Surgery Partners, Inc 10-Q for FY2021 Q2

Surgery Partners, Inc. (SGRY)

10-Q 2021-08-04 For: 2021-06-30

Added on April 07, 2026

About this 10-Q

Surgery Partners, Inc filed this 10-Q on August 4, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

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

Revenue: $543.3M; up 45.0% from $374.7M a year earlier
Net loss: $26.9M; compared with a net loss of $32.5M a year earlier
Diluted EPS: -$0.39; compared with -$0.86 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

Signatures		34


	(Unaudited)
	June 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	464.8	$	317.9
Accounts receivable	374.9		382.2
Inventories	57.3		56.4
Prepaid expenses	28.3		17.6
Other current assets	27.6		27.4
Total current assets	952.9		801.5
Property and equipment, net of accumulated depreciation of $231.0 and $189.3, respectively	543.9		544.6
Goodwill and other intangible assets, net	3,533.9		3,514.9
Investments in and advances to affiliates	90.2		90.3
Right-of-use operating lease assets	318.8		310.1
Long-term deferred tax assets	129.8		124.8
Other long-term assets	51.1		27.0
Total assets	$	5,620.6	$	5,413.2

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	109.1	$	100.2
Accrued payroll and benefits	75.6		65.4
Medicare accelerated payments and deferred governmental grants	78.6		109.8
Other current liabilities	199.0		217.0
Current maturities of long-term debt	69.6		64.4
Total current liabilities	531.9		556.8
Long-term debt, less current maturities	2,786.1		2,792.4
Right-of-use operating lease liabilities	310.8		300.9
Other long-term liabilities	151.7		139.7

Non-controlling interests—redeemable	312.8		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 - 82,478,580 and 50,461,706, respectively	0.8		0.5
Additional paid-in capital	1,298.4		607.9
Accumulated other comprehensive loss	(54.4)		(61.0)
Retained deficit	(479.7)		(431.8)
Total Surgery Partners, Inc. stockholders' equity	765.1		115.6
Non-controlling interests—non-redeemable	762.2		766.5
Total stockholders' equity	1,527.3		882.1
Total liabilities and stockholders' equity	$	5,620.6	$	5,413.2


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020

Revenues	$	543.3	$	374.7	$	1,055.7	$	815.7
Operating expenses:
Salaries and benefits	155.3		116.1		307.0		256.5
Supplies	157.5		110.1		304.8		239.4
Professional and medical fees	57.4		45.3		112.9		92.1
Lease expense	22.6		21.5		45.4		42.8
Other operating expenses	32.2		26.3		63.8		54.7
Cost of revenues	425.0		319.3		833.9		685.5
General and administrative expenses	24.5		25.3		51.3		48.1
Depreciation and amortization	25.2		23.4		50.9		45.2
Income from equity investments	(3.0)		(2.5)		(5.6)		(4.5)
Loss on disposals and deconsolidations, net	1.0		2.9		0.1		6.4
Transaction and integration costs	9.2		4.9		14.5		10.4
Grant funds	(4.9)		(43.1)		(20.0)		(43.1)
Loss on debt extinguishment	9.6		—		9.6		—
Litigation settlement	—		—		—		1.2
Other income	(2.8)		(0.2)		(2.8)		(1.7)
Total operating expenses	483.8		330.0		931.9		747.5
Operating income	59.5		44.7		123.8		68.2
Interest expense, net	(53.4)		(49.2)		(106.7)		(96.3)
Income (loss) before income taxes	6.1		(4.5)		17.1		(28.1)
Income tax benefit	(2.7)		(0.6)		(2.5)		(15.8)
Net income (loss)	8.8		(3.9)		19.6		(12.3)
Less: Net income attributable to non-controlling interests	(35.7)		(28.6)		(67.5)		(47.7)
Net loss attributable to Surgery Partners, Inc.	(26.9)		(32.5)		(47.9)		(60.0)
Less: Amounts attributable to participating securities	—		(9.7)		(10.3)		(19.2)
Net loss attributable to common stockholders	$	(26.9)	$	(42.2)	$	(58.2)	$	(79.2)

Net loss per share attributable to common stockholders
Basic	$	(0.39)	$	(0.86)	$	(0.94)	$	(1.63)
Diluted (1)	$	(0.39)	$	(0.86)	$	(0.94)	$	(1.63)
Weighted average common shares outstanding
Basic	69,267		48,840		62,060		48,661
Diluted (1)	69,267		48,840		62,060		48,661


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

Balance at December 31, 2019	49,299	$	0.5	$	662.7	$	(50.7)	$	(315.7)	$	686.6	$	983.4
Net (loss) income	—	—		—		—		(27.5)		13.6		(13.9)
Equity-based compensation	1,219	—		2.8		—		—		—		2.8
Preferred dividends	—	—		(9.5)		—		—		—		(9.5)
Other comprehensive loss	—	—		—		(25.2)		—		—		(25.2)
Acquisition and disposal of shares of non-controlling interests, net (1)	—	—		(0.7)		—		—		1.4		0.7
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(14.9)		(14.9)
Balance at March 31, 2020	50,518	$	0.5	$	655.3	$	(75.9)	$	(343.2)	$	686.7	$	923.4
Net (loss) income	—	—		—		—		(32.5)		22.8		(9.7)
Equity-based compensation	33	—		3.8		—		—		—		3.8
Preferred dividends	—	—		(9.7)		—		—		—		(9.7)
Other comprehensive income	—	—		—		7.3		—		—		7.3
Acquisition and disposal of shares of non-controlling interests, net (1)	—	—		(1.2)		—		—		2.9		1.7
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(20.9)		(20.9)
Balance at June 30, 2020	50,551	$	0.5	$	648.2	$	(68.6)	$	(375.7)	$	691.5	$	895.9



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 loss	—	—		—		6.4		—		—		6.4
Acquisition and disposal of shares of non-controlling interests, net (1)	—	—		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 loss	—	—		—		0.2		—		—		0.2
Acquisition and disposal of shares of non-controlling interests, net (1)	—	—		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


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

Senior secured term loan	$	1,538.2	$	1,539.4	$	1,530.5	$	1,533.4
6.750% senior unsecured notes due 2025	$	370.0	$	370.0	$	374.2	$	376.0
10.000% senior unsecured notes due 2027	$	545.0	$	545.0	$	596.1	$	596.8


Balance at December 31, 2020	$	3,468.0
Acquisitions, including post acquisition adjustments	20.2
Divestitures and deconsolidations	(0.1)
Balance at June 30, 2021	$	3,488.1


	2021		2020

Balance at beginning of period	$	306.8	$	321.0
Net income attributable to non-controlling interests—redeemable	24.4		11.3
Acquisition (disposal) of shares of non-controlling interests, net—redeemable	1.9		(1.7)
Distributions to non-controlling interest—redeemable holders	(20.3)		(15.9)
Balance at end of period	$	312.8	$	314.7



Total consideration	$	15.4
Fair value of non-controlling interests	7.5
Aggregate acquisition date fair value	$	22.9
Net assets acquired:
Current assets	$	1.7
Property and equipment	1.7
Goodwill	20.0
Right-of-use operating lease assets	2.1
Current liabilities	(0.6)
Long-term debt	(0.1)
Right-of-use operating lease liabilities	(1.9)
Aggregate acquisition date fair value	$	22.9


	June 30, 2021		December 31, 2020

Senior secured term loan (1)	$	1,538.2	$	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	137.6		137.5
Finance lease obligations	281.7		281.2
Less: unamortized debt issuance costs and discounts	(16.8)		(16.3)
Total debt	2,855.7		2,856.8
Less: Current maturities	69.6		64.4
Total long-term debt	$	2,786.1	$	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 June 30, 2021	$	—


		June 30, 2021				December 31, 2020
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate swaps	Other long-term assets	$	17.6	$	—	$	—	$	—
Interest rate swaps	Other long-term liabilities	—		17.3		—		—

Derivatives in cash flow hedging relationships
Interest rate swaps	Other long-term liabilities (1)	—		55.5		—		61.0
Total		$	17.6	$	72.8	$	—	$	61.0


	June 30, 2021		December 31, 2020
Assets:
Surgical Facility Services	$	5,021.6	$	4,962.4
Ancillary Services	32.7		35.0
All other	566.3		415.8
Total assets	$	5,620.6	$	5,413.2


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Patient service revenues:
Surgical facilities revenues	95.5	%	95.0	%	95.5	%	94.8	%
Ancillary services revenues	3.2	%	3.5	%	3.2	%	3.7	%
Total patient service revenues	98.7	%	98.5	%	98.7	%	98.5	%
Other service revenues	1.3	%	1.5	%	1.3	%	1.5	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%


	Three Months Ended June 30,
	2021				2020
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	273.0	50.9	%	$	199.2	54.0	%
Government	226.2		42.2	%	140.8		38.1	%
Self-pay	17.8		3.3	%	11.2		3.0	%
Other (1)	18.9		3.6	%	17.9		4.9	%
Total patient service revenues	535.9		100.0	%	369.1		100.0	%
Other service revenues	7.4				5.6
Total revenues	$	543.3			$	374.7


	Six Months Ended June 30,
	2021				2020
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	519.1	49.8	%	$	425.2	52.9	%
Government	452.6		43.5	%	316.6		39.4	%
Self-pay	31.0		3.0	%	24.0		3.0	%
Other (1)	38.9		3.7	%	37.9		4.7	%
Total patient service revenues	1,041.6		100.0	%	803.7		100.0	%
Other service revenues	14.1				12.0
Total revenues	$	1,055.7			$	815.7


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Patient service revenues:
Surgical facilities revenues	95.5	%	95.0	%	95.5	%	94.8	%
Ancillary services revenues	3.2	%	3.5	%	3.2	%	3.7	%
Total patient service revenues	98.7	%	98.5	%	98.7	%	98.5	%
Other service revenues	1.3	%	1.5	%	1.3	%	1.5	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%


	Twelve Months Ended June 30, 2021

Cash flows from operating activities	$	88.3
Plus (minus):
Non-cash interest income, net	(8.0)
Non-cash lease expense	(39.3)
Deferred income taxes	8.7
Income from equity investments, net of distributions received	(0.3)
Changes in operating assets and liabilities, net of acquisitions and divestitures	142.4
Income tax expense	(6.8)
Net income attributable to non-controlling interests	(137.2)
Interest expense, net	212.2
Transaction, integration and acquisition costs	36.3
Litigation settlement and other litigation costs	4.4
Acquisitions and synergies (1)	72.2
Credit Agreement EBITDA	$	372.9


	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(dollars in millions, except per share amounts)
April 1, 2021 to April 30, 2021	13,300	$	43.60	—	$	46.0
May 1, 2021 to May 31, 2021	—	$	—	—	$	46.0
June 1, 2021 to June 30, 2021	—	$	—	—	$	46.0
Total	13,300	$	43.60	—	$	46.0


No.						Description

10.1						Sixth Amendment to the Credit Agreement, dated as of May 3, 2021, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., the other Guarantors party thereto Jefferies Finance LLC and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 5, 2021).
10.2						First Amendment to the Surgery Partners, Inc. 2015 Omnibus Incentive Plan, as amended and restated effective January 1, 2020.
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 June 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)