2016 Q4 Form 10-Q Financial Statement

#000163883316000055 Filed on November 10, 2016

View on sec.gov

Income Statement

Concept 2016 Q4 2016 Q3 2015 Q3
Revenue $306.0M $282.7M $239.6M
YoY Change 16.21% 17.98% 214.01%
Cost Of Revenue $214.2M $201.4M $168.8M
YoY Change 16.96% 19.29% 272.04%
Gross Profit $91.75M $81.29M $70.78M
YoY Change 14.48% 14.85% 128.86%
Gross Profit Margin 29.98% 28.76% 29.54%
Selling, General & Admin $39.80M $36.70M $28.30M
YoY Change -1.0% 29.68% 139.83%
% of Gross Profit 43.38% 45.15% 39.98%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $10.60M $9.713M $8.611M
YoY Change 17.78% 12.8% 203.85%
% of Gross Profit 11.55% 11.95% 12.17%
Operating Expenses $50.40M $239.8M $195.3M
YoY Change 2.65% 22.79% 244.8%
Operating Profit $41.35M $42.85M $44.27M
YoY Change 33.19% -3.22% 125.27%
Interest Expense -$23.90M -$26.48M -$26.57M
YoY Change 10.65% -0.37% 135.93%
% of Operating Profit -57.79% -61.79% -60.02%
Other Income/Expense, Net $700.0K -$4.100M $300.0K
YoY Change -100.59% -1466.67%
Pretax Income $42.70M $12.64M $17.70M
YoY Change -135.2% -28.59% 110.95%
Income Tax $4.600M -$1.694M $3.917M
% Of Pretax Income 10.77% -13.4% 22.13%
Net Earnings $16.86M -$2.338M -$3.122M
YoY Change 0.73% -25.11% -54.81%
Net Earnings / Revenue 5.51% -0.83% -1.3%
Basic Earnings Per Share $0.35 -$0.05 -$0.10
Diluted Earnings Per Share $0.35 -$0.05 -$0.10
COMMON SHARES
Basic Shares Outstanding 48.49M shares 48.02M shares 32.05M shares
Diluted Shares Outstanding 48.02M shares 32.05M shares

Balance Sheet

Concept 2016 Q4 2016 Q3 2015 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $69.70M $55.20M $56.80M
YoY Change 20.38% -2.82%
Cash & Equivalents $69.70M $55.21M $56.85M
Short-Term Investments
Other Short-Term Assets $11.34M $10.39M $9.662M
YoY Change 34.75% 7.51%
Inventory $28.78M $26.87M $24.75M
Prepaid Expenses $11.16M $11.52M $8.122M
Receivables $220.6M $206.0M $164.6M
Other Receivables $9.500M $9.500M $10.00M
Total Short-Term Assets $362.0M $328.7M $288.0M
YoY Change 16.4% 14.14%
LONG-TERM ASSETS
Property, Plant & Equipment $204.3M $199.6M $173.8M
YoY Change 10.67% 14.84%
Goodwill $1.555B $1.531B $1.330B
YoY Change 10.46% 15.14%
Intangibles $48.02M $48.67M $53.14M
YoY Change -10.35% -8.4%
Long-Term Investments $39.50M $39.40M $36.60M
YoY Change 7.05% 7.65%
Other Assets $16.44M $13.83M $7.510M
YoY Change 56.39% 84.15%
Total Long-Term Assets $1.943B $1.920B $1.604B
YoY Change 8.34% 19.74%
TOTAL ASSETS
Total Short-Term Assets $362.0M $328.7M $288.0M
Total Long-Term Assets $1.943B $1.920B $1.604B
Total Assets $2.305B $2.249B $1.892B
YoY Change 9.53% 18.88%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $49.77M $44.45M $40.81M
YoY Change 9.76% 8.93%
Accrued Expenses $71.00M $69.80M $51.10M
YoY Change 31.73% 36.59%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00 $0.00
YoY Change
Long-Term Debt Due $27.80M $29.10M $27.70M
YoY Change 2.21% 5.05%
Total Short-Term Liabilities $186.7M $178.7M $176.2M
YoY Change 3.0% 1.41%
LONG-TERM LIABILITIES
Long-Term Debt $1.467B $1.411B $1.425B
YoY Change 14.44% -1.01%
Other Long-Term Liabilities $76.27M $87.43M $83.78M
YoY Change -10.92% 4.36%
Total Long-Term Liabilities $76.27M $87.43M $83.78M
YoY Change -10.92% 4.36%
TOTAL LIABILITIES
Total Short-Term Liabilities $186.7M $178.7M $176.2M
Total Long-Term Liabilities $76.27M $87.43M $83.78M
Total Liabilities $263.0M $266.1M $260.0M
YoY Change -1.47% 2.36%
SHAREHOLDERS EQUITY
Retained Earnings -$311.4M -$328.2M -$337.5M
YoY Change -2.95% -2.76%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $9.677M -$8.331M -$277.4M
YoY Change
Total Liabilities & Shareholders Equity $2.305B $2.249B $1.892B
YoY Change 9.53% 18.88%

Cashflow Statement

Concept 2016 Q4 2016 Q3 2015 Q3
OPERATING ACTIVITIES
Net Income $16.86M -$2.338M -$3.122M
YoY Change 0.73% -25.11% -54.81%
Depreciation, Depletion And Amortization $10.60M $9.713M $8.611M
YoY Change 17.78% 12.8% 203.85%
Cash From Operating Activities $32.30M $18.90M $29.30M
YoY Change 33.47% -35.49% 104.9%
INVESTING ACTIVITIES
Capital Expenditures -$10.70M -$8.000M -$6.600M
YoY Change -30.07% 21.21% 450.0%
Acquisitions
YoY Change
Other Investing Activities -$19.60M -$13.00M -$20.20M
YoY Change -75.5% -35.64% 3266.67%
Cash From Investing Activities -$30.30M -$21.00M -$26.80M
YoY Change -68.21% -21.64% 1388.89%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities 12.50M 5.800M 6.400M
YoY Change -82.71% -9.38% -145.39%
NET CHANGE
Cash From Operating Activities 32.30M 18.90M 29.30M
Cash From Investing Activities -30.30M -21.00M -26.80M
Cash From Financing Activities 12.50M 5.800M 6.400M
Net Change In Cash 14.50M 3.700M 8.900M
YoY Change 1108.33% -58.43% -656.25%
FREE CASH FLOW
Cash From Operating Activities $32.30M $18.90M $29.30M
Capital Expenditures -$10.70M -$8.000M -$6.600M
Free Cash Flow $43.00M $26.90M $35.90M
YoY Change 8.86% -25.07% 131.61%

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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:10px;text-align:left;padding-left:24px;text-indent:-24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;font-weight:bold;">Organization</font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:9pt;">Surgery Partners, Inc.</font><font style="font-family:inherit;font-size:9pt;">,</font><font style="font-family:inherit;font-size:10pt;"> a </font><font style="font-family:inherit;font-size:9pt;">Delaware corporation (together with its subsidiaries, the &#8220;Company&#8221;), was formed April 2, 2015, as a holding company for the purpose of facilitating an initial public offering (the &#8220;IPO&#8221;) of shares of common stock. Prior to September 30, 2015, the Company conducted business through Surgery Center Holdings, Inc. and its subsidiaries. Surgery Center Holdings, LLC was and is the sole indirect owner of the equity interests of Surgery Center Holdings, Inc. and has no other material assets. On October&#160;1, 2015, the Company completed its IPO of </font><font style="font-family:inherit;font-size:9pt;">14,285,000</font><font style="font-family:inherit;font-size:9pt;"> shares of common stock at an offering price of $</font><font style="font-family:inherit;font-size:9pt;">19.00</font><font style="font-family:inherit;font-size:9pt;"> per share.</font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;">On September 30, 2015, Surgery Partners, Inc. became the direct parent and sole member of Surgery Center Holdings, LLC (the "Reorganization"). In the Reorganization, all of the equity interests held by the pre-IPO owners of Surgery Center Holdings, LLC were contributed to Surgery Partners, Inc. in exchange for </font><font style="font-family:inherit;font-size:9pt;">33,871,990</font><font style="font-family:inherit;font-size:9pt;"> shares of common stock of Surgery Partners, Inc. and certain rights to additional payments under a tax receivable agreement. After giving effect to the Reorganization, Surgery Partners, Inc. is a holding company, and its sole material asset is an equity interest in Surgery Center Holdings, LLC. The Company's condensed consolidated financial statements for periods prior to the Reorganization represent the historical operating results and financial position of Surgery Center Holdings, Inc. and certain of its subsidiaries.</font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:inherit;font-size:9pt;">As of </font><font style="font-family:inherit;font-size:9pt;">September&#160;30, 2016</font><font style="font-family:inherit;font-size:9pt;">, the Company owned and operated a national network of surgical facilities and ancillary services in </font><font style="font-family:inherit;font-size:9pt;">29</font><font style="font-family:inherit;font-size:9pt;"> states.&#160; The surgical facilities, which include ASCs and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, otolaryngology</font><font style="font-family:inherit;font-size:10pt;">&#160;</font><font style="font-family:inherit;font-size:9pt;">("ENT"), gastroenterology</font><font style="font-family:inherit;font-size:10pt;">&#160;("</font><font style="font-family:inherit;font-size:9pt;">GI"), general surgery, ophthalmology, orthopedics, cardiology and pain management.&#160;The Company's surgical hospitals provide services such as diagnostic imaging, laboratory, obstetrics, oncology, pharmacy, physical therapy and wound care. Ancillary services are comprised of a diagnostic laboratory, multi-specialty physician practices, urgent care facilities, anesthesia services, optical services and specialty pharmacy services. </font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;"> As of </font><font style="font-family:inherit;font-size:9pt;">September&#160;30, 2016</font><font style="font-family:inherit;font-size:9pt;">, the Company owned or operated a portfolio of </font><font style="font-family:inherit;font-size:9pt;">104</font><font style="font-family:inherit;font-size:9pt;"> surgical facilities, comprised of </font><font style="font-family:inherit;font-size:9pt;">99</font><font style="font-family:inherit;font-size:9pt;"> ASCs and </font><font style="font-family:inherit;font-size:9pt;">five</font><font style="font-family:inherit;font-size:9pt;"> surgical hospitals. The Company owns these facilities in partnership with physicians and, in some cases, healthcare systems in the markets and communities it serves.&#160;The Company owned a majority interest in </font><font style="font-family:inherit;font-size:9pt;">73</font><font style="font-family:inherit;font-size:9pt;"> of the surgical facilities and consolidated </font><font style="font-family:inherit;font-size:9pt;">93</font><font style="font-family:inherit;font-size:9pt;"> of these facilities for financial reporting purposes.&#160;In addition, the Company owned or operated a network of </font><font style="font-family:inherit;font-size:9pt;">53</font><font style="font-family:inherit;font-size:9pt;"> physician practices.</font></div></div>
us-gaap Prior Period Reclassification Adjustment Description
PriorPeriodReclassificationAdjustmentDescription
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;font-weight:bold;">Reclassifications</font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;">Certain reclassifications have been made to the comparative periods' financial statements to conform to the three</font><font style="font-family:inherit;font-size:9pt;"> and nine </font><font style="font-family:inherit;font-size:9pt;">months ended </font><font style="font-family:inherit;font-size:9pt;">September&#160;30, 2016</font><font style="font-family:inherit;font-size:9pt;"> presentation. </font></div></div>
us-gaap Revenue Recognition Sales Of Services
RevenueRecognitionSalesOfServices
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;font-style:italic;">Other service revenues.</font><font style="font-family:inherit;font-size:9pt;font-style:italic;font-weight:bold;"> </font><font style="font-family:inherit;font-size:9pt;"> Optical service revenues consist of product sales from the Company's optical laboratories as well as handling charges billed to the members of the Company's optical products purchasing organization and sales from the Company's marketing products and services business. The Company's optical products purchasing organization negotiates volume buying discounts with optical products manufacturers. The buying discounts and any handling charges billed to the members of the buying group represent the revenue recognized for financial reporting purposes. Revenue is recognized as orders are shipped to members. The Company bases its estimates for sales returns and discounts on historical experience and has not experienced significant fluctuations between estimated and actual return activity and discounts given. The Company's optical laboratories manufacture and distribute corrective lenses and eyeglasses to ophthalmologists and optometrists. Revenue is recognized when product is shipped, net of allowance for discounts. The Company's marketing products and services businesses recognize revenue when product is shipped or services are rendered. </font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;">Other revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which services are rendered.</font></div></div><div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;font-weight:bold;">Revenues</font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;">The Company recognizes revenues in the period in which the services are performed. Patient service revenues and receivables from third-party payors are recorded net of estimated contractual adjustments and allowances, which the Company estimates based on the historical trend of its cash collections and contractual write-offs, accounts receivable agings, established fee schedules, contracts with payors and procedure statistics.</font></div></div><div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;font-style:italic;">Patient service revenues.</font><font style="font-family:inherit;font-size:9pt;">&#160;The fee charged for healthcare procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications.&#160;The fee does not normally include professional fees charged by the patient&#8217;s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor.&#160; However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians. Patient service revenues are recognized on the date of service, net of estimated contractual adjustments and discounts from third-party payors, including Medicare and Medicaid.&#160; Changes in estimated contractual adjustments and discounts are recorded in the period of change.</font></div></div>
us-gaap Use Of Estimates
UseOfEstimates
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;font-weight:bold;">Use of Estimates</font></div><div style="line-height:120%;padding-bottom:6px;padding-top:6px;text-align:justify;text-indent:24px;font-size:9pt;"><font style="font-family:inherit;font-size:9pt;">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All adjustments are of a normal, recurring nature. Actual results could differ from those estimates.</font></div></div>

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