Surgery Partners, Inc 10-Q for FY2023 Q2

Surgery Partners, Inc. (SGRY)

10-Q 2023-08-01 For: 2023-06-30

Added on April 07, 2026

About this 10-Q

Surgery Partners, Inc filed this 10-Q on August 1, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $667.6M; up 8.5% from $615.4M a year earlier
Net income: $18.9M; compared with a net loss of $18.4M a year earlier
Diluted EPS: $0.15; compared with -$0.21 a year earlier

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

340 Seven Springs Way, Suite 600
Brentwood, Tennessee						37027
(Address of Principal Executive Offices)						(Zip Code)


Large accelerated filer ☒						Accelerated filer ☐
Non-accelerated filer ☐						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	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	27

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29

Signatures		30


	(Unaudited)
	June 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	177.4	$	282.9
Accounts receivable	449.9		456.3
Inventories	70.3		71.4
Prepaid expenses	39.3		31.4
Other current assets	73.3		79.0
Total current assets	810.2		921.0
Property and equipment, net of accumulated depreciation of $403.4 and $374.3, respectively	826.0		876.6
Goodwill and other intangible assets, net	4,291.2		4,179.4
Investments in and advances to affiliates	192.2		190.3
Right-of-use operating lease assets	267.2		279.1
Long-term deferred tax assets	105.7		91.5
Other long-term assets	128.1		144.2
Total assets	$	6,620.6	$	6,682.1

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	131.5	$	151.6
Accrued payroll and benefits	64.3		68.9
Other current liabilities	198.1		210.1
Current maturities of long-term debt	64.7		62.8
Total current liabilities	458.6		493.4
Long-term debt, less current maturities	2,504.8		2,559.0
Right-of-use operating lease liabilities	264.1		271.4
Other long-term liabilities	82.2		75.4

Non-controlling interests—redeemable	328.1		342.0

Stockholders' equity:
Preferred stock, $0.01 par value; shares authorized - 20,310,000; shares issued or outstanding - none	—		—
Common stock, $0.01 par value; shares authorized - 300,000,000; shares issued and outstanding - 126,492,822 and 125,960,834, respectively	1.3		1.3
Additional paid-in capital	2,501.4		2,478.0
Accumulated other comprehensive income	78.8		76.2
Retained deficit	(563.3)		(557.3)
Total Surgery Partners, Inc. stockholders' equity	2,018.2		1,998.2
Non-controlling interests—non-redeemable	964.6		942.7
Total stockholders' equity	2,982.8		2,940.9
Total liabilities and stockholders' equity	$	6,620.6	$	6,682.1


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Revenues	$	667.6	$	615.4	$	1,333.8	$	1,211.6
Operating expenses:
Salaries and benefits	195.2		181.9		397.4		360.8
Supplies	182.2		173.5		370.6		345.1
Professional and medical fees	72.9		66.7		147.5		130.3
Lease expense	21.8		20.2		43.2		40.2
Other operating expenses	41.4		38.5		87.0		75.8
Cost of revenues	513.5		480.8		1,045.7		952.2
General and administrative expenses	31.2		26.1		63.2		55.6
Depreciation and amortization	24.4		28.0		58.1		55.4
Transaction and integration costs	12.0		8.2		24.5		15.3
Grant funds	—		(0.1)		(1.1)		(1.3)
Net (gain) loss on disposals, consolidations and deconsolidations	(8.8)		1.1		1.7		1.0
Equity in earnings of unconsolidated affiliates	(2.6)		(2.6)		(5.9)		(5.7)
Litigation settlements	1.5		—		4.5		(32.8)
Other income, net	(1.2)		(2.6)		(0.9)		(5.0)
	570.0		538.9		1,189.8		1,034.7
Operating income	97.6		76.5		144.0		176.9
Interest expense, net	(47.7)		(56.9)		(94.5)		(113.2)
Income before income taxes	49.9		19.6		49.5		63.7
Income tax benefit (expense)	7.8		(4.3)		9.4		(5.6)
Net income	57.7		15.3		58.9		58.1
Less: Net income attributable to non-controlling interests	(38.8)		(33.7)		(64.9)		(64.3)
Net income (loss) attributable to Surgery Partners, Inc.	$	18.9	$	(18.4)	$	(6.0)	$	(6.2)

Net income (loss) per share attributable to common stockholders
Basic	$	0.15	$	(0.21)	$	(0.05)	$	(0.07)
Diluted (1)	$	0.15	$	(0.21)	$	(0.05)	$	(0.07)
Weighted average common shares outstanding
Basic	125,718		88,900		125,463		88,450
Diluted (1)	127,370		88,900		125,463		88,450


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

Balance at December 31, 2021	89,333	$	0.9	$	1,622.3	$	(31.5)	$	(502.7)	$	880.6	$	1,969.6
Net income	—	—		—		—		12.2		20.0		32.2
Equity-based compensation	572	—		7.7		—		—		—		7.7
Other comprehensive income	—	—		—		56.8		—		—		56.8
Acquisition and disposal of shares of non-controlling interests, net	—	—		(4.8)		—		—		(24.3)		(29.1)
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(24.6)		(24.6)
Balance at March 31, 2022	89,905	$	0.9	$	1,625.2	$	25.3	$	(490.5)	$	851.7	$	2,012.6
Net (loss) income	—	—		—		—		(18.4)		22.7		4.3
Equity-based compensation	30	—		4.4		—		—		—		4.4
Other comprehensive income	—	—		—		19.0		—		—		19.0
Acquisition and disposal of shares of non-controlling interests, net	—	—		(10.8)		—		—		38.7		27.9
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(27.7)		(27.7)
Balance at June 30, 2022	89,935	$	0.9	$	1,618.8	$	44.3	$	(508.9)	$	885.4	$	2,040.5


Balance at December 31, 2022	125,961	$	1.3	$	2,478.0	$	76.2	$	(557.3)	$	942.7	$	2,940.9
Net (loss) income	—	—		—		—		(25.0)		18.3		(6.7)
Equity-based compensation	519	—		3.7		—		—		—		3.7
Other comprehensive loss	—	—		—		(11.3)		—		—		(11.3)
Acquisition and disposal of shares of non-controlling interests, net	—	—		(3.6)		—		—		49.7		46.1
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(30.2)		(30.2)
Balance at March 31, 2023	126,480	$	1.3	$	2,478.1	$	64.9	$	(582.3)	$	980.5	$	2,942.5
Net income	—	—		—		—		19.0		27.6		46.6
Equity-based compensation	13	—		4.5		—		—		—		4.5
Other comprehensive income	—	—		—		13.9		—		—		13.9
Acquisition and disposal of shares of non-controlling interests, net	—	—		18.8		—		—		(19.7)		(0.9)
Distributions to non-controlling interests—non-redeemable holders	—	—		—		—		—		(23.8)		(23.8)
Balance at June 30, 2023	126,493	$	1.3	$	2,501.4	$	78.8	$	(563.3)	$	964.6	$	2,982.8


Balance at December 31, 2022	$	4,137.1
Acquisitions, including post acquisition adjustments	134.6
Disposals	(35.8)
Balance at June 30, 2023	$	4,235.9


	Carrying Amount				Fair Value
	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022

Senior secured term loan	$	1,370.2	$	1,370.0	$	1,366.8	$	1,359.7
6.750% senior unsecured notes due 2025	$	185.0	$	185.0	$	183.8	$	183.4
10.000% senior unsecured notes due 2027	$	320.0	$	320.0	$	326.4	$	326.8


	June 30, 2023		December 31, 2022

Senior secured term loan (1)	$	1,370.2	$	1,370.0
6.750% senior unsecured notes due 2025	185.0		185.0
10.000% senior unsecured notes due 2027	320.0		320.0
Notes payable and other secured loans	178.5		171.3
Finance lease obligations	524.9		585.7
Less: unamortized debt issuance costs and discounts	(9.1)		(10.2)
Total debt	2,569.5		2,621.8
Less: Current maturities	64.7		62.8
Total long-term debt	$	2,504.8	$	2,559.0


	Classification in Consolidated Balance Sheets	June 30, 2023		December 31, 2022

Assets:
Operating lease assets	Right-of-use operating lease assets	$	267.2	$	279.1
Finance lease assets	Property and equipment, net of accumulated depreciation	461.6		529.6
Total leased assets		$	728.8	$	808.7

Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	37.2	$	36.5
Long-term	Right-of-use operating lease liabilities	264.1		271.4
Total operating lease liabilities		301.3		307.9
Finance lease liabilities:
Current	Current maturities of long-term debt	20.9		20.9
Long-term	Long-term debt, less current maturities	504.0		564.8
Total finance lease liabilities		524.9		585.7
Total lease liabilities		$	826.2	$	893.6


		June 30, 2023				December 31, 2022
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate caps	Other long-term assets	$	—	$	—	$	9.0	$	—
Interest rate swaps	Other long-term assets	4.8		—		8.5		—
Interest rate swaps	Other long-term liabilities	—		4.8		—		8.5

Derivatives in cash flow hedging relationships
Interest rate caps	Other long-term assets	9.4		—		10.4		—
Interest rate swaps	Other long-term assets	78.2		—		85.5		—
Interest rate swaps	Other long-term liabilities (1)	—		24.8		—		31.9
Total		$	92.4	$	29.6	$	113.4	$	40.4


	Twelve Months Ended June 30, 2023

Cash flows from operating activities	$	163.5
Plus (minus):
Non-cash interest expense, net	(26.6)
Non-cash lease expense	(35.6)
Deferred income taxes	(5.5)
Equity in earnings of unconsolidated affiliates, net of distributions received	2.2
Other non-cash income	7.5
Changes in operating assets and liabilities, net of acquisitions and divestitures	145.7
Income tax expense	8.3
Net income attributable to non-controlling interests	(142.2)
Interest expense, net	216.2
Transaction, integration and acquisition costs	59.1
Litigation settlements and regulatory change impact	14.1
Hurricane-related impacts	1.5
Undesignated derivative activity	(7.4)
Other (1)	6.5
Acquisitions and synergies (2)	89.2
Credit Agreement EBITDA	$	496.5


No.						Description

10						Tenth Amendment to the Credit Agreement, dated as of June 8, 2023, 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.
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						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.
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101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
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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, 2023, formatted in Inline XBRL (included in Exhibit 101).


SURGERY PARTNERS, INC.

By:			/s/ David T. Doherty David T. Doherty Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Patient service revenues:
Surgical facilities revenues	96.0	%	95.9	%	96.0	%	95.8	%
Ancillary services revenues	2.6	%	2.8	%	2.5	%	2.8	%
Total patient service revenues	98.6	%	98.7	%	98.5	%	98.6	%
Other service revenues	1.4	%	1.3	%	1.5	%	1.4	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%


	Three Months Ended June 30,
	2023				2022
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	341.6	51.9	%	$	309.5	51.0	%
Government	278.2		42.3	%	258.1		42.5	%
Self-pay	17.1		2.6	%	16.5		2.7	%
Other (1)	21.1		3.2	%	23.2		3.8	%
Total patient service revenues	658.0		100.0	%	607.3		100.0	%
Other service revenues	9.6				8.1
Total revenues	$	667.6			$	615.4


	Six Months Ended June 30,
	2023				2022
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	677.2	51.5	%	$	608.6	50.9	%
Government	566.0		43.1	%	507.0		42.4	%
Self-pay	32.7		2.5	%	33.2		2.8	%
Other (1)	38.5		2.9	%	46.2		3.9	%
Total patient service revenues	1,314.4		100.0	%	1,195.0		100.0	%
Other service revenues	19.4				16.6
Total revenues	$	1,333.8			$	1,211.6


	June 30, 2023		December 31, 2022
Assets:
Surgical Facility Services	$	6,031.2	$	6,001.1
Ancillary Services	39.6		41.7
All other	549.8		639.3
Total assets	$	6,620.6	$	6,682.1