Surgery Partners, Inc 10-Q for FY2021 Q3

Surgery Partners, Inc. (SGRY)

10-Q 2021-11-03 For: 2021-09-30

Added on April 07, 2026

About this 10-Q

Surgery Partners, Inc filed this 10-Q on November 3, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $559.2M; up 12.7% from $496.1M a year earlier
Net loss: $22.9M; compared with a net loss of $61.6M a year earlier
Diluted EPS: -$0.28; compared with -$1.46 a year earlier

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Delaware						47-3620923
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Large accelerated filer o						Accelerated filer ☒
Non-accelerated filer o						Smaller reporting company ☐
						Emerging growth company ☐


		Page

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations (Unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34

Signatures		35


	(Unaudited)
	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	330.4	$	317.9
Accounts receivable	393.4		382.2
Inventories	59.3		56.4
Prepaid expenses	29.8		17.6
Other current assets	28.8		27.4
Total current assets	841.7		801.5
Property and equipment, net of accumulated depreciation of $254.0 and $189.3, respectively	542.1		544.6
Goodwill and other intangible assets, net	3,659.3		3,514.9
Investments in and advances to affiliates	89.6		90.3
Right-of-use operating lease assets	320.5		310.1
Long-term deferred tax assets	128.1		124.8
Other long-term assets	50.3		27.0
Total assets	$	5,631.6	$	5,413.2

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	116.5	$	100.2
Accrued payroll and benefits	73.1		65.4
Medicare accelerated payments and deferred governmental grants	81.8		109.8
Other current liabilities	208.3		217.0
Current maturities of long-term debt	60.8		64.4
Total current liabilities	540.5		556.8
Long-term debt, less current maturities	2,791.9		2,792.4
Right-of-use operating lease liabilities	312.4		300.9
Other long-term liabilities	124.4		139.7

Non-controlling interests—redeemable	310.4		306.8
Redeemable preferred stock - Series A; shares authorized - 310,000; shares issued or outstanding - none and 310,000, respectively; redemption value - $— and $434.5, respectively	—		434.5

Stockholders' equity:
Preferred stock, $0.01 par value; shares authorized - 20,000,000; shares issued or outstanding - none	—		—
Common stock, $0.01 par value; shares authorized - 300,000,000; shares issued and outstanding - 82,458,385 and 50,461,706, respectively	0.8		0.5
Additional paid-in capital	1,306.0		607.9
Accumulated other comprehensive loss	(47.9)		(61.0)
Retained deficit	(502.6)		(431.8)
Total Surgery Partners, Inc. stockholders' equity	756.3		115.6
Non-controlling interests—non-redeemable	795.7		766.5
Total stockholders' equity	1,552.0		882.1
Total liabilities and stockholders' equity	$	5,631.6	$	5,413.2


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Revenues	$	559.2	$	496.1	$	1,614.9	$	1,311.8
Operating expenses:
Salaries and benefits	162.3		141.7		468.7		398.2
Supplies	160.1		142.8		464.9		382.2
Professional and medical fees	56.8		46.3		169.7		138.4
Lease expense	23.4		21.9		68.8		64.7
Other operating expenses	34.1		29.2		98.5		83.9
Cost of revenues	436.7		381.9		1,270.6		1,067.4
General and administrative expenses	25.5		25.2		76.8		73.3
Depreciation and amortization	25.2		24.1		76.1		69.3
Income from equity investments	(2.9)		(3.1)		(8.5)		(7.6)
Loss on disposals and deconsolidations, net	1.9		0.7		2.0		7.1
Transaction and integration costs	10.2		5.4		24.7		15.8
Impairment charges	—		33.5		—		33.5
Grant funds	—		9.9		(20.0)		(33.2)
(Gain) loss on debt extinguishment	(0.5)		—		9.1		—
Litigation settlement	—		—		—		1.2
Other income	(0.5)		—		(3.3)		(1.7)
Total operating expenses	495.6		477.6		1,427.5		1,225.1
Operating income	63.6		18.5		187.4		86.7
Interest expense, net	(54.2)		(51.5)		(160.9)		(147.8)
Income (loss) before income taxes	9.4		(33.0)		26.5		(61.1)
Income tax expense (benefit)	1.2		1.3		(1.3)		(14.5)
Net income (loss)	8.2		(34.3)		27.8		(46.6)
Less: Net income attributable to non-controlling interests	(31.1)		(27.3)		(98.6)		(75.0)
Net loss attributable to Surgery Partners, Inc.	(22.9)		(61.6)		(70.8)		(121.6)
Less: Amounts attributable to participating securities	—		(10.0)		(10.3)		(29.2)
Net loss attributable to common stockholders	$	(22.9)	$	(71.6)	$	(81.1)	$	(150.8)

Net loss per share attributable to common stockholders
Basic	$	(0.28)	$	(1.46)	$	(1.19)	$	(3.09)
Diluted (1)	$	(0.28)	$	(1.46)	$	(1.19)	$	(3.09)
Weighted average common shares outstanding
Basic	80,726		48,883		68,350		48,736
Diluted (1)	80,726		48,883		68,350		48,736


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Deficit		Non-Controlling Interests— Non-Redeemable		Total
	Shares	Amount

Balance at December 31, 2020	50,462	$	0.5	$	607.9	$	(61.0)	$	(431.8)	$	766.5	$	882.1
Net (loss) income	—	—		—		—		(21.0)		21.1		0.1
Equity-based compensation	812	—		(2.8)		—		—		—		(2.8)
Preferred dividends	—	—		(10.3)		—		—		—		(10.3)
Equity offering	8,625	0.1		248.2		—		—		—		248.3
Other comprehensive income	—	—		—		6.4		—		—		6.4
Acquisition and disposal of shares of non-controlling interests, net	—	—		0.3		—		—		2.0		2.3
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(20.8)		(20.8)
Balance at March 31, 2021	59,899	$	0.6	$	843.3	$	(54.6)	$	(452.8)	$	768.8	$	1,105.3
Net (loss) income	—	—		—		—		(26.9)		22.0		(4.9)
Equity-based compensation	(29)	—		3.7		—		—		—		3.7
Preferred share conversion	22,609	0.2		439.5		—		—		—		439.7
Other comprehensive income	—	—		—		0.2		—		—		0.2
Acquisition and disposal of shares of non-controlling interests, net	—	—		11.9		—		—		(6.3)		5.6
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(22.3)		(22.3)
Balance at June 30, 2021	82,479	$	0.8	$	1,298.4	$	(54.4)	$	(479.7)	$	762.2	$	1,527.3
Net (loss) income	—	—		—		—		(22.9)		21.7		(1.2)
Equity-based compensation	(21)	—		4.1		—		—		—		4.1
Other comprehensive income	—	—		—		6.5		—		—		6.5
Acquisition and disposal of shares of non-controlling interests, net	—	—		3.5		—		—		33.6		37.1
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(21.8)		(21.8)
Balance at September 30, 2021	82,458	$	0.8	$	1,306.0	$	(47.9)	$	(502.6)	$	795.7	$	1,552.0


	Carrying Amount				Fair Value
	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020

Senior secured term loan	$	1,534.5	$	1,539.4	$	1,523.0	$	1,533.4
6.750% senior unsecured notes due 2025	$	370.0	$	370.0	$	376.0	$	376.0
10.000% senior unsecured notes due 2027	$	545.0	$	545.0	$	589.3	$	596.8


Balance at December 31, 2020	$	3,468.0
Acquisitions, including post acquisition adjustments	145.7
Divestitures and deconsolidations	(0.1)
Balance at September 30, 2021	$	3,613.6


	2021		2020

Balance at beginning of period	$	306.8	$	321.0
Net income attributable to non-controlling interests—redeemable	33.8		19.3
Acquisition (disposal) of shares of non-controlling interests, net—redeemable	2.4		(7.9)
Distributions to non-controlling interest—redeemable holders	(32.6)		(27.7)
Balance at end of period	$	310.4	$	304.7



Total consideration	$	103.0
Fair value of non-controlling interests	46.4
Aggregate acquisition date fair value	$	149.4
Net assets acquired:
Current assets	$	6.9
Property and equipment	3.8
Goodwill	145.8
Right-of-use operating lease assets	8.2
Other long-term assets	0.1
Current liabilities	(8.2)
Long-term debt	(0.1)
Right-of-use operating lease liabilities	(7.1)
Aggregate acquisition date fair value	$	149.4


	September 30, 2021		December 31, 2020

Senior secured term loan (1)	$	1,534.5	$	1,539.4
6.750% senior unsecured notes due 2025	370.0		370.0
10.000% senior unsecured notes due 2027	545.0		545.0
Notes payable and other secured loans	140.5		137.5
Finance lease obligations	279.9		281.2
Less: unamortized debt issuance costs and discounts	(17.2)		(16.3)
Total debt	2,852.7		2,856.8
Less: Current maturities	60.8		64.4
Total long-term debt	$	2,791.9	$	2,792.4


Balance at December 31, 2020	$	434.5
Dividends accrued	10.3
Dividends declared	(5.1)
Redeemable preferred stock conversion to common stock	(439.7)
Balance at September 30, 2021	$	—


		September 30, 2021				December 31, 2020
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate swaps	Other long-term assets	$	15.8	$	—	$	—	$	—
Interest rate swaps	Other long-term liabilities	—		15.6		—		—

Derivatives in cash flow hedging relationships
Interest rate swaps	Other long-term liabilities (1)	—		51.0		—		61.0
Interest rate caps	Other long-term assets	1.8		—		—		—
Total		$	17.6	$	66.6	$	—	$	61.0


	September 30, 2021		December 31, 2020
Assets:
Surgical Facility Services	$	5,124.4	$	4,962.4
Ancillary Services	32.5		35.0
All other	474.7		415.8
Total assets	$	5,631.6	$	5,413.2


	Twelve Months Ended September 30, 2021

Cash flows from operating activities	$	76.3
Plus (minus):
Non-cash interest expense, net	(13.4)
Non-cash lease expense	(40.3)
Deferred income taxes	8.9
Income from equity investments, net of distributions received	(1.7)
Changes in operating assets and liabilities, net of acquisitions and divestitures	173.9
Income tax benefit	(6.9)
Net income attributable to non-controlling interests	(141.0)
Interest expense, net	214.9
Transaction, integration and acquisition costs	39.0
Litigation settlement and other litigation costs	5.8
Hurricane-related operating losses	0.5
Acquisitions and synergies (1)	67.0
Credit Agreement EBITDA	$	383.0


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Patient service revenues:
Surgical facilities revenues	95.6	%	95.4	%	95.5	%	95.0	%
Ancillary services revenues	3.0	%	3.4	%	3.1	%	3.6	%
Total patient service revenues	98.6	%	98.8	%	98.6	%	98.6	%
Other service revenues	1.4	%	1.2	%	1.4	%	1.4	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%


	Three Months Ended September 30,
	2021				2020
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	271.4	49.2	%	$	257.4	52.6	%
Government	248.0		45.0	%	188.8		38.5	%
Self-pay	15.9		2.9	%	19.4		4.0	%
Other (1)	16.1		2.9	%	24.2		4.9	%
Total patient service revenues	551.4		100.0	%	489.8		100.0	%
Other service revenues	7.8				6.3
Total revenues	$	559.2			$	496.1


	Nine Months Ended September 30,
	2021				2020
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	790.5	49.6	%	$	682.6	52.8	%
Government	700.6		44.0	%	505.4		39.1	%
Self-pay	46.9		2.9	%	43.4		3.4	%
Other (1)	55.0		3.5	%	62.1		4.7	%
Total patient service revenues	1,593.0		100.0	%	1,293.5		100.0	%
Other service revenues	21.9				18.3
Total revenues	$	1,614.9			$	1,311.8


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Patient service revenues:
Surgical facilities revenues	95.6	%	95.4	%	95.5	%	95.0	%
Ancillary services revenues	3.0	%	3.4	%	3.1	%	3.6	%
Total patient service revenues	98.6	%	98.8	%	98.6	%	98.6	%
Other service revenues	1.4	%	1.2	%	1.4	%	1.4	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%


No.						Description

31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Taxonomy Extension Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL (included in Exhibit 101).


SURGERY PARTNERS, INC.

By:			/s/ Thomas F. Cowhey Thomas F. Cowhey Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)