Surgical Care Affiliates, Inc. - FORM 8-K - EX-99.1

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8-K - 8-K - Surgical Care Affiliates, Inc.	d653924d8k.htm

Exhibit 99.1

Surgical Care Affiliates, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Statements

On December 31, 2013, a wholly owned subsidiary of Surgical Care Affiliates, Inc. (“SCA”) sold its controlling 51% equity interest in Fort Worth Endoscopy Center (“FWEC”) for $1.3 million in cash consideration.

The following unaudited pro forma condensed consolidated balance sheet of SCA as of September 30, 2013 and unaudited pro forma condensed consolidated statements of operations of SCA for the nine–month period ended September 30, 2013 and the year ended December 31, 2012, give effect to this sale. The unaudited pro forma condensed consolidated financial statements have been prepared by management of SCA based upon the historical financial statements of SCA and the adjustments and assumptions in the accompanying notes to the pro forma condensed consolidated financial statements.

The unaudited pro forma condensed consolidated balance sheet reflects the disposition of FWEC as if such a transaction had been consummated on September 30, 2013.

The unaudited pro forma condensed consolidated statements of operations set forth the effect of the disposition of FWEC as if it had occurred on January 1, 2012.

The unaudited pro forma condensed consolidated financial statements may not be indicative of the results that actually would have occurred if the sale of FWEC had occurred on the dates indicated or which may be obtained in the future. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) SCA’s historical audited consolidated financial statements and related notes thereto as of and for the year ended December 31, 2012 contained in its prospectus dated October 29, 2013, which was filed with the Securities and Exchange Commission (the “SEC”) on October 30, 2013 as part of SCA’s registration statement on Form S-1, as amended, which was declared effective by the SEC on October 29, 2013, and (ii) SCA’s historical unaudited condensed consolidated financial statements and related notes thereto as of and for the nine-months ended September 30, 2013 contained in its Quarterly Report on Form 10-Q filed with the SEC on November 15, 2013.

Certain amounts in the unaudited pro forma condensed consolidated financial statements for prior periods have been reclassified to conform to the current period presentation.

SCA was converted from a Delaware limited liability company, previously named ASC Acquisition LLC, to a Delaware corporation on October 30, 2013. Pursuant to the conversion, every 10.25 outstanding membership units of ASC Acquisition LLC were converted into one share of common stock of SCA, and options to purchase membership units of ASC Acquisition LLC were converted into options to purchase shares of common stock of SCA at a ratio of 10.25 membership units of ASC Acquisition LLC underlying such options to each one share of common stock of SCA underlying such converted options. In connection with the conversion, the exercise prices of such converted options were adjusted accordingly. In addition, every 10.25 outstanding restricted equity units of ASC Acquisition LLC were converted into one restricted share of SCA. The unaudited pro forma condensed consolidated financial statements reflect the conversion to a Delaware corporation.

SURGICAL CARE AFFILIATES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2013

(In thousands of U.S. dollars)


	As reported		Pro forma adjustments			Pro forma
Assets
Current assets
Cash and cash equivalents	$	88,561	$	(401	)(a), (b)	$	88,160
Restricted cash		21,619		—			21,619
Accounts receivable, net of allowance for doubtful accounts (SCAI: $8,336; Pro forma: $8,328)		81,235		(713	)(b)		80,522
Receivable from nonconsolidated affiliates		14,369		—			14,369
Prepaids and other current assets		22,203		(66	)(b)		22,137
Current assets related to discontinued operations		312		—			312

Total current assets		228,299		(1,180	)		227,119
Property and equipment, net of accumulated depreciation		183,687		(916	)(b)		182,771
Goodwill		701,971		(10,062	)(b)		691,909
Intangible assets, net of accumulated amortization Deferred debt issue costs		50,926 10,838		— —			50,926 10,838
Investment in and advances to nonconsolidated affiliates		180,618		—			180,618
Other long-term assets		4,536		—			4,536
Assets related to discontinued operations		2,128		—			2,128

Total assets	$	1,363,003	$	(12,158	)	$	1,350,845

Liabilities and Equity
Current liabilities
Current portion of long-term debt	$	21,711	$	—		$	21,711
Accounts payable		22,911		(73	)(b)		22,838
Accrued payroll		30,432		(207	)(b)		30,225
Accrued interest		3,595		—			3,595
Accrued distributions		24,565		—			24,565
Payable to nonconsolidated affiliates		65,085		—			65,085
Deferred income tax liability		639		—			639
Other current liabilities		18,563		(86	)(b)		18,477
Current liabilities related to discontinued operations		298		—			298

Total current liabilities		187,799		(366	)		187,433
Long-term debt, net of current portion		789,202		(85	)(b)		789,117
Deferred income tax liability		110,975		—			110,975
Other long-term liabilities		23,111		—			23,111
Liabilities related to discontinued operations		403		—			403

Total liabilities		1,111,490		(451	)		1,111,039

Noncontrolling interests – redeemable		22,723		—			22,723

Equity
Surgical Care Affiliates’ equity		56,600		(10,068	)(b), (c)		46,532
Noncontrolling interests – non-redeemable		172,190		(1,639	)(b)		170,551

Total equity		228,790		(11,707	)		217,083

Total liabilities and equity	$	1,363,003	$	(12,158	)	$	1,350,845

a)	To recognize the proceeds of $1.3 million in cash from the disposition.

b)	To record the removal of the net assets allocated to Fort Worth Endoscopy Center.

c)	To record the estimated loss on disposition. The actual loss to be reported in continuing operations for the fourth quarter of 2013 is subject to change pending final determination of the net assets of the business, transaction costs and other adjustments.

SURGICAL CARE AFFILIATES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the nine-months ended September 30, 2013

(In thousands of U. S. dollars except per share data)


	As reported			Pro forma adjustments (a)			Pro forma
Net operating revenues:
Net patient revenues	$	548,685		$	(8,167	)	$	540,518
Management fee revenues		26,220			—			26,220
Other revenues		10,580			(1	)		10,579

Total net operating revenues		585,485			(8,168	)		577,317
Equity in net income of nonconsolidated affiliates		16,111			—			16,111
Operating expenses:
Salaries and benefits		202,189			(2,330	)		199,859
Supplies		128,242			(552	)		127,690
Other operating expenses		89,293			(737	)		88,556
Depreciation and amortization		31,928			(218	)		31,710
Occupancy costs		20,378			(490	)		19,888
Provision for doubtful accounts		10,364			(109	)		10,255
Impairment of intangible and long-lived assets		—			—			—
Loss (gain) on disposal of assets		339			—			339

Total operating expenses		482,733			(4,436	)		478,297

Operating income		118,863			(3,732	)		115,131
Interest expense		48,817			—			48,817
Loss from extinguishment of debt		3,800			—			3,800
Interest income		(167	)		3			(164	)
Loss on sale of investments		1,060			—			1,060

Income from continuing operations before income tax expense		65,353			(3,735	)		61,618
Provision for income tax expense		10,163			(48	)		10,115

Income from continuing operations		55,190			(3,687	)		51,503

Less: Net income attributable to noncontrolling interests from continuing operations		(75,309	)		1,807			(73,502	)

Loss attributable to Surgical Care Affiliates from continuing operations	$	(20,119	)	$	(1,880	)	$	(21,999	)

Basic and diluted loss per share attributable to Surgical Care Affiliates:
Continuing operations per share attributable to Surgical Care Affiliates	$	(.67	)	$	(.06	)	$	(.73	)

Basic and diluted weighted average shares outstanding (in thousands)		30,347			30,347			30,347

a)	These Pro forma adjustments reflect the elimination of the operating results of Fort Worth Endoscopy Center assuming the transaction occurred January 1, 2012.

SURGICAL CARE AFFILIATES, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the year ended December 31, 2012

(In thousands of U. S. dollars except per share data)


	As reported (a)			Pro forma adjustments (b)			Pro forma
Net operating revenues:
Net patient revenues	$	716,191		$	(11,284	)	$	704,907
Management fee revenues		17,804			—			17,804
Other revenues		12,459			(26	)		12,433

Total net operating revenues		746,454			(11,310	)		735,144
Equity in net income of nonconsolidated affiliates		16,767			—			16,767
Operating expenses:
Salaries and benefits		242,744			(3,095	)		239,649
Supplies		170,278			(803	)		169,475
Other operating expenses		118,720			(960	)		117,760
Depreciation and amortization		41,661			(320	)		41,341
Occupancy costs		26,757			(643	)		26,114
Provision for doubtful accounts		13,201			(313	)		12,888
Impairment of intangible and long-lived assets		1,086			—			1,086
Loss (gain) on disposal of assets		(306	)		6			(300	)

Total operating expenses		614,141			(6,128	)		608,013

Operating income		149,080			(5,182	)		143,898
Interest expense		58,842			—			58,842
Interest income		(315	)		—			(315	)
Loss on sale of investments		7,100			—			7,100

Income from continuing operations before income tax expense		83,453			(5,182	)		78,271
Provision for income tax expense		8,345			(50	)		8,295

Income from continuing operations		75,108			(5,132	)		69,976

Less: Net income attributable to noncontrolling interests from continuing operations		(92,357	)		2,512			(89,845	)

Loss attributable to Surgical Care Affiliates from continuing operations	$	(17,249	)	$	(2,620	)	$	(19,869	)

Basic and diluted loss per share attributable to Surgical Care Affiliates:
Continuing operations per share attributable to Surgical Care Affiliates	$	(.57	)	$	(.09	)	$	(.66	)

Basic and diluted weighted average shares outstanding (in thousands)		30,339			30,339			30,339

a)	The As reported presentation includes reclassifications totaling $3.7 million within the other revenues and provision for doubtful accounts lines to conform the December 31, 2012 presentation to the presentation at September 30, 2013.

b)	These Pro forma adjustments reflect the elimination of the operating results of Fort Worth Endoscopy Center assuming the transaction occurred January 1, 2012.

Surgical Care Affiliates, Inc. - FORM 8-K - EX-99.1 - January 7, 2014

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Surgical Care Affiliates, Inc. Reports