sgry-20230630

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 June 30, 2023

☐ 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.)

340 Seven Springs Way, Suite 600
Brentwood, Tennessee						37027
(Address of Principal Executive Offices)						(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 July 25, 2023, there were 126,498,920 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	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

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)
	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

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 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)

SEC Form 10-Q filed by Surgery Partners Inc.