COVID-19 outbreak.



We regularly monitor the economic and other factors listed above. We develop
strategic and tactical plans designed to improve performance and maximize our
competitive position. Our ability to achieve our financial objectives is
dependent upon our ability to effectively execute these plans and to
appropriately respond to emerging economic and company-specific trends.

Impact of COVID-19 on our Business

Health and Safety

From the earliest signs of the outbreak, we have taken proactive action to
protect the health and safety of our employees, customers, partners and
suppliers. We enacted safety measures in all of our sites, including
implementing social distancing protocols, requiring working from home for those
employees that do not need to be physically present to perform their work,
suspending travel, implementing temperature checks at the entrances to our
facilities, extensively and


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frequently disinfecting our workspaces and providing masks to those employees
who must be physically present. We expect to continue to implement these
measures until we determine that the COVID-19 pandemic is adequately contained
for purposes of our business, and we may take further actions as government
authorities require or recommend or as we determine to be in the best interests
of our employees, customers, partners and suppliers.

Operations


As a result of the COVID-19 pandemic, governmental authorities have implemented
and are continuing to implement numerous and constantly evolving measures to try
to contain the virus, such as travel bans and restrictions, limits on
gatherings, quarantines, shelter-in-place orders and business shutdowns.
Measures providing for business shutdowns generally exclude certain essential
services, and those essential services commonly include critical infrastructure
and the businesses that support that critical infrastructure. While all of our
facilities currently remain operational, these measures have impacted and may
further impact our workforce and operations, as well as those of our customers,
vendors and suppliers. In connection with the COVID-19 pandemic, we have
experienced limited absenteeism from those employees who are required to
be on-site to perform their jobs, and we do not currently expect that our
operations will be adversely affected by significant absenteeism.

Liquidity

Although there is uncertainty related to the impact of the recent COVID-19,
including new variants, on our future results, we believe our business model,
our current cash reserves and available borrowings under our Revolving Credit
Facility leave us well-positioned to manage our business through this crisis. We
believe our existing balances of cash and cash equivalents and our currently
anticipated operating cash flows will be sufficient to meet our cash needs
arising in the ordinary course of business for the next twelve months and the
foreseeable future.

We continue to monitor the rapidly evolving situation and guidance from federal,
state and local public health authorities and may take additional actions based
on their recommendations. In these circumstances, there may be developments
outside our control requiring us to adjust our operating plan. As such, given
the dynamic nature of this situation, we cannot reasonably estimate the impacts
of COVID-19 on our financial condition, results of operations or cash flows
in
the future.

Principles of Consolidation

The consolidated financial statements present the consolidated financial
information for Agiliti and its subsidiaries and the consolidated financial
information for Agiliti Health, Inc. for the period of January 1 through January
3, 2019. Agiliti is the successor of Agiliti Health, Inc. for financial
reporting purposes. In addition, in accordance with guidance issued by the
Financial Accounting Standards Board, we have accounted for our equity
investments in entities in which we are the primary beneficiary under the full
consolidation method. All intercompany transactions and balances have been
eliminated through consolidation. As the primary beneficiary, we consolidate the
limited liability companies referred to in Note 13, Principles of Consolidation
to our audited consolidated financial statements for the year ended December 31,
2021, as we effectively receive the majority of the benefits from such entities
and we provide equipment lease guarantees for such entities.

Critical Accounting Policies and Estimates


The preparation of consolidated financial statements in conformity with GAAP
requires us to make decisions that impact the reported amounts of assets,
liabilities, revenue and expenses and the related disclosures. Such decisions
include the selection of the appropriate accounting principles to be applied and
the assumptions on which to base accounting estimates. In reaching such
decisions, we apply judgments based on our understanding and analysis of
relevant circumstances, historical experience and actuarial valuations. Actual
amounts could differ from those estimated at the time the consolidated financial
statements are prepared.

Some of our critical accounting policies require us to make difficult,
subjective or complex judgments or estimates. An accounting estimate is
considered to be critical if it meets both of the following criteria: (i) the
estimate requires


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assumptions about matters that are highly uncertain at the time the accounting
estimate is made, and (ii) different estimates reasonably could have been used,
or changes in the estimate that are reasonably likely to occur from period to
period may have a material impact on the presentation of our financial
condition, changes in financial condition or results of operations. Our most
critical accounting policies and estimates include the following:

? revenue recognition;

? fair value measurements in business combinations; and

? valuation of long-lived assets, including goodwill and definite-lived

   intangible assets.


Revenue Recognition

We recognize revenue when we satisfy performance obligations by transferring
promised goods or services to customers in an amount that reflects the
consideration we expect to receive in exchange for those goods or services.


Customer arrangements typically have multiple performance obligations to provide
equipment solutions, clinical engineering and/or on-site equipment managed
services on a per use and/or over time basis. Consideration paid by the customer
for each performance obligation is billed within the month the service is
performed, and contractual prices are established within our customer
arrangements that are representative of the stand-alone selling price. Taxes
assessed by a governmental authority that are both imposed on and concurrent
with a specific revenue-producing transaction, that we collect from a customer,
are excluded from revenue. Our performance obligations that are satisfied at a
point in time are recognized when the service is performed or equipment is
delivered to the customer. For certain performance obligations satisfied over
time, we use a straight-line method to recognize revenue ratably over the
contract period, as this coincides with our stand-ready performance obligation
under the contract.

Business Combinations

We account for the acquisition of a business in accordance with the accounting
standards codification guidance for business combinations, whereby the total
consideration transferred is allocated to the assets acquired and liabilities
assumed, including amounts attributable to non-controlling interests, when
applicable, based on their respective estimated fair values as of the date of
acquisition. Goodwill represents the excess of consideration transferred over
the estimated fair value of the net assets acquired in a business combination.

Assigning estimated fair values to the assets acquired and liabilities assumed
requires the use of significant estimates, judgments, inputs and assumptions
regarding the fair value of the assets and liabilities. Such significant
estimates, judgments, inputs and assumptions may include, but would not be
limited to, selection of an appropriate valuation model, applying an appropriate
discount rate, assumptions related to projected financial information and
estimates of customer attrition.

Recoverability and Valuation of Long-Lived Assets Including Goodwill and
Indefinite Lived Intangible Assets


For long-lived assets and definite lived intangible assets, impairment is
evaluated when a triggering event is indicated. If there is an indication of
impairment, an evaluation of undiscounted cash flow versus carrying value is
conducted. If necessary, an impairment is measured based on the estimated fair
value of the long-lived or amortizable asset in comparison to its carrying
value. This evaluation is conducted at the lowest level of identifiable cash
flows. Our amortizable intangible assets consist of customer relationships
and non-compete agreements. For property and equipment, primarily movable
medical equipment, we continuously monitor individual makes and models for
potential triggering events such as product recalls or technological
obsolescence.

For goodwill we review for impairment annually at the reporting unit level and
upon the occurrence of certain events that might indicate the asset may be
impaired. A qualitative review is conducted to determine whether it is more
likely than not that the fair value is less than its carrying amount. If it is
determined that it is more likely than not that the carrying value is greater
than the fair value of the asset, a quantitative impairment test is performed.
We then review goodwill for impairment by comparing the fair value of a
reporting unit with its carrying amount and recognize an impairment charge for
the amount by which the carrying amount exceeds the reporting unit's fair value.
We operate under one reporting unit

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and do not aggregate any components into our one reporting unit. There are no
known trends or uncertainties that we reasonably expect will have an unfavorable
impact on revenue or income from operations. We have not performed a
quantitative impairment test since January 4, 2019, the date of the Business
Combination, in which the balance sheet was fair valued.

Adjusted EBITDA

EBITDA is defined as earnings attributable to Agiliti, Inc. before interest
expense, income taxes, depreciation and amortization. Adjusted Earnings Before
Interest, 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 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.

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Results of Operations

The following discussion addresses:

? Our financial condition as of December 31, 2021 and 2020;

? the results of operations for the years ended December 31, 2021 and 2020;

In accordance with Item 303 of Regulation S-K, the Company has excluded the

discussion of 2019 results in “Management’s Discussion and Analysis of

Financial Condition and Results of Operations”, as this discussion can be found

? in our Registration Statement on Form S-1, filed with the SEC on file no.

333-253947, under “Management’s Discussion and Analysis of Financial Condition

and Results of Operations”.Results of Operations for the year ended

December 31, 2021 compared to the year ended December 31, 2020



The following table presents our results of operations for the periods
indicated:

                                                         Year Ended
                                                        December 31,                              Change
(in thousands)                                 2021                       2020                 $         %
                                           (Successor)                 (Successor)
Consolidated Statement of                          % of total                 % of total
Operations Data:                                    revenue                    revenue
Revenue                              $ 1,038,690    100.0 %      $  773,312    100.0 %     $ 265,378     34.3 %
Cost of revenue                          614,073     59.1           486,965     63.0         127,108     26.1
Gross margin                             424,617     40.9           286,347     37.0         138,270     48.3
Selling, general and
administrative                           320,387     30.8           250,289     32.4          70,098     28.0
Operating income                         104,230     10.1            36,058      4.6          68,172    189.1
Loss on the extinguishment of
debt                                      10,116      1.0                 -        -          10,116        -
Interest expense                          53,514      5.2            61,530      8.0         (8,016)   (13.0)
Income (loss) before income taxes
and noncontrolling interest               40,600      3.9          (25,472)    (3.4)          76,188        *
Income tax expense (benefit)              16,433      1.6           (3,234)    (0.4)          19,667        *
Consolidated net income (loss)       $    24,167      2.3          (22,238)
   (3.0)       $  56,521        *
* not meaningful


Total Revenue

The following table presents revenue by service solution for the years ended
December 31, 2021 and 2020:

                                               Year Ended
                                              December 31,                              Change
(in thousands)                       2021                       2020                 $          %
                                 (Successor)                 (Successor)
Disaggregated Revenue:                   % of total                 % of total
                                          revenue                    revenue
Equipment Solutions        $   352,094     33.9 %      $  296,267     38.3 %     $   55,827    18.8 %
Clinical Engineering           384,147     37.0           256,874     33.2          127,273    49.5
Onsite Managed Services        302,449     29.1           220,171     28.5           82,278    37.4
Total revenue              $ 1,038,690    100.0        $  773,312    100.0       $  265,378    34.3


Total revenue for the year ended December 31, 2021 was $1,038.7 million,
compared with $773.3 million for the year ended December 31, 2020, an increase
of $265.4 million or 34.3%. Equipment Solutions revenue increased 18.8%
primarily driven by the Sizewise acquisition completed on October 1, 2021 which
generated 42.0 million in revenue and the increased demand for surgical
equipment procedures. Although difficult to determine, we estimate that the
overall

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favorable impact from COVID-19 within Equipment Solutions was $30 million to $40
million for the year ended December 31, 2021, and $30 million to $40 million for
the year ended December 31, 2020. Clinical Engineering revenue increased 49.5%
due to continued strong growth as a result of the Northfield acquisition
completed on March 19, 2021 and supplemental clinical engineering work related
to the government contract entered into in the third quarter of 2020. Onsite
Managed Services revenue increased 37.4% with the majority of growth coming the
government contract related to the comprehensive maintenance and management
services of medical ventilator equipment.

Cost of Revenue


Total cost of revenue for the year ended December 31, 2021 was $614.1 million
compared to $487.0 million for the year ended December 31, 2020, an increase of
$127.1 million or 26.1 %. On a percentage of revenue basis, cost of revenue
decreased from 63.0% of revenue in 2020 to 59.1% in 2021. The decrease 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 year ended December 31, 2021 was $424.6 million, or
40.9% of total revenue compared to $286.3 million, or 37.0% of total revenue for
the year ended December 31, 2020, an increase of $138.3 million or 48.3%. The
increase in gross margin as a percentage of revenue was primarily impacted by
favorable leverage from volume growth.

Selling, General and Administrative


Selling, general, and administrative expenses for the year ended December 31,
2021 increased by $70.1 million, or 28.0%, to $320.4 million as compared to the
same period of 2020. The increase was primarily due to the increases in costs
and amortization expense related to the Northfield acquisition, the Sizewise
acquisition, the buyout fee related to the termination of an advisory services
agreement (the "Advisory Services Agreement") with Agiliti Holdco, Inc., Agiliti
Health, Inc. and THL Managers VIII, LLC (the "Advisor") of $7.0 million and an
increase in payroll related costs associated with the growth of our business.
Selling, general and administrative expense as a percentage of total revenue was
30.8% and 32.4 % for the years ended December 31, 2021 and 2020, respectively.

Loss on Extinguishment of Debt


Loss on extinguishment of debt for the year ended December 31, 2021 consisted of
the write-off of the unamortized deferred financing cost and debt discount of
$7.4 million and an additional 1% redemption price or $2.4 million related to
the 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 $8.0 million to $53.5 million for the year ended
December 31, 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 $16.4 million and a benefit of $3.2 million for
the years ended December 31, 2021 and 2020, respectively. The income tax expense
for year ended December 31, 2021 is primarily due to the tax-effect of pre-tax
income from operations plus deductions for share-based compensation,
non-deductible transaction costs, nondeductible expenses related to executive
compensation disallowed under Internal Revenue Code Section 162(m), a tax rate
change and the remeasurement of the tax receivable agreement. The tax benefit
for the year ended December 31, 2020 was primarily due to the tax-effect of
pre-tax loss from operations for the period, amended state income tax filings
and the remeasurement of the tax receivable agreement.

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Consolidated Net Income (Loss)


Consolidated net income was $24.2 for year ended December 31, 2021. Consolidated
net loss was $22.2 million for the year ended December 31, 2020. The increase in
net income was impacted primarily by the increase in revenue.

Adjusted EBITDA

Adjusted EBITDA was $330.7 million and $234.2 million for the years ended
December 31, 2021 and 2020, respectively. Adjusted EBITDA for the year ended
December 31, 2021 was higher than in 2020 primarily due to the increase in
revenue.


A reconciliation of net income (loss) attributable to Agiliti, Inc. to Adjusted
EBITDA is included below:

                                                                 Year Ended
                                                                December 31,
(in thousands)                                              2021            2020
                                                         (Successor)     (Successor)
Net income (loss) attributable to Agiliti, Inc. and
Subsidiaries                                            $      24,006   $  

(22,478)

Interest expense                                               53,514      

61,530

Income tax expense (benefit)                                   16,433      

(3,234)

Depreciation and amortization                                 187,963      

169,241

EBITDA                                                        281,916      

205,059

Non-cash share-based compensation expense                      13,960      

10,334

Management and other expenses (1)                               7,926      

671

Transaction costs (2)                                          12,222      

3,837

Tax receivable agreement remeasurement                          4,542      

14,300

Loss on extinguishment of debt (3)                             10,116      
        -
Adjusted EBITDA                                         $     330,682   $     234,201

Other Financial Data:
Net cash provided by operating activities               $     210,317   $  

137,927

Net cash used in investing activities                       (734,134)      

(151,732)

Net cash provided by financing activities                     391,637      

220,310

Management and other expenses represent (a) management fees and buyout
(1) termination fee under the Advisory Services Agreement, which was terminated

    in connection with the initial public offering and (b) employee related
    non-recurring expenses

Transaction costs represent costs associated with potential and completed
(2) mergers and acquisitions and are primarily related to the Northfield and

Sizewise acquisitions for the year ended December 31, 2021.

Loss on extinguishment of debt consists of the write-off of the unamortized

deferred financing costs and debt discount and an additional 1% redemption
(3) 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.


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Liquidity and Capital Resources

General


Our principal sources of liquidity are expected to be 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
will be 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 and our currently
anticipated operating cash flows will be sufficient to meet our cash needs
arising in the ordinary course of business for the next twelve months and the
foreseeable future. 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 $210.3 million and $137.9 million
for the years ended December 31, 2021 and 2020, respectively. Net cash provided
by operating activities during 2021 compared to 2020 was favorably impacted by
our improved financial performance. Partially offsetting the increase in net
cash provided by operating activities was the use of cash to pay accrued
compensation related to the strong 2020 operating results, payments of over $15
million on the tax receivable agreement and payments related to the deferred
payroll tax provided for by part of the CARES Act. Our improved financial
performance in 2021 was driven by the 34.3% increase in revenue.

Net cash used in investing activities was $734.1 million and $151.7 million for
the years ended December 31, 2021 and 2020, respectively. The increase in net
cash used in investing activities during 2021 was primarily due to the
Northfield Acquisition completed in March 2021 and the Sizewise acquisition
completed in October 2021.

Net cash provided by financing activities was $391.6 million and 220.3 million,
the years ended December 31, 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.

Restricted stock units and performance restricted stock units are not taxable to
the employee until they have settled and underlying shares have been delivered.
In connection with the IPO, settlement of vested restricted stock unit and
performance restricted stock unit awards granted prior to 2021 were deferred
until one year following our IPO as permitted under the 2018 Plan and in
accordance with the terms of the grant agreements. As a result, shares
underlying these vested restricted stock unit and performance restricted stock
unit awards will be delivered on April 23, 2022 and will become taxable to the
employees on that date. Upon settlement, the Company will reduce the number of
shares that the employee is entitled to receive to cover the estimated income
taxes and other payroll taxes. The Company will then pay the outstanding tax
liability. The amount of the tax liability is dependent upon the share price at
the date of settlement and, although difficult to quantify, is currently
estimated to be between $15 million and $20 million. This liability will be paid
in the second quarter of 2022.

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

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our principal First Lien Term Loan facility by $125 million and the revolving
loan facility by $40 million. In October 2021 and April 2021, we further
increased our principal First Lien Term Loan facility by $150 million and
$200 million, respectively. All terms to the First Lien Term Loan remained the
same, except these additional loans are subject to an interest rate floor
of 0.75%.

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 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 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.

On October 1, 2021, in connection with the closing of Sizewise Rentals, LLC
("Sizewise"), we entered into Amendment No. 5 to the First Lien Credit
Agreement. This amendment provides for a $150.0 million incremental term loan
facility, the proceeds of which were used, together with cash on hand, to
finance the Sizewise acquisition. This incremental term loan facility has terms
identical to those applicable to the Initial Term Loans and the February 2020
Amendment (each as defined in the First Lien Credit Agreement), including as to
pricing and interest, tenor, rights of payment and prepayment and right of
security.

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.

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Second Lien Credit Facilities
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 a 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 Rates and Fees


Borrowings under the First Lien Credit Agreement bear interest at a rate per
annum, at the borrower's option, equal to an applicable margin, plus (a) a base
rate determined by reference to the highest of (i) the prime lending rate
published in The Wall Street Journal, (ii) the federal funds rate in effect on
such day plus 1/2 of 1.00% and (iii) the LIBOR rate for a one-month interest
period on such day 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 subject to a LIBOR floor of 0.00%.

The applicable margin for borrowings under the First Lien Credit Agreement is:

(a) (1) prior to March 31, 2019 and

(2) on or after March 31, 2019 (so long as the first lien leverage ratio is
greater than 3.75 to 1.00),

(i) 2.00% for alternate base rate borrowings and

(ii) 3.00% for Eurodollar borrowings and

(b) on or after June 30, 2020 (so long as the first lien leverage ratio is less
than or equal to 3.75 to 1.00), subject

to step downs to

(i) 1.75% for alternate base rate borrowings and

(ii) 2.75% for Eurodollar borrowings.

Under the First Lien Credit Agreement, the borrower is also required to pay a
commitment fee on the average daily undrawn portion of the Revolving Credit
Facility of:

(i) 0.50% per annum if the first lien leverage ratio is greater than
4.00:1.00,

(ii) 0.375% per annum if the first lien leverage ratio is less than or equal to
4.00:1.00 but greater than


3.50:1.00 and

(iii) 0.250% if the first lien leverage ratio is less than or equal to
3.50:1.00, and a letter of credit

participation fee equal to the applicable margin for Eurodollar revolving loans
on the actual daily

amount of the letter of credit exposure

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.

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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 December 31, 2021 was $2.1 million, of which $0.4 million
is included in other current assets and $1.7 million is included in other
long-term assets on our consolidated balance sheet. The change in fair value was
recorded as a component of accumulated other comprehensive loss on our
consolidated balance sheet, net of tax, since the instrument was determined to
be an effective hedge at December 31, 2021. 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.

Contractual Obligations


The following table is a summary, as of December 31, 2021, of our future
contractual obligations:

                                                                       Payments due by period
                                                                                                             2027 and
(in thousands)                                   Total          2022        2023 - 2024     2025 - 2026       beyond
Other financial data:
Long-term debt principal obligations          $ 1,183,071    $    9,398    $      18,796    $  1,154,877    $         -
Interest on notes                                 141,528        35,695           70,580          35,253              -
Principal and interest on finance leases           28,789         8,746           10,401           5,112          4,530
Principal and interest on operating leases         89,898        24,399    
      38,959          24,883          1,657
Pension obligations (1)                               650           650                -               -              -
Tax receivable obligations                         39,880        29,187           10,693               -              -
Unrecognized tax positions (2)                     10,111             -                -               -              -
Total contractual obligations                 $ 1,493,927    $  108,075    $     149,429    $  1,220,125    $     6,187
Other commercial commitments:
Stand by letter of credit                     $     8,005    $        -    $           -    $          -    $         -


While our net pension liability at December 31, 2021 was approximately
(1) $4.8 million, we cannot reasonably estimate required payments beyond 2022 due

to changing actuarial and market conditions.

(2) We cannot reasonably determine the exact timing of payments related to our

unrecognized tax positions.



Based on the level of operating performance in 2021, we believe our cash from
operations and additional borrowings under our Revolving Credit Facility will
meet our liquidity needs for the foreseeable future, exclusive of any borrowings
that we may make to finance potential acquisitions. However, if during that
period or thereafter we are not successful in generating sufficient cash flows
from operations or in raising additional capital when required in sufficient
amounts and on terms acceptable to us, our business could be adversely affected.

Our levels of borrowing are further restricted by the financial covenants set
forth in our Revolving Credit Facility.

As of December 31, 2021, we were in compliance with all covenants for all years
presented.

Our expansion and acquisition strategy may require substantial capital.
Sufficient funding for future acquisitions may not be available under our
Revolving Credit Facility, and we may not be able to raise any necessary
additional funds through bank financing or the issuance of equity or debt
securities on terms acceptable to us, if at all.

Recent Accounting Pronouncements

Refer to Note 2 – “Summary of Significant Accounting Policies,” of our
consolidated financial statements contained in this report for a description of
recently issued accounting pronouncements that are applicable to our business.


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