Surgery Partners, Inc. (NASDAQ:SGRY) ("Surgery Partners" or
the "Company"), a leading provider of surgical services, today
announced results for the third quarter
ended September 30, 2017.
- Revenues increased 8.4% compared to third quarter 2016 to
$306.3 million
- Normalized same-facility revenues increased 2.9% compared to
third quarter 2016
- Net loss before income taxes was $19.2 million compared to
income before income taxes of $12.6 million in the third quarter
2016
- Normalized Adjusted EBITDA was $43.1 million, compared to $44.7
million in the third quarter 2016
- Diluted EPS of $(0.66) per share compared to $(0.05) per share
in the third quarter 2016
“Although the quarter and near term outlook were impacted by
certain industry headwinds and the recent hurricanes, with the
integration of NSH we move towards 2018 with a larger, more
diversified business focused on delivering high quality, cost
effective surgical procedures to a growing number of patients,
payors and providers. While we were pleased to see normalized
same-facility revenue growth over the prior year, we have launched
specific initiatives to accelerate same-facility case growth, and
improve margins including implementing procurement optimization
programs. We are confident we will enter 2018 with a stronger
business capable of delivering improved, sustainable long-term
financial performance,” said Clifford Adlerz, Interim CEO of
Surgery Partners.
Adlerz added, “We continue to believe that the trend in surgical
procedures moving towards high quality, more cost-effective
settings remains a long-term growth driver for Surgery Partners.
The Company remains well capitalized to take advantage of the
underlying trends in the industry and fund both organic growth
initiatives and accretive acquisitions. To further advance
our leadership position in the industry, we will remain focused on
providing high quality, cost effective solutions for surgical
procedures and continue our focus on identifying opportunities to
optimize our business.”
As of September 30, 2017, the Company owned or operated 124
surgical facilities primarily in partnership with physicians and,
on a select basis, physicians and health systems, in addition to a
network of 60 physician practices.
Third Quarter 2017 Results
Total revenues for the third quarter of 2017 increased 8.4% to
$306.3 million from $282.7 million for the third quarter of 2016.
On a normalized basis and including the pro forma effect of the NSH
acquisition, same-facility revenues for the third quarter of 2017
increased 2.9% over the same period last year. Same facility
revenue per case increased 3.3% and same facility cases decreased
0.3%.
For the third quarter of 2017, the Company’s net loss
attributable to Surgery Partners was $13.6 million compared to $2.3
million for the same period last year. For the third quarter of
2017, the Company's Normalized Adjusted EBITDA was $43.1 million
compared to $44.7 million for the same period last year.
Year to Date 2017 Results
Total revenues year to date 2017 increased 4.9% to $880.9
million from $839.4 million for the same period last year. On a
normalized basis and including the pro forma effect of the NSH
acquisition, same facility revenues increased 5.7% year to date.
Year to date, same facility revenue per case increased 4.3% and
same facility cases increased 1.3%.
.For year to date 2017, the Company’s net loss attributable to
Surgery Partners was $20.8 million compared to $7.4 million for the
same period last year. For year to date 2017, the Company's
Normalized Adjusted EBITDA was $120.3 million compared to $129.2
million for the same period last year.
Liquidity
Surgery Partners had cash and cash equivalents of $199.7 million
at September 30, 2017 and $75 million of undrawn revolver
capacity. Net operating cash flow, including operating cash flow
less distributions to non-controlling interests and adjusting for
merger related and tax receivable payments of $15.2 million, was
$5.3 million for the third quarter of 2017. The Company’s ratio of
total debt to EBITDA at the end of the third quarter of 2017, as
calculated under the Company’s credit agreement, was 6.8x.
Full Year 2017 Guidance
For 2017, as a result of the continuation of broader industry
softness related to residual effects of the hurricanes as well as
the ongoing impact of slower volumes and a less favorable payor
mix, the Company’s 2017 guidance ranges for the year have been
updated from the range issued in our second quarter earnings press
release. Including the partial year impact of the NSH acquisition,
which is performing as anticipated, revenue is now expected in the
range of $1.30 billion to $1.33 billion and Adjusted
EBITDA in the range of $178 million to $185 million which
includes the normalization for the impact of hurricanes and the
reserve adjustment.
Conference Call Information
Surgery Partners will hold its conference call tomorrow,
November 9, 2017 at 8:30 a.m. (Eastern Time). The conference call
can be accessed live over the phone by dialing 1-877-407-0792, or
for international callers, 1-201-689-8263. A replay will be
available two hours after the call and can be accessed by dialing
1-844-512-2921 or for international callers, 1-412-317-6671. The
passcode for the live call and the replay is 13667317. The replay
will be available until November 23, 2017.
Interested investors and other parties may also listen to a
simultaneous webcast of the conference call by logging onto the
Investor Relations section of the Company's website at
www.surgerypartners.com. The on-line replay will remain available
for a limited time beginning immediately following the call.
To learn more about Surgery Partners, please visit the Company's
website at www.surgerypartners.com. Surgery Partners uses its
website as a channel of distribution for material Company
information. Financial and other material information regarding
Surgery Partners is routinely posted on the Company's website and
is readily accessible.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements, which have been included in reliance of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, involve risks and uncertainties and assumptions
relating to our operations, financial condition, business,
prospects, growth strategy and liquidity, which may cause our
actual results to differ materially from those projected by such
forward-looking statements, and the Company cannot give assurances
that such statements will prove to be correct. You can identify
forward-looking statements because they do not relate strictly to
historical or current facts. These statements may include words
such as “aim,” “anticipate,” “believe,” “estimate,” “expect,”
“forecast,” “outlook,” “potential,” “project,” “projection,”
“plan,” “intend,” “seek,” “may,” “could,” “would,” “will,”
“should,” “can,” “can have,” “likely,” the negatives thereof and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events.
The forward-looking statements appear in a number of places
throughout this press release and include statements regarding our
intentions, beliefs or current expectations concerning, among other
things, our results of operations, financial condition, liquidity,
prospects, growth, strategies and the industry in which we operate.
All forward-looking statements are subject to risks and
uncertainties, including but not limited to those risks and
uncertainties described in “Risk Factors” in our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2017 that may cause
actual results to differ materially from those that we
expected.
The forward-looking statements made in this press release are
made only as of the date of the hereof. Except as required by law,
we undertake no obligation to update any forward-looking statement,
whether as a result of new information or otherwise. More
information about potential factors that could affect our business
and financial results is included in our filings with
the Securities and Exchange Commission.
Use of Non-GAAP Financial Measures
In addition to the results prepared in accordance with generally
accepted accounting principles in the United
States ("GAAP") provided throughout this press release,
Surgery Partners has presented the following non-GAAP financial
measures: Normalized Revenues, EBITDA, Adjusted EBITDA and
Normalized Adjusted EBITDA, which exclude various items detailed in
the attached "Reconciliation of Non-GAAP Financial Measures".
These non-GAAP financial measures are not intended to replace
financial performance measures determined in accordance with GAAP.
Rather, they are presented as supplemental measures of the
Company's performance that management believes may enhance the
evaluation of the Company's ongoing operating results. These
non-GAAP financial measures are not presented in accordance with
GAAP, and the Company’s computation of these non-GAAP financial
measures may vary from those used by other companies. These
measures have limitations as an analytical tool, and should not be
considered in isolation or as a substitute or alternative to net
income or loss, operating income or loss, cash flows from operating
activities, total indebtedness or any other measures of operating
performance, liquidity or indebtedness derived in accordance with
GAAP.
About Surgery Partners
Headquartered in Nashville, Tennessee, Surgery Partners is a
leading healthcare services company with a differentiated
outpatient delivery model focused on providing high quality, cost
effective solutions for surgical and related ancillary care in
support of both patients and physicians. Founded in 2004, Surgery
Partners is one of the largest and fastest growing surgical
services businesses in the country, with more than 150 locations in
29 states, including ambulatory surgery centers, surgical
hospitals, a diagnostic laboratory, multi-specialty physician
practices and urgent care facilities.
|
SURGERY PARTNERS, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Amounts in thousands, except shares and per
share amounts) |
(Unaudited) |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
306,337 |
|
|
$ |
282,682 |
|
|
$ |
880,873 |
|
|
$ |
839,437 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Salaries
and benefits |
|
103,024 |
|
|
85,724 |
|
|
282,933 |
|
|
266,401 |
|
Supplies |
|
83,106 |
|
|
65,907 |
|
|
228,350 |
|
|
196,484 |
|
Professional and medical fees |
|
25,483 |
|
|
20,856 |
|
|
69,185 |
|
|
60,813 |
|
Lease
expense |
|
16,061 |
|
|
13,204 |
|
|
43,361 |
|
|
38,712 |
|
Other
operating expenses |
|
19,022 |
|
|
15,703 |
|
|
51,267 |
|
|
44,539 |
|
Cost of
revenues |
|
246,696 |
|
|
201,394 |
|
|
675,096 |
|
|
606,949 |
|
General
and administrative expenses (1) |
|
20,378 |
|
|
14,985 |
|
|
54,574 |
|
|
42,205 |
|
Depreciation and amortization |
|
10,929 |
|
|
9,713 |
|
|
33,454 |
|
|
28,984 |
|
Provision
for doubtful accounts |
|
8,524 |
|
|
8,514 |
|
|
19,987 |
|
|
15,931 |
|
Income
from equity investments |
|
(1,608 |
) |
|
(1,167 |
) |
|
(3,860 |
) |
|
(3,007 |
) |
Loss on
disposal or impairment of long-lived assets, net |
|
447 |
|
|
572 |
|
|
2,048 |
|
|
1,697 |
|
Merger
transaction and integration costs |
|
5,326 |
|
|
1,864 |
|
|
8,567 |
|
|
6,361 |
|
Loss on
debt refinancing |
|
18,211 |
|
|
3,595 |
|
|
18,211 |
|
|
11,876 |
|
Gain on
litigation settlement |
|
— |
|
|
— |
|
|
(3,794 |
) |
|
— |
|
Gain on
acquisition escrow |
|
(1,000 |
) |
|
— |
|
|
(1,000 |
) |
|
— |
|
Electronic health records incentive expense (income) |
|
4 |
|
|
364 |
|
|
(298 |
) |
|
269 |
|
Other
(income) expense |
|
— |
|
|
— |
|
|
(2 |
) |
|
97 |
|
Total
operating expenses |
|
307,907 |
|
|
239,834 |
|
|
802,983 |
|
|
711,362 |
|
Operating
income (loss) |
|
(1,570 |
) |
|
42,848 |
|
|
77,890 |
|
|
128,075 |
|
Gain on amendment to
tax receivable agreement |
|
16,392 |
|
|
— |
|
|
16,392 |
|
|
— |
|
Tax receivable
agreement expense |
|
— |
|
|
(3,733 |
) |
|
— |
|
|
(3,733 |
) |
Interest expense,
net |
|
(34,030 |
) |
|
(26,475 |
) |
|
(84,812 |
) |
|
(74,863 |
) |
(Loss)
income before income taxes |
|
(19,208 |
) |
|
12,640 |
|
|
9,470 |
|
|
49,479 |
|
Income tax (benefit)
expense |
|
(20,929 |
) |
|
(1,694 |
) |
|
(18,300 |
) |
|
2,496 |
|
Net
(loss) income |
|
1,721 |
|
|
14,334 |
|
|
27,770 |
|
|
46,983 |
|
Less: Net income
attributable to non-controlling interests |
|
(15,305 |
) |
|
(16,672 |
) |
|
(48,579 |
) |
|
(54,392 |
) |
Net loss
attributable to Surgery Partners, Inc. |
|
$ |
(13,584 |
) |
|
$ |
(2,338 |
) |
|
$ |
(20,809 |
) |
|
$ |
(7,409 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share
attributable to common stockholders (2) |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.66 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.81 |
) |
|
$ |
(0.15 |
) |
Diluted
(3) |
|
$ |
(0.66 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.81 |
) |
|
$ |
(0.15 |
) |
Weighted average common
shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
48,203,265 |
|
|
48,019,652 |
|
|
48,143,359 |
|
|
48,018,706 |
|
Diluted
(3) |
|
48,203,265 |
|
|
48,019,652 |
|
|
48,143,359 |
|
|
48,018,706 |
|
(1) Includes contingent acquisition compensation expense of $1.8
million and $1.5 million for the three months ended
September 30, 2017 and 2016, respectively, and $5.7 million
and $3.1 million for the nine months ended September 30, 2017
and 2016, respectively.
(2) Earnings per share reflects the reduction of net loss to
common shareholders of a preferred dividend of $2.6 million and a
redemption adjustment of $15.6 million allocated to the
participating securities.
(3) The impact of potentially dilutive securities for all
periods presented was not considered because the effect would be
anti-dilutive in those periods.
|
|
SURGERY PARTNERS, INC. |
Unaudited Selected Financial and Operating
Data |
(Amounts in thousands, except shares
and per share amounts) |
|
|
September 30, 2017 |
|
December 31, 2016 |
|
|
|
|
Balance Sheet
Data (at period end): |
|
|
|
Cash and cash
equivalents |
$ |
199,701 |
|
|
$ |
69,699 |
|
Total current
assets |
573,659 |
|
|
361,955 |
|
Total assets |
4,601,854 |
|
|
2,304,958 |
|
|
|
|
|
Current maturities of
long-term debt |
48,472 |
|
|
27,822 |
|
Total current
liabilities |
275,012 |
|
|
186,725 |
|
Long-term debt, less
current maturities |
2,144,862 |
|
|
1,414,421 |
|
Total liabilities |
2,624,421 |
|
|
1,799,763 |
|
|
|
|
|
Total Surgery Partners,
Inc. stockholders' equity |
695,402 |
|
|
9,677 |
|
Non-controlling
interests-non-redeemable |
683,733 |
|
|
314,997 |
|
Total stockholders'
equity |
1,379,135 |
|
|
324,674 |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
Cash Flow
Data: |
|
|
|
|
|
|
|
Net cash provided by
(used in): |
|
|
|
|
|
|
|
Operating
activities |
$ |
10,025 |
|
|
$ |
18,826 |
|
|
$ |
66,496 |
|
|
$ |
92,863 |
|
Investing
activities |
(718,364 |
) |
|
(21,028 |
) |
|
(747,559 |
) |
|
(154,395 |
) |
Capital
expenditures |
(5,511 |
) |
|
(8,027 |
) |
|
(20,613 |
) |
|
(28,377 |
) |
Investments in new businesses |
(712,853 |
) |
|
(13,001 |
) |
|
(727,016 |
) |
|
(126,018 |
) |
Financing
activities |
851,006 |
|
|
5,812 |
|
|
811,065 |
|
|
58,808 |
|
Distributions to non-controlling interests |
(19,946 |
) |
|
(17,081 |
) |
|
(56,787 |
) |
|
(49,443 |
) |
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Other
Data: |
|
|
|
|
|
|
|
Number of surgical
facilities as of the end of period |
124 |
|
|
104 |
|
|
124 |
|
|
104 |
|
Number of consolidated
surgical facilities as of the end of period |
109 |
|
|
93 |
|
|
109 |
|
|
93 |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
306,337 |
|
|
$ |
282,682 |
|
|
$ |
880,873 |
|
|
$ |
839,437 |
|
Cases |
111,674 |
|
|
106,821 |
|
|
332,261 |
|
|
315,508 |
|
Revenue per case |
$ |
2,743 |
|
|
$ |
2,646 |
|
|
$ |
2,651 |
|
|
$ |
2,661 |
|
Normalized
Revenues |
$ |
329,909 |
|
|
$ |
282,682 |
|
|
$ |
904,445 |
|
|
$ |
839,437 |
|
Adjusted EBITDA |
$ |
23,244 |
|
|
$ |
44,748 |
|
|
$ |
100,406 |
|
|
$ |
129,205 |
|
Adjusted EBITDA as a %
of revenues |
7.6 |
% |
|
15.8 |
% |
|
11.4 |
% |
|
15.4 |
% |
Normalized Adjusted
EBITDA |
$ |
43,112 |
|
|
$ |
44,748 |
|
|
$ |
120,274 |
|
|
$ |
129,205 |
|
Normalized Adjusted
EBITDA as a % of revenues |
14.1 |
% |
|
15.8 |
% |
|
13.7 |
% |
|
15.4 |
% |
Adjusted EPS-
Basic |
(0.02 |
) |
|
0.21 |
|
|
0.01 |
|
|
0.48 |
|
Adjusted EPS-
Diluted |
(0.02 |
) |
|
0.21 |
|
|
0.01 |
|
|
0.47 |
|
SURGERY PARTNERS, INC. |
Supplemental Information |
(Unaudited, in thousands, except cases
and growth rates) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Same-facility
Information: |
|
|
|
|
|
|
|
Cases (3) (4) |
138,798 |
|
|
139,247 |
|
|
410,331 |
|
|
405,051 |
|
Case growth |
(0.3 |
)% |
|
N/A |
|
|
1.3 |
% |
|
N/A |
|
Revenue per case (3)
(4) |
$ |
3,245 |
|
|
$ |
3,143 |
|
|
$ |
3,263 |
|
|
$ |
3,128 |
|
Revenue per case
growth |
3.3 |
% |
|
N/A |
|
|
4.3 |
% |
|
N/A |
|
(3) Same-facility revenues include revenues from our
consolidated and non-consolidated surgical facilities (excluding
facilities acquired in new markets or divested during the current
and prior periods) along with the revenues from our ancillary
services comprised of a diagnostic laboratory, multi-specialty
physician practices, urgent care facilities, anesthesia services,
optical services and specialty pharmacy services that complement
our surgical facilities in our existing markets.(4) The
normalization impact of the hurricanes and the non-recurring
adjustment to revenue on the same-facility information above was
$23.6 million in revenues and 2,828 cases for both the three and
nine months ended September 30, 2017.
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Segment
Revenues: |
|
|
|
|
|
|
|
|
Surgical facility
services |
|
$ |
293,360 |
|
|
$ |
256,795 |
|
|
$ |
814,320 |
|
|
$ |
766,248 |
|
Ancillary services |
|
10,184 |
|
|
22,684 |
|
|
58,036 |
|
|
62,967 |
|
Optical services |
|
2,793 |
|
|
3,203 |
|
|
8,517 |
|
|
10,222 |
|
Total
revenues |
|
$ |
306,337 |
|
|
$ |
282,682 |
|
|
$ |
880,873 |
|
|
$ |
839,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
Surgical facility
services |
|
$ |
48,673 |
|
|
$ |
53,347 |
|
|
$ |
146,859 |
|
|
$ |
153,318 |
|
Ancillary services |
|
(12,002 |
) |
|
2,573 |
|
|
(7,791 |
) |
|
9,141 |
|
Optical services |
|
748 |
|
|
1,276 |
|
|
2,407 |
|
|
3,004 |
|
All other |
|
(14,175 |
) |
|
(12,448 |
) |
|
(41,069 |
) |
|
(36,258 |
) |
Total
adjusted EBITDA |
|
23,244 |
|
|
44,748 |
|
|
100,406 |
|
|
129,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SURGERY PARTNERS,
INC.Reconciliation of Non-GAAP Financial
Measures(Unaudited, Amounts in
thousands)
The following table reconciles normalized
revenues to revenues, the most directly comparable U.S. GAAP
financial measure:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Condensed
Consolidated Statements of Operations Data: |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
306,337 |
|
|
$ |
282,682 |
|
|
$ |
880,873 |
|
|
$ |
839,437 |
|
Hurricane
estimated impact |
|
8,000 |
|
|
— |
|
|
8,000 |
|
|
— |
|
Reserve
adjustment |
|
15,572 |
|
|
— |
|
|
15,572 |
|
|
— |
|
Normalized
Revenues |
|
$ |
329,909 |
|
|
$ |
282,682 |
|
|
$ |
904,445 |
|
|
$ |
839,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles Normalized
Adjusted EBITDA and Adjusted EBITDA to income before income taxes
in the reported condensed consolidated financial information, the
most directly comparable U.S. GAAP financial measure:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
Normalized
Adjusted EBITDA |
|
$ |
43,112 |
|
|
$ |
44,748 |
|
|
$ |
120,274 |
|
|
$ |
129,205 |
|
Hurricane
estimated impact |
|
(5,000 |
) |
|
— |
|
|
(5,000 |
) |
|
— |
|
Reserve
adjustment |
|
(14,868 |
) |
|
— |
|
|
(14,868 |
) |
|
— |
|
Adjusted EBITDA
(5) |
|
23,244 |
|
|
44,748 |
|
|
100,406 |
|
|
129,205 |
|
|
|
|
|
|
|
|
|
|
Net
income attributable to non-controlling interests |
|
15,305 |
|
|
16,672 |
|
|
48,579 |
|
|
54,392 |
|
Depreciation and amortization |
|
(10,929 |
) |
|
(9,713 |
) |
|
(33,454 |
) |
|
(28,984 |
) |
Interest
expense, net |
|
(34,030 |
) |
|
(26,475 |
) |
|
(84,812 |
) |
|
(74,863 |
) |
Non-cash
stock compensation expense |
|
(3,311 |
) |
|
(691 |
) |
|
(5,380 |
) |
|
(1,326 |
) |
Contingent acquisition compensation expense |
|
(1,815 |
) |
|
(1,530 |
) |
|
(5,662 |
) |
|
(3,060 |
) |
Merger
transaction, integration and practice acquisition costs (6) |
|
(6,406 |
) |
|
(2,471 |
) |
|
(11,134 |
) |
|
(8,579 |
) |
Gain on
litigation settlement |
|
— |
|
|
— |
|
|
3,794 |
|
|
— |
|
Gain on
acquisition escrow |
|
1,000 |
|
|
— |
|
|
1,000 |
|
|
— |
|
Loss on
disposal or impairment of long-lived assets, net |
|
(447 |
) |
|
(572 |
) |
|
(2,048 |
) |
|
(1,697 |
) |
Gain on
amendment to tax receivable agreement |
|
16,392 |
|
|
— |
|
|
16,392 |
|
|
— |
|
Tax
receivable agreement expense |
|
— |
|
|
(3,733 |
) |
|
— |
|
|
(3,733 |
) |
Loss on
debt refinancing |
|
(18,211 |
) |
|
(3,595 |
) |
|
(18,211 |
) |
|
(11,876 |
) |
Income before
income taxes |
|
$ |
(19,208 |
) |
|
$ |
12,640 |
|
|
$ |
9,470 |
|
|
$ |
49,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5) The above table reconciles Adjusted EBITDA to income before
income taxes as reflected in the unaudited condensed consolidated
statements of operations.
When we use the term “Adjusted EBITDA,” it is referring to
income before income taxes minus (a) net income attributable
to non-controlling interests plus (b) depreciation and
amortization, (c) interest expense, net, (d) non-cash stock
compensation expense, (e) contingent acquisition compensation
expense, (f) merger transaction, integration and practice
acquisition costs, minus (g) gain on litigation settlement, plus
(h) loss on disposal or impairment of long-lived assets and (i)
loss on debt refinancing. We use Adjusted EBITDA as a measure of
financial performance. Adjusted EBITDA is a key measure used by
management to assess operating performance, make business decisions
and allocate resources. Non-controlling interests represent the
interests of third parties, such as physicians, and in some cases,
healthcare systems that own an interest in surgical facilities that
we consolidate for financial reporting purposes. We believe that it
is helpful to investors to present Adjusted EBITDA as defined above
because it excludes the portion of net income attributable to these
third-party interests and clarifies for investors our portion of
Adjusted EBITDA generated by its surgical facilities and other
operations.
Adjusted EBITDA is not a measurement of
financial performance under GAAP, and should not be considered in
isolation or as a substitute for net income, operating income or
any other measure calculated in accordance with generally accepted
accounting principles. The items excluded from Adjusted EBITDA are
significant components in understanding and evaluating our
financial performance. We believe such adjustments are appropriate,
as the magnitude and frequency of such items can vary significantly
and are not related to the assessment of normal operating
performance. Our calculation of Adjusted EBITDA may not be
comparable to similarly titled measures reported by other
companies.
(6) This amount includes merger transaction and integration
costs of $5.3 million and $1.9 million for the three months ended
September 30, 2017 and 2016, respectively, and practice
acquisition costs of $1.1 million and $607,000 for the three months
ended September 30, 2017 and 2016, respectively.
This amount includes merger transaction and
integration costs of $8.6 million and $6.4 million for the nine
months ended September 30, 2017 and 2016, respectively, and
practice acquisition costs of $2.6 million and $2.2 million for the
nine months ended September 30, 2017 and 2016,
respectively.
SURGERY PARTNERS,
INC.Reconciliation of Non-GAAP Financial
Measures(Unaudited, Amounts in
thousands)
From time to time, the Company incurs certain non-recurring
gains or losses that are normally nonoperational in nature and that
it does not consider relevant in assessing its ongoing operating
performance. When significant, Surgery Partners’ management and
Board of Directors typically exclude these gains or losses when
evaluating the Company’s operating performance and in certain
instances when evaluating performance for incentive compensation
purposes. Additionally, the Company believes that certain investors
and equity analysts exclude these or similar items when evaluating
the Company’s current or future operating performance and in making
informed investment decisions regarding the Company. Accordingly,
the Company provides adjusted net income per share attributable to
Surgery Partners, Inc. stockholders as a supplement to its
comparable GAAP measure of net income per share attributable to
Surgery Partners, Inc. Adjusted net income per share attributable
to Surgery Partners, Inc. stockholders should not be considered a
measure of financial performance under GAAP, and the items excluded
from adjusted net income per share attributable to Surgery
Partners, Inc. stockholders are significant components in
understanding and assessing financial performance. Adjusted net
income per share attributable to Surgery Partners, Inc.
stockholders should not be considered in isolation or as an
alternative to net income per share attributable to Surgery
Partners, Inc. stockholders as presented in the consolidated
financial statements.
The following table reconciles net income as reflected in the
consolidated statements of operations to adjusted net income used
to calculate adjusted net income per share attributable to Surgery
Partners, Inc. stockholders:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Consolidated
Statements of Operations Data: |
|
|
|
|
|
|
|
|
Net
Income |
|
$ |
1,721 |
|
|
$ |
14,334 |
|
|
$ |
27,770 |
|
|
$ |
46,983 |
|
Less: |
|
|
|
|
|
|
|
|
Net
income attributable to non-controlling interests |
|
15,305 |
|
|
16,672 |
|
|
48,579 |
|
|
54,392 |
|
Plus: |
|
|
|
|
|
|
|
|
Non-cash
stock compensation expense |
|
3,311 |
|
|
691 |
|
|
5,380 |
|
|
1,326 |
|
Contingent acquisition compensation expense |
|
1,815 |
|
|
1,530 |
|
|
5,662 |
|
|
3,060 |
|
Merger
transaction, integration and practice acquisition costs |
|
6,406 |
|
|
2,471 |
|
|
11,134 |
|
|
8,579 |
|
Gain on
litigation settlement |
|
— |
|
|
— |
|
|
(3,794 |
) |
|
— |
|
Gain on
acquisition escrow |
|
(1,000 |
) |
|
— |
|
|
(1,000 |
) |
|
— |
|
Loss on
disposal or impairment of long-lived assets, net |
|
447 |
|
|
572 |
|
|
2,048 |
|
|
1,697 |
|
Gain on
amendment to tax receivable agreement |
|
(16,392 |
) |
|
— |
|
|
(16,392 |
) |
|
— |
|
Tax
receivable agreement expense |
|
— |
|
|
3,733 |
|
|
— |
|
|
3,733 |
|
Loss on
debt refinancing |
|
18,211 |
|
|
3,595 |
|
|
18,211 |
|
|
11,876 |
|
Adjusted net
(loss) income |
|
$ |
(786 |
) |
|
$ |
10,254 |
|
|
$ |
440 |
|
|
$ |
22,862 |
|
|
|
|
|
|
|
|
|
|
Adjusted net
(loss) income per share (6) |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.02 |
) |
|
$ |
0.21 |
|
|
$ |
0.01 |
|
|
$ |
0.48 |
|
Diluted
(7) |
|
$ |
(0.02 |
) |
|
$ |
0.21 |
|
|
$ |
0.01 |
|
|
$ |
0.47 |
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
48,203,265 |
|
|
48,019,652 |
|
|
48,143,359 |
|
|
48,018,706 |
|
Diluted
(7) |
|
48,203,265 |
|
|
48,329,783 |
|
|
48,250,051 |
|
|
48,197,585 |
|
(6) Adjusted net loss per share during the three and nine months
ended September 30, 2017 excludes the impact of the preferred
dividend of $2.6 million and a redemption adjustment of $15.6
million allocated to the participating securities.(7) The impact of
potentially dilutive securities for the three and nine months ended
September 30, 2017 was not considered because the effect would be
anti-dilutive in each of those periods.
In connection with the Preferred Private
Placement and the Private Sale, as previously disclosed on Form 8-K
filed with the Securities and Exchange Commission on September 1,
2017, the Company elected to apply “pushdown” accounting with the
change of control effective August 31, 2017, by applying the
guidance in Accounting Standards Codification Topic ("ASC") 805,
Business Combinations. Accordingly, the condensed consolidated
financial statements of the Company for periods before and after
August 31, 2017 will reflect different bases of accounting, and the
financial positions and results of operations of those periods are
not comparable. Throughout the Company's condensed consolidated
financial statements and the accompanying notes therein to be filed
on November 9, 2017, periods prior to the change of control are
identified as "Predecessor" and periods after the change of control
are identified as "Successor."
The following table reconciles the consolidated statement of
operations for the three and nine months ended September 30, 2017
presented above, to the Successor and Predecessor periods:
|
|
Successor |
|
|
|
Predecessor |
|
|
September 1 to September 30, |
|
|
|
July 1 to August 31, |
|
January 1 to August 31, |
|
|
2017 |
|
|
|
2017 |
|
2017 |
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
132,258 |
|
|
|
|
$ |
174,079 |
|
|
$ |
748,615 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
Salaries
and benefits |
|
41,784 |
|
|
|
|
61,240 |
|
|
241,149 |
|
Supplies |
|
35,028 |
|
|
|
|
48,078 |
|
|
193,322 |
|
Professional and medical fees |
|
11,254 |
|
|
|
|
14,229 |
|
|
57,931 |
|
Lease
expense |
|
6,858 |
|
|
|
|
9,203 |
|
|
36,503 |
|
Other
operating expenses |
|
8,000 |
|
|
|
|
11,022 |
|
|
43,267 |
|
Cost of
revenues |
|
102,924 |
|
|
|
|
143,772 |
|
|
572,172 |
|
General
and administrative expenses (1) |
|
7,777 |
|
|
|
|
12,601 |
|
|
46,797 |
|
Depreciation and amortization |
|
3,330 |
|
|
|
|
7,599 |
|
|
30,124 |
|
Provision
for doubtful accounts |
|
3,690 |
|
|
|
|
4,834 |
|
|
16,297 |
|
Income
from equity investments |
|
(712 |
) |
|
|
|
(896 |
) |
|
(3,148 |
) |
Loss on
disposal or impairment of long-lived assets, net |
|
333 |
|
|
|
|
114 |
|
|
1,715 |
|
Merger
transaction and integration costs |
|
2,983 |
|
|
|
|
2,343 |
|
|
5,584 |
|
Loss on
debt refinancing |
|
— |
|
|
|
|
18,211 |
|
|
18,211 |
|
Gain on
litigation settlement |
|
— |
|
|
|
|
— |
|
|
(3,794 |
) |
Gain on
acquisition escrow release |
|
— |
|
|
|
|
(1,000 |
) |
|
(1,000 |
) |
Electronic health records incentive expense (income) |
|
7 |
|
|
|
|
(3 |
) |
|
(305 |
) |
Other
(income) expense |
|
— |
|
|
|
|
— |
|
|
(2 |
) |
Total
operating expenses |
|
120,332 |
|
|
|
|
187,575 |
|
|
682,651 |
|
Operating
income (loss) |
|
11,926 |
|
|
|
|
(13,496 |
) |
|
65,964 |
|
Gain on amendment to
tax receivable agreement |
|
1,098 |
|
|
|
|
15,294 |
|
|
15,294 |
|
Tax receivable
agreement expense |
|
— |
|
|
|
|
— |
|
|
— |
|
Interest expense,
net |
|
(15,883 |
) |
|
|
|
(18,147 |
) |
|
(68,929 |
) |
(Loss)
income before income taxes |
|
(2,859 |
) |
|
|
|
(16,349 |
) |
|
12,329 |
|
Income tax (benefit)
expense |
|
(211 |
) |
|
|
|
(20,718 |
) |
|
(18,089 |
) |
Net
(loss) income |
|
(2,648 |
) |
|
|
|
4,369 |
|
|
30,418 |
|
Less: Net income
attributable to non-controlling interests |
|
(6,492 |
) |
|
|
|
(8,813 |
) |
|
(42,087 |
) |
Net loss
attributable to Surgery Partners, Inc. |
|
$ |
(9,140 |
) |
|
|
|
$ |
(4,444 |
) |
|
$ |
(11,669 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share
attributable to common stockholders (2) |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.57 |
) |
|
|
|
$ |
(0.09 |
) |
|
$ |
(0.24 |
) |
Diluted
(3) |
|
$ |
(0.57 |
) |
|
|
|
$ |
(0.09 |
) |
|
$ |
(0.24 |
) |
Weighted average common
shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
48,314,746 |
|
|
|
|
48,146,611 |
|
|
48,121,404 |
|
Diluted
(3) |
|
48,314,746 |
|
|
|
|
48,146,611 |
|
|
48,121,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the selected cash flow data for
the three and nine months ended September 30, 2017 as presented
above to the Successor and Predecessor periods:
|
|
Successor |
|
|
|
Predecessor |
|
|
September 1 to September 30, |
|
|
|
July 1 to August 31, |
|
January 1 to August 31, |
|
|
2017 |
|
|
|
2017 |
|
2017 |
|
|
|
|
|
|
|
|
|
Cash Flow
Data: |
|
|
|
|
|
|
|
|
Net cash provided by
(used in): |
|
|
|
|
|
|
|
|
Operating
activities |
|
$ |
(1,222 |
) |
|
|
|
$ |
11,247 |
|
|
$ |
67,718 |
|
Investing
activities |
|
(3,003 |
) |
|
|
|
(715,361 |
) |
|
(744,556 |
) |
Capital
expenditures |
|
(1,840 |
) |
|
|
|
(3,671 |
) |
|
(18,773 |
) |
Investments in new businesses |
|
(1,163 |
) |
|
|
|
(711,690 |
) |
|
(725,853 |
) |
Financing
activities |
|
(10,280 |
) |
|
|
|
861,286 |
|
|
821,345 |
|
Distributions to non-controlling interests |
|
(6,444 |
) |
|
|
|
(13,502 |
) |
|
(50,343 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles the segment revenues for the
three and nine months ended September 30, 2017 as presented above
to the Successor and Predecessor periods:
|
|
Successor |
|
|
|
Predecessor |
|
|
September 1 to September 30, |
|
|
|
July 1 to August 31, |
|
January 1 to August 31, |
|
|
2017 |
|
|
|
2017 |
|
2017 |
Revenues: |
|
|
|
|
|
|
|
|
Surgical facility
services |
|
$ |
125,595 |
|
|
|
|
$ |
167,765 |
|
|
$ |
688,725 |
|
Ancillary services |
|
5,775 |
|
|
|
|
4,409 |
|
|
52,261 |
|
Optical services |
|
888 |
|
|
|
|
1,905 |
|
|
7,629 |
|
Total
revenues |
|
$ |
132,258 |
|
|
|
|
$ |
174,079 |
|
|
$ |
748,615 |
|
|
The following table reconciles the segment Adjusted EBITDA table
for the three and nine months ended September 30, 2017 as presented
above to the Successor and Predecessor periods:
|
|
Successor |
|
|
|
Predecessor |
|
|
September 1 to September 30, |
|
|
|
July 1 to August 31, |
|
January 1 to August 31, |
|
|
2017 |
|
|
|
2017 |
|
2017 |
Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
Surgical facility
services |
|
$ |
20,947 |
|
|
|
|
$ |
27,726 |
|
|
$ |
125,912 |
|
Ancillary services |
|
(1,265 |
) |
|
|
|
(10,737 |
) |
|
(6,526 |
) |
Optical services |
|
193 |
|
|
|
|
555 |
|
|
2,214 |
|
All other |
|
(5,033 |
) |
|
|
|
(9,142 |
) |
|
(36,036 |
) |
Total Adjusted
EBITDA |
|
14,842 |
|
|
|
|
8,402 |
|
|
85,564 |
|
|
|
|
|
|
|
|
|
|
Net income attributable
to non-controlling interests |
|
6,492 |
|
|
|
|
8,813 |
|
|
42,087 |
|
Depreciation and
amortization |
|
(3,330 |
) |
|
|
|
(7,599 |
) |
|
(30,124 |
) |
Interest expense,
net |
|
(15,883 |
) |
|
|
|
(18,147 |
) |
|
(68,929 |
) |
Non-cash stock
compensation expense |
|
(1,683 |
) |
|
|
|
(1,628 |
) |
|
(3,697 |
) |
Contingent acquisition
compensation expense |
|
(605 |
) |
|
|
|
(1,210 |
) |
|
(5,057 |
) |
Merger transaction,
integration and practice acquisition costs (1) |
|
(3,457 |
) |
|
|
|
(2,949 |
) |
|
(7,677 |
) |
Gain on litigation
settlement |
|
— |
|
|
|
|
— |
|
|
3,794 |
|
Gain on acquisition
escrow release |
|
— |
|
|
|
|
1,000 |
|
|
1,000 |
|
Loss on disposal or
impairment of long-lived assets, net |
|
(333 |
) |
|
|
|
(114 |
) |
|
(1,715 |
) |
Gain on amendment to
tax receivable agreement |
|
1,098 |
|
|
|
|
15,294 |
|
|
15,294 |
|
Tax receivable
agreement expense |
|
— |
|
|
|
|
— |
|
|
— |
|
Loss on debt
refinancing |
|
— |
|
|
|
|
(18,211 |
) |
|
(18,211 |
) |
(Loss)
income before income taxes |
|
$ |
(2,859 |
) |
|
|
|
$ |
(16,349 |
) |
|
$ |
12,329 |
|
(1) This amount includes merger transaction and
integration costs of $3.0 million for the one month ended
September 30, 2017 (Successor), $2.3 million and $5.6 million
for the two and eight months ended August 31, 2017
(Predecessor), respectively.
This amount includes practice acquisition costs
of $474,000 for the one month ended September 30, 2017
(Successor), $606,000 and $2.1 million for the two and eight months
ended August 31, 2017 (Predecessor), respectively.
Contact
Teresa Sparks, CFOSurgery Partners, Inc.(615)
234-8940IR@surgerypartners.com
Surgery Partners (NASDAQ:SGRY)
Historical Stock Chart
Von Feb 2024 bis Mär 2024
Surgery Partners (NASDAQ:SGRY)
Historical Stock Chart
Von Mär 2023 bis Mär 2024