sgry-20230331

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, 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 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 25, 2023, there were 126,476,669 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	25
Item 4.	Controls and Procedures	25

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28

Signatures		29

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, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	245.5	$	282.9
Accounts receivable	452.9		456.3
Inventories	71.8		71.4
Prepaid expenses	29.3		31.4
Other current assets	69.4		79.0
Total current assets	868.9		921.0
Property and equipment, net of accumulated depreciation of $382.7 and $374.3, respectively	844.3		876.6
Goodwill and other intangible assets, net	4,252.6		4,179.4
Investments in and advances to affiliates	191.6		190.3
Right-of-use operating lease assets	274.0		279.1
Long-term deferred tax assets	93.3		91.5
Other long-term assets	118.6		144.2
Total assets	$	6,643.3	$	6,682.1

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	144.4	$	151.6
Accrued payroll and benefits	67.8		68.9
Other current liabilities	200.0		210.1
Current maturities of long-term debt	62.9		62.8
Total current liabilities	475.1		493.4
Long-term debt, less current maturities	2,530.9		2,559.0
Right-of-use operating lease liabilities	268.8		271.4
Other long-term liabilities	80.2		75.4

Non-controlling interests—redeemable	345.8		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 - 126,480,483 and 125,960,834, respectively	1.3		1.3
Additional paid-in capital	2,478.1		2,478.0
Accumulated other comprehensive income	64.9		76.2
Retained deficit	(582.3)		(557.3)
Total Surgery Partners, Inc. stockholders' equity	1,962.0		1,998.2
Non-controlling interests—non-redeemable	980.5		942.7
Total stockholders' equity	2,942.5		2,940.9
Total liabilities and stockholders' equity	$	6,643.3	$	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 March 31,
	2023		2022

Revenues	$	666.2	$	596.2
Operating expenses:
Salaries and benefits	202.2		178.9
Supplies	188.4		171.6
Professional and medical fees	74.6		63.6
Lease expense	21.4		20.0
Other operating expenses	45.6		37.3
Cost of revenues	532.2		471.4
General and administrative expenses	32.0		29.5
Depreciation and amortization	33.7		27.4
Transaction and integration costs	12.5		7.1
Grant funds	(1.1)		(1.2)
Net loss (gain) on disposals, consolidations and deconsolidations	10.5		(0.1)
Equity in earnings of unconsolidated affiliates	(3.3)		(3.1)
Litigation settlements	3.0		(32.8)
Other expense (income), net	0.3		(2.4)
	619.8		495.8
Operating income	46.4		100.4
Interest expense, net	(46.8)		(56.3)
(Loss) income before income taxes	(0.4)		44.1
Income tax benefit (expense)	1.6		(1.3)
Net income	1.2		42.8
Less: Net income attributable to non-controlling interests	(26.1)		(30.6)
Net (loss) income attributable to Surgery Partners, Inc.	$	(24.9)	$	12.2

Net (loss) income per share attributable to common stockholders
Basic	$	(0.20)	$	0.14
Diluted (1)	$	(0.20)	$	0.14
Weighted average common shares outstanding
Basic	125,206		87,995
Diluted (1)	125,206		90,272

(1) The impact of potentially dilutive securities for the three months ended March 31, 2023 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,
	2023		2022

Net income	$	1.2	$	42.8
Other comprehensive (loss) income, net of tax:
Derivative activity, net of tax of $0	(11.3)		56.8
Comprehensive (loss) income	(10.1)		99.6
Less: Comprehensive income attributable to non-controlling interests	(26.1)		(30.6)
Comprehensive (loss) income attributable to Surgery Partners, Inc.	$	(36.2)	$	69.0

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 (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


Balance at December 31, 2022	125,961	$	1.3	$	2,478.0	$	76.2	$	(557.3)	$	942.7	$	2,940.9
Net (loss) income	—

SEC Form 10-Q filed by Surgery Partners Inc.