Surgery Partners, Inc 10-Q for FY2022 Q2

Surgery Partners, Inc. (SGRY)

10-Q 2022-08-02 For: 2022-06-30

Added on April 07, 2026

About this 10-Q

Surgery Partners, Inc filed this 10-Q on August 2, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $615.4M; up 13.3% from $543.3M a year earlier
Net loss: $18.4M; compared with a net loss of $26.9M a year earlier
Diluted EPS: -$0.21; compared with -$0.39 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 ☒						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	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31

Signatures		32


	(Unaudited)
	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	227.4	$	389.9
Accounts receivable	412.0		430.2
Inventories	64.0		61.1
Prepaid expenses	37.4		25.6
Other current assets	47.6		39.3
Total current assets	788.4		946.1
Property and equipment, net of accumulated depreciation of $320.7 and $272.3, respectively	789.1		629.7
Goodwill and other intangible assets, net	4,035.6		3,955.5
Investments in and advances to affiliates	159.7		88.7
Right-of-use operating lease assets	277.8		324.1
Long-term deferred tax assets	110.4		114.4
Other long-term assets	130.6		59.1
Total assets	$	6,291.6	$	6,117.6

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	126.4	$	124.9
Accrued payroll and benefits	83.8		77.1
Medicare accelerated payments and deferred governmental grants	21.4		64.4
Other current liabilities	221.8		210.0
Current maturities of long-term debt	68.3		60.4
Total current liabilities	521.7		536.8
Long-term debt, less current maturities	3,019.4		2,878.4
Right-of-use operating lease liabilities	271.8		315.6
Other long-term liabilities	96.4		87.0

Non-controlling interests—redeemable	341.8		330.2

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 - 89,935,287 and 89,332,557, respectively	0.9		0.9
Additional paid-in capital	1,618.8		1,622.3
Accumulated other comprehensive income (loss)	44.3		(31.5)
Retained deficit	(508.9)		(502.7)
Total Surgery Partners, Inc. stockholders' equity	1,155.1		1,089.0
Non-controlling interests—non-redeemable	885.4		880.6
Total stockholders' equity	2,040.5		1,969.6
Total liabilities and stockholders' equity	$	6,291.6	$	6,117.6


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Revenues	$	615.4	$	543.3	$	1,211.6	$	1,055.7
Operating expenses:
Salaries and benefits	181.9		155.3		360.8		307.0
Supplies	173.5		157.5		345.1		304.8
Professional and medical fees	66.7		57.4		130.3		112.9
Lease expense	20.2		22.6		40.2		45.4
Other operating expenses	38.5		32.2		75.8		63.8
Cost of revenues	480.8		425.0		952.2		833.9
General and administrative expenses	26.1		24.5		55.6		51.3
Depreciation and amortization	28.0		25.2		55.4		50.9
Transaction and integration costs	8.2		9.2		15.3		14.5
Grant funds	(0.1)		(4.9)		(1.3)		(20.0)
Loss on disposals and deconsolidations, net	1.1		1.0		1.0		0.1
Equity in earnings of unconsolidated affiliates	(2.6)		(3.0)		(5.7)		(5.6)
Litigation settlement	—		—		(32.8)		—
Loss on debt extinguishment	—		9.6		—		9.6
Other income, net	(2.6)		(2.8)		(5.0)		(2.8)
	538.9		483.8		1,034.7		931.9
Operating income	76.5		59.5		176.9		123.8
Interest expense, net	(56.9)		(53.4)		(113.2)		(106.7)
Income before income taxes	19.6		6.1		63.7		17.1
Income tax (expense) benefit	(4.3)		2.7		(5.6)		2.5
Net income	15.3		8.8		58.1		19.6
Less: Net income attributable to non-controlling interests	(33.7)		(35.7)		(64.3)		(67.5)
Net loss attributable to Surgery Partners, Inc.	(18.4)		(26.9)		(6.2)		(47.9)
Less: Amounts attributable to participating securities	—		—		—		(10.3)
Net loss attributable to common stockholders	$	(18.4)	$	(26.9)	$	(6.2)	$	(58.2)

Net loss per share attributable to common stockholders
Basic	$	(0.21)	$	(0.39)	$	(0.07)	$	(0.94)
Diluted (1)	$	(0.21)	$	(0.39)	$	(0.07)	$	(0.94)
Weighted average common shares outstanding
Basic	88,900		69,267		88,450		62,060
Diluted (1)	88,900		69,267		88,450		62,060


	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, 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


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, 2021	$	3,911.8
Acquisitions, including post acquisition adjustments	110.7
Disposals and deconsolidations	(29.4)
Balance at June 30, 2022	$	3,993.1


	Carrying Amount				Fair Value
	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021

Senior secured term loan	$	1,523.3	$	1,530.7	$	1,439.5	$	1,530.7
6.750% senior unsecured notes due 2025	$	370.0	$	370.0	$	339.0	$	371.9
10.000% senior unsecured notes due 2027	$	545.0	$	545.0	$	531.4	$	577.0


	June 30, 2022		December 31, 2021

Senior secured term loan (1)	$	1,523.3	$	1,530.7
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	160.2		145.0
Finance lease obligations	504.3		364.6
Less: unamortized debt issuance costs and discounts	(15.1)		(16.5)
Total debt	3,087.7		2,938.8
Less: Current maturities	68.3		60.4
Total long-term debt	$	3,019.4	$	2,878.4


	Classification in Consolidated Balance Sheets	June 30, 2022		December 31, 2021

Assets:
Operating lease assets	Right-of-use operating lease assets	$	277.8	$	324.1
Finance lease assets	Property and equipment, net of accumulated depreciation	460.2		329.6
Total leased assets		$	738.0	$	653.7

Liabilities:
Operating lease liabilities:
Current	Other current liabilities	$	35.7	$	40.1
Long-term	Right-of-use operating lease liabilities	271.8		315.6
Total operating lease liabilities		307.5		355.7
Finance lease liabilities:
Current	Current maturities of long-term debt	22.7		19.0
Long-term	Long-term debt, less current maturities	481.6		345.6
Total finance lease liabilities		504.3		364.6
Total lease liabilities		$	811.8	$	720.3


		June 30, 2022				December 31, 2021
	Location	Assets		Liabilities		Assets		Liabilities
Derivatives not designated as hedging instruments
Interest rate swaps	Other long-term assets	$	2.9	$	—	$	12.5	$	—
Interest rate swaps	Other long-term liabilities	—		2.9		—		12.4

Derivatives in cash flow hedging relationships
Interest rate caps	Other long-term assets	13.5		—		2.9		—
Interest rate swaps	Other long-term assets	62.5		—		8.2		—
Interest rate swaps	Other long-term liabilities (1)	—		38.8		—		45.8
Total		$	78.9	$	41.7	$	23.6	$	58.2


	Twelve Months Ended June 30, 2022

Cash flows from operating activities	$	156.5
Plus (minus):
Non-cash interest expense, net	(28.7)
Non-cash lease expense	(36.2)
Deferred income taxes	(17.0)
Equity in earnings of unconsolidated affiliates, net of distributions received	(0.2)
Changes in operating assets and liabilities, net of acquisitions and divestitures	156.8
Income tax expense	18.6
Net income attributable to non-controlling interests	(138.4)
Interest expense, net	227.5
Transaction, integration and acquisition costs	40.6
Litigation settlement and other litigation costs	(25.3)
Hurricane-related impacts (1)	(0.2)
Acquisitions and synergies (2)	84.7
Credit Agreement EBITDA	$	438.7


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 June 30, 2022, 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,
	2022		2021		2022		2021
Patient service revenues:
Surgical facilities revenues	95.9	%	95.5	%	95.8	%	95.5	%
Ancillary services revenues	2.8	%	3.2	%	2.8	%	3.2	%
Total patient service revenues	98.7	%	98.7	%	98.6	%	98.7	%
Other service revenues	1.3	%	1.3	%	1.4	%	1.3	%
Total revenues	100.0	%	100.0	%	100.0	%	100.0	%


	Three Months Ended June 30,
	2022				2021
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	309.5	51.0	%	$	273.0	50.9	%
Government	258.1		42.5	%	226.2		42.2	%
Self-pay	16.5		2.7	%	17.8		3.3	%
Other (1)	23.2		3.8	%	18.9		3.6	%
Total patient service revenues	607.3		100.0	%	535.9		100.0	%
Other service revenues	8.1				7.4
Total revenues	$	615.4			$	543.3


	Six Months Ended June 30,
	2022				2021
	Amount		%		Amount		%
Patient service revenues:
Private insurance	$	608.6	50.9	%	$	519.1	49.8	%
Government	507.0		42.4	%	452.6		43.5	%
Self-pay	33.2		2.8	%	31.0		3.0	%
Other (1)	46.2		3.9	%	38.9		3.7	%
Total patient service revenues	1,195.0		100.0	%	1,041.6		100.0	%
Other service revenues	16.6				14.1
Total revenues	$	1,211.6			$	1,055.7


	June 30, 2022		December 31, 2021
Assets:
Surgical Facility Services	$	5,691.3	$	5,552.8
Ancillary Services	44.5		47.5
All other	555.8		517.3
Total assets	$	6,291.6	$	6,117.6