PART I [Business](index=7&type=section&id=Item%201.%20Business) ATI Physical Therapy is the largest single-branded independent outpatient physical therapy provider in the U.S., operating 910 clinics and navigating significant regulatory and operational challenges - As of December 31, 2021, ATI is the **largest single-branded independent outpatient physical therapy provider** in the U.S. by clinic count, with **910 owned clinics** and 20 managed clinics across 25 states[12](index=12&type=chunk) - The company's core services include outpatient physical therapy, ATI Worksite Solutions (AWS) for employers, Management Service Agreements (MSA) for physician-owned clinics, and Sports Medicine arrangements[13](index=13&type=chunk)[14](index=14&type=chunk) - ATI's strategy focuses on exceeding customer expectations, strengthening relationships with referral sources and payors, allocating capital for growth (de novo clinics and acquisitions), and integrating services earlier in the musculoskeletal (MSK) treatment process[15](index=15&type=chunk) - The company faces a highly fragmented and competitive market from national, regional, and local providers, as well as hospital systems, with key competitive factors including quality of care, cost, treatment outcomes, and brand awareness[34](index=34&type=chunk)[36](index=36&type=chunk) - The business is significantly impacted by federal and state regulations, including Medicare/Medicaid reimbursement rules, the Anti-Kickback Law, the Stark Law (physician self-referral), and HIPAA for patient data privacy[46](index=46&type=chunk)[50](index=50&type=chunk)[53](index=53&type=chunk)[58](index=58&type=chunk) - In 2021, the company experienced elevated levels of clinician attrition, which it has sought to address through initiatives related to compensation, staffing, and professional development[21](index=21&type=chunk)[39](index=39&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks from government payor dependence, clinician attrition, COVID-19 impacts, potential goodwill impairment, and extensive healthcare regulatory compliance - A significant portion of revenue comes from governmental payors; in 2021, approximately **23.7%** was from Medicare and Medicaid, exposing the company to risks from legislative and regulatory changes that could reduce reimbursement rates, such as Medicare Physician Fee Schedule (MPFS) adjustments[66](index=66&type=chunk) - The COVID-19 pandemic has materially impacted operations, causing unpredictable reductions in patient visits and economic uncertainty, with future impacts depending on evolving factors like new variants, vaccine effectiveness, and government mandates[80](index=80&type=chunk)[84](index=84&type=chunk)[87](index=87&type=chunk) - The company competes for physical therapists and experienced elevated attrition in 2021, which has increased labor costs and may continue to adversely affect business operations and the ability to open new clinics[99](index=99&type=chunk)[142](index=142&type=chunk) - The company recorded significant non-cash impairment charges for goodwill and other intangible assets in 2021 due to reductions in its forecast, with further impairments possible if business conditions deteriorate[162](index=162&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk) - Material weaknesses in internal control over financial reporting related to income taxes were identified as of December 31, 2021, due to not maintaining a sufficient complement of tax personnel and ineffective controls over valuation allowances for deferred tax assets[167](index=167&type=chunk)[168](index=168&type=chunk) - As Advent International controls over **50%** of the voting power, ATI is a "controlled company" under NYSE rules, exempting it from certain corporate governance requirements, such as having a majority of independent directors on its board[185](index=185&type=chunk)[187](index=187&type=chunk) [Unresolved Staff Comments](index=43&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[190](index=190&type=chunk) [Properties](index=43&type=section&id=Item%202.%20Properties) ATI leases all its clinical locations and corporate headquarters, with clinics typically 1,000-5,000 square feet and executive offices occupying 135,000 square feet - All clinic properties are leased, with terms typically ranging from **7 to 10 years**[190](index=190&type=chunk) - The corporate headquarters are located in Bolingbrook, Illinois, under a lease expiring in December 2032, covering approximately **135,000 square feet**[190](index=190&type=chunk) [Legal Proceedings](index=43&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings arising in the ordinary course of business, with further details provided in Note 18 of the consolidated financial statements - The company may be involved in legal proceedings from time to time, with further details provided in Note 18 - Commitments and Contingencies[191](index=191&type=chunk) [Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[192](index=192&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=44&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A common stock and Public Warrants are listed on the NYSE, with no cash dividends paid, and shares were withheld for employee tax obligations in Q4 2021 - The company's Class A common stock and Public Warrants trade on the New York Stock Exchange under the symbols "**ATIP**" and "**ATIP WS**"[194](index=194&type=chunk) - ATI has a policy of not paying cash dividends and intends to retain future earnings to finance business operations[195](index=195&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 1 - October 31, 2021 | — | — | | November 1 - November 30, 2021 | 3,931 | $3.60 | | December 1 - December 31, 2021 | 25,860 | $3.14 | | **Total** | **29,791** | **$3.20** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) ATI's 2021 financial results were significantly impacted by clinician attrition, increased labor costs, and a **$962.3 million** goodwill impairment, leading to a substantial net loss and requiring debt refinancing Consolidated Results of Operations (2021 vs. 2020) | Metric ($ in thousands) | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net operating revenue | $627,871 | $592,253 | 6.0% | | Total cost of services | $533,797 | $488,846 | 9.2% | | Goodwill and intangible asset impairment charges | $962,303 | $0 | n/m | | Operating loss | ($980,038) | ($913) | n/m | | Net loss | ($782,028) | ($298) | n/m | - The company's 2021 performance was adversely affected by elevated clinician attrition, increased labor market competition and wage inflation, a less favorable payor mix, and lower than expected patient referral volumes[214](index=214&type=chunk)[215](index=215&type=chunk) - Due to revised forecasts, the company recorded non-cash impairment charges totaling **$962.3 million** in 2021, including **$726.8 million** for goodwill and **$234.3 million** for its trade name intangible asset[217](index=217&type=chunk)[218](index=218&type=chunk)[253](index=253&type=chunk) Key Business Metrics (2019-2021) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Number of clinics owned (end of period) | 910 | 875 | 872 | | Average visits per day | 20,608 | 18,274 | 25,152 | | Total patient visits (in millions) | 5.30 | 4.70 | 6.41 | | Net patient revenue per visit | $105.94 | $112.76 | $111.88 | | Same clinic revenue growth rate | 4.6% | (26.9)% | 2.8% | - In February 2022, the company refinanced its debt, entering a new credit agreement for a **$500.0 million** term loan and a **$50.0 million** revolving facility, concurrently issuing **$165.0 million** of Series A Senior Preferred Stock and warrants, adding approximately **$77.3 million** of cash to its balance sheet[275](index=275&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate variability on variable-rate debt, which is hedged using interest rate swaps, and the impact of the LIBOR transition is currently under evaluation - The company is exposed to interest rate variability on its debt, which is indexed to rates like LIBOR[323](index=323&type=chunk) - To mitigate this risk, the company uses interest rate swaps, with management believing this reduces the risk of interest rate variability to an immaterial amount[323](index=323&type=chunk) - The company is evaluating the effects of the reference rate reform (transition from LIBOR) on its financial reporting[324](index=324&type=chunk) [Financial Statements and Supplementary Data](index=71&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2021, 2020, and 2019, reflecting a significant net loss in 2021 driven by goodwill impairment and a decline in operating cash flow Consolidated Balance Sheet Data (as of Dec 31) | ($ in thousands) | 2021 | 2020 | | :--- | :--- | | **Total Assets** | **$1,562,694** | **$2,610,372** | | Goodwill, net | $608,811 | $1,330,085 | | **Total Liabilities** | **$1,051,187** | **$1,709,255** | | Long-term debt, net | $543,799 | $991,418 | | **Total Stockholders' Equity** | **$511,507** | **$901,117** | Consolidated Statement of Operations Data (Year Ended Dec 31) | ($ in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net operating revenue | $627,871 | $592,253 | $785,458 | | Goodwill and intangible asset impairment charges | $962,303 | $0 | $0 | | **Net (loss) income** | **($782,028)** | **($298)** | **$9,749** | Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | ($ in thousands) | 2021 | 2020 | | :--- | :--- | | Net cash (used in) provided by operating activities | ($42,100) | $138,604 | | Net cash used in investing activities | ($39,889) | ($21,809) | | Net cash used in financing activities | ($11,523) | ($12,970) | | **Net (decrease) increase in cash** | **($93,512)** | **$103,825** | - The company is involved in shareholder class action lawsuits and a derivative complaint following its revised 2021 forecast, and also received a voluntary request for documents from the SEC related to the same matter[551](index=551&type=chunk)[555](index=555&type=chunk)[557](index=557&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=126&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[579](index=579&type=chunk) [Controls and Procedures](index=126&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of December 31, 2021, due to material weaknesses in internal control over financial reporting related to the income tax provision - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021[582](index=582&type=chunk) - Material weaknesses were identified in internal control over financial reporting related to the income tax provision, with root causes being an insufficient complement of experienced tax personnel and ineffective controls related to valuation allowances for deferred tax assets[588](index=588&type=chunk) - A remediation plan is being developed to hire additional tax personnel, refine the use of external advisors, and enhance the design of controls related to the income tax provision[589](index=589&type=chunk) [Other Information](index=128&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[592](index=592&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=129&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's board structure and corporate governance, noting ATI is a 'controlled company' due to Advent International's majority ownership, which exempts it from certain NYSE governance requirements - The company's board consists of **eight members** and is classified into three classes with staggered three-year terms[612](index=612&type=chunk)[613](index=613&type=chunk) - ATI is a "controlled company" under NYSE listing rules because Advent International beneficially owns a majority of the voting power, exempting the company from certain governance requirements, including the need for a majority of independent directors[618](index=618&type=chunk) - The Board has four standing committees: Audit, Compensation, Nominating and Corporate Governance, and Health Care Compliance[620](index=620&type=chunk) - The Audit Committee is composed entirely of independent directors, with Jamie Parisi serving as Chair and designated as an "audit committee financial expert"[622](index=622&type=chunk) [Executive Compensation](index=136&type=section&id=Item%2011.%20Executive%20Compensation) The executive compensation program emphasizes long-term equity incentives, with a discretionary **50% funding** for 2021 annual bonuses despite underperformance, and details employment agreements and severance benefits - The executive compensation program is heavily weighted towards equity awards to align NEO interests with long-term stockholder value[634](index=634&type=chunk) - Despite underperforming against the initial EBITDA target for the Annual Incentive Bonus (AIB) Plan, the Compensation Committee approved a discretionary **50% funding** for 2021 bonuses to recognize performance efforts and retain talent[649](index=649&type=chunk) 2021 Annual Incentive Bonus Payouts | Name | 2021 AIB Target Opportunity ($) | Discretionary 2021 Annual Bonus Earned ($) | | :--- | :--- | :--- | | Joseph Jordan | $337,500 | $168,750 | | Ray Wahl | $337,500 | $168,750 | | Diana Chafey | $269,325 | $134,663 | | Joseph Zavalishin | $269,325 | $134,663 | | Augustus Oakes | $162,500 | $81,250 | - In 2021, NEOs were granted long-term equity incentives consisting of a mix of Restricted Stock Units (RSUs) and stock options, both vesting over three years[651](index=651&type=chunk)[653](index=653&type=chunk) - Employment agreements for key executives provide for severance payments in the event of termination without cause or for good reason, with enhanced benefits if the termination occurs within 18 months following a change in control[682](index=682&type=chunk)[686](index=686&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=152&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details beneficial ownership of common stock as of February 17, 2022, with Advent International holding **56.1%** and Fortress Acquisition Sponsor II LLC holding **9.0%** Beneficial Ownership of Common Stock (as of Feb 17, 2022) | Name of Beneficial Owner | Beneficial Ownership (%) | | :--- | :--- | | Advent International Corporation | **56.1%** | | Fortress Acquisition Sponsor II LLC | **9.0%** | | All Directors and Executive Officers as a group (14 persons) | **<1%** | [Certain Relationships and Related Transactions, and Director Independence](index=154&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section outlines related party transactions, including Founder Shares and Private Placement Warrants for Fortress, a PIPE investment, and contingent Earnout Shares for Advent-affiliated entities based on stock price targets - Fortress Acquisition Sponsor II LLC (Sponsor) purchased Founder Shares which converted into Common Stock subject to vesting based on stock price targets[716](index=716&type=chunk)[718](index=718&type=chunk) - The Sponsor purchased **5,933,333 Private Placement Warrants**, of which **2,966,667** were surrendered at the business combination closing[719](index=719&type=chunk) - As part of the PIPE Investment, the Sponsor purchased **7,500,000 shares** of Class A common stock for **$75 million**[722](index=722&type=chunk) - Entities affiliated with Advent have a contingent right to receive up to **15.0 million Earnout Shares** if the company's stock price achieves specified targets (**$12.00, $14.00, and $16.00**) within ten years of the business combination[724](index=724&type=chunk) [Principal Accountant Fees and Services](index=157&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to PricewaterhouseCoopers LLP (PwC) for 2021 and 2020, with all services pre-approved by the Audit Committee Accountant Fees (PwC) | Fee Type | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Audit Fees | $1,380,593 | $1,672,880 | | Audit Related Fees | $0 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $5,400 | $5,400 | | **Total Fees** | **$1,385,993** | **$1,678,280** | - The Audit Committee pre-approves all audit and permitted non-audit services provided by the independent registered public accounting firm[737](index=737&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=159&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists consolidated financial statements, schedules, and exhibits filed with the Form 10-K, including Schedule II - Valuation and Qualifying Accounts - This section contains an index of all financial statements, schedules, and exhibits filed with the Form 10-K[739](index=739&type=chunk) Schedule II - Valuation and Qualifying Accounts (2021) | ($ in thousands) | Beginning Balance | Additions | Deductions/Adjustments | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | Allowance for doubtful accounts | $69,693 | $16,369 | ($32,529) | $53,533 | | Valuation allowance for deferred tax assets | $22,581 | $35,731 | $0 | $58,312 | [Form 10-K Summary](index=162&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for this item - None[748](index=748&type=chunk)

ATI Physical Therapy, Inc. (NYSE:ATIP) Q4 2021 Earnings Conference Call February 25, 2022 8:00 AM ET Company Participants Joanne Fong - Senior Vice President, Treasurer & Head of Investor Relations Jack Larsen - Executive Chairman Ray Wahl - Chief Operating Officer Joseph Jordan - Chief Financial Officer Conference Call Participants Steph Wissink - Jefferies Jason Cassorla - Citi Larry Solow - CJS Securities Bill Sutherland - Benchmark Operator Good morning and welcome to ATI Physical Therapy Fourth Quarter ...

Financial Data and Key Metrics Changes - Net operating revenue in Q3 2021 was $159 million, a 7% increase year-over-year from $149 million in Q3 2020 [15] - Net patient revenue was $142 million, increasing 6.8% year-over-year, while other revenue was $17 million, increasing 8.2% year-over-year [15] - Operating loss in Q3 2021 was $509 million, decreasing year-over-year from income of $2 million in Q3 2020 [20] - Net loss in Q3 2021 was $326 million, decreasing year-over-year from net income of $1 million in Q3 2020 [21] - Adjusted EBITDA in Q3 2021 was $9 million, or a 5.4% margin, decreasing year-over-year from $17 million, or an 11.7% margin in Q3 2020 [21] Business Line Data and Key Metrics Changes - Visits per day per clinic for Q3 2021 was 23.1, a decrease from 24.3 in Q2 2021 [15] - Annualized clinician headcount turnover decreased from 50% in July to just over 30% in September [10] - Total clinical FTE increased by 91 from July to September [11] Market Data and Key Metrics Changes - Visit volume softened slightly in Q3 2021 to 26,674 visits per day, down from about 21,570 visits per day in Q2 2021 [12] - Some clinics in the South and Northeast are running close to or exceeding pre-COVID levels, while key states in the Midwest and Northwest are lagging [12][13] Company Strategy and Development Direction - The company is focused on driving visit volume to scale the business and leverage fixed costs [24] - Investments are being made in field-based sales representatives and digital marketing campaigns to increase referrals [13] - The company plans to open between 55 to 65 new clinics for the full year [23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that financial performance for 2021 did not meet expectations but believes they are laying the foundation for improvement [10] - The company is committed to transparency and has included supplemental tables summarizing key performance metrics in earnings releases [14] - Management expressed confidence in the recovery of visit volumes and referrals, despite some markets lagging behind [32][33] Other Important Information - The company recorded impairment charges of $300 million for goodwill and $201 million for trading, primarily due to revised forecasts [20] - Available liquidity at September 30 was $135 million, comprised of $66 million in cash equivalents and $69 million in available undrawn revolver capacity [22] Q&A Session Summary Question: Update on referral sources and their strength - Management indicated that while some markets are lagging, they are working to rebuild referral relationships and improve visit volumes [32][33] Question: Impact of labor constraints and COVID on Midwest markets - Management acknowledged challenges in the Midwest, attributing some issues to competitors and systemic factors rather than solely COVID [47][48] Question: Changes to compensation and benefits packages - Positive feedback has been received regarding changes to compensation and support structures, which have helped with retention and recruitment [40][42] Question: Guidance for Q4 and full year - The guidance reflects a cautious outlook due to softer visit volumes and the time required for investments in sales to pay off [77][78] Question: Urban vs. rural market performance - Management stated that market performance does not strictly follow urban-rural divides, with each market having unique challenges [60][62]

Part I [Business](index=7&type=section&id=Item%201.%20Business) Fortress Value Acquisition Corp. II is a SPAC that completed its IPO and recently signed a merger agreement with ATI Physical Therapy - The company is a blank check company, or SPAC, formed to effect a business combination with one or more businesses. It has not engaged in any operations or generated revenue to date[12](index=12&type=chunk) - On February 21, 2021, the Company entered into a definitive Agreement and Plan of Merger with ATI Physical Therapy to effect a Business Combination[16](index=16&type=chunk) Initial Public Offering and Private Placement Details | Offering/Placement | Units/Warrants | Price per Unit/Warrant | Gross Proceeds | | :--- | :--- | :--- | :--- | | **Initial Public Offering** | 34,500,000 units | $10.00 | $345.0 million | | **Private Placement** | 5,933,333 warrants | $1.50 | $8.9 million | - The company has **24 months** from the closing of its IPO to complete an initial business combination. If it fails to do so, it will cease operations, redeem **100%** of public shares, and dissolve[63](index=63&type=chunk) [Introduction and Recent Developments](index=7&type=section&id=Introduction) The company, incorporated in June 2020, completed its IPO and entered a merger agreement with ATI Physical Therapy in February 2021 [Business Strategy and Sourcing](index=8&type=section&id=Business%20Strategy%20and%20Sourcing) The company's strategy focuses on identifying and acquiring a target business by leveraging its management team's extensive network and expertise - The company's strategy focuses on identifying and acquiring a business where its management's operating experience, relationships, and capital markets expertise can accelerate growth and performance[17](index=17&type=chunk) - The company utilizes its management team's broad network of contacts from sourcing, acquiring, and financing businesses as a primary source for acquisition opportunities[18](index=18&type=chunk)[20](index=20&type=chunk) [Effecting our Initial Business Combination](index=11&type=section&id=Effecting%20our%20Initial%20Business%20Combination) The company plans to fund its initial business combination, requiring the target to be at least **80%** of trust assets, with public stockholders having redemption rights - The initial business combination must be with a business having a fair market value equal to at least **80%** of the net assets held in the Trust Account at the time of signing a definitive agreement[33](index=33&type=chunk) - Public stockholders have the right to redeem their Class A common stock for cash upon completion of the business combination. The Sponsor, officers, and directors have waived their redemption rights for Founder Shares[49](index=49&type=chunk) - To discourage hostile tactics, a public stockholder, along with affiliates, is restricted from redeeming more than **15%** of the shares sold in the IPO without the company's prior consent[57](index=57&type=chunk) [Redemption of Public Shares and Liquidation if no Initial Business Combination](index=21&type=section&id=Redemption%20of%20Public%20Shares%20and%20Liquidation%20if%20no%20Initial%20Business%20Combination) If no business combination is completed within **24 months**, the company will liquidate, redeeming **100%** of public shares, with the Sponsor liable for certain claims - If no business combination is completed within **24 months**, the company will redeem **100%** of public shares using funds from the Trust Account, which will then completely extinguish public stockholders' rights[63](index=63&type=chunk) - The Sponsor has agreed to be liable for claims by third parties that could reduce the Trust Account funds below **$10.00** per public share, subject to certain exceptions[70](index=70&type=chunk)[98](index=98&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks as a SPAC, including no operating history, failure to complete a business combination, and conflicts of interest with its Sponsor - As a recently incorporated company with no operating history, there is no basis for investors to evaluate its ability to achieve its business objective[113](index=113&type=chunk) - The company must complete its initial business combination within **24 months** of its IPO. Failure to do so will result in liquidation, with public stockholders receiving approximately **$10.00** per share and warrants expiring worthless[131](index=131&type=chunk)[132](index=132&type=chunk) - Significant conflicts of interest exist as officers and directors have duties to other Fortress-affiliated entities, including other SPACs (FVAC III, FVAC IV, FCAC), and may present opportunities to them instead of the company[87](index=87&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) - The Sponsor's investment in Founder Shares and private placement warrants will be worthless if a business combination is not completed, creating a conflict of interest that may influence the selection of a target business[238](index=238&type=chunk)[239](index=239&type=chunk) - The COVID-19 pandemic poses a risk to completing a business combination by restricting travel, meetings, and access to financing, and could adversely affect the business of a potential target[301](index=301&type=chunk) [Unresolved Staff Comments](index=84&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[304](index=304&type=chunk) [Properties](index=84&type=section&id=Item%202.%20Properties) The company maintains its corporate offices in New York, NY, paying **$20,000** monthly to an affiliate of its Sponsor - The company pays an affiliate of its Sponsor **$20,000** per month for office space and related support services at its New York, NY corporate office[304](index=304&type=chunk) [Legal Proceedings](index=84&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material litigation, arbitration, or governmental proceedings pending against it or its management - None[304](index=304&type=chunk) [Mine Safety Disclosures](index=84&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - None[304](index=304&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=85&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's units, Class A common stock, and warrants trade on the NYSE, with no cash dividends paid or intended prior to business combination - The company's securities trade on the NYSE. Units trade under "FAII.U", Class A common stock under "FAII", and warrants under "FAII WS"[307](index=307&type=chunk) - No cash dividends have been paid to date, and none are intended to be paid prior to the completion of the initial business combination[309](index=309&type=chunk) - In June 2020, the company issued **8,625,000** Founder Shares to its Sponsor for a capital contribution of **$25,000**. The Sponsor also purchased **5,933,333** private placement warrants at **$1.50** per warrant[311](index=311&type=chunk) [Selected Financial Data](index=86&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, Fortress Value Acquisition Corp. II is not required to provide this information - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide this information[313](index=313&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=86&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For the period from inception to December 31, 2020, the company reported a net loss of **$1.59 million**, with sufficient funds from its Sponsor to meet obligations Financial Highlights as of December 31, 2020 | Metric | Value (USD) | | :--- | :--- | | Net Loss (Inception to 12/31/2020) | $(1,588,639) | | Cash in Operating Account | $1,300,000 (approx.) | | Working Capital | $(26,000) (deficit) | | Investments held in Trust Account | $345,000,000 | - Management has determined that despite having insufficient liquidity to meet current obligations, it has access to funds from the Sponsor sufficient to fund working capital needs for at least one year[325](index=325&type=chunk)[377](index=377&type=chunk) - Related party transactions include a **$97,250** loan from the Sponsor which was repaid, and an ongoing agreement to pay a Sponsor affiliate **$20,000** per month for office space and support services[328](index=328&type=chunk)[330](index=330&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=93&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Fortress Value Acquisition Corp. II is not required to provide this information - The company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide this information[339](index=339&type=chunk) [Financial Statements and Supplementary Data](index=94&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited financial statements for 2020, showing **$346.7 million** in total assets and a **$1.59 million** net loss, highlighting the ATI Physical Therapy merger Balance Sheet Summary (as of December 31, 2020) | Category | Amount (USD) | | :--- | :--- | | **Assets** | | | Cash | $1,313,454 | | Investments held in Trust Account | $345,018,957 | | **Total Assets** | **$346,678,349** | | **Liabilities & Equity** | | | Total current liabilities | $1,685,083 | | Deferred underwriting commissions payable | $12,075,000 | | **Total Liabilities** | **$13,760,083** | | **Total Stockholders' Equity** | **$5,000,006** | Statement of Operations Summary (Inception to December 31, 2020) | Line Item | Amount (USD) | | :--- | :--- | | Loss from operations | $(1,607,596) | | Interest income | $18,957 | | **Net loss** | **$(1,588,639)** | - A significant subsequent event noted is the entry into a merger agreement with ATI Physical Therapy on February 21, 2021[366](index=366&type=chunk)[427](index=427&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=121&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[429](index=429&type=chunk) [Controls and Procedures](index=121&type=section&id=Item%209A.%20Controls%20and%20Procedures) The company's disclosure controls ensure timely reporting, with no management assessment of internal control over financial reporting due to a transition period - This Annual Report does not include a report of management's assessment regarding internal control over financial reporting due to a transition period for new public companies[431](index=431&type=chunk) [Other Information](index=121&type=section&id=Item%209B.%20Other%20Information) This section details the definitive merger agreement with ATI Physical Therapy, subject to customary closing conditions including a **$472.5 million** minimum available cash condition - On February 21, 2021, the company entered into a definitive merger agreement with ATI Physical Therapy[432](index=432&type=chunk) - The consummation of the business combination is subject to a minimum Available Cash condition of **$472,500,000**, which includes proceeds from PIPE investors who have committed to purchase at least **$300,000,000** in company stock[435](index=435&type=chunk) - The merger agreement can be terminated if the transaction has not occurred by the "Outside Date" of August 23, 2021, or if the minimum cash condition is not met[438](index=438&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=124&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company is led by executive officers and an eight-member board, with significant conflicts of interest due to involvement with other Fortress-sponsored SPACs - The board of directors consists of **eight** members, with **four** determined to be independent: Aaron F. Hood, Carmen A. Policy, Rakefet Russak-Aminoach, and Sunil Gulati[455](index=455&type=chunk)[457](index=457&type=chunk) - Significant conflicts of interest exist as officers and directors have fiduciary and contractual duties to other entities, including other Fortress-sponsored SPACs like FVAC III, FVAC IV, and FCAC[477](index=477&type=chunk)[225](index=225&type=chunk) - The company has adopted a Code of Business Conduct and Ethics and established three standing board committees: Audit, Compensation, and Nominating and Corporate Governance[462](index=462&type=chunk)[473](index=473&type=chunk) [Executive Compensation](index=136&type=section&id=Item%2011.%20Executive%20Compensation) The company's officers and directors receive no cash compensation, but an affiliate of the Sponsor is paid **$20,000** monthly for office space and support - None of the company's officers or directors have received any cash compensation for services rendered[488](index=488&type=chunk) - The company pays an affiliate of its Sponsor a total of **$20,000** per month for office space and related support services[489](index=489&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=137&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The Sponsor, Fortress Acquisition Sponsor II LLC, is the largest beneficial owner with **19.8%** of common stock, and initial stockholders collectively own **20%** Security Ownership of Major Holders | Beneficial Owner | Shares Beneficially Owned | Percentage of Outstanding | | :--- | :--- | :--- | | Fortress Acquisition Sponsor II LLC | 8,525,000 | 19.8% | | Grandview LLC | 2,151,500 | 6.2% | - The initial stockholders beneficially own **20%** of the company's issued and outstanding common stock (on an as-converted basis) and have the right to elect all directors prior to the initial business combination[497](index=497&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=138&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section outlines related party transactions, including the Sponsor's purchase of Founder Shares and warrants, and affirms the independence of **four** board members - The Sponsor purchased **8,625,000** Founder Shares for **$25,000** and **5,933,333** private placement warrants for approximately **$8.9 million**[500](index=500&type=chunk)[501](index=501&type=chunk) - The company has a Related Person Transactions Policy, under which the audit committee must review and approve or ratify all such transactions[507](index=507&type=chunk) - The board has determined that **four** of its directors (Mr. Hood, Mr. Policy, Ms. Russak-Aminoach, and Mr. Gulati) are independent under NYSE and SEC rules[510](index=510&type=chunk) [Principal Accountant Fees and Services](index=141&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Total fees paid to the independent auditor, WithumSmith+Brown, PC, for fiscal year 2020 amounted to **$96,305** for audit services, with all services pre-approved by the audit committee Accountant Fees for Fiscal Year 2020 | Fee Category | Amount (USD) | | :--- | :--- | | Audit Fees | $96,305 | | Audit-Related Fees | $0 | | Tax Fees | $0 | | All Other Fees | $0 | | **Total** | **$96,305** | - The audit committee is responsible for appointing, compensating, and overseeing the work of the independent auditor and pre-approves all audit and permitted non-audit services[515](index=515&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=143&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report on Form 10-K, including the Merger Agreement with ATI Physical Therapy and various other agreements - The report includes a list of all exhibits filed, with key documents such as the Merger Agreement with Wilco Holdco, Inc. (ATI), charter documents, warrant agreement, registration rights agreement, and various subscription and service agreements[518](index=518&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ 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: 001-39439 FORTRESS VALUE ACQUISITION CORP. II (Exact name of registrant as specified in its charter) Delaware 85-1408039 (State or other j ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ 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: 001-39439 FORTRESS VALUE ACQUISITION CORP. II (Exact name of registrant as specified in its charter) Delaware 85-1408039 (State or other jurisd ...