Surgery Partners, Inc 10-Q for FY2021 Q1

Surgery Partners, Inc. (SGRY)

10-Q 2021-05-05 For: 2021-03-31

Added on April 07, 2026

About this 10-Q

Surgery Partners, Inc filed this 10-Q on May 5, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $512.4M; up 16.2% from $441M a year earlier
Net loss: $21M; compared with a net loss of $27.5M a year earlier
Diluted EPS: -$0.57; compared with -$0.76 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)	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	26

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)
	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	541.9	$	317.9
Accounts receivable	367.0		382.2
Inventories	56.1		56.4
Prepaid expenses	21.1		17.6
Other current assets	31.7		27.4
Total current assets	1,017.8		801.5
Property and equipment, net of accumulated depreciation of $215.6 and $189.3, respectively	544.3		544.6
Goodwill and other intangible assets, net	3,517.5		3,514.9
Investments in and advances to affiliates	90.4		90.3
Right-of-use operating lease assets	305.4		310.1
Long-term deferred tax assets	127.4		124.8
Other long-term assets	36.2		27.0
Total assets	$	5,639.0	$	5,413.2

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	96.0	$	100.2
Accrued payroll and benefits	67.3		65.4
Medicare accelerated payments and deferred governmental grants	109.0		109.8
Other current liabilities	241.3		217.0
Current maturities of long-term debt	61.2		64.4
Total current liabilities	574.8		556.8
Long-term debt, less current maturities	2,789.5		2,792.4
Right-of-use operating lease liabilities	295.4		300.9
Other long-term liabilities	126.1		139.7

Non-controlling interests—redeemable	308.2		306.8
Redeemable preferred stock - Series A; shares authorized, issued and outstanding - 310,000; redemption value - $439.7 and $434.5, respectively	439.7		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 - 59,898,730 and 50,461,706, respectively	0.6		0.5
Additional paid-in capital	843.3		607.9
Accumulated other comprehensive loss	(54.6)		(61.0)
Retained deficit	(452.8)		(431.8)
Total Surgery Partners, Inc. stockholders' equity	336.5		115.6
Non-controlling interests—non-redeemable	768.8		766.5
Total stockholders' equity	1,105.3		882.1
Total liabilities and stockholders' equity	$	5,639.0	$	5,413.2


	Three Months Ended March 31,
	2021		2020

Revenues	$	512.4	$	441.0
Operating expenses:
Salaries and benefits	151.7		140.4
Supplies	147.3		129.3
Professional and medical fees	55.5		46.8
Lease expense	22.8		21.3
Other operating expenses	31.6		28.4
Cost of revenues	408.9		366.2
General and administrative expenses	26.8		22.8
Depreciation and amortization	25.7		21.8
Income from equity investments	(2.6)		(2.0)
(Gain) loss on disposals and deconsolidations, net	(0.9)		3.5
Transaction and integration costs	5.3		5.5
Grant funds	(15.1)		—
Litigation settlement	—		1.2
Other income	—		(1.5)
Total operating expenses	448.1		417.5
Operating income	64.3		23.5
Interest expense, net	(53.3)		(47.1)
Income (loss) before income taxes	11.0		(23.6)
Income tax expense (benefit)	0.2		(15.2)
Net income (loss)	10.8		(8.4)
Less: Net income attributable to non-controlling interests	(31.8)		(19.1)
Net loss attributable to Surgery Partners, Inc.	(21.0)		(27.5)
Less: Amounts attributable to participating securities	(10.3)		(9.5)
Net loss attributable to common stockholders	$	(31.3)	$	(37.0)

Net loss per share attributable to common stockholders
Basic	$	(0.57)	$	(0.76)
Diluted (1)	$	(0.57)	$	(0.76)
Weighted average common shares outstanding
Basic	54,773		48,472
Diluted (1)	54,773		48,472


	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



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


	Carrying Amount				Fair Value
	March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020

Senior secured term loan	$	1,535.7	$	1,539.4	$	1,522.2	$	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	$	598.8	$	596.8


Balance at December 31, 2020	$	3,468.0
Acquisitions, including post acquisition adjustments	2.0
Balance at March 31, 2021	$	3,470.0


	2021		2020

Balance at beginning of period	$	306.8	$	321.0
Net income attributable to non-controlling interests—redeemable	10.7		5.5
Acquisition and disposal of shares of non-controlling interests, net—redeemable	1.2		(1.6)
Distributions to non-controlling interest—redeemable holders	(10.5)		(9.1)
Balance at end of period	$	308.2	$	315.8


	March 31, 2021		December 31, 2020

Senior secured term loan (1)	$	1,535.7	$	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	131.2		137.5
Finance lease obligations	284.5		281.2
Less: unamortized debt issuance costs, discount and premium, net	(15.7)		(16.3)
Total debt	2,850.7		2,856.8
Less: Current maturities	61.2		64.4
Total long-term debt	$	2,789.5	$	2,792.4


Balance at December 31, 2019	$	434.5
Dividends accrued	10.3
Dividends declared	(5.1)
Balance at March 31, 2021	$	439.7


	March 31, 2021		December 31, 2020
Assets:
Surgical Facility Services	$	4,966.3	$	4,962.4
Ancillary Services	34.7		35.0
All other	638.0		415.8
Total assets	$	5,639.0	$	5,413.2


	Twelve Months Ended March 31, 2021

Cash flows from operating activities	$	267.9
Plus (minus):
Non-cash interest income, net	(4.8)
Non-cash lease expense	(39.8)
Deferred income taxes	6.5
Income from equity investments, net of distributions received	0.2
Changes in operating assets and liabilities, net of acquisitions and divestitures	(61.1)
Income tax expense	(4.7)
Net income attributable to non-controlling interests	(130.1)
Interest expense, net	208.0
Transaction, integration and acquisition costs	35.0
Litigation settlement and other litigation costs	5.9
Acquisitions and synergies (1)	76.1
Credit Agreement EBITDA	$	359.1


	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)
January 1, 2021 to January 31, 2021	—	$	—	—	$	46.0
February 1, 2021 to February 28, 2021	514	$	35.25	—	$	46.0
March 1, 2021 to March 31, 2021	189,656	$	42.36	—	$	46.0
Total	190,170	$	42.34	—	$	46.0


	Three Months Ended March 31,
	2021				2020
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	246.1	48.7	%	$	226.0	52.0	%
Government	226.4		44.8	%	175.8		40.5	%
Self-pay	13.2		2.6	%	12.8		2.9	%
Other (1)	20.0		3.9	%	20.0		4.6	%
Total patient service revenues	505.7		100.0	%	434.6		100.0	%
Other service revenues	6.7				6.4
Total revenues	$	512.4			$	441.0


	Three Months Ended March 31,
	2021		2020

Private insurance payors	48.7	%	52.0	%
Government payors	44.8	%	40.5	%
Self-pay payors	2.6	%	2.9	%
Other payors (1)	3.9	%	4.6	%
Total	100.0	%	100.0	%


	Three Months Ended March 31,
	2021		2020

Orthopedic and pain management	37.5	%	38.7	%
Ophthalmology	25.4	%	25.8	%
Gastrointestinal	21.4	%	20.0	%
General surgery	3.0	%	3.1	%
Other	12.7	%	12.4	%
Total	100.0	%	100.0	%


SURGERY PARTNERS, INC.

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


No.						Description

10.1						Fifth Amendment to Credit Agreement, dated as of January 27, 2021, by and among SP Holdco I, Inc., Surgery Center Holdings, Inc., Jefferies Finance LLC and the other guarantors and lenders party thereto (incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed March 10, 2021).
10.2						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).
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 March 31, 2021, formatted in Inline XBRL (included in Exhibit 101).