sgry-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

Form 10-Q

_____________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37576

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Surgery Partners, Inc.

(Exact name of registrant as specified in its charter)

_____________________________________


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

310 Seven Springs Way, Suite 500

Brentwood, Tennessee 37027

(Address of principal executive offices and zip code)

(615) 234-5900

(Registrant’s telephone number, including area code)

_____________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

SGRY

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 26, 2022, there were 89,904,299 shares of the registrant’s common stock outstanding.

SURGERY PARTNERS, INC.

FORM 10-Q

TABLE OF CONTENTS


		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	20
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

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)


	(Unaudited)
	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	378.9	$	389.9
Accounts receivable	412.4		430.2
Inventories	62.9		61.1
Prepaid expenses	32.2		25.6
Other current assets	50.6		39.3
Total current assets	937.0		946.1
Property and equipment, net of accumulated depreciation of $294.6 and $272.3, respectively	778.9		629.7
Goodwill and other intangible assets, net	3,967.8		3,955.5
Investments in and advances to affiliates	94.5		88.7
Right-of-use operating lease assets	277.4		324.1
Long-term deferred tax assets	113.9		114.4
Other long-term assets	120.0		59.1
Total assets	$	6,289.5	$	6,117.6

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	122.9	$	124.9
Accrued payroll and benefits	83.8		77.1
Medicare accelerated payments and deferred governmental grants	46.5		64.4
Other current liabilities	221.1		210.0
Current maturities of long-term debt	68.0		60.4
Total current liabilities	542.3		536.8
Long-term debt, less current maturities	3,025.2		2,878.4
Right-of-use operating lease liabilities	272.1		315.6
Other long-term liabilities	95.8		87.0

Non-controlling interests—redeemable	341.5		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 - 89,904,913 and 89,332,557, respectively	0.9		0.9
Additional paid-in capital	1,625.2		1,622.3
Accumulated other comprehensive income (loss)	25.3		(31.5)
Retained deficit	(490.5)		(502.7)
Total Surgery Partners, Inc. stockholders' equity	1,160.9		1,089.0
Non-controlling interests—non-redeemable	851.7		880.6
Total stockholders' equity	2,012.6		1,969.6
Total liabilities and stockholders' equity	$	6,289.5	$	6,117.6

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, dollars in millions, except per share amounts, shares in thousands)


	Three Months Ended March 31,
	2022		2021

Revenues	$	596.2	$	512.4
Operating expenses:
Salaries and benefits	178.9		151.7
Supplies	171.6		147.3
Professional and medical fees	63.6		55.5
Lease expense	20.0		22.8
Other operating expenses	37.3		31.6
Cost of revenues	471.4		408.9
General and administrative expenses	29.5		26.8
Depreciation and amortization	27.4		25.7
Transaction and integration costs	7.1		5.3
Grant funds	(1.2)		(15.1)
Gain on disposals and deconsolidations, net	(0.1)		(0.9)
Equity in earnings of unconsolidated affiliates	(3.1)		(2.6)
Litigation settlement	(32.8)		—
Other income, net	(2.4)		—
	495.8		448.1
Operating income	100.4		64.3
Interest expense, net	(56.3)		(53.3)
Income before income taxes	44.1		11.0
Income tax expense	(1.3)		(0.2)
Net income	42.8		10.8
Less: Net income attributable to non-controlling interests	(30.6)		(31.8)
Net income (loss) attributable to Surgery Partners, Inc.	12.2		(21.0)
Less: Amounts attributable to participating securities	—		(10.3)
Net income (loss) attributable to common stockholders	$	12.2	$	(31.3)

Net income (loss) per share attributable to common stockholders
Basic	$	0.14	$	(0.57)
Diluted (1)	$	0.14	$	(0.57)
Weighted average common shares outstanding
Basic	87,995		54,773
Diluted (1)	90,272		54,773

(1) The impact of potentially dilutive securities for the three months ended March 31, 2021 was not considered because the effect would be anti-dilutive.

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, dollars in millions)


	Three Months Ended March 31,
	2022		2021

Net income	$	42.8	$	10.8
Other comprehensive income, net of tax:
Derivative activity	56.8		6.4
Comprehensive income	99.6		17.2
Less: Comprehensive income attributable to non-controlling interests	(30.6)		(31.8)
Comprehensive income (loss) attributable to Surgery Partners, Inc.	$	69.0	$	(14.6)

See notes to unaudited condensed consolidated financial statements.

Table of Contents

SURGERY PARTNERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, dollars in millions, shares in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (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)

SEC Form 10-Q filed by Surgery Partners Inc.