Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 09, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Surgery Partners, Inc. | |
Entity Central Index Key | 1,638,833 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 48,811,091 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 57,034 | $ 69,699 |
Accounts receivable, less allowance for doubtful accounts of $31,465 and $29,872, respectively | 215,294 | 220,594 |
Inventories | 29,680 | 28,777 |
Prepaid expenses and other current assets | 42,332 | 32,014 |
Acquisition escrow deposit | 7,971 | 10,871 |
Total current assets | 352,311 | 361,955 |
Property and equipment, net | 205,744 | 204,253 |
Intangible assets, net | 43,421 | 48,023 |
Goodwill | 1,569,408 | 1,555,204 |
Investments in and advances to affiliates | 34,488 | 34,980 |
Restricted invested assets | 315 | 315 |
Long-term deferred tax assets | 80,166 | 83,793 |
Financing escrow asset | 370,000 | 0 |
Other long-term assets | 15,634 | 16,435 |
Total assets | 2,671,487 | 2,304,958 |
Current liabilities: | ||
Accounts payable | 48,210 | 49,766 |
Accrued payroll and benefits | 27,437 | 29,273 |
Acquisition escrow liability | 7,971 | 10,871 |
Other current liabilities | 72,465 | 68,993 |
Current maturities of long-term debt | 29,919 | 27,822 |
Total current liabilities | 186,002 | 186,725 |
Long-term debt, less current maturities | 1,795,265 | 1,414,421 |
Long-term tax receivable agreement liability | 122,351 | 122,351 |
Other long-term liabilities | 76,101 | 76,266 |
Non-controlling interests—redeemable | 176,252 | 180,521 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 20,000,000 shares authorized, no shares issued or outstanding | 0 | 0 |
Common stock, $0.01 par value, 300,000,000 shares authorized, 48,810,075 shares issued and outstanding at June 30, 2017; 48,488,616 shares issued and outstanding at December 31, 2016 | 488 | 485 |
Additional paid-in capital | 324,340 | 320,543 |
Retained deficit | (318,576) | (311,351) |
Total Surgery Partners, Inc. stockholders' equity | 6,252 | 9,677 |
Non-controlling interests—non-redeemable | 309,264 | 314,997 |
Total stockholders' equity | 315,516 | 324,674 |
Total liabilities and stockholders' equity | $ 2,671,487 | $ 2,304,958 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 31,465 | $ 29,872 |
Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 20,000,000 | 20,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (shares) | 48,810,075 | 48,488,616 |
Common stock, shares outstanding (shares) | 48,810,075 | 48,488,616 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Income Statement [Abstract] | |||||
Revenues | $ 288,353 | $ 289,681 | $ 574,536 | $ 556,755 | |
Operating expenses: | |||||
Salaries and benefits | 90,022 | 93,791 | 179,909 | 180,677 | |
Supplies | 74,084 | 66,915 | 145,244 | 130,577 | |
Professional and medical fees | 22,577 | 20,304 | 43,702 | 39,957 | |
Lease expense | 13,674 | 13,074 | 27,300 | 25,508 | |
Other operating expenses | 16,095 | 14,768 | 32,245 | 28,836 | |
Cost of revenues | 216,452 | 208,852 | 428,400 | 405,555 | |
General and administrative expenses | [1] | 18,655 | 15,023 | 34,196 | 27,220 |
Depreciation and amortization | 11,417 | 9,702 | 22,525 | 19,271 | |
Provision for doubtful accounts | 5,788 | 3,544 | 11,463 | 7,417 | |
Income from equity investments | (1,052) | (1,082) | (2,252) | (1,840) | |
Loss on disposal or impairment of long-lived assets, net | 405 | 1,331 | 1,601 | 1,125 | |
Gain on litigation settlement | (3,794) | 0 | (3,794) | 0 | |
Loss on debt refinancing | 0 | 0 | 0 | 8,281 | |
Merger transaction and integration costs | 2,904 | 1,325 | 3,241 | 4,497 | |
Electronic health records incentive income | (161) | (2) | (302) | (95) | |
Other expense (income) | 0 | 40 | (2) | 97 | |
Total operating expenses | 250,614 | 238,733 | 495,076 | 471,528 | |
Operating income | 37,739 | 50,948 | 79,460 | 85,227 | |
Interest expense, net | (25,600) | (26,235) | (50,782) | (48,388) | |
Income before income taxes | 12,139 | 24,713 | 28,678 | 36,839 | |
Income tax expense | 512 | 2,420 | 2,629 | 4,190 | |
Net income | 11,627 | 22,293 | 26,049 | 32,649 | |
Less: Net income attributable to non-controlling interests | (16,098) | (20,173) | (33,274) | (37,720) | |
Net (loss) income attributable to Surgery Partners, Inc. | $ (4,471) | $ 2,120 | $ (7,225) | $ (5,071) | |
Net (loss) income per share attributable to common stockholders | |||||
Basic (in USD per share) | $ (0.09) | $ 0.04 | $ (0.15) | $ (0.11) | |
Diluted (in USD per share) | [2] | $ (0.09) | $ 0.04 | $ (0.15) | $ (0.11) |
Weighted average common shares outstanding | |||||
Basic (shares) | 48,145,729 | 48,019,652 | 48,112,909 | 48,018,228 | |
Diluted (shares) | [2] | 48,145,729 | 48,129,041 | 48,112,909 | 48,018,228 |
Contingent acquisition expense | $ 1,814 | $ 1,530 | $ 3,847 | $ 1,530 | |
[1] | Includes contingent acquisition compensation expense of $1.8 million and $1.5 million for the three months ended June 30, 2017 and 2016, respectively, and $3.8 million and $1.5 million for the six months ended June 30, 2017 and 2016, respectively. | ||||
[2] | The impact of potentially dilutive securities for the three and six months ended June 30, 2017 and the six months ended June 30, 2016 was not considered because the effect would be anti-dilutive in those periods. |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 11,627 | $ 22,293 | $ 26,049 | $ 32,649 |
Other comprehensive income | 0 | 0 | 0 | 0 |
Comprehensive income | 11,627 | 22,293 | 26,049 | 32,649 |
Less: Comprehensive income attributable to non-controlling interests | (16,098) | (20,173) | (33,274) | (37,720) |
Comprehensive (loss) income attributable to Surgery Partners, Inc. | $ (4,471) | $ 2,120 | $ (7,225) | $ (5,071) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Stockholders' Equity - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Deficit | Non-Controlling Interests— Non-Redeemable |
Beginning Balance, stockholders' equity (shares) at Dec. 31, 2016 | 48,488,616 | 48,488,616 | |||
Beginning Balance, stockholders' equity at Dec. 31, 2016 | $ 324,674 | $ 485 | $ 320,543 | $ (311,351) | $ 314,997 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net (loss) income | 18,940 | (7,225) | 26,165 | ||
Issuance of restricted stock, net of forfeitures (shares) | 354,058 | ||||
Issuance of restricted stock, net of forfeitures | 0 | $ 3 | (3) | ||
Equity-based compensation | 2,069 | 2,069 | |||
Cancellation of restricted shares (in shares) | (32,599) | ||||
Cancellation of restricted shares | (658) | (658) | |||
Acquisition and disposal of shares of non-controlling interests, net | (849) | 2,389 | (3,238) | ||
Distributions to non-controlling interests—non-redeemable holders | $ (28,660) | (28,660) | |||
Ending Balance, stockholders' equity (shares) at Jun. 30, 2017 | 48,810,075 | 48,810,075 | |||
Ending Balance, stockholders' equity at Jun. 30, 2017 | $ 315,516 | $ 488 | $ 324,340 | $ (318,576) | $ 309,264 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net income | $ 26,049 | $ 32,649 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 22,525 | 19,271 |
Amortization of debt issuance costs and discounts | 3,774 | 3,348 |
Amortization of unfavorable lease liability | (162) | (216) |
Equity-based compensation | 2,069 | 635 |
Loss on disposal or impairment of long-lived assets, net | 1,601 | 1,125 |
Loss on debt refinancing | 0 | 8,281 |
Deferred income taxes | 1,894 | 3,890 |
Provision for doubtful accounts | 11,463 | 7,417 |
Income from equity investments, net of distributions received | 487 | (611) |
Changes in operating assets and liabilities, net of acquisitions and divestitures: | ||
Accounts receivable | (5,699) | (25,902) |
Other operating assets and liabilities | (7,530) | 24,150 |
Net cash provided by operating activities | 56,471 | 74,037 |
Cash flows from investing activities: | ||
Purchases of property and equipment, net | (15,102) | (20,350) |
Payments for acquisitions, net of cash acquired | (14,163) | (113,017) |
Proceeds from divestitures | 70 | 0 |
Net cash used in investing activities | (29,195) | (133,367) |
Cash flows from financing activities: | ||
Principal payments on long-term debt | (113,364) | (424,348) |
Borrowings of long-term debt | 119,778 | 525,422 |
Payments of debt issuance costs | (941) | (12,555) |
Lender financing escrow fee | (6,591) | 0 |
Penalty on prepayment of debt | 0 | (4,900) |
Distributions to non-controlling interest holders | (36,841) | (32,362) |
(Payments) receipts related to ownership transactions with non-controlling interest holders | (745) | 573 |
Financing lease obligation | (579) | (390) |
Other financing activities | (658) | 1,556 |
Net cash (used in) provided by financing activities | (39,941) | 52,996 |
Net decrease in cash and cash equivalents | (12,665) | (6,334) |
Cash and cash equivalents at beginning of period | 69,699 | 57,933 |
Cash and cash equivalents at end of period | $ 57,034 | $ 51,599 |
Organization
Organization | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Surgery Partners, Inc. , a Delaware corporation (together with its subsidiaries, the “Company”), was formed on April 2, 2015, as a holding company for the purpose of facilitating an initial public offering (the “IPO”) 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 1, 2015, the Company completed its IPO of 14,285,000 shares of common stock at an offering price of $19.00 per share. 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 33,871,990 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. On May 9, 2017, the Company entered into a series of transactions pursuant to which the Company agreed (i) to acquire NSH Holdco, Inc. (“NSH”), an owner and operator of surgical facilities, for approximately $760 million through a merger of SP Merger Sub, Inc., a wholly owned subsidiary of the Company, with and into NSH (the “NSH Merger”), pursuant to an Agreement and Plan of Merger, by and among the Company, SP Merger Sub, Inc., NSH, and IPC / NSH, L.P., solely in its capacity as sellers’ representative (as amended by that certain Letter Amendment, dated July 7, 2017, the “NSH Merger Agreement”) and (ii) to issue to BCPE Seminole Holdings LP (“Bain Capital”), an affiliate of Bain Capital Private Equity, up to 320,000 shares of the Company’s preferred stock, par value $0.01 per share, to be created out of the authorized and unissued shares of the Company’s preferred stock and designated as 10.00% Series A Convertible Perpetual Participating Preferred Stock at a purchase price per share of $1,000 (the “Preferred Private Placement”), pursuant to a Securities Purchase Agreement by and among the Company and Bain Capital (the “Preferred Purchase Agreement”). In connection with the NSH Merger and the Preferred Private Placement, on May 9. 2017, the Company also entered into (i) a Stock Purchase Agreement, by and among the Company, H.I.G. Surgery Centers, LLC (“H.I.G.”), the Company’s controlling stockholder, H.I.G. Bayside Debt & LBO Fund II L.P. (for the purposes stated therein) and Bain Capital (the “Common Stock Purchase Agreement”), pursuant to which H.I.G. agreed to sell all of its 26,455,651 shares of the Company’s common stock to Bain Capital at a purchase price per share of $19.00 (together with the NSH Merger and the Preferred Private Placement, the “Transactions”) and (ii) an amendment to that certain Income Tax Receivable Agreement, dated September 30, 2015, by and between the Company, H.I.G. (in its capacity as the Stockholders Representative) and the other parties referred to therein (the “TRA Amendment”). The Transactions have not yet been consummated and the TRA Amendment has not yet become effective. Following the consummation of the Transactions, NSH will be a wholly-owned subsidiary of the Company, and Bain Capital will be the controlling stockholder of the Company. As of June 30, 2017 , the Company owned and operated a national network of surgical facilities and ancillary services in 29 states. The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, gastroenterology (" GI"), general surgery, ophthalmology, orthopedics and pain management. 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. As of June 30, 2017 , the Company owned or operated a portfolio of 103 surgical facilities, comprised of 98 ASCs and five surgical hospitals. The Company owns these facilities in partnership with physicians and, in some cases, healthcare systems in the markets and communities it serves. The Company owned a majority interest in 73 of the surgical facilities and consolidated 93 of these facilities for financial reporting purposes. In addition, the Company owned or operated a network of 59 physician practices. The foregoing description of the Transactions, the NSH Merger Agreement, the Preferred Purchase Agreement, the Common Stock Purchase Agreement and the TRA Amendment do not purport to be complete and is subject to, and qualified in its entirety by, the full text of the respective agreements and any amendments thereto, copies of which are filed as Exhibit 2.1, Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively, to the Company’s Current Report on Form 8-K filed with the SEC on May 11, 2017. A copy of the amendment to the NSH Merger Agreement is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 11, 2017. |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited financial statements as of that date. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 31, 2016 . 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 accompanying notes. Actual results could differ from those estimates. Non-Controlling Interests The physician limited partners and physician minority members of the entities that the Company controls are responsible for the supervision and delivery of medical services. The governance rights of limited partners and minority members are restricted to those that protect their financial interests. Under certain partnership and operating agreements governing these partnerships and limited liability companies, the Company could be removed as the sole general partner or managing member for certain events such as material breach of the partnership or operating agreement, gross negligence or bankruptcy. These protective rights do not preclude consolidation of the respective partnerships and limited liability companies. Ownership interests in consolidated subsidiaries held by parties other than the Company are identified and generally presented in the condensed consolidated financial statements within the equity section but separate from the Company's equity. However, in instances in which certain redemption features that are not solely within the control of the Company are present, classification of non-controlling interests outside of permanent equity is required. Consolidated net income attributable to the Company and to the non-controlling interests are identified and presented on the condensed consolidated statements of operations; changes in ownership interests in which the Company retains a controlling interest are accounted for as equity transactions assuming the Company continues to consolidate related entities. Certain transactions with non-controlling interests are classified within financing activities in the condensed consolidated statements of cash flows. The condensed consolidated financial statements of the Company include all assets, liabilities, revenues and expenses of surgical facilities in which the Company has sufficient ownership and rights to allow the Company to consolidate the surgical facilities. Similar to its investments in non-consolidated affiliates, the Company regularly engages in the purchase and sale of ownership interests with respect to its consolidated subsidiaries that do not result in a change of control. Non-Controlling Interests — Redeemable. Each of the partnerships and limited liability companies through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement. In certain circumstances, the partnership and operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physicians’ ownership if certain adverse regulatory events occur, such as it becoming illegal for the physicians to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests - redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets. A summary of activity related to the non-controlling interests—redeemable follows (in thousands): Balance at December 31, 2016 $ 180,521 Net income attributable to non-controlling interests—redeemable 7,109 Acquisition and disposal of shares of non-controlling interests, net—redeemable (3,197 ) Distributions to non-controlling interest—redeemable holders (8,181 ) Balance at June 30, 2017 $ 176,252 Variable Interest Entities The condensed consolidated financial statements include the accounts of variable interest entities in which the Company is the primary beneficiary under the provisions of Accounting Standards Codification Topic ("ASC") 810, Consolidation . As of June 30, 2017 , the variable interest entities include five surgical facilities, three anesthesia practices and three physician practices. At December 31, 2016 , the variable interest entities included five surgical facilities, three anesthesia practices and two physician practices. The change is due to a physician practice acquired during the three months ended June 30, 2017. The Company has the power to direct the activities that most significantly impact the variable interest entity's economic performance. Additionally, the Company would absorb the majority of the expected losses of these entities should they occur. As of June 30, 2017 and December 31, 2016 , the condensed consolidated balance sheets of the Company included total assets of $93.3 million and $99.5 million , respectively, and total liabilities of $9.5 million and $10.7 million , respectively, related to the Company's variable interest entities. Equity Method Investments The Company has non-consolidating investments in surgical facilities and management companies that own or manage surgical facilities. These investments are accounted for using the equity method of accounting. The total amount of these investments included in investments in and advances to affiliates in the condensed consolidated balance sheets was $34.5 million and $35.0 million as of June 30, 2017 and December 31, 2016 , respectively. Use of Estimates 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. Fair Value of Financial Instruments The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on quoted prices in active markets for identical assets or liabilities (Level 1), inputs other than quoted prices in active markets that are either directly or indirectly observable (Level 2), or unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions (Level 3), depending on the nature of the item being valued. The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values. A summary of the carrying amounts and fair values of the Company's long-term debt follows (in thousands): Carrying Amount Fair Value June 30, December 31, June 30, December 31, 2014 First Lien Credit Agreement, net of debt issuance costs and discount $ 909,410 $ 911,784 $ 911,120 $ 917,528 Senior Unsecured Notes due 2021, net of debt issuance costs and discount $ 389,095 $ 387,942 $ 420,223 $ 412,189 Senior Unsecured Notes due 2025, net of debt issuance costs $ 367,100 $ — $ 367,100 $ — 2014 Revolver Loan $ 91,000 $ 85,000 $ 91,000 $ 85,000 The fair values of the 2014 First Lien Credit Agreement and the 2021 Unsecured Notes (in each case, as defined in Note 4, "Long-Term Debt") were based on a Level 2 computation using quoted prices for identical liabilities in inactive markets at June 30, 2017 and December 31, 2016 , as applicable. The carrying amounts related to the Company's other long-term debt obligations, including the 2025 Unsecured Notes issued on June 30, 2017 and the 2014 Revolver Loan (in each case, as defined in Note 4, "Long-Term Debt"), approximate their fair values. The Company maintains a supplemental executive retirement savings plan (the "SERP") for certain executive officers. The SERP is a non-qualified deferred compensation plan for eligible executive officers and other key employees of the Company that allows participants to defer portions of their compensation. The fair value of the SERP asset and liability was based on a quoted market price, or a Level 1 computation. As of June 30, 2017 and December 31, 2016 , the fair value of the assets in the SERP were $1.8 million and $1.7 million , respectively, and were included in other long-term assets in the condensed consolidated balance sheets. The Company had a liability related to the SERP of $1.8 million and $1.7 million as of June 30, 2017 and December 31, 2016 , respectively, which was included in other long-term liabilities in the condensed consolidated balance sheets. Revenues 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. A summary of revenues by service type as a percentage of total revenues follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Patient service revenues: Surgical facilities revenues 90.5 % 90.0 % 90.1 % 90.6 % Ancillary services revenues 7.9 % 7.7 % 8.3 % 7.2 % 98.4 % 97.7 % 98.4 % 97.8 % Other service revenues: Optical services revenues 1.0 % 1.2 % 1.0 % 1.3 % Other 0.6 % 1.1 % 0.6 % 0.9 % 1.6 % 2.3 % 1.6 % 2.2 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % Patient service revenues. 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. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. 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. Changes in estimated contractual adjustments and discounts are recorded in the period of change. During the three and six months ended June 30, 2017 , the Company recognized an increase to patient service revenues as a result of changes in estimates to third-party settlements related to prior years of approximately $128,000 and $506,000 , respectively. The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in thousands): Three Months Ended June 30, 2017 2016 Amount % Amount % Patient service revenues: Private insurance $ 140,922 49.6 % $ 145,211 51.3 % Government 118,381 41.7 % 113,971 40.2 % Self-pay 5,760 2.0 % 4,766 1.7 % Other (1) 18,771 6.7 % 19,263 6.8 % Total patient service revenues $ 283,834 100.0 % $ 283,211 100.0 % Other service revenues: Optical service revenues $ 2,903 $ 3,395 Other revenues 1,616 3,075 Total net revenues $ 288,353 $ 289,681 Six Months Ended June 30, 2017 2016 Amount % Amount % Patient service revenues: Private insurance $ 279,925 49.5 % $ 277,426 50.9 % Government 235,259 41.6 % 219,774 40.3 % Self-pay 11,831 2.1 % 8,479 1.6 % Other (1) 38,465 6.8 % 39,092 7.2 % Total patient service revenues $ 565,480 100.0 % $ 544,771 100.0 % Other service revenues: Optical service revenues $ 5,724 $ 7,019 Other revenues 3,332 4,965 Total net revenues $ 574,536 $ 556,755 (1) Other is comprised of anesthesia service agreements, auto liability, letters of protection and other payor types. Other service revenues. 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.. 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. 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. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash and cash equivalent balances at high credit quality financial institutions. Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts Accounts receivable are recorded net of contractual adjustments and allowances for doubtful accounts to reflect accounts receivable at net realizable value. Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors. As of June 30, 2017 and December 31, 2016 , the Company had a net third-party Medicaid settlements receivable of $1.1 million and $454,000 , respectively. The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not significant. The Company's policy is to collect co-payments and deductibles prior to providing medical services. It is also the Company's policy to verify a patient’s insurance 72 hours prior to the patient’s procedure. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients. The Company analyzes accounts receivable at each of its facilities to ensure the proper aged category and collection assessment. At a consolidated level, the Company's policy is to review accounts receivable aging, by facility, to determine the appropriate allowance for doubtful accounts. Patient account balances are reviewed for delinquency based on contractual terms. This review is supported by an analysis of the actual revenues, contractual adjustments and cash collections received. An account balance is written off only after the Company has pursued collection with legal or collection agency assistance or otherwise has deemed an account to be uncollectible. The receivables related to the Company's optical products purchasing organization are recognized separately from patient accounts receivable, as discussed above, and are included in other current assets in the condensed consolidated balance sheets. Such receivables were $9.0 million and $7.0 million at June 30, 2017 and December 31, 2016 , respectively. Inventories Inventories, which consist primarily of medical and drug supplies, are stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. Prepaid Expenses and Other Current Assets A summary of prepaid expenses and other current assets follows (in thousands): June 30, December 31, Prepaid expenses $ 19,178 $ 11,158 Receivables - optical product purchasing organization 8,964 7,042 Insurance recoveries 2,305 2,476 Other current assets 11,885 11,338 Total $ 42,332 $ 32,014 Property and Equipment Property and equipment are stated at cost or, if obtained through acquisition, at fair value determined on the date of acquisition. Depreciation is recognized using the straight-line method over the estimated useful lives of the assets, generally three to five years for computers and software and five to seven years for furniture and equipment. Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term or the estimated useful life of the assets. Routine maintenance and repairs are expensed as incurred, while expenditures that increase capacities or extend useful lives are capitalized. A summary of property and equipment follows (in thousands): June 30, December 31, Land $ 8,082 $ 8,082 Buildings and improvements 123,106 118,172 Furniture and equipment 16,234 14,670 Computer and software 33,238 29,902 Medical equipment 136,149 117,418 Construction in progress 4,333 2,396 Property and equipment, at cost 321,142 290,640 Less: Accumulated depreciation (115,398 ) (86,387 ) Property and equipment, net $ 205,744 $ 204,253 The Company also leases certain facilities and equipment under capital leases. Assets held under capital leases are stated at the present value of minimum lease payments at the inception of the related lease. Such assets are depreciated on a straight-line basis over the lesser of the lease term or the remaining useful life of the leased asset. The carrying values of assets under capital lease were $15.9 million and $15.4 million as of June 30, 2017 and December 31, 2016 , respectively, net of accumulated depreciation of $12.6 million and $11.6 million , respectively. Intangible Assets The Company has indefinite-lived intangible assets related to the certificates of need held in jurisdictions where certain of its surgical facilities are located. The Company also has finite-lived intangible assets related to physician guarantee agreements, non-compete agreements, management agreements and customer relationships. Physician income guarantees are amortized into salaries and benefits costs in the condensed consolidated statements of operations over the commitment period of the contract, generally three to four years . Non-compete agreements and management rights agreements are amortized into depreciation and amortization expense in the condensed consolidated statements of operations over the service lives of the agreements, typically ranging from 2 to 5 years for non-compete agreements and 15 years for the management rights agreements. Customer relationships are amortized into depreciation and amortization expense in the condensed consolidated statements of operations over the estimated lives of the relationships, ranging from three to ten years . A summary of the activity related to intangible assets for the six months ended June 30, 2017 follows (in thousands): Physician Income Guarantees Management Rights Non-Compete Agreements Certificates of Need Customer Relationships Other Total Intangible Assets Balance at December 31, 2016 $ 813 $ 21,290 $ 16,457 $ 3,780 $ 3,704 $ 1,979 $ 48,023 Additions 175 — 92 14 — — 281 Recruitment expense (284 ) — — — — — (284 ) Amortization — (865 ) (2,843 ) — (550 ) (341 ) (4,599 ) Balance at June 30, 2017 $ 704 $ 20,425 $ 13,706 $ 3,794 $ 3,154 $ 1,638 $ 43,421 Goodwill Goodwill represents the fair value of the consideration provided in an acquisition over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. A summary of activity related to goodwill for the six months ended June 30, 2017 follows (in thousands): Balance at December 31, 2016 $ 1,555,204 Acquisitions 13,137 Divestitures (175 ) Purchase price adjustments 1,242 Balance at June 30, 2017 $ 1,569,408 Impairment of Long-Lived Assets, Goodwill and Intangible Assets The Company evaluates the carrying value of long-lived assets when impairment indicators are present or when circumstances indicate that impairment may exist in accordance with Accounting Standards Codification (ASC) 350, Intangibles- Goodwill and Other . The Company performs an impairment test by preparing an expected undiscounted cash flow projection. If the projection indicates that the recorded amount of the long-lived asset is not expected to be recovered, the carrying value is reduced to estimated fair value. The cash flow projection and fair value represents management’s best estimate, using appropriate and customary assumptions, projections and methodologies, at the date of evaluation. The Company tests its goodwill and intangible assets for impairment at least annually, or more frequently if certain indicators arise. Restricted Invested Assets Restricted invested assets of $315,000 as of both June 30, 2017 and December 31, 2016 were related to a requirement under the operating lease agreement at the Company's Chesterfield, Missouri facility. In accordance with the provisions of the lease agreement, the Company has a deposit with the landlord that shall be held as security for performance under the Company's covenants and obligations within the agreement through January 2024 . Other Long-Term Assets A summary of other long-term assets follows (in thousands): June 30, December 31, Notes receivable $ 817 $ 716 Deposits 3,284 4,196 Assets of SERP 1,834 1,725 Debt issuance costs 1,199 1,488 Insurance recoverable 6,835 6,835 Other 1,665 1,475 Total $ 15,634 $ 16,435 Other Current Liabilities A summary of other current liabilities follows (in thousands): June 30, December 31, Interest payable $ 11,771 $ 19,206 Current taxes payable 3,408 2,622 Insurance liabilities 6,814 6,625 Amounts due to patients and payors 14,660 12,221 Tax receivable agreement liability 999 999 Contingent acquisition compensation liability 6,555 4,589 Other accrued expenses 28,258 22,731 Total $ 72,465 $ 68,993 Other Long-Term Liabilities A summary of other long-term liabilities follows (in thousands): June 30, December 31, Facility lease obligations $ 51,904 $ 52,653 Medical malpractice liability 10,453 10,453 Liability of SERP 1,834 1,725 Unfavorable lease liability 1,509 1,671 Other long-term liabilities 10,401 9,764 Total $ 76,101 $ 76,266 The Company has facility lease obligations in connection with the surgical hospital located in Idaho Falls, Idaho and with a radiation oncology building at this facility. The obligation is payable to the lessor of this facility for the land, building and improvements. The current portion of the lease obligation was $1.3 million and $1.1 million at June 30, 2017 and December 31, 2016 , respectively, and was included in other current liabilities in the condensed consolidated balance sheets. The long-term portion of the lease obligation, included in the table above, was $48.3 million and $48.9 million at June 30, 2017 and December 31, 2016 , respectively. Additionally, the Company has a facility lease obligation in connection with a surgical facility in Ocala, Florida payable to the lessor of this facility for the building. The current portion of the lease obligation was $189,000 and $182,000 at June 30, 2017 and December 31, 2016 , respectively, and was included in other current liabilities in the condensed consolidated balance sheets. The long-term portion of the facility lease obligation, included in the table above, was $3.6 million and $3.7 million at June 30, 2017 and December 31, 2016 , respectively. Operating Leases The Company leases office space and equipment for its surgical facilities, including surgical facilities under development. The lease agreements generally require the lessee, or the Company, to pay all maintenance, property taxes, utilities and insurance costs. The Company accounts for operating lease obligations and sublease income on a straight-line basis. Contingent obligations of the Company, as defined by each lease agreement, are recognized when specific contractual measures have been met, typically the result of an increase in the Consumer Price Index. Lease obligations paid in advance are recorded as prepaid rent and included in prepaid expenses and other current assets on the condensed consolidated balance sheets. The difference between actual lease payments and straight-line lease expense over the initial lease term, excluding optional renewal periods, is recorded as deferred rent and included in other current liabilities and other long-term liabilities on the condensed consolidated balance sheets. Equity-Based Compensation Transactions in which the Company receives employee and non-employee services in exchange for the Company’s equity instruments or liabilities that are based on the fair value of the Company’s equity securities or may be settled by the issuance of these securities are accounted for using a fair value method. The Company applies the Black-Scholes-Merton method of valuation in determining share-based compensation expense for option awards. The Company’s policy is to recognize compensation expense using the straight line method over the relevant vesting period for units that vest based on time. In connection with the Reorganization, the Company’s board of directors and stockholders adopted the Surgery Partners, Inc. 2015 Omnibus Incentive Plan from which the Company’s future equity-based awards will be granted. Professional, General and Workers' Compensation Insurance The Company maintains general liability and professional liability insurance in excess of self-insured retentions through third party commercial insurance carriers in amounts that management believes is sufficient for the Company's operations, although, potentially, some claims may exceed the scope of coverage in effect. The professional and general insurance coverage is on a claims-made basis. Workers' compensation insurance is on an occurrence basis. The Company expenses the costs under the self-insured retention exposure for general and professional liability and workers compensation claims which relate to (i) claims made during the policy period, which are offset by insurance recoveries and (ii) an estimate of claims incurred but not yet reported that are expected to be reported after the policy period expires. Reserves and provisions are based upon actuarially determined estimates. The reserves are estimated using individual case-basis valuations and actuarial analysis. Reserves for professional, general and workers' compensation claim liabilities are determined with no regard for expected insurance recoveries and are presented gross on the condensed consolidated balance sheets. Total professional, general and workers' compensation claim liabilities as of June 30, 2017 and December 31, 2016 are $13.5 million and $13.8 million , respectively. The balance includes expected insurance recoveries of $9.1 million and $9.3 million as of June 30, 2017 and December 31, 2016 , respectively. Income Taxes and Tax Receivable Agreement The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a net operating loss carryforward exists, the Company makes a determination as to whether that net operating loss ("NOL") carryforward will be utilized in the future. A valuation allowance is established for certain net operating loss carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to adjust its deferred tax valuation allowances. The Company, or one or more of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years prior to 2013 or state income tax examinations for years prior to 2012. As part of the Reorganization that was effective September 30, 2015, the Company entered into a Tax Receivable Agreement (“TRA”), the terms of which required the Company to pay to its stockholders as of immediately prior to the IPO 85% of the cash savings, if any, in U.S. federal, state or local tax that the Company actually realizes (or is deemed to realize in certain circumstances) as a result of (i) certain tax attributes, including NOLs, capital losses, charitable deductions, alternative minimum tax credit carryforwards and federal and state tax credits of Surgery Partners, Inc. and its affiliates relating to taxable years ending on or before the date of the Reorganization (calculated by assuming the taxable year of the relevant entity closes on the date of the Reorganization) that are or become available to the Company and its wholly-owned subsidiaries as a result of the Reorganization, and (ii) tax benefits attributable to payments made under the TRA, together with interest accrued at a rate of LIBOR plus 300 basis points from the date the applicable tax return is due (without extension) until paid. As described in Note 1, "Organization," on May 9, 2017, the Company entered into the TRA Amend |
Acquisitions and Developments
Acquisitions and Developments | 6 Months Ended |
Jun. 30, 2017 | |
Business Combinations [Abstract] | |
Acquisitions and Developments | Acquisitions and Developments The Company accounts for its business combinations in accordance with the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer can be identified for each business combination. The acquirer is the entity that obtains control of one or more businesses in the business combination and the acquisition date is the date the acquirer achieves control. The assets acquired, liabilities assumed and any non-controlling interests in the acquired business at the acquisition date are recognized at their fair values as of that date, and the direct costs incurred in connection with the business combination are recorded and expensed separately from the business combination. Acquisitions in which the Company is able to exert significant influence but does not have control are accounted for using the equity method. 2017 Transactions During the six months ended June 30, 2017 , the Company completed acquisitions in existing markets of three physician practices for a combined purchase price of $14.2 million . The acquisitions were funded through cash from operations and proceeds from the Revolver (as defined in Note 4, "Long-Term Debt"). The aggregate amounts preliminarily recognized as of the acquisition date for each major class of assets and liabilities assumed in the acquisitions closed during the six months ended June 30, 2017 are as follows: Cash consideration $ 14,163 Fair value of non-controlling interests 105 Aggregate fair value of acquisitions 14,268 Net assets acquired: Accounts receivable 871 Other current assets 18 Property and equipment 622 Intangible assets 92 Accounts payable (99 ) Other current liabilities (187 ) Long-term debt (186 ) Net assets acquired 1,131 Excess of fair value over identifiable net assets acquired 13,137 The fair values assigned to certain assets and liabilities assumed by the Company have been estimated on a preliminary basis and are subject to change as new facts and circumstances emerge that were present at the date of acquisition. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt A summary of long-term debt follows (in thousands): June 30, December 31, 2014 Revolver Loan $ 91,000 $ 85,000 2014 First Lien Credit Agreement 927,250 932,000 Senior Unsecured Notes due 2021 400,000 400,000 Senior Unsecured Notes due 2025 370,000 — Subordinated Notes 1,000 1,000 Notes payable and secured loans 52,793 42,521 Capital lease obligations 14,787 13,996 Less: unamortized debt issuance costs and discount (31,646 ) (32,274 ) Total debt 1,825,184 1,442,243 Less: Current maturities 29,919 27,822 Total long-term debt $ 1,795,265 $ 1,414,421 2014 Revolver Loan The 2014 Revolver Loan (“Revolver”), entered into on November 3, 2014, is a revolving credit facility used for working capital, acquisitions and development activities and general corporate purposes and matures on November 3, 2019 . On October 7, 2015, the Company entered into an amendment to the 2014 First Lien Credit Agreement to increase certain lenders’ commitments under the Revolver from $80.0 million to an aggregate principal amount at any time outstanding not to exceed $150.0 million . The Company has the option of classifying borrowings under the Revolver as either Alternate Base Rate ("ABR") loans or Eurodollar ("ED") loans. The interest base rate on an ABR loan is equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50% and (c) the adjusted LIBO Rate for a Eurodollar Borrowing with a one-month interest period plus 1.00% . In addition to the base rate, the Company is required to pay a 3.25% margin for ABR loans. The interest base rate on an ED loan is equal to (x) the LIBO Rate for such Eurodollar borrowing in effect for such Interest Period divided by (y) One minus the Statutory Reserves (if any) for such Eurodollar Borrowing for such interest period. In addition to the base rate, the Company is required to pay a 4.25% margin for ED loans. The Company must also pay quarterly commitment fees of 0.50% per annum of the average daily unused amount of the Revolver. As of June 30, 2017 , the Company's availability on the Revolver was $55.9 million (including outstanding letters of credit of $3.1 million ). The 2014 First Lien Credit Agreement governs the Revolver and contains various covenants that include limitations on the Company's indebtedness, liens, acquisitions and investments. It additionally includes the requirement that, if triggered, the Company maintain a net leverage ratio within a specified range. As of June 30, 2017 , the Company was in compliance with the covenants contained in the 2014 First Lien Credit Agreement. 2014 First Lien Credit Agreement The 2014 First Lien Credit Agreement (“2014 First Lien”), entered into on November 3, 2014, is a senior secured obligation of Surgery Center Holdings, Inc. and is guaranteed on a senior secured basis by certain subsidiaries of the Company. The 2014 First Lien matures on November 3, 2020 . On March 24, 2016, Surgery Center Holdings, Inc. and certain subsidiaries of the Company entered into an amendment to the 2014 First Lien to obtain an incremental term loan in an aggregate principal amount of $80.0 million , which increased the total term loan obligation under the 2014 First Lien to $950.0 million . On September 26, 2016, the Company entered into an amendment to the 2014 First Lien to reduce the interest margins for an ABR loan to 2.75% and for an ED loan to 3.75% . The Company has the option of classifying the 2014 First Lien as either an ABR loan or an ED loan. The interest base rate on an ABR loan is equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.50% , and (c) the Adjusted LIBO Rate for a Eurodollar Borrowing with a one-month interest period plus 1.00% ; provided that the base rate shall not be less than 2.00% per annum. In addition to the base rate, the Company is required to pay a 2.75% margin for ABR loans. The interest base rate on an ED loan is equal to (x) the LIBO Rate for such Eurodollar borrowing in effect for such Interest Period divided by (y) One minus the Statutory Reserves (if any) for such Eurodollar Borrowing for such interest period; provided that the rate shall not be less than 1.00% per annum. In addition to the base rate, the Company is required to pay a 3.75% margin for ED loans. Accrued interest is payable in arrears on a quarterly basis. Within five business days after the earlier of (i) 90 days after the end of each fiscal year or (ii) the date on which financial statements have been delivered, the Company is required to make mandatory prepayments in amounts calculated in accordance with the excess cash flow provisions of the 2014 First Lien Credit Agreement. There were no excess cash flow payments required as of June 30, 2017 . The 2014 First Lien Credit Agreement governs the 2014 First Lien and contains various covenants that include limitations on the Company's indebtedness, liens, acquisitions and investments. As of June 30, 2017 , the Company was in compliance with the covenants contained in the 2014 First Lien Credit Agreement. The 2014 First Lien is collateralized by substantially all of the assets of the Company. 2014 Second Lien Credit Agreement The 2014 Second Lien Credit Agreement (“2014 Second Lien”), entered into on November 3, 2014, was prepaid in full on March 31, 2016. The 2014 Second Lien was a senior secured obligation of Surgery Center Holdings, Inc. and was guaranteed on a senior secured basis by the Company and certain of its subsidiaries. On March 31, 2016, the Company repaid the remaining principal of the 2014 Second Lien of $252.8 million with the proceeds of the issuance of the 2021 Unsecured Notes, defined below, of which $1.3 million was accrued interest. In connection with the prepayment, the Company incurred a loss on the extinguishment of debt of $8.3 million which included the write-off of loan costs and the original issue discount and a prepayment penalty for the six months ended June 30, 2016 . Senior Unsecured Notes due 2021 Effective March 31, 2016, one of the Company's subsidiaries, Surgery Center Holdings, Inc., issued $400.0 million in gross proceeds of senior unsecured notes due April 15, 2021 (the "2021 Unsecured Notes"). The 2021 Unsecured Notes bear interest at the rate of 8.875% per year, payable semi-annually on April 15 and October 15 of each year. The 2021 Unsecured Notes are a senior unsecured obligation of Surgery Center Holdings, Inc. and are guaranteed on a senior unsecured basis by each of Surgery Center Holdings, Inc.'s existing and future domestic wholly owned restricted subsidiaries that guarantees the Revolver and the 2014 First Lien (subject to certain exceptions). The Company may redeem up to 35% of the aggregate principal amount of the 2021 Unsecured Notes, at any time before April 15, 2018, with the net cash proceeds of certain equity offerings at a redemption price equal to 108.875% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the date of redemption, provided that at least 50% of the aggregate principal amount of the 2021 Unsecured Notes remain outstanding immediately after the occurrence of such redemption and such redemption occurs within 180 days of the date of the closing of any such qualified equity offering. The Company may redeem the 2021 Unsecured Notes, in whole or in part, at any time prior to April 15, 2018 at a price equal to 100.000% of the principal amount to be redeemed plus an applicable make-whole premium, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company may redeem the 2021 Unsecured Notes, in whole or in part, at any time on or after April 15, 2018, at the redemption prices set forth below (expressed as a percentage of the principal amount to be redeemed), plus accrued and unpaid interest, if any, to the date of redemption: April 15, 2018 to April 14, 2019 106.656 % April 15, 2019 to April 14, 2020 104.438 % April 15, 2020 and thereafter 100.000 % If Surgery Center Holdings, Inc., experiences a change in control under certain circumstances, it must offer to purchase the notes at a purchase price equal to 101.000% of the principal amount, plus accrued and unpaid interest to, but excluding, the date of repurchase. The 2021 Unsecured Notes contain customary affirmative and negative covenants, which among other things, limit the Company’s ability to incur additional debt, pay dividends, create or assume liens, effect transactions with its affiliates, guarantee payment of certain debt securities, sell assets, merge, consolidate, enter into acquisitions and effect sale and leaseback transactions. In connection with the offering of the 2021 Unsecured Notes, the Company recorded debt issuance costs of $8.4 million . Senior Unsecured Notes due 2025 Effective June 30, 2017, SP Finco, LLC, a wholly owned subsidiary of Surgery Center Holdings, Inc., issued $370.0 million in gross proceeds of senior unsecured notes due July 1, 2025 (the "2025 Unsecured Notes"), which gross proceeds were deposited in an escrow account (the “Escrow Account”) established at Wilmington Trust, National Association (in such capacity, the “Escrow Agent”) in the name of the trustee under the indenture governing the 2025 Unsecured Notes (the “2025 Unsecured Notes Indenture”) on behalf of the holders of the 2025 Unsecured Notes. The 2025 Unsecured Notes bear interest at the rate of 6.750% per year, payable semi-annually on January 1 and July 1 of each year, commencing on January 1, 2018. The 2025 Unsecured Notes are a senior unsecured obligation of SP Finco, LLC. In connection with the closing of the NSH Merger and the release of the proceeds from the Escrow Account (the “Escrow Release”), SP Finco, LLC will be merged with and into Surgery Center Holdings, Inc., with Surgery Center Holdings, Inc. surviving such merger (the “Initial Issuer Merger”) and assuming the rights and obligations of SP Finco, LLC under the 2025 Unsecured Notes and the 2025 Unsecured Notes Indenture by operation of law. From and after the release of the proceeds from the Escrow Account, the Initial Issuer Merger and the consummation of the NSH Merger, the 2025 Unsecured Notes will be guaranteed on a senior unsecured basis by each of Surgery Center Holdings, Inc.’s domestic wholly owned restricted subsidiaries that guarantees Surgery Center Holdings, Inc.’s senior secured credit facilities (subject to certain exceptions). At June 30, 2017, the Company included the escrowed proceeds as a long-term asset in its condensed consolidated balance sheets. The Company may redeem up to 40% of the aggregate principal amount of the 2025 Unsecured Notes at any time prior to July 1, 2020, with the net cash proceeds of certain equity issuances at a redemption price equal to 106.750% of the principal amount to be redeemed, plus accrued and unpaid interest to, but excluding, the date of redemption, provided that at least 50% of the aggregate principal amount of the 2025 Unsecured Notes remain outstanding immediately after the occurrence of such redemption and such redemption occurs within 180 days of the date of the closing of the applicable equity offering. The Company may redeem the 2025 Unsecured Notes, in whole or in part, at any time prior to July 1, 2020, at a price equal to 100.000% of the principal amount to be redeemed plus the applicable premium, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company may redeem the 2025 Unsecured Notes, in whole or in part, at any time on or after July 1, 2020, at the redemption prices set forth below (expressed as a percentage of the principal amount to be redeemed), plus accrued and unpaid interest, if any, to, but excluding, the date of redemption: July 1, 2020 to June 30, 2021 103.375 % July 1, 2021 to June 30, 2022 101.688 % July 1, 2022 and thereafter 100.000 % If the NSH Merger does not occur on or prior to the applicable date set forth in the 2025 Unsecured Notes Indenture or, if earlier, the Company notifies the Escrow Agent that the NSH Merger will not be closed, then SP Finco, LLC will be required to redeem the 2025 Unsecured Notes within three business days at a price equal to 100.000% of the initial issue price of the 2025 Unsecured Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of such redemption. If Surgery Center Holdings, Inc. experiences a change in control under certain circumstances, it must offer to purchase the 2025 Unsecured Notes at a purchase price equal to 101.000% of the principal amount, plus accrued and unpaid interest to, but excluding, the date of repurchase. The 2025 Unsecured Notes contain customary affirmative and negative covenants, which, upon consummation of the Initial Issuer Merger, among other things, will limit the Company’s ability to incur additional debt, pay dividends, create or assume liens, effect transactions with its affiliates, guarantee payment of certain debt securities, sell assets, merge, consolidate, enter into acquisitions and effect sale and leaseback transactions. In connection with the offering of the 2025 Unsecured Notes, the Company recorded debt issuance costs of $2.9 million . Subordinated Notes As of June 30, 2017, the Company had a subordinated debt facility ("Subordinated Notes") of $1.0 million . The Subordinated Notes, owed to H.I.G. Surgery Centers, LLC, had a maturity date of August 4, 2017 and had the interest rate of 17.00% per annum. As described in Note 8, "Subsequent Events," on August 3, 2017 the Company redeemed the Subordinated Notes, in whole, at a price equal 100% of the $1.0 million principal amount redeemed, plus accrued and unpaid interest. Notes Payable and Secured Loans Certain of the Company’s subsidiaries have outstanding bank indebtedness, which is collateralized by the real estate and equipment owned by the surgical facilities to which the loans were made. The various bank indebtedness agreements contain covenants to maintain certain financial ratios and also restrict encumbrance of assets, creation of indebtedness, investing activities and payment of distributions. At June 30, 2017 , the Company was in compliance with its covenants contained in the credit agreement. The Company and its subsidiaries had notes payable to financial institutions of $52.8 million and $42.5 million as of June 30, 2017 and December 31, 2016 , respectively. The Company and its subsidiaries also provide a corporate guarantee of certain indebtedness of the Company’s subsidiaries. Capital Lease Obligations The Company is liable to various vendors for several equipment leases classified as capital leases. The carrying value of the leased assets was $15.9 million and $15.4 million as of June 30, 2017 and December 31, 2016 , respectively. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic and diluted earnings per share are calculated in accordance with ASC 260, Earnings Per Share , based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings per share. The following is a reconciliation of the numerator and denominator of basic and diluted earnings per share for the three and six months ended June 30, 2017 and 2016 (in thousands except share and per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Numerator: Net (loss) income attributable to Surgery Partners, Inc. $ (4,471 ) $ 2,120 $ (7,225 ) $ (5,071 ) Denominator: Weighted average shares outstanding- basic 48,145,729 48,019,652 48,112,909 48,018,228 Effect of dilutive securities (1) — 109,389 — — Weighted average shares outstanding- diluted 48,145,729 48,129,041 48,112,909 48,018,228 (Loss) earnings per share: Basic $ (0.09 ) $ 0.04 $ (0.15 ) $ (0.11 ) Diluted (1) $ (0.09 ) $ 0.04 $ (0.15 ) $ (0.11 ) Dilutive securities outstanding not included in the computation of (loss) earnings per share as their effect is antidilutive: Stock options 1,312 — 1,056 — Restricted shares 209,858 — 188,342 100,560 (1) The impact of potentially dilutive securities for the three and six months ended June 30, 2017 and the six months ended June 30, 2016 was not considered because the effect would be anti-dilutive in those periods. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Professional, General and Workers' Compensation Liability Risks The Company is subject to claims and legal actions in the ordinary course of business, including claims relating to patient treatment, employment practices and personal injuries. To cover these claims, the Company maintains general liability and professional liability insurance in excess of self-insured retentions through third party commercial insurance carriers in amounts that management believes is sufficient for the Company's operations, although, potentially, some claims may exceed the scope of coverage in effect. The professional and general insurance coverage is on a claims-made basis. Workers' compensation insurance is on an occurrence basis. Plaintiffs in these matters may request punitive or other damages that may not be covered by insurance. The Company is not aware of any such proceedings that would have a material adverse effect on the Company's business, financial position, results of operations or liquidity. Laws and Regulations Laws and regulations governing the Company's business, including those relating to the Medicare and Medicaid programs, are complex and subject to interpretation. These laws and regulations govern every aspect of how the Company's surgical facilities conduct their operations, from licensing requirements to how and whether the Company's facilities may receive payments pursuant to the Medicare and Medicaid programs. Compliance with such laws and regulations can be subject to future government agency review and interpretation as well as legislative changes to such laws. Noncompliance with such laws and regulations may subject the Company to significant regulatory action including fines, penalties, and exclusion from the Medicare, Medicaid and other federal healthcare programs. From time to time, governmental regulatory agencies will conduct inquiries of the Company's practices, including, but not limited to, the Company's compliance with federal and state fraud and abuse laws, billing practices and relationships with physicians. It is the Company's current practice and future intent to cooperate fully with such inquiries. The Company is not aware of any such inquiry that would have a material adverse effect on the Company's business, financial position, results of operations or liquidity. Acquired Facilities The Company, through its wholly-owned subsidiaries or controlled partnerships and limited liability companies, has acquired and will continue to acquire surgical facilities with prior operating histories. Such facilities may have unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. Although the Company attempts to assure that no such liabilities exist, obtain indemnification from prospective sellers covering such matters and institute policies designed to conform centers to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. There can be no assurance that any such matter will be covered by indemnification or, if covered, that the liability sustained will not exceed contractual limits or the financial capacity of the indemnifying party. The Company cannot predict whether federal or state statutory or regulatory provisions will be enacted that would prohibit or otherwise regulate relationships which the Company has established or may establish with other healthcare providers or have materially adverse effects on its business or revenues arising from such future actions. Management believes, however, that it will be able to adjust the Company's operations so as to be in compliance with any statutory or regulatory provision as may be applicable. Potential Physician Investor Liability A majority of the physician investors in the partnerships and limited liability companies which operate the Company's surgical facilities carry general and professional liability insurance on a claims-made basis. Each partnership or limited liability company may, however, be liable for damages to persons or property arising from occurrences at the surgical facilities. Although the various physician investors and other surgeons generally are required to obtain general and professional liability insurance with tail coverage that extends beyond the period of any claims-made policies, such individuals may not be able to obtain coverage in amounts sufficient to cover all potential liability. Since most insurance policies contain exclusions, the physician investors will not be insured against all possible occurrences. In the event of an uninsured or underinsured loss, the value of an investment in the partnership interests or limited liability company membership units and the amount of distributions could be adversely affected. Contingent Consideration Pursuant to a purchase agreement dated December 24, 2009 (“the Purchase Agreement”), the Company acquired controlling interests in 36 business entities in various Florida locations which operate freestanding ASCs and provided anesthesia and pain management services (“the 2009 Acquisition”). The Purchase Agreement provided for maximum potential contingent consideration of up to $10.0 million based on operating results subsequent to the acquisition for the period from January 1, 2010 to December 31, 2010 . Pursuant to the Purchase Agreement, the contingent consideration is payable as principal under a Subordinated Promissory Note, the form of which was delivered concurrent with the Purchase Agreement. The balance has remained outstanding due to ongoing litigation as a result of a civil claim. The Company has made indemnification claims against the Seller exceeding the amount of the contingent consideration liability, which the Company has a contractual right of offset against. Based on a court order in December 2016, the Company removed the contingent consideration liability on its consolidated balance sheets at December 31, 2016 . On April 20, 2017, a settlement was reached between the two parties resulting in the Company receiving $3.9 million of which $2.7 million was paid from the escrow funds set up at the time of purchase and $1.2 million was paid by the seller. During the second quarter the Company recorded a gain on litigation settlement of $3.8 million for the settlement amount, net of legal costs. In connection with an acquisition during the three months ended June 30, 2016, pursuant to the purchase agreement, the Company must pay consideration to the prior owners of the applicable facility should the requirements for continuing employment agreed to in the purchase agreement be met. As of June 30, 2017, the Company estimates it may have to pay $15.7 million in future contingent acquisition compensation expense over the remaining performance periods. The contingent acquisition compensation expense is recognized as a component of general and administrative expense in the condensed consolidated statements of operations and was $1.8 million and $1.5 million for the three months ended June 30, 2017 and 2016, respectively and $3.8 million and $1.5 million for the six months ended June 30, 2017 and 2016, respectively. |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting A public company is required to report annual and interim financial and descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or "CODM," in deciding how to allocate resources and in assessing performance. The Company operates in three major lines of business that are also the Company's reportable operating segments - the operation of surgical facilities, the operation of optical services and the operation of ancillary services, which includes physician practices, a diagnostic laboratory and a specialty pharmacy. Adjusted EBITDA is the primary profit/loss metric reviewed by the CODM in making key business decisions and on allocation of resources. The segment disclosures below provide a reconciliation from adjusted EBITDA back to net income in the reported condensed consolidated financial information. The following tables present financial information for each reportable segment (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenues: Surgical facility services $ 262,810 $ 263,783 $ 520,960 $ 509,453 Ancillary services 22,640 22,503 47,852 40,283 Optical services 2,903 3,395 5,724 7,019 Total revenues $ 288,353 $ 289,681 $ 574,536 $ 556,755 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Segment Adjusted EBITDA: Surgical facility services $ 49,946 $ 54,311 $ 98,187 $ 99,971 Ancillary services 429 3,068 4,211 6,568 Optical services 883 849 1,659 1,728 Total segment adjusted EBITDA (1) $ 51,258 $ 58,228 $ 104,057 $ 108,267 General and administrative expenses $ (18,655 ) $ (15,023 ) $ (34,196 ) $ (27,220 ) Non-cash stock compensation expense 1,435 502 2,069 635 Contingent acquisition compensation expense 1,814 1,530 3,847 1,530 Acquisition related costs 1,203 795 1,385 1,245 Total adjusted EBITDA (1) 37,055 46,032 77,162 84,457 Net income attributable to non-controlling interests 16,098 20,173 33,274 37,720 Depreciation and amortization (11,417 ) (9,702 ) (22,525 ) (19,271 ) Interest expense, net (25,600 ) (26,235 ) (50,782 ) (48,388 ) Income tax expense (512 ) (2,420 ) (2,629 ) (4,190 ) Non-cash stock compensation expense (1,435 ) (502 ) (2,069 ) (635 ) Contingent acquisition compensation expense (1,814 ) (1,530 ) (3,847 ) (1,530 ) Merger transaction, integration and practice acquisition costs (2) (4,137 ) (2,192 ) (4,728 ) (6,108 ) Gain on litigation settlement 3,794 — 3,794 — Loss on disposal or impairment of long-lived assets, net (405 ) (1,331 ) (1,601 ) (1,125 ) Loss on debt refinancing — — — (8,281 ) Total net income $ 11,627 $ 22,293 $ 26,049 $ 32,649 (1) The above table reconciles adjusted EBITDA by segment to net income as reflected in the unaudited condensed consolidated statements of operations. When the Company uses the term “Adjusted EBITDA,” it is referring to net income minus (a) net income attributable to non-controlling interests plus (b) depreciation and amortization, (c) interest expense, net, (d) income tax expense, (e) non-cash stock compensation expense, (f) contingent acquisition compensation expense, (g) merger transaction, integration and practice acquisition costs, (h) gain on litigation settlement, (i) loss on disposal or impairment of long-lived assets and (j) loss on debt refinancing. 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 the Company consolidates for financial reporting purposes. Our operating strategy is to apply a market-based approach in structuring its partnerships with individual market dynamics driving the structure. The Company believes 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 the Company's portion of Adjusted EBITDA generated by its surgical facilities and other operations. The Company uses Adjusted EBITDA as a measure of liquidity. It is included because the Company believes that it provides investors with additional information about its ability to incur and service debt and make capital expenditures. Adjusted EBITDA is not a measurement of financial performance or liquidity under GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, 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 financial performance and liquidity. The Company's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. (2) This amount includes merger transaction and integration costs of $2.9 million and $1.3 million for the three months ended June 30, 2017 and 2016 , respectively, and practice acquisition costs of $1.2 million and $867,000 for the three months ended June 30, 2017 and 2016 , respectively. This amount includes merger transaction and integration costs of $3.2 million and $4.5 million for the six months ended June 30, 2017 and 2016 , respectively, and practice acquisition costs of $1.5 million and $1.6 million for the six months ended June 30, 2017 and 2016 , respectively. June 30, 2017 December 31, 2016 Assets: Surgical facility services $ 1,912,913 $ 1,914,842 Ancillary services 185,195 184,002 Optical services 23,604 22,478 Total 2,121,712 2,121,322 General and administrative $ 549,775 $ 183,636 Total assets $ 2,671,487 $ 2,304,958 Six Months Ended June 30, 2017 2016 Supplemental Information: Cash purchases of property and equipment, net: Surgical facility services $ 11,266 $ 14,745 Ancillary services 1,740 2,951 Optical services 68 96 Total $ 13,074 $ 17,792 General and administrative $ 2,028 $ 2,558 Total cash purchases of property and equipment, net $ 15,102 $ 20,350 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On August 3, 2017 the Company redeemed the Subordinated Notes (as defined in Note 4, "Long-Term Debt"), in whole, at a price equal 100% of the $1.0 million principal amount redeemed, plus accrued and unpaid interest. |
Significant Accounting Polici16
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited financial statements as of that date. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the fiscal year ended December 31, 2016 . 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 accompanying notes. Actual results could differ from those estimates. |
Non-Controlling Interests | Non-Controlling Interests The physician limited partners and physician minority members of the entities that the Company controls are responsible for the supervision and delivery of medical services. The governance rights of limited partners and minority members are restricted to those that protect their financial interests. Under certain partnership and operating agreements governing these partnerships and limited liability companies, the Company could be removed as the sole general partner or managing member for certain events such as material breach of the partnership or operating agreement, gross negligence or bankruptcy. These protective rights do not preclude consolidation of the respective partnerships and limited liability companies. Ownership interests in consolidated subsidiaries held by parties other than the Company are identified and generally presented in the condensed consolidated financial statements within the equity section but separate from the Company's equity. However, in instances in which certain redemption features that are not solely within the control of the Company are present, classification of non-controlling interests outside of permanent equity is required. Consolidated net income attributable to the Company and to the non-controlling interests are identified and presented on the condensed consolidated statements of operations; changes in ownership interests in which the Company retains a controlling interest are accounted for as equity transactions assuming the Company continues to consolidate related entities. Certain transactions with non-controlling interests are classified within financing activities in the condensed consolidated statements of cash flows. The condensed consolidated financial statements of the Company include all assets, liabilities, revenues and expenses of surgical facilities in which the Company has sufficient ownership and rights to allow the Company to consolidate the surgical facilities. Similar to its investments in non-consolidated affiliates, the Company regularly engages in the purchase and sale of ownership interests with respect to its consolidated subsidiaries that do not result in a change of control. Non-Controlling Interests — Redeemable. Each of the partnerships and limited liability companies through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement. In certain circumstances, the partnership and operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physicians’ ownership if certain adverse regulatory events occur, such as it becoming illegal for the physicians to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests - redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets. |
Variable Interest Entities | Variable Interest Entities The condensed consolidated financial statements include the accounts of variable interest entities in which the Company is the primary beneficiary under the provisions of Accounting Standards Codification Topic ("ASC") 810, Consolidation . As of June 30, 2017 , the variable interest entities include five surgical facilities, three anesthesia practices and three physician practices. At December 31, 2016 , the variable interest entities included five surgical facilities, three anesthesia practices and two physician practices. The change is due to a physician practice acquired during the three months ended June 30, 2017. The Company has the power to direct the activities that most significantly impact the variable interest entity's economic performance. Additionally, the Company would absorb the majority of the expected losses of these entities should they occur. |
Equity Method Investments | Equity Method Investments The Company has non-consolidating investments in surgical facilities and management companies that own or manage surgical facilities. These investments are accounted for using the equity method of accounting. |
Use of Estimates | Use of Estimates 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The Company uses fair value measurements based on quoted prices in active markets for identical assets or liabilities (Level 1), inputs other than quoted prices in active markets that are either directly or indirectly observable (Level 2), or unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions (Level 3), depending on the nature of the item being valued. The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values. The fair values of the 2014 First Lien Credit Agreement and the 2021 Unsecured Notes (in each case, as defined in Note 4, "Long-Term Debt") were based on a Level 2 computation using quoted prices for identical liabilities in inactive markets at June 30, 2017 and December 31, 2016 , as applicable. The carrying amounts related to the Company's other long-term debt obligations, including the 2025 Unsecured Notes issued on June 30, 2017 and the 2014 Revolver Loan (in each case, as defined in Note 4, "Long-Term Debt"), approximate their fair values. The Company maintains a supplemental executive retirement savings plan (the "SERP") for certain executive officers. The SERP is a non-qualified deferred compensation plan for eligible executive officers and other key employees of the Company that allows participants to defer portions of their compensation. |
Revenues | Revenues 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. Patient service revenues. 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. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. 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. Changes in estimated contractual adjustments and discounts are recorded in the period of change. Other service revenues. 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.. 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. 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. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash and cash equivalent balances at high credit quality financial institutions. |
Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts | Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts Accounts receivable are recorded net of contractual adjustments and allowances for doubtful accounts to reflect accounts receivable at net realizable value. Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors. As of June 30, 2017 and December 31, 2016 , the Company had a net third-party Medicaid settlements receivable of $1.1 million and $454,000 , respectively. The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not significant. The Company's policy is to collect co-payments and deductibles prior to providing medical services. It is also the Company's policy to verify a patient’s insurance 72 hours prior to the patient’s procedure. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients. The Company analyzes accounts receivable at each of its facilities to ensure the proper aged category and collection assessment. At a consolidated level, the Company's policy is to review accounts receivable aging, by facility, to determine the appropriate allowance for doubtful accounts. Patient account balances are reviewed for delinquency based on contractual terms. This review is supported by an analysis of the actual revenues, contractual adjustments and cash collections received. An account balance is written off only after the Company has pursued collection with legal or collection agency assistance or otherwise has deemed an account to be uncollectible. The receivables related to the Company's optical products purchasing organization are recognized separately from patient accounts receivable, as discussed above, and are included in other current assets in the condensed consolidated balance sheets. |
Inventories | Inventories Inventories, which consist primarily of medical and drug supplies, are stated at the lower of cost or market value. Cost is determined using the first-in, first-out method. |
Property and Equipment | The Company also leases certain facilities and equipment under capital leases. Assets held under capital leases are stated at the present value of minimum lease payments at the inception of the related lease. Such assets are depreciated on a straight-line basis over the lesser of the lease term or the remaining useful life of the leased asset. Property and Equipment Property and equipment are stated at cost or, if obtained through acquisition, at fair value determined on the date of acquisition. Depreciation is recognized using the straight-line method over the estimated useful lives of the assets, generally three to five years for computers and software and five to seven years for furniture and equipment. Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term or the estimated useful life of the assets. Routine maintenance and repairs are expensed as incurred, while expenditures that increase capacities or extend useful lives are capitalized. |
Goodwill and Intangible Assets | Goodwill Goodwill represents the fair value of the consideration provided in an acquisition over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. Intangible Assets The Company has indefinite-lived intangible assets related to the certificates of need held in jurisdictions where certain of its surgical facilities are located. The Company also has finite-lived intangible assets related to physician guarantee agreements, non-compete agreements, management agreements and customer relationships. Physician income guarantees are amortized into salaries and benefits costs in the condensed consolidated statements of operations over the commitment period of the contract, generally three to four years . Non-compete agreements and management rights agreements are amortized into depreciation and amortization expense in the condensed consolidated statements of operations over the service lives of the agreements, typically ranging from 2 to 5 years for non-compete agreements and 15 years for the management rights agreements. Customer relationships are amortized into depreciation and amortization expense in the condensed consolidated statements of operations over the estimated lives of the relationships, ranging from three to ten years . |
Impairment of Long-Lived Assets, Goodwill and Intangible Assets | Impairment of Long-Lived Assets, Goodwill and Intangible Assets The Company evaluates the carrying value of long-lived assets when impairment indicators are present or when circumstances indicate that impairment may exist in accordance with Accounting Standards Codification (ASC) 350, Intangibles- Goodwill and Other . The Company performs an impairment test by preparing an expected undiscounted cash flow projection. If the projection indicates that the recorded amount of the long-lived asset is not expected to be recovered, the carrying value is reduced to estimated fair value. The cash flow projection and fair value represents management’s best estimate, using appropriate and customary assumptions, projections and methodologies, at the date of evaluation. The Company tests its goodwill and intangible assets for impairment at least annually, or more frequently if certain indicators arise. |
Operating Leases | Operating Leases The Company leases office space and equipment for its surgical facilities, including surgical facilities under development. The lease agreements generally require the lessee, or the Company, to pay all maintenance, property taxes, utilities and insurance costs. The Company accounts for operating lease obligations and sublease income on a straight-line basis. Contingent obligations of the Company, as defined by each lease agreement, are recognized when specific contractual measures have been met, typically the result of an increase in the Consumer Price Index. Lease obligations paid in advance are recorded as prepaid rent and included in prepaid expenses and other current assets on the condensed consolidated balance sheets. The difference between actual lease payments and straight-line lease expense over the initial lease term, excluding optional renewal periods, is recorded as deferred rent and included in other current liabilities and other long-term liabilities on the condensed consolidated balance sheets. |
Equity-Based Compensation | Equity-Based Compensation Transactions in which the Company receives employee and non-employee services in exchange for the Company’s equity instruments or liabilities that are based on the fair value of the Company’s equity securities or may be settled by the issuance of these securities are accounted for using a fair value method. The Company applies the Black-Scholes-Merton method of valuation in determining share-based compensation expense for option awards. The Company’s policy is to recognize compensation expense using the straight line method over the relevant vesting period for units that vest based on time. In connection with the Reorganization, the Company’s board of directors and stockholders adopted the Surgery Partners, Inc. 2015 Omnibus Incentive Plan from which the Company’s future equity-based awards will be granted. |
Professional, General and Workers' Compensation Insurance | Professional, General and Workers' Compensation Insurance The Company maintains general liability and professional liability insurance in excess of self-insured retentions through third party commercial insurance carriers in amounts that management believes is sufficient for the Company's operations, although, potentially, some claims may exceed the scope of coverage in effect. The professional and general insurance coverage is on a claims-made basis. Workers' compensation insurance is on an occurrence basis. The Company expenses the costs under the self-insured retention exposure for general and professional liability and workers compensation claims which relate to (i) claims made during the policy period, which are offset by insurance recoveries and (ii) an estimate of claims incurred but not yet reported that are expected to be reported after the policy period expires. Reserves and provisions are based upon actuarially determined estimates. The reserves are estimated using individual case-basis valuations and actuarial analysis. Reserves for professional, general and workers' compensation claim liabilities are determined with no regard for expected insurance recoveries and are presented gross on the condensed consolidated balance sheets. |
Income Taxes and Tax Receivable Agreement | Income Taxes and Tax Receivable Agreement The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a net operating loss carryforward exists, the Company makes a determination as to whether that net operating loss ("NOL") carryforward will be utilized in the future. A valuation allowance is established for certain net operating loss carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to adjust its deferred tax valuation allowances. The Company, or one or more of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years prior to 2013 or state income tax examinations for years prior to 2012. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, " Revenue from Contracts with Customers ," along with subsequent amendments, updates and an extension of the effective date (collectively the “New Revenue Standard”), which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This five-step process will require significant management judgment in addition to changing the way many companies recognize revenue in their financial statements. Additionally, and among other provisions, the New Revenue Standard requires expanded quantitative and qualitative disclosures, including disclosure about the nature, amount, timing and uncertainty of revenue. The provisions of the New Revenue Standard are effective for annual periods beginning after December 15, 2017, including interim periods within those years by applying either the full retrospective method or the modified retrospective approach upon adoption. The Company will adopt this ASU on January 1, 2018. Upon the continued evaluation of the New Revenue Standard, the Company currently plans to adopt using the modified retrospective method, including providing all requisite disclosures under such method. In preparation for the adoption of the New Revenue Standard, the Company continues to evaluate and refine its estimates of the anticipated impacts the New Revenue Standard will have on its revenue recognition policies, procedures, financial position, results of operations, cash flows, financial disclosures and control framework. Specifically, the Company is continuing to evaluate its accounting policies and internal controls under the New Revenue Standard, as well as analyzing all of the potential effects of the New Revenue Standard, particularly with respect to non-patient service revenue sources. Upon further evaluation, the Company anticipates that the majority of its provision for doubtful accounts will continue to be recognized as an operating expense rather than as a direct reduction to revenues, given the Company’s practice of assessing a patient’s ability to pay prior to or on the date of providing healthcare services. In February 2016, the FASB issued ASU 2016-02, “ Leases, ” which will require, among other items, lessees to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company believes the primary effect of adopting the new standard will be to record right-of-use assets and obligations for current operating leases. In March 2016, the FASB issued ASU 2016-07, “ Investments- Equity Method and Joint Ventures, ” which allows investments that now meet equity method treatment that were previously accounted for under a different method to apply the equity method prospectively from the date the investment qualifies for equity method treatment. ASU 2016-07 is effective prospectively for fiscal years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. The Company adopted this ASU on January 1, 2017. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial position, results of operations, cash flows and financial disclosures. In August 2016, the FASB issued ASU 2016-15, “ Classification of Certain Cash Receipts and Cash Payments, ” which clarifies the classification of certain cash receipts and cash payments on the statement of cash flows. ASU 2016-15 is effective retrospectively for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact this new guidance may have on the condensed consolidated cash flows. In October 2016, the FASB issued ASU 2016-17, “ Interests Held through Related Parties That Are under Common Control ,” which modifies existing guidance with respect to how a decision maker that holds an indirect interest in a VIE through a common control party determines whether it is the primary beneficiary of the VIE as part of the analysis of whether the VIE would need to be consolidated. Under the ASU, a decision maker would need to consider only its proportionate indirect interest in the VIE held through a common control party. Previous guidance had required the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. As a result of the ASU, in certain cases, previous consolidation conclusions may change. ASU 2016-17 is effective prospectively for fiscal years beginning after December 15, 2016, including interim periods within those years. The Company adopted this ASU on January 1, 2017. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial position, results of operations, cash flows and financial disclosures. In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows: Restricted Cash, ” w hich will require the reconciliation of restricted cash in the statement of cash flows. ASU 2016-18 is effective retrospectively for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The adoption of this ASU will not have a material impact on the Company's condensed consolidated cash flows. In January 2017, the FASB issued ASU 2017-01, “ Business Combinations – Clarifying the Definition of a Business ,” which narrows the definition of a business when evaluating whether transactions should be accounted for as asset acquisition or business combination. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact this new guidance may have on the condensed consolidated financial position, results of operations and cash flows. In January 2017, the FASB issued ASU 2017-04, “ Simplifying the Test for Goodwill Impairment ,” which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Early adoption is permitted for annual and interim periods after January 1, 2017. The Company early adopted this ASU on January 1, 2017. The adoption of ASU 2017-04 only impacts the Company's financial statements in situations where an impairment of a reporting unit’s assets is determined. |
Business Combinations | The Company accounts for its business combinations in accordance with the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer can be identified for each business combination. The acquirer is the entity that obtains control of one or more businesses in the business combination and the acquisition date is the date the acquirer achieves control. The assets acquired, liabilities assumed and any non-controlling interests in the acquired business at the acquisition date are recognized at their fair values as of that date, and the direct costs incurred in connection with the business combination are recorded and expensed separately from the business combination. Acquisitions in which the Company is able to exert significant influence but does not have control are accounted for using the equity method. |
Significant Accounting Polici17
Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Rollforward of Non-Controlling Interests - Redeemable | A summary of activity related to the non-controlling interests—redeemable follows (in thousands): Balance at December 31, 2016 $ 180,521 Net income attributable to non-controlling interests—redeemable 7,109 Acquisition and disposal of shares of non-controlling interests, net—redeemable (3,197 ) Distributions to non-controlling interest—redeemable holders (8,181 ) Balance at June 30, 2017 $ 176,252 |
Schedule of Carrying Amounts and Fair Values of Debt | A summary of the carrying amounts and fair values of the Company's long-term debt follows (in thousands): Carrying Amount Fair Value June 30, December 31, June 30, December 31, 2014 First Lien Credit Agreement, net of debt issuance costs and discount $ 909,410 $ 911,784 $ 911,120 $ 917,528 Senior Unsecured Notes due 2021, net of debt issuance costs and discount $ 389,095 $ 387,942 $ 420,223 $ 412,189 Senior Unsecured Notes due 2025, net of debt issuance costs $ 367,100 $ — $ 367,100 $ — 2014 Revolver Loan $ 91,000 $ 85,000 $ 91,000 $ 85,000 |
Schedule of Revenues by Service Type | A summary of revenues by service type as a percentage of total revenues follows: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Patient service revenues: Surgical facilities revenues 90.5 % 90.0 % 90.1 % 90.6 % Ancillary services revenues 7.9 % 7.7 % 8.3 % 7.2 % 98.4 % 97.7 % 98.4 % 97.8 % Other service revenues: Optical services revenues 1.0 % 1.2 % 1.0 % 1.3 % Other 0.6 % 1.1 % 0.6 % 0.9 % 1.6 % 2.3 % 1.6 % 2.2 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % |
Schedule of Revenue Sources for Patient Service Revenues | The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in thousands): Three Months Ended June 30, 2017 2016 Amount % Amount % Patient service revenues: Private insurance $ 140,922 49.6 % $ 145,211 51.3 % Government 118,381 41.7 % 113,971 40.2 % Self-pay 5,760 2.0 % 4,766 1.7 % Other (1) 18,771 6.7 % 19,263 6.8 % Total patient service revenues $ 283,834 100.0 % $ 283,211 100.0 % Other service revenues: Optical service revenues $ 2,903 $ 3,395 Other revenues 1,616 3,075 Total net revenues $ 288,353 $ 289,681 Six Months Ended June 30, 2017 2016 Amount % Amount % Patient service revenues: Private insurance $ 279,925 49.5 % $ 277,426 50.9 % Government 235,259 41.6 % 219,774 40.3 % Self-pay 11,831 2.1 % 8,479 1.6 % Other (1) 38,465 6.8 % 39,092 7.2 % Total patient service revenues $ 565,480 100.0 % $ 544,771 100.0 % Other service revenues: Optical service revenues $ 5,724 $ 7,019 Other revenues 3,332 4,965 Total net revenues $ 574,536 $ 556,755 (1) Other is comprised of anesthesia service agreements, auto liability, letters of protection and other payor types. |
Schedule of Prepaid Expenses and Other Current Assets | A summary of prepaid expenses and other current assets follows (in thousands): June 30, December 31, Prepaid expenses $ 19,178 $ 11,158 Receivables - optical product purchasing organization 8,964 7,042 Insurance recoveries 2,305 2,476 Other current assets 11,885 11,338 Total $ 42,332 $ 32,014 |
Schedule of Property and Equipment | A summary of property and equipment follows (in thousands): June 30, December 31, Land $ 8,082 $ 8,082 Buildings and improvements 123,106 118,172 Furniture and equipment 16,234 14,670 Computer and software 33,238 29,902 Medical equipment 136,149 117,418 Construction in progress 4,333 2,396 Property and equipment, at cost 321,142 290,640 Less: Accumulated depreciation (115,398 ) (86,387 ) Property and equipment, net $ 205,744 $ 204,253 |
Schedule of Finite-Lived Intangible Assets | A summary of the activity related to intangible assets for the six months ended June 30, 2017 follows (in thousands): Physician Income Guarantees Management Rights Non-Compete Agreements Certificates of Need Customer Relationships Other Total Intangible Assets Balance at December 31, 2016 $ 813 $ 21,290 $ 16,457 $ 3,780 $ 3,704 $ 1,979 $ 48,023 Additions 175 — 92 14 — — 281 Recruitment expense (284 ) — — — — — (284 ) Amortization — (865 ) (2,843 ) — (550 ) (341 ) (4,599 ) Balance at June 30, 2017 $ 704 $ 20,425 $ 13,706 $ 3,794 $ 3,154 $ 1,638 $ 43,421 |
Schedule of Indefinite-Lived Intangible Assets | A summary of the activity related to intangible assets for the six months ended June 30, 2017 follows (in thousands): Physician Income Guarantees Management Rights Non-Compete Agreements Certificates of Need Customer Relationships Other Total Intangible Assets Balance at December 31, 2016 $ 813 $ 21,290 $ 16,457 $ 3,780 $ 3,704 $ 1,979 $ 48,023 Additions 175 — 92 14 — — 281 Recruitment expense (284 ) — — — — — (284 ) Amortization — (865 ) (2,843 ) — (550 ) (341 ) (4,599 ) Balance at June 30, 2017 $ 704 $ 20,425 $ 13,706 $ 3,794 $ 3,154 $ 1,638 $ 43,421 |
Schedule of Rollforward of Goodwill | A summary of activity related to goodwill for the six months ended June 30, 2017 follows (in thousands): Balance at December 31, 2016 $ 1,555,204 Acquisitions 13,137 Divestitures (175 ) Purchase price adjustments 1,242 Balance at June 30, 2017 $ 1,569,408 |
Schedule of Other Long-Term Assets | A summary of other long-term assets follows (in thousands): June 30, December 31, Notes receivable $ 817 $ 716 Deposits 3,284 4,196 Assets of SERP 1,834 1,725 Debt issuance costs 1,199 1,488 Insurance recoverable 6,835 6,835 Other 1,665 1,475 Total $ 15,634 $ 16,435 |
Schedule of Other Current Liabilities | A summary of other current liabilities follows (in thousands): June 30, December 31, Interest payable $ 11,771 $ 19,206 Current taxes payable 3,408 2,622 Insurance liabilities 6,814 6,625 Amounts due to patients and payors 14,660 12,221 Tax receivable agreement liability 999 999 Contingent acquisition compensation liability 6,555 4,589 Other accrued expenses 28,258 22,731 Total $ 72,465 $ 68,993 |
Schedule of Other Long-Term Liabilities | A summary of other long-term liabilities follows (in thousands): June 30, December 31, Facility lease obligations $ 51,904 $ 52,653 Medical malpractice liability 10,453 10,453 Liability of SERP 1,834 1,725 Unfavorable lease liability 1,509 1,671 Other long-term liabilities 10,401 9,764 Total $ 76,101 $ 76,266 |
Acquisitions and Developments (
Acquisitions and Developments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Business Combinations [Abstract] | |
Schedule of Assets Acquired and Liabilities Assumed | The aggregate amounts preliminarily recognized as of the acquisition date for each major class of assets and liabilities assumed in the acquisitions closed during the six months ended June 30, 2017 are as follows: Cash consideration $ 14,163 Fair value of non-controlling interests 105 Aggregate fair value of acquisitions 14,268 Net assets acquired: Accounts receivable 871 Other current assets 18 Property and equipment 622 Intangible assets 92 Accounts payable (99 ) Other current liabilities (187 ) Long-term debt (186 ) Net assets acquired 1,131 Excess of fair value over identifiable net assets acquired 13,137 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Summary of long-term debt | A summary of long-term debt follows (in thousands): June 30, December 31, 2014 Revolver Loan $ 91,000 $ 85,000 2014 First Lien Credit Agreement 927,250 932,000 Senior Unsecured Notes due 2021 400,000 400,000 Senior Unsecured Notes due 2025 370,000 — Subordinated Notes 1,000 1,000 Notes payable and secured loans 52,793 42,521 Capital lease obligations 14,787 13,996 Less: unamortized debt issuance costs and discount (31,646 ) (32,274 ) Total debt 1,825,184 1,442,243 Less: Current maturities 29,919 27,822 Total long-term debt $ 1,795,265 $ 1,414,421 |
Debt redemption percentages | The Company may redeem the 2021 Unsecured Notes, in whole or in part, at any time on or after April 15, 2018, at the redemption prices set forth below (expressed as a percentage of the principal amount to be redeemed), plus accrued and unpaid interest, if any, to the date of redemption: April 15, 2018 to April 14, 2019 106.656 % April 15, 2019 to April 14, 2020 104.438 % April 15, 2020 and thereafter 100.000 % |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following is a reconciliation of the numerator and denominator of basic and diluted earnings per share for the three and six months ended June 30, 2017 and 2016 (in thousands except share and per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Numerator: Net (loss) income attributable to Surgery Partners, Inc. $ (4,471 ) $ 2,120 $ (7,225 ) $ (5,071 ) Denominator: Weighted average shares outstanding- basic 48,145,729 48,019,652 48,112,909 48,018,228 Effect of dilutive securities (1) — 109,389 — — Weighted average shares outstanding- diluted 48,145,729 48,129,041 48,112,909 48,018,228 (Loss) earnings per share: Basic $ (0.09 ) $ 0.04 $ (0.15 ) $ (0.11 ) Diluted (1) $ (0.09 ) $ 0.04 $ (0.15 ) $ (0.11 ) Dilutive securities outstanding not included in the computation of (loss) earnings per share as their effect is antidilutive: Stock options 1,312 — 1,056 — Restricted shares 209,858 — 188,342 100,560 (1) The impact of potentially dilutive securities for the three and six months ended June 30, 2017 and the six months ended June 30, 2016 was not considered because the effect would be anti-dilutive in those periods. |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting [Abstract] | |
Reconciliation of Revenue from Segments to Consolidated | The following tables present financial information for each reportable segment (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenues: Surgical facility services $ 262,810 $ 263,783 $ 520,960 $ 509,453 Ancillary services 22,640 22,503 47,852 40,283 Optical services 2,903 3,395 5,724 7,019 Total revenues $ 288,353 $ 289,681 $ 574,536 $ 556,755 |
Schedule of Segment Operating Income | Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Segment Adjusted EBITDA: Surgical facility services $ 49,946 $ 54,311 $ 98,187 $ 99,971 Ancillary services 429 3,068 4,211 6,568 Optical services 883 849 1,659 1,728 Total segment adjusted EBITDA (1) $ 51,258 $ 58,228 $ 104,057 $ 108,267 General and administrative expenses $ (18,655 ) $ (15,023 ) $ (34,196 ) $ (27,220 ) Non-cash stock compensation expense 1,435 502 2,069 635 Contingent acquisition compensation expense 1,814 1,530 3,847 1,530 Acquisition related costs 1,203 795 1,385 1,245 Total adjusted EBITDA (1) 37,055 46,032 77,162 84,457 Net income attributable to non-controlling interests 16,098 20,173 33,274 37,720 Depreciation and amortization (11,417 ) (9,702 ) (22,525 ) (19,271 ) Interest expense, net (25,600 ) (26,235 ) (50,782 ) (48,388 ) Income tax expense (512 ) (2,420 ) (2,629 ) (4,190 ) Non-cash stock compensation expense (1,435 ) (502 ) (2,069 ) (635 ) Contingent acquisition compensation expense (1,814 ) (1,530 ) (3,847 ) (1,530 ) Merger transaction, integration and practice acquisition costs (2) (4,137 ) (2,192 ) (4,728 ) (6,108 ) Gain on litigation settlement 3,794 — 3,794 — Loss on disposal or impairment of long-lived assets, net (405 ) (1,331 ) (1,601 ) (1,125 ) Loss on debt refinancing — — — (8,281 ) Total net income $ 11,627 $ 22,293 $ 26,049 $ 32,649 (1) The above table reconciles adjusted EBITDA by segment to net income as reflected in the unaudited condensed consolidated statements of operations. When the Company uses the term “Adjusted EBITDA,” it is referring to net income minus (a) net income attributable to non-controlling interests plus (b) depreciation and amortization, (c) interest expense, net, (d) income tax expense, (e) non-cash stock compensation expense, (f) contingent acquisition compensation expense, (g) merger transaction, integration and practice acquisition costs, (h) gain on litigation settlement, (i) loss on disposal or impairment of long-lived assets and (j) loss on debt refinancing. 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 the Company consolidates for financial reporting purposes. Our operating strategy is to apply a market-based approach in structuring its partnerships with individual market dynamics driving the structure. The Company believes 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 the Company's portion of Adjusted EBITDA generated by its surgical facilities and other operations. The Company uses Adjusted EBITDA as a measure of liquidity. It is included because the Company believes that it provides investors with additional information about its ability to incur and service debt and make capital expenditures. Adjusted EBITDA is not a measurement of financial performance or liquidity under GAAP. It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, 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 financial performance and liquidity. The Company's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. (2) This amount includes merger transaction and integration costs of $2.9 million and $1.3 million for the three months ended June 30, 2017 and 2016 , respectively, and practice acquisition costs of $1.2 million and $867,000 for the three months ended June 30, 2017 and 2016 , respectively. This amount includes merger transaction and integration costs of $3.2 million and $4.5 million for the six months ended June 30, 2017 and 2016 , respectively, and practice acquisition costs of $1.5 million and $1.6 million for the six months ended June 30, 2017 and 2016 , respectively. |
Reconciliation of Assets from Segment to Consolidated | June 30, 2017 December 31, 2016 Assets: Surgical facility services $ 1,912,913 $ 1,914,842 Ancillary services 185,195 184,002 Optical services 23,604 22,478 Total 2,121,712 2,121,322 General and administrative $ 549,775 $ 183,636 Total assets $ 2,671,487 $ 2,304,958 |
Schedule of Other Segment Reporting Information | Six Months Ended June 30, 2017 2016 Supplemental Information: Cash purchases of property and equipment, net: Surgical facility services $ 11,266 $ 14,745 Ancillary services 1,740 2,951 Optical services 68 96 Total $ 13,074 $ 17,792 General and administrative $ 2,028 $ 2,558 Total cash purchases of property and equipment, net $ 15,102 $ 20,350 |
Organization (Details)
Organization (Details) $ / shares in Units, $ in Millions | May 09, 2017USD ($)$ / sharesshares | Oct. 01, 2015$ / sharesshares | Jun. 30, 2017surgical_facilitystate$ / sharesshares | Dec. 31, 2016$ / sharesshares | Sep. 30, 2015shares |
Product Information [Line Items] | |||||
Common stock, shares issued (shares) | shares | 48,810,075 | 48,488,616 | |||
Preferred stock, par value (in USD per share) | $ / shares | $ 0.01 | $ 0.01 | |||
Number of States in which entity operates | state | 29 | ||||
Number of surgical facilities owned | 103 | ||||
Number of surgical facilities owned, majority interest | 73 | ||||
Number of surgical facilities owned, consolidated | 93 | ||||
Facilities, Ambulatory Surgery Centers | |||||
Product Information [Line Items] | |||||
Number of surgical facilities owned | 98 | ||||
Facilities, Surgical Hospitals | |||||
Product Information [Line Items] | |||||
Number of surgical facilities owned | 5 | ||||
Facilities, Physician Clinics | |||||
Product Information [Line Items] | |||||
Number of surgical facilities owned | 59 | ||||
NSH | |||||
Product Information [Line Items] | |||||
Business acquisition total purchase price | $ | $ 760 | ||||
Surgery Center Holdings, LLC | |||||
Product Information [Line Items] | |||||
Common stock, shares issued (shares) | shares | 33,871,990 | ||||
BCPE Seminole Holdings LP | Majority Shareholder | |||||
Product Information [Line Items] | |||||
Stock expected to be sold by investor (in shares) | shares | 26,455,651 | ||||
Stock expected to be sold by investor, price per share (in USD per share) | $ / shares | $ 19 | ||||
BCPE Seminole Holdings LP | Preferred Class A | Preferred Stock | |||||
Product Information [Line Items] | |||||
Preferred stock, par value (in USD per share) | $ / shares | $ 0.01 | ||||
Preferred stock dividend rate | 10.00% | ||||
Purchase price per share (in USD per share) | $ / shares | $ 1,000 | ||||
BCPE Seminole Holdings LP | Preferred Class A | Preferred Stock | Maximum | |||||
Product Information [Line Items] | |||||
Stock issued during period (shares) | shares | 320,000 | ||||
IPO | |||||
Product Information [Line Items] | |||||
Stock issued during period (shares) | shares | 14,285,000 | ||||
Share price (in USD per share) | $ / shares | $ 19 |
Significant Accounting Polici23
Significant Accounting Policies - Schedule of Non-Controlling Interests - Redeemable (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Non-Controlling Interests - Redeemable [Roll Forward] | |
Beginning balance | $ 180,521 |
Net income attributable to non-controlling interests—redeemable | 7,109 |
Acquisition and disposal of shares of non-controlling interests, net—redeemable | (3,197) |
Distributions to non-controlling interest—redeemable holders | (8,181) |
Ending balance | $ 176,252 |
Significant Accounting Polici24
Significant Accounting Policies - Variable Interest Entities (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Jun. 30, 2017USD ($)Practice | Jun. 30, 2017USD ($)Anesthesia_Practice | Jun. 30, 2017USD ($)surgical_facility | Jun. 30, 2017USD ($)Practice | Dec. 31, 2016USD ($)Anesthesia_Practice | Dec. 31, 2016USD ($)surgical_facility | Dec. 31, 2016USD ($)Practice | |
Variable Interest Entity [Line Items] | |||||||
Number of facilities included in VIE | 3 | 5 | 3 | 3 | 5 | 2 | |
Number of physician practices acquired | Practice | 1 | ||||||
Variable Interest Entity, Primary Beneficiary, Aggregated Disclosure | |||||||
Variable Interest Entity [Line Items] | |||||||
Total assets related to VIE | $ 93.3 | $ 93.3 | $ 93.3 | $ 93.3 | $ 99.5 | $ 99.5 | $ 99.5 |
Total liabilities related to VIE | $ 9.5 | $ 9.5 | $ 9.5 | $ 9.5 | $ 10.7 | $ 10.7 | $ 10.7 |
Significant Accounting Polici25
Significant Accounting Policies - Equity Method Investments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Investments in and advances to affiliates | $ 34,488 | $ 34,980 |
Significant Accounting Polici26
Significant Accounting Policies - Schedule of Carrying Amount and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Senior Unsecured Notes Due 2021 | Senior Unsecured Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 400,000 | $ 400,000 |
Senior Unsecured Notes Due 2021 | Carrying Amount | Senior Unsecured Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 389,095 | 387,942 |
Senior Unsecured Notes Due 2021 | Fair Value | Senior Unsecured Notes | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 420,223 | 412,189 |
Senior Unsecured Notes Due 2025 | Senior Unsecured Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 370,000 | 0 |
Senior Unsecured Notes Due 2025 | Carrying Amount | Senior Unsecured Notes | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 367,100 | 0 |
Senior Unsecured Notes Due 2025 | Fair Value | Senior Unsecured Notes | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 367,100 | 0 |
2014 First Lien Credit Agreement | Line of Credit | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 927,250 | 932,000 |
2014 First Lien Credit Agreement | Carrying Amount | Line of Credit | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 909,410 | 911,784 |
2014 First Lien Credit Agreement | Fair Value | Line of Credit | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 911,120 | 917,528 |
2014 Revolver Loan | Line of Credit | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 91,000 | 85,000 |
2014 Revolver Loan | Carrying Amount | Line of Credit | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 91,000 | 85,000 |
2014 Revolver Loan | Fair Value | Line of Credit | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 91,000 | $ 85,000 |
Significant Accounting Polici27
Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Assets of SERP | $ 1,834 | $ 1,725 |
Liability of SERP | 1,834 | 1,725 |
Fair Value, Inputs, Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Assets of SERP | 1,800 | 1,700 |
Liability of SERP | $ 1,800 | $ 1,700 |
Significant Accounting Polici28
Significant Accounting Policies - Schedule of Revenues by Service Type (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Revenue from External Customer [Line Items] | ||||
Increase of revenue as result of changes in estimates to third-party settlements related to prior years | $ 128 | $ 506 | ||
Revenue Source | Revenue | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 100.00% | 100.00% | 100.00% | 100.00% |
Revenue Source | Revenue | Healthcare Organization, Patient Service | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 98.40% | 97.70% | 98.40% | 97.80% |
Revenue Source | Revenue | Surgical Facility Services | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 90.50% | 90.00% | 90.10% | 90.60% |
Revenue Source | Revenue | Ancillary Services | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 7.90% | 7.70% | 8.30% | 7.20% |
Revenue Source | Revenue | Healthcare Organization, Other Service | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 1.60% | 2.30% | 1.60% | 2.20% |
Revenue Source | Revenue | Optical Services | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 1.00% | 1.20% | 1.00% | 1.30% |
Revenue Source | Revenue | Other | ||||
Revenue from External Customer [Line Items] | ||||
Service revenues as a percentage of total revenues | 0.60% | 1.10% | 0.60% | 0.90% |
Significant Accounting Polici29
Significant Accounting Policies - Schedule of Revenues by Sources (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Total net revenues | $ 288,353 | $ 289,681 | $ 574,536 | $ 556,755 |
Healthcare Organization, Patient Service | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Patient service revenues | $ 283,834 | $ 283,211 | $ 565,480 | $ 544,771 |
Healthcare Organization, Patient Service | Customer | Revenue | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Service revenues as a percentage of total revenues | 100.00% | 100.00% | 100.00% | 100.00% |
Healthcare Organization, Patient Service | Private insurance | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Patient service revenues | $ 140,922 | $ 145,211 | $ 279,925 | $ 277,426 |
Healthcare Organization, Patient Service | Private insurance | Customer | Revenue | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Service revenues as a percentage of total revenues | 49.60% | 51.30% | 49.50% | 50.90% |
Healthcare Organization, Patient Service | Government | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Patient service revenues | $ 118,381 | $ 113,971 | $ 235,259 | $ 219,774 |
Healthcare Organization, Patient Service | Government | Customer | Revenue | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Service revenues as a percentage of total revenues | 41.70% | 40.20% | 41.60% | 40.30% |
Healthcare Organization, Patient Service | Self-pay | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Patient service revenues | $ 5,760 | $ 4,766 | $ 11,831 | $ 8,479 |
Healthcare Organization, Patient Service | Self-pay | Customer | Revenue | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Service revenues as a percentage of total revenues | 2.00% | 1.70% | 2.10% | 1.60% |
Healthcare Organization, Patient Service | Other | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Patient service revenues | $ 18,771 | $ 19,263 | $ 38,465 | $ 39,092 |
Healthcare Organization, Patient Service | Other | Customer | Revenue | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Service revenues as a percentage of total revenues | 6.70% | 6.80% | 6.80% | 7.20% |
Optical Services | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Other service revenues | $ 2,903 | $ 3,395 | $ 5,724 | $ 7,019 |
Other | ||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ||||
Other service revenues | $ 1,616 | $ 3,075 | $ 3,332 | $ 4,965 |
Significant Accounting Polici30
Significant Accounting Policies - Accounts Receivable (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Third-Party Medicaid settlement receivable | $ 1,100 | $ 454 |
Optical products receivable | $ 8,964 | $ 7,042 |
Significant Accounting Polici31
Significant Accounting Policies - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Prepaid expenses | $ 19,178 | $ 11,158 |
Receivables - optical product purchasing organization | 8,964 | 7,042 |
Insurance recoveries | 2,305 | 2,476 |
Other current assets | 11,885 | 11,338 |
Total | $ 42,332 | $ 32,014 |
Significant Accounting Polici32
Significant Accounting Policies - Property and Equipment (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | $ 321,142 | $ 290,640 |
Less: accumulated depreciation | (115,398) | (86,387) |
Property and equipment, net | 205,744 | 204,253 |
Carrying value of assets under capital lease | 15,900 | 15,400 |
Accumulated depreciation of assets under capital lease | (12,600) | (11,600) |
Land | ||
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | 8,082 | 8,082 |
Buildings and improvements | ||
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | 123,106 | 118,172 |
Furniture and equipment | ||
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | $ 16,234 | 14,670 |
Furniture and equipment | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Property, and equipment useful life | 5 years | |
Furniture and equipment | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Property, and equipment useful life | 7 years | |
Computer and software | ||
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | $ 33,238 | 29,902 |
Computer and software | Minimum | ||
Property, Plant and Equipment [Line Items] | ||
Property, and equipment useful life | 3 years | |
Computer and software | Maximum | ||
Property, Plant and Equipment [Line Items] | ||
Property, and equipment useful life | 5 years | |
Medical equipment | ||
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | $ 136,149 | 117,418 |
Construction in progress | ||
Schedule of Property, Plant and Equipment | ||
Property and equipment, gross | $ 4,333 | $ 2,396 |
Significant Accounting Polici33
Significant Accounting Policies - Schedule of Intangible Assets (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Intangible Assets [Roll Forward] | |
Beginning balance | $ 48,023 |
Additions | 281 |
Recruitment expense | (284) |
Amortization | (4,599) |
Ending balance | 43,421 |
Certificates of Need | |
Intangible Assets [Roll Forward] | |
Beginning balance | 3,780 |
Additions | 14 |
Ending balance | 3,794 |
Physician Income Guarantees | |
Intangible Assets [Roll Forward] | |
Beginning balance | 813 |
Additions | 175 |
Recruitment expense | (284) |
Ending balance | $ 704 |
Physician Income Guarantees | Minimum | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 3 years |
Physician Income Guarantees | Maximum | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 4 years |
Non-Compete Agreements | |
Intangible Assets [Roll Forward] | |
Beginning balance | $ 16,457 |
Additions | 92 |
Amortization | (2,843) |
Ending balance | $ 13,706 |
Non-Compete Agreements | Minimum | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 2 years |
Non-Compete Agreements | Maximum | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 5 years |
Management Rights | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 15 years |
Intangible Assets [Roll Forward] | |
Beginning balance | $ 21,290 |
Additions | 0 |
Amortization | (865) |
Ending balance | 20,425 |
Customer Relationships | |
Intangible Assets [Roll Forward] | |
Beginning balance | 3,704 |
Additions | 0 |
Amortization | (550) |
Ending balance | $ 3,154 |
Customer Relationships | Minimum | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 3 years |
Customer Relationships | Maximum | |
Intangible Assets [Line Items] | |
Intangible asset useful life | 10 years |
Other | |
Intangible Assets [Roll Forward] | |
Beginning balance | $ 1,979 |
Additions | 0 |
Amortization | (341) |
Ending balance | $ 1,638 |
Significant Accounting Polici34
Significant Accounting Policies - Schedule of Rollforward of Goodwill (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | $ 1,555,204 |
Acquisitions | 13,137 |
Divestitures | (175) |
Purchase price adjustments | 1,242 |
Goodwill, end of period | $ 1,569,408 |
Significant Accounting Polici35
Significant Accounting Policies - Restricted Invested Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted invested assets | $ 315 | $ 315 |
Chesterfield, Missouri facility | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Restricted invested assets | $ 315 | $ 315 |
Significant Accounting Polici36
Significant Accounting Policies - Schedule of Other Long-Term Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Notes receivable | $ 817 | $ 716 |
Deposits | 3,284 | 4,196 |
Assets of SERP | 1,834 | 1,725 |
Debt issuance costs | 1,199 | 1,488 |
Insurance recoverable | 6,835 | 6,835 |
Other | 1,665 | 1,475 |
Total | $ 15,634 | $ 16,435 |
Significant Accounting Polici37
Significant Accounting Policies - Schedule of Other Current Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Other Liabilities, Current [Abstract] | ||
Interest payable | $ 11,771 | $ 19,206 |
Current taxes payable | 3,408 | 2,622 |
Insurance liabilities | 6,814 | 6,625 |
Amounts due to patients and payors | 14,660 | 12,221 |
Tax receivable agreement liability | 999 | 999 |
Contingent acquisition compensation liability | 6,555 | 4,589 |
Other accrued expenses | 28,258 | 22,731 |
Total | $ 72,465 | $ 68,993 |
Significant Accounting Polici38
Significant Accounting Policies - Schedule of Other Long-Term Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Facility lease obligations | $ 51,904 | $ 52,653 |
Medical malpractice liability | 10,453 | 10,453 |
Liability of SERP | 1,834 | 1,725 |
Unfavorable lease liability | 1,509 | 1,671 |
Other long-term liabilities | 10,401 | 9,764 |
Total | 76,101 | 76,266 |
Capital Leased Assets [Line Items] | ||
Capital lease obligations | 14,787 | 13,996 |
Idaho Falls, Idaho, Surgical Hospital | ||
Capital Leased Assets [Line Items] | ||
Current portion of lease obligation | 1,300 | 1,100 |
Capital lease obligations | 48,300 | 48,900 |
Ocala, Florida | ||
Capital Leased Assets [Line Items] | ||
Current portion of lease obligation | 189 | 182 |
Capital lease obligations | $ 3,600 | $ 3,700 |
Significant Accounting Polici39
Significant Accounting Policies - Professional, General and Workers' Compensation Insurance (Details) - USD ($) $ in Millions | Jun. 30, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Professional, general and workers' compensation insurance reserve | $ 13.5 | $ 13.8 |
Estimated insurance recoveries | $ 9.1 | $ 9.3 |
Significant Accounting Polici40
Significant Accounting Policies - Income Taxes and Tax Receivable Agreement (Details) - USD ($) $ in Millions | 6 Months Ended | |||
Jun. 30, 2017 | May 09, 2017 | May 08, 2017 | Sep. 30, 2015 | |
Income Tax Contingency [Line Items] | ||||
Percentage of cash savings requited to pay Tax Receivables Agreement | 85.00% | |||
Long-term tax receivable agreement liability | $ 120.5 | $ 123.4 | ||
LIBOR | ||||
Income Tax Contingency [Line Items] | ||||
Interest accrued on payment under Tax Receivable Agreement, basis spread on variable rate | 3.00% |
Acquisitions and Developments -
Acquisitions and Developments - Additional Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2017Practice | Jun. 30, 2017USD ($)Practice | |
Business Acquisition [Line Items] | ||
Number of businesses acquired in existing market | 1 | |
2017 Physician Practice Acquisitions | ||
Business Acquisition [Line Items] | ||
Number of businesses acquired in existing market | 3 | |
Combined purchase price | $ | $ 14,163 |
Acquisitions and Developments42
Acquisitions and Developments - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Net assets acquired: | ||
Excess of fair value over identifiable net assets acquired | $ 1,569,408 | $ 1,555,204 |
2017 Physician Practice Acquisitions | ||
Business Acquisition [Line Items] | ||
Cash consideration | 14,163 | |
Fair value of non-controlling interests | 105 | |
Aggregate fair value of acquisitions | 14,268 | |
Net assets acquired: | ||
Accounts receivable | 871 | |
Other current assets | 18 | |
Property and equipment | 622 | |
Intangible assets | 92 | |
Accounts payable | (99) | |
Other current liabilities | (187) | |
Long-term debt | (186) | |
Net assets acquired | 1,131 | |
Excess of fair value over identifiable net assets acquired | $ 13,137 |
Long-Term Debt - Summary of Lon
Long-Term Debt - Summary of Long-Term Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Instrument [Line Items] | ||
Capital lease obligations | $ 14,787 | $ 13,996 |
Less: unamortized debt issuance costs and discount | (31,646) | (32,274) |
Debt and capital lease obligations | 1,825,184 | 1,442,243 |
Less: Current maturities | 29,919 | 27,822 |
Total long-term debt | 1,795,265 | 1,414,421 |
Line of Credit | 2014 Revolver Loan | ||
Debt Instrument [Line Items] | ||
Long-term debt | 91,000 | 85,000 |
Line of Credit | 2014 First Lien Credit Agreement | ||
Debt Instrument [Line Items] | ||
Long-term debt | 927,250 | 932,000 |
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 400,000 | 400,000 |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 370,000 | 0 |
Subordinated Notes | ||
Debt Instrument [Line Items] | ||
Long-term debt | 1,000 | 1,000 |
Notes payable and secured loans | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 52,793 | $ 42,521 |
Long-Term Debt - 2014 Revolver
Long-Term Debt - 2014 Revolver Loan (Details) - Line of Credit - USD ($) | 6 Months Ended | ||
Jun. 30, 2017 | Oct. 07, 2015 | Nov. 03, 2014 | |
2014 Revolver Loan | |||
Debt Instrument [Line Items] | |||
Debt maximum borrowing capacity | $ 150,000,000 | $ 80,000,000 | |
Quarterly commitment fee percentage | 0.50% | ||
Debt remaining borrowing capacity | $ 55,900,000 | ||
2014 Revolver Loan | Alternate Base Rate Loan | |||
Debt Instrument [Line Items] | |||
Debt instrument, margin in addition to base rate | 3.25% | ||
2014 Revolver Loan | Alternate Base Rate Loan | Federal Funds Effective Rate | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 0.50% | ||
2014 Revolver Loan | Alternate Base Rate Loan | LIBOR | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 1.00% | ||
2014 Revolver Loan | Eurodollar Loan | |||
Debt Instrument [Line Items] | |||
Debt instrument, margin in addition to base rate | 4.25% | ||
Letters of Credit | |||
Debt Instrument [Line Items] | |||
Debt remaining borrowing capacity | $ 3,100,000 |
Long-Term Debt - 2014 First Lie
Long-Term Debt - 2014 First Lien Credit Agreement (Details) - 2014 First Lien Credit Agreement - Line of Credit - USD ($) | Sep. 26, 2016 | Jun. 30, 2017 | Mar. 24, 2016 |
Debt Instrument [Line Items] | |||
Debt instrument, increase in maximum borrowing capacity | $ 80,000,000 | ||
Debt maximum borrowing capacity | $ 950,000,000 | ||
Debt instrument, threshold business days in certain condition to make mandatory interest payment | 5 days | ||
Debt Instrument, number of days after each fiscal year in certain condition to make mandatory interest payment | 90 days | ||
Alternate Base Rate Loan | |||
Debt Instrument [Line Items] | |||
Debt instrument, margin in addition to base rate | 2.75% | 2.75% | |
Debt instrument, maximum base rate condition | 2.00% | ||
Alternate Base Rate Loan | Federal Funds Effective Rate | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 0.50% | ||
Alternate Base Rate Loan | LIBOR | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 1.00% | ||
Eurodollar Loan | |||
Debt Instrument [Line Items] | |||
Debt instrument, margin in addition to base rate | 3.75% | 3.75% | |
Debt instrument, maximum base rate condition | 1.00% |
Long-Term Debt - 2014 Second Li
Long-Term Debt - 2014 Second Lien Credit Agreement (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 |
Debt Instrument [Line Items] | |||||
Loss on debt refinancing | $ 0 | $ 0 | $ 0 | $ 8,281 | |
2014 Second Lien Credit Agreement | Line of Credit | |||||
Debt Instrument [Line Items] | |||||
Line of credit, repayments | $ 252,800 | ||||
Accrued interest repaid | 1,300 | ||||
Loss on debt refinancing | $ 8,300 |
Long-Term Debt - Senior Unsecur
Long-Term Debt - Senior Unsecured Notes Due 2021 (Details) - USD ($) | 6 Months Ended | ||
Jun. 30, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | |
Debt Instrument [Line Items] | |||
Debt issuance costs | $ 1,199,000 | $ 1,488,000 | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | |||
Debt Instrument [Line Items] | |||
Debt, face amount | $ 400,000,000 | ||
Debt instrument, stated rate | 8.875% | ||
Debt issuance costs | $ 8,400,000 | ||
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | Before April 15, 2018 | |||
Debt Instrument [Line Items] | |||
Debt instrument, redeemable percentage of aggregate principal | 35.00% | ||
Redemption price, percentage of principal, proceeds from equity offerings | 108.875% | ||
Required remaining principal balance, after redemption | 50.00% | ||
Debt redemption, required period after closing of equity offering | 180 days | ||
Redemption price, percentage of principal | 100.00% | ||
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | April 15, 2018 to April 14, 2019 | |||
Debt Instrument [Line Items] | |||
Redemption price, percentage of principal | 106.656% | ||
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | April 15, 2019 to April 14, 2020 | |||
Debt Instrument [Line Items] | |||
Redemption price, percentage of principal | 104.438% | ||
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | April 15, 2020 and thereafter | |||
Debt Instrument [Line Items] | |||
Redemption price, percentage of principal | 100.00% | ||
Senior Unsecured Notes | Senior Unsecured Notes Due 2021 | Change in control | |||
Debt Instrument [Line Items] | |||
Redemption price, percentage of principal | 101.00% |
Long-Term Debt - Senior Unsec48
Long-Term Debt - Senior Unsecured Notes Due 2025 (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | |
Debt Instrument [Line Items] | ||
Debt issuance costs | $ 1,199,000 | $ 1,488,000 |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Debt, face amount | $ 370,000,000 | |
Debt instrument, stated rate | 6.75% | |
Debt issuance costs | $ 2,900,000 | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | Before July 01, 2020 | ||
Debt Instrument [Line Items] | ||
Debt instrument, redeemable percentage of aggregate principal | 40.00% | |
Redemption price, percentage of principal, proceeds from equity offerings | 106.75% | |
Required remaining principal balance, after redemption | 50.00% | |
Debt redemption, required period after closing of equity offering | 180 days | |
Redemption price, percentage of principal | 100.00% | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | July 1, 2020 to June 30, 2021 | ||
Debt Instrument [Line Items] | ||
Redemption price, percentage of principal | 103.375% | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | July 1, 2021 to June 30, 2022 | ||
Debt Instrument [Line Items] | ||
Redemption price, percentage of principal | 101.688% | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | July 1, 2022 and thereafter | ||
Debt Instrument [Line Items] | ||
Redemption price, percentage of principal | 100.00% | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | Merger does not occur | ||
Debt Instrument [Line Items] | ||
Redemption price, percentage of principal | 100.00% | |
Senior Unsecured Notes | Senior Unsecured Notes Due 2025 | Change in control | ||
Debt Instrument [Line Items] | ||
Redemption price, percentage of principal | 101.00% |
Long-Term Debt - Additional (De
Long-Term Debt - Additional (Details) - USD ($) | Aug. 03, 2017 | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Instrument [Line Items] | |||
Capital leased assets | $ 15,900,000 | $ 15,400,000 | |
Subordinated Notes | |||
Debt Instrument [Line Items] | |||
Debt maximum borrowing capacity | $ 1,000,000 | ||
Debt instrument, stated rate | 17.00% | ||
Long-term debt, carrying value | $ 1,000,000 | 1,000,000 | |
Subordinated Notes | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Redemption price, percentage of principal | 100.00% | ||
Principal amount of debt redeemed | $ 1,000,000 | ||
Notes payable and secured loans | |||
Debt Instrument [Line Items] | |||
Long-term debt, carrying value | $ 52,793,000 | $ 42,521,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Numerator: | |||||
Net (loss) income attributable to Surgery Partners, Inc. | $ (4,471) | $ 2,120 | $ (7,225) | $ (5,071) | |
Denominator: | |||||
Weighted average shares outstanding- basic (shares) | 48,145,729 | 48,019,652 | 48,112,909 | 48,018,228 | |
Effect of dilutive securities (shares) | [1] | 0 | 109,389 | 0 | 0 |
Weighted average shares outstanding- diluted (shares) | [2] | 48,145,729 | 48,129,041 | 48,112,909 | 48,018,228 |
(Loss) earnings per share: | |||||
Basic (in USD per share) | $ (0.09) | $ 0.04 | $ (0.15) | $ (0.11) | |
Diluted (in USD per share) | [2] | $ (0.09) | $ 0.04 | $ (0.15) | $ (0.11) |
Stock options | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 1,312 | 0 | 1,056 | 0 | |
Restricted shares | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 209,858 | 0 | 188,342 | 100,560 | |
[1] | Includes contingent acquisition compensation expense of $1.8 million and $1.5 million for the three months ended June 30, 2017 and 2016, respectively, and $3.8 million and $1.5 million for the six months ended June 30, 2017 and 2016, respectively. | ||||
[2] | The impact of potentially dilutive securities for the three and six months ended June 30, 2017 and the six months ended June 30, 2016 was not considered because the effect would be anti-dilutive in those periods. |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Apr. 20, 2017USD ($) | Dec. 24, 2009USD ($)Entity | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) |
Guarantor Obligations [Line Items] | ||||||
Total settlement amount | $ 3,794,000 | $ 0 | $ 3,794,000 | $ 0 | ||
Purchase Agreement | ||||||
Guarantor Obligations [Line Items] | ||||||
Number of business entities acquired | Entity | 36 | |||||
Maximum potential contingent consideration | $ 10,000,000 | |||||
Total settlement amount | $ 3,900,000 | 3,800,000 | ||||
Amount of settlement paid from escrow | 2,700,000 | |||||
Amount of settlement paid by seller | $ 1,200,000 | |||||
Q2 Period Ended, 2016 Acquisition | ||||||
Guarantor Obligations [Line Items] | ||||||
Contingent consideration, liability | 15,700,000 | 15,700,000 | ||||
Q2 Period Ended, 2016 Acquisition | General and Administrative Expense | ||||||
Guarantor Obligations [Line Items] | ||||||
Contingent acquisition compensation expense | $ 1,800,000 | $ 1,500,000 | $ 3,800,000 | $ 1,500,000 |
Segment Reporting - Revenues by
Segment Reporting - Revenues by Reportable Segment (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)segment | Jun. 30, 2016USD ($) | |
Segment Reporting Information [Line Items] | ||||
Number of operating segments | segment | 3 | |||
Revenues | $ 288,353 | $ 289,681 | $ 574,536 | $ 556,755 |
Surgical Facility Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 262,810 | 263,783 | 520,960 | 509,453 |
Ancillary Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 22,640 | 22,503 | 47,852 | 40,283 |
Optical Services | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 2,903 | $ 3,395 | $ 5,724 | $ 7,019 |
Segment Reporting - Segment Ope
Segment Reporting - Segment Operating Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | $ 37,055 | $ 46,032 | $ 77,162 | $ 84,457 | |
General and administrative expenses | [1] | (18,655) | (15,023) | (34,196) | (27,220) |
Non-cash stock compensation expense | 1,435 | 502 | 2,069 | 635 | |
Contingent acquisition compensation expense | 1,814 | 1,530 | 3,847 | 1,530 | |
Acquisition related costs | 1,203 | 795 | 1,385 | 1,245 | |
Total segment adjusted EBITDA | 37,055 | 46,032 | 77,162 | 84,457 | |
Net income attributable to non-controlling interests | 16,098 | 20,173 | 33,274 | 37,720 | |
Depreciation and amortization | (11,417) | (9,702) | (22,525) | (19,271) | |
Interest expense, net | (25,600) | (26,235) | (50,782) | (48,388) | |
Income tax expense | (512) | (2,420) | (2,629) | (4,190) | |
Non-cash stock compensation expense | (1,435) | (502) | (2,069) | (635) | |
Contingent acquisition compensation expense | (1,814) | (1,530) | (3,847) | (1,530) | |
Merger transaction, integration and practice acquisition costs | (4,137) | (2,192) | (4,728) | (6,108) | |
Gain on litigation settlement | 3,794 | 0 | 3,794 | 0 | |
Loss on disposal or impairment of long-lived assets, net | (405) | (1,331) | (1,601) | (1,125) | |
Loss on debt refinancing | 0 | 0 | 0 | (8,281) | |
Net income | 11,627 | 22,293 | 26,049 | 32,649 | |
Merger transaction and integration costs | 2,904 | 1,325 | 3,241 | 4,497 | |
Practice acquisition costs | 1,200 | 867 | 1,487 | 1,611 | |
Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | 51,258 | 58,228 | 104,057 | 108,267 | |
Total segment adjusted EBITDA | 51,258 | 58,228 | 104,057 | 108,267 | |
Operating Segments | Surgical Facility Services | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | 49,946 | 54,311 | 98,187 | 99,971 | |
Total segment adjusted EBITDA | 49,946 | 54,311 | 98,187 | 99,971 | |
Operating Segments | Ancillary Services | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | 429 | 3,068 | 4,211 | 6,568 | |
Total segment adjusted EBITDA | 429 | 3,068 | 4,211 | 6,568 | |
Operating Segments | Optical Services | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | 883 | 849 | 1,659 | 1,728 | |
Total segment adjusted EBITDA | $ 883 | $ 849 | $ 1,659 | $ 1,728 | |
[1] | Includes contingent acquisition compensation expense of $1.8 million and $1.5 million for the three months ended June 30, 2017 and 2016, respectively, and $3.8 million and $1.5 million for the six months ended June 30, 2017 and 2016, respectively. |
Segment Reporting - Assets by O
Segment Reporting - Assets by Operating Segment (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Segment Reporting Information [Line Items] | ||
Assets | $ 2,671,487 | $ 2,304,958 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Assets | 2,121,712 | 2,121,322 |
Operating Segments | Surgical Facility Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 1,912,913 | 1,914,842 |
Operating Segments | Ancillary Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 185,195 | 184,002 |
Operating Segments | Optical Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 23,604 | 22,478 |
Corporate, Non-Segment | ||
Segment Reporting Information [Line Items] | ||
Assets | $ 549,775 | $ 183,636 |
Segment Reporting - Cash Purcha
Segment Reporting - Cash Purchases of Property and Equipment (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Segment Reporting Information [Line Items] | ||
Purchases of property and equipment, net | $ 15,102 | $ 20,350 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Purchases of property and equipment, net | 13,074 | 17,792 |
Operating Segments | Surgical Facility Services | ||
Segment Reporting Information [Line Items] | ||
Purchases of property and equipment, net | 11,266 | 14,745 |
Operating Segments | Ancillary Services | ||
Segment Reporting Information [Line Items] | ||
Purchases of property and equipment, net | 1,740 | 2,951 |
Operating Segments | Optical Services | ||
Segment Reporting Information [Line Items] | ||
Purchases of property and equipment, net | 68 | 96 |
Corporate, Non-Segment | ||
Segment Reporting Information [Line Items] | ||
Purchases of property and equipment, net | $ 2,028 | $ 2,558 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event - Subordinated Notes | Aug. 03, 2017USD ($) |
Subsequent Event [Line Items] | |
Redemption price, percentage of principal | 100.00% |
Principal amount of debt redeemed | $ 1,000,000 |