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Hanger Reports Fourth Quarter 2019 Results and Provides 2020 Outlook

Growth in revenue and earnings driven by favorable patient care segment performance

Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic (O&P) patient care services and solutions, today announced its financial results for the fourth quarter and year ended December 31, 2019.

Financial Highlights for the Fourth Quarter of 2019

  • Net revenue was $300.9 million for the three months ended December 31, 2019, compared to $284.9 million for the same period in 2018, reflecting growth of 5.6 percent. Patient Care segment net same clinic revenue grew by 2.9 percent.
  • Net income was $18.8 million for the three months ended December 31, 2019, compared to $4.5 million for the same period in 2018. Fourth quarter 2019 net income benefited from a $7.1 million reduction of certain tax valuation allowances relating to state tax deferred assets.
  • Adjusted EBITDA was $42.4 million in the fourth quarter, compared to $40.0 million for the same period in 2018, reflecting an increase of $2.3 million or 5.8 percent. Growth in Adjusted EBITDA was driven by a $16.4 million increase in Patient Care segment revenue and a resulting $5.2 million increase in segment Adjusted EBITDA.
  • GAAP diluted earnings per share was $0.49 for the fourth quarter of 2019, compared to $0.12 for the same period in 2018. Adjusted diluted earnings per share was $0.45 for the three months ended December 31, 2019, compared to $0.40 for the same period in 2018, a 12.5 percent increase year-over-year.
  • The Company introduced its 2020 financial outlook for revenue and earnings growth (see "2020 Outlook" within this release).

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "I'm pleased with our strong finish to the year. We accomplished the key operating and financial objectives that we established at the start of 2019. Our patient care segment achieved same clinic revenue growth of 2.1 percent for the year through growth in both our prosthetics and orthotics portfolios. I believe these results have demonstrated the benefits of our strategy to elevate the value of our clinical care through a focus on patient outcomes and services, positioning us for continued momentum in 2020."

Segment Results for Three Months Ended December 31, 2019

Patient Care Segment

For the three months ended December 31, 2019, Patient Care net revenue was $253.0 million, an increase of $16.4 million or 6.9 percent, compared to the same period in 2018. Total revenue growth for the segment includes $9.1 million of revenue from O&P clinics acquired in late 2018 and early 2019, inclusive of consolidations.

Net same clinic revenue grew by 2.9 percent during the quarter. Revenue from prosthetics increased 4.4 percent and net revenue from orthotics grew 1.3 percent. Prosthetics comprised 57.3 percent of Patient Care segment net revenue during the fourth quarter of 2019 as compared with 56.5 percent during the same period in 2018.

Income from operations in the Patient Care segment was $47.9 million during the fourth quarter of 2019, reflecting growth of $5.7 million or 13.6 percent compared to the $42.2 million reported in the prior year. Adjusted EBITDA for the segment was $53.6 million, which reflected a $5.2 million or 10.7 percent increase compared to the prior year period. Adjusted EBITDA margin in the segment totaled 21.2 percent compared to 20.5 percent during the fourth quarter of 2018.

Products & Services Segment

For the three months ended December 31, 2019, Products & Services net revenue totaled $47.9 million, which reflected a decline of $0.3 million compared with the same period in 2018. Revenue from the distribution of O&P componentry increased by $0.6 million and revenue from therapeutic solutions decreased by $0.9 million.

Income from operations for the Products & Services segment decreased by $1.5 million to $3.8 million in the fourth quarter of 2019 compared to the same period in 2018. Adjusted EBITDA for the Products & Services segment was $6.5 million for the fourth quarter of 2019, which reflected a $1.9 million decrease compared with the same period of 2018. The decline in therapeutic solutions revenue as well as lower margins within O&P distribution impacted segment earnings in the quarter.

Corporate & Other

Corporate and other activities segment operating expenses totaled $24.8 million for the quarter and were consistent with the same period in 2018. An increase in costs related to information technology, including the initial planning and design for the implementation of new financial and supply chain systems was offset by a decline in other overhead-related costs.

Excluding the effects of depreciation and amortization, excess third party professional fees, non-cash equity compensation expense and certain acquisition-related expenses, the net cost of corporate and other activities increased by $0.9 million to $17.8 million during the quarter, which reflected a 5.5 percent increase.

Net Income; Interest Expense

Interest expense totaled $8.3 million in the three month period ended December 31, 2019, a decline of $0.8 million compared to the same period of 2018.

Due primarily to favorable patient care segment results, income before taxes grew by 36.1 percent in the quarter to $18.4 million. After incorporating the effect of taxes, net income totaled $18.8 million compared with $4.5 million for the same period in 2018. Growth in net income benefited in part by the reduction of a $7.1 million valuation allowance on certain state deferred tax assets.

For the three months ended December 31, 2019, GAAP diluted earnings per share was $0.49, compared to $0.12 per share in 2018. Adjusted diluted earnings per share was $0.45 for the three months ended December 31, 2019, compared to $0.40 per share for the same period in 2018.

Financial Highlights for the Year Ended December 31, 2019

Net revenue was $1,098.0 million for the year ended December 31, 2019, compared to $1,048.8 million for the same period of 2018, reflecting net revenue growth of 4.7 percent. For the twelve month period, acquisitions that occurred in late 2018 and early 2019 contributed $28.9 million to net revenue growth, inclusive of consolidations.

Patient Care net revenue grew $48.3 million, or 5.6 percent, for the year to $905.7 million. Net same clinic revenue growth for 2019 totaled 2.1 percent. The number of clinic operating days was equivalent for both 2019 and 2018.

For the full year of 2019, excluding the effect of acquisitions, revenue from prosthetics increased by 3.2 percent, while orthotics revenue increased by 0.9 percent.

Products & Services segment net revenue grew $1.0 million, or 0.5 percent, driven by growth of $7.4 million in distribution services, offset by a $6.4 million decrease in revenue from therapeutic solutions. The revenue decline in therapeutic solutions was within the range originally anticipated for 2019.

Net income was $27.5 million for the year ended December 31, 2019, compared to a $0.9 million net loss for the same period in 2018. Results for the period ending December 31, 2018 included a $17.0 million pre-tax loss on the extinguishment of debt related to the Company’s March 2018 refinancing, which was partially offset by a $3.7 million one-time gain related to favorable settlements.

Adjusted EBITDA of $124.2 million for 2019 compares with the $121.1 million reported in the prior year.

For the year ended December 31, 2019, GAAP diluted earnings per share was $0.72, compared to a loss of $0.02 per share in 2018. Adjusted diluted earnings per share was $0.90 for 2019, compared to $0.78 per share for the same period in 2018.

Net Cash Provided by Operating Activities; Liquidity

Cash flows provided by operating activities for the three months ending December 31, 2019 were $38.9 million compared to $41.4 million for the same period in 2018. This decrease related in part to expenditures of $1.7 million incurred in the fourth quarter of 2019 related to the Company's implementation of cloud computing systems associated with its supply chain and financial systems project.

On December 31, 2019, the Company had liquidity of $169.2 million, comprised of $74.4 million in cash and cash equivalents, and $94.8 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $144.8 million on September 30, 2019.

2020 Outlook

The Company currently anticipates 2020 net revenue in a range between $1.125 billion and $1.155 billion, and Adjusted EBITDA in a range between $129.0 million and $134.0 million.

It is expected that revenue and earnings growth will primarily be driven by continued same clinic growth and margin expansion in its Patient Care segment. Products & Services segment revenue is anticipated to decline modestly due to the discontinuance of the distribution of some low-margin orthotics products to podiatrists.

The Company's outlook for 2020 includes approximately $27 million in revenue relating to the full year of contribution of acquisitions previously completed in 2019 and acquisitions having signed definitive agreements as of March 5, 2020.

Adjusted EBITDA is provided on a non-GAAP basis only because a reconciliation to the most comparable GAAP financial measure, net income, is not available without unreasonable effort due to the unpredictable nature of reconciling items that render such a reconciliation not meaningful for investors.

Conference and Webcast Details

The Company’s management team will host a conference call tomorrow, Thursday, March 12, at 8:30 a.m. Eastern time to discuss the Company’s fourth quarter and full year 2019 financial results and business outlook for 2020.

To participate, dial 866-270-1533 or 412-317-0797 outside the U.S. and Canada, and ask to be joined into the Hanger, Inc. call. A live webcast, replay of the call and earnings release, will be available on the Company’s Investor Relations website: www.investor.hanger.com/financial-reporting.

Additional Notes

A reconciliation of GAAP and non-GAAP financial results is included in the tables provided at the back of this press release. The Company has provided certain supplemental key statistics relating to its results for certain prior periods. These key statistics are non-GAAP measures used by the Company’s management to analyze the Company’s business results that are being provided for informational and analytical context.

Accompanying supplemental information will be posted to the Investor Relations section of Hanger’s web site at www.hanger.com/investors.

About Hanger, Inc. – Built on the legacy of James Edward Hanger, the first amputee of the American Civil War, Hanger, Inc. (NYSE: HNGR) delivers orthotic and prosthetic (O&P) patient care, and distributes O&P products and rehabilitative solutions. Hanger’s Patient Care segment is the largest owner and operator of O&P patient care clinics with approximately 800 patient care locations nationwide. Through its Products & Services segment, Hanger distributes O&P devices, products and components, and provides rehabilitative solutions. With over 150 years of clinical excellence and innovation, Hanger’s vision is to lead the orthotic & prosthetic markets by providing superior patient care, outcomes, services and value. For more information on Hanger, visit www.hanger.com.

This press release contains certain "forward-looking statements" relating to the Company. All statements, other than statements of historical fact included herein, are "forward looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "preliminary," "intends," "expects," "plans," "anticipates," "believes," "views" or similar expressions and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. These uncertainties include, but are not limited to, federal laws governing the health care industry; governmental policies affecting O&P operations, including with respect to reimbursement; failure to successfully implement a new enterprise resource planning system or other disruptions to information technology systems; the inability to successfully execute our acquisition strategy, including integration of recently acquired O&P clinics into our existing business; impacts of a pandemic, epidemic or widespread outbreak of an infectious disease in the United States; changes in the demand for the Company’s O&P products and services, including additional competition in the O&P services market; disruptions to the Company’s supply chain; the Company’s ability to enter into and derive benefits from managed-care contracts; the Company’s ability to successfully attract and retain qualified O&P clinicians; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its annual, quarterly and other reports filed with the Securities and Exchange Commission from time to time. The information contained in this press release is made only as of the date hereof, even if subsequently made available by the Company on its website or otherwise.

Table 1

Hanger, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

For the Three Months Ended
December 31,

 

For the Years Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Net revenues

 

$

300,891

 

 

$

284,853

 

 

$

1,098,046

 

 

$

1,048,760

 

Material costs

 

95,961

 

 

90,340

 

 

357,771

 

 

338,017

 

Personnel costs

 

99,430

 

 

97,574

 

 

372,225

 

 

364,089

 

Other operating costs

 

34,876

 

 

31,271

 

 

134,943

 

 

123,902

 

General and administrative expenses

 

30,591

 

 

29,085

 

 

118,065

 

 

109,552

 

Professional accounting and legal fees

 

4,113

 

 

4,726

 

 

13,689

 

 

16,915

 

Depreciation and amortization

 

9,019

 

 

8,903

 

 

35,925

 

 

36,455

 

Impairment of intangible assets

 

 

 

183

 

 

 

 

183

 

Income from operations

 

26,901

 

 

22,771

 

 

65,428

 

 

59,647

 

Interest expense, net

 

8,285

 

 

9,046

 

 

34,258

 

 

37,566

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

16,998

 

Non-service defined benefit plan expense

 

172

 

 

176

 

 

691

 

 

703

 

Income before income taxes

 

18,444

 

 

13,549

 

 

30,479

 

 

4,380

 

(Benefit) provision for income taxes

 

(306

)

 

9,086

 

 

2,954

 

 

5,238

 

Net income (loss)

 

$

18,750

 

 

$

4,463

 

 

$

27,525

 

 

$

(858

)

 

 

 

 

 

 

 

 

 

Basic and Diluted Per Common Share Data:

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.50

 

 

$

0.12

 

 

$

0.74

 

 

$

(0.02

)

Weighted average shares used to compute basic earnings per common share

 

37,411,847

 

 

36,906,938

 

 

37,267,188

 

 

36,764,551

 

Diluted earnings (loss) per share

 

$

0.49

 

 

$

0.12

 

 

$

0.72

 

 

$

(0.02

)

Weighted average shares used to compute diluted earnings per common share

 

38,415,108

 

 

37,721,662

 

 

38,064,617

 

 

36,764,551

 

Table 2

Hanger, Inc.

Consolidated Balance Sheets

(in thousands)

 

 

 

As of December 31,

 

 

2019

 

2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

74,419

 

 

$

95,114

 

Accounts receivable, net

 

159,359

 

 

143,986

 

Inventories

 

68,204

 

 

67,690

 

Income taxes receivable

 

 

 

379

 

Other current assets

 

13,673

 

 

18,731

 

Total current assets

 

315,655

 

 

325,900

 

Non-current assets:

 

 

 

 

Property, plant, and equipment, net

 

84,057

 

 

89,489

 

Goodwill

 

232,244

 

 

198,742

 

Other intangible assets, net

 

17,952

 

 

15,478

 

Deferred income taxes

 

70,481

 

 

65,635

 

Operating lease right-of-use assets

 

110,559

 

 

 

Other assets

 

11,305

 

 

7,766

 

Total assets

 

$

842,253

 

 

$

703,010

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

8,752

 

 

$

8,583

 

Accounts payable

 

48,477

 

 

55,797

 

Accrued expenses and other current liabilities

 

55,825

 

 

51,783

 

Accrued compensation related costs

 

61,010

 

 

55,111

 

Current portion of operating lease liabilities

 

34,342

 

 

 

Total current liabilities

 

208,406

 

 

171,274

 

Long-term liabilities:

 

 

 

 

Long-term debt, less current portion

 

490,121

 

 

502,090

 

Operating lease liabilities

 

88,418

 

 

 

Other liabilities

 

45,804

 

 

51,570

 

Total liabilities

 

832,749

 

 

724,934

 

 

 

 

 

 

Shareholders’ equity (deficit):

 

 

 

 

Common stock

 

376

 

 

371

 

Additional paid-in capital

 

354,326

 

 

343,955

 

Accumulated other comprehensive loss

 

(12,551

)

 

(4,531

)

Accumulated deficit

 

(331,951

)

 

(361,023

)

Treasury stock, at cost

 

(696

)

 

(696

)

Total shareholders’ equity (deficit)

 

9,504

 

 

(21,924

)

Total liabilities and shareholders’ equity (deficit)

 

$

842,253

 

 

$

703,010

 

 

Table 3

Hanger, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

For the Years Ended
December 31,

 

 

2019

 

2018

Cash flows provided by operating activities:

 

 

 

 

Net income (loss)

 

$

27,525

 

 

$

(858

)

Adjustments to reconcile net income (loss) to net cash from operating activities:

 

 

 

 

Depreciation and amortization

 

35,925

 

 

36,455

 

Provision (benefit) for doubtful accounts

 

1,131

 

 

(733

)

Impairment of intangible assets

 

 

 

183

 

Stock-based compensation expense

 

13,414

 

 

13,065

 

Deferred income taxes

 

(3,226

)

 

3,452

 

Amortization of debt discounts and issuance costs

 

1,623

 

 

2,837

 

Loss on extinguishment of debt

 

 

 

16,998

 

Gain on sale and disposal of fixed assets

 

(1,614

)

 

(2,713

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

(12,329

)

 

3,238

 

Inventories

 

1,568

 

 

1,750

 

Other current assets and other assets

 

(2,611

)

 

4,459

 

Income taxes receivable

 

1,248

 

 

12,700

 

Accounts payable

 

(6,725

)

 

6,511

 

Accrued expenses and other current liabilities

 

(1,242

)

 

(16,550

)

Accrued compensation related costs

 

5,780

 

 

1,713

 

Other liabilities

 

(1,883

)

 

(3,980

)

Operating lease liabilities, net of amortization of right-of-use assets

 

262

 

 

 

Net cash provided by operating activities

 

58,846

 

 

78,527

 

Cash flows used in investing activities:

 

 

 

 

Purchase of property, plant, and equipment

 

(26,433

)

 

(18,984

)

Purchase of therapeutic program equipment leased to third parties under operating leases

 

(6,672

)

 

(9,835

)

Acquisitions, net of cash acquired

 

(36,585

)

 

(1,978

)

Purchase of company-owned life insurance investment

 

(66

)

 

(598

)

Proceeds from sale of property, plant and equipment

 

2,598

 

 

4,237

 

Net cash used in investing activities

 

(67,158

)

 

(27,158

)

Cash flows (used in) provided by financing activities:

 

 

 

 

Borrowings under term loan, net of discount

 

 

 

501,467

 

Repayment of term loan

 

(5,050

)

 

(435,660

)

Borrowings under revolving credit agreement

 

 

 

3,000

 

Repayments under revolving credit agreement

 

 

 

(8,000

)

Payment of employee taxes on stock-based compensation

 

(4,137

)

 

(2,906

)

Payment on seller notes

 

(3,821

)

 

(2,599

)

Payment of financing lease obligations

 

(474

)

 

(1,207

)

Payment of debt issuance costs

 

 

 

(6,757

)

Payment of debt extinguishment costs

 

 

 

(8,436

)

Proceeds from exercise of options

 

1,099

 

 

64

 

Net cash (used in) provided by financing activities

 

(12,383

)

 

38,966

 

(Decrease) increase in cash, cash equivalents and restricted cash

 

(20,695

)

 

90,335

 

Cash, cash equivalents, and restricted cash, at beginning of period

 

95,114

 

 

4,779

 

Cash, cash equivalents, and restricted cash, at end of period

 

$

74,419

 

 

$

95,114

 

 

 

 

 

 

Reconciliation of Cash, Cash Equivalents, and Restricted Cash

 

 

 

 

Cash and cash equivalents, at beginning of period

 

$

95,114

 

 

$

1,508

 

Restricted cash, at beginning of period

 

 

 

3,271

 

Cash, cash equivalents, and restricted cash, at beginning of period

 

$

95,114

 

 

$

4,779

 

 

 

 

 

 

Cash and cash equivalents, at end of period

 

$

74,419

 

 

$

95,114

 

Restricted cash, at end of period

 

 

 

 

Cash, cash equivalents, and restricted cash, at end of period

 

$

74,419

 

 

$

95,114

 

 

Table 4

Hanger, Inc.

Segment Information: Revenue, EBITDA and Adjusted EBITDA

(in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user’s understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net Revenue (a)

 

 

 

 

 

 

 

 

Patient Care

 

$

252,991

 

 

$

236,637

 

 

$

905,691

 

 

$

857,382

 

Products & Services

 

47,900

 

 

48,216

 

 

192,355

 

 

191,378

 

Net revenue

 

$

300,891

 

 

$

284,853

 

 

$

1,098,046

 

 

$

1,048,760

 

 

 

 

 

 

 

 

 

 

EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

52,459

 

 

$

46,756

 

 

$

160,117

 

 

$

145,918

 

Products & Services

 

6,620

 

 

7,980

 

 

28,615

 

 

35,720

 

Corporate & Other

 

(23,159

)

 

(23,062

)

 

(87,379

)

 

(85,536

)

EBITDA (Non-GAAP)

 

$

35,920

 

 

$

31,674

 

 

$

101,353

 

 

$

96,102

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

53,623

 

 

$

48,457

 

 

$

164,552

 

 

$

150,881

 

Products & Services

 

6,502

 

 

8,420

 

 

29,223

 

 

36,503

 

Corporate & Other

 

(17,771

)

 

(16,837

)

 

(69,532

)

 

(66,327

)

Adjusted EBITDA (Non-GAAP)

 

$

42,354

 

 

$

40,040

 

 

$

124,243

 

 

$

121,057

 

 

 

 

 

 

 

 

 

 

(a) Excludes intersegment revenue.

 

 

 

 

 

 

(b) EBITDA and Adjusted EBITDA are "Non-GAAP" measures. Please refer to both Table 6 and Table 7 for a reconciliation of these measures to GAAP net income.

Table 5

Hanger, Inc.

Reconciliation of Net Income (Loss) and Earnings (Loss) Per Share to

Adjusted Net Income and Adjusted Earnings Per Share

(in thousands, except share and per share amounts)

Earnings Per Share (or "EPS") is defined as net income divided by our diluted common shares during the applicable period. Adjusted EPS is defined as EPS adjusted for impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, severance expenses, certain expenses incurred in connection with our acquisitions, and certain other charges.

We utilize Adjusted EPS to assess our operating and financial performance. We believe that this measure enhances a user’s understanding of normal operating results excluding certain charges.

Adjusted EPS is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of Adjusted EPS is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. Adjusted EPS may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income (loss) - as reported (GAAP)

 

$

18,750

 

 

$

4,463

 

 

$

27,525

 

 

$

(858

)

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Impairment of intangible assets

 

 

 

183

 

 

 

 

183

 

Amortization expense

 

1,368

 

 

1,443

 

 

5,285

 

 

6,707

 

Third-party professional fees

 

3,018

 

 

3,591

 

 

8,548

 

 

12,461

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

16,998

 

Acquisition-related expenses

 

91

 

 

510

 

 

939

 

 

510

 

Disaster recovery / unclaimed property settlement

 

 

 

 

 

 

 

(3,729

)

Severance expenses

 

 

 

591

 

 

(11

)

 

957

 

Adjustments prior to tax effect

 

$

4,477

 

 

$

6,318

 

 

$

14,761

 

 

$

34,087

 

Tax effect of specified adjustments (a)

 

(5,807

)

 

4,317

 

 

(7,904

)

 

(3,994

)

Adjustments after taxes

 

(1,330

)

 

10,635

 

 

6,857

 

 

30,093

 

 

 

 

 

 

 

 

 

 

Adjusted net income (Non-GAAP)

 

$

17,420

 

 

$

15,098

 

 

$

34,382

 

 

$

29,235

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share - as reported (GAAP)

 

$

0.50

 

 

$

0.12

 

 

$

0.74

 

 

$

(0.02

)

Effect of above listed specified adjustments

 

(0.03

)

 

0.29

 

 

0.18

 

 

0.82

 

Adjusted basic earnings per share - as reported (Non-GAAP)

 

$

0.47

 

 

$

0.41

 

 

$

0.92

 

 

$

0.80

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share - as reported (GAAP)

 

$

0.49

 

 

$

0.12

 

 

$

0.72

 

 

$

(0.02

)

Effect of above listed specified adjustments

 

(0.04

)

 

0.28

 

 

0.18

 

 

0.80

 

Adjusted diluted earnings per share - as reported (Non-GAAP)

 

$

0.45

 

 

$

0.40

 

 

$

0.90

 

 

$

0.78

 

 

 

 

 

 

 

 

 

 

Shares used to compute basic earnings (loss) per share

 

37,411,847

 

 

36,906,938

 

 

37,267,188

 

 

36,764,551

 

Shares used to compute diluted earnings (loss) per share

 

38,415,108

 

 

37,721,662

 

 

38,064,617

 

 

37,473,860

 

(a) "Tax effect of specified adjustments" reflects the difference between the Company's effective provision for taxes and the application of a combined federal and state statutory tax rate of 24% for the 2019 and 2018 periods to the Company's earnings from operations before taxes, after the incorporation of the identified adjustments above and a $7.1 million reduction of certain tax valuation allowances relating to state deferred tax assets in the fourth quarter of 2019.

Table 6

Hanger, Inc.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

(in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user’s understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income (loss) - as reported (GAAP)

 

$

18,750

 

 

$

4,463

 

 

$

27,525

 

 

$

(858

)

 

 

 

 

 

 

 

 

 

Adjustments to calculate EBITDA:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

9,019

 

 

8,903

 

 

35,925

 

 

36,455

 

Interest expense, net

 

8,285

 

 

9,046

 

 

34,258

 

 

37,566

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

16,998

 

Non-service defined benefit plan expense

 

172

 

 

176

 

 

691

 

 

703

 

(Benefit) provision for income taxes

 

(306

)

 

9,086

 

 

2,954

 

 

5,238

 

Adjustments - net income (loss) to EBITDA

 

17,170

 

 

27,211

 

 

73,828

 

 

96,960

 

EBITDA (Non-GAAP)

 

35,920

 

 

31,674

 

 

101,353

 

 

96,102

 

 

 

 

 

 

 

 

 

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Impairment of intangible assets

 

 

 

183

 

 

 

 

183

 

Third-party professional fees

 

3,018

 

 

3,591

 

 

8,548

 

 

12,461

 

Equity-based compensation

 

3,325

 

 

3,491

 

 

13,414

 

 

13,065

 

Acquisition-related expenses

 

91

 

 

510

 

 

939

 

 

510

 

Disaster recovery / unclaimed property settlement

 

 

 

 

 

 

 

(2,221

)

Severance expenses

 

 

 

591

 

 

(11

)

 

957

 

Further adjustments - EBITDA to Adjusted EBITDA

 

6,434

 

 

8,366

 

 

22,890

 

 

24,955

 

Adjusted EBITDA (Non-GAAP)

 

$

42,354

 

 

$

40,040

 

 

$

124,243

 

 

$

121,057

 

Table 7

Hanger, Inc.

Segment Reconciliation of Income From Operations to EBITDA and Adjusted EBITDA

(in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user’s understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

 

 

For the Three Months Ended December 31,

 

For the Years Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

Patient Care

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

$

47,915

 

 

$

42,190

 

 

$

141,576

 

 

$

126,805

 

Depreciation & amortization

 

4,544

 

 

4,566

 

 

18,541

 

 

19,113

 

EBITDA (Non-GAAP)

 

52,459

 

 

46,756

 

 

160,117

 

 

145,918

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

1,164

 

 

1,110

 

 

4,446

 

 

4,372

 

Severance expenses

 

 

 

591

 

 

(11

)

 

591

 

Further adjustments - EBITDA to Adjusted EBITDA

 

1,164

 

 

1,701

 

 

4,435

 

 

4,963

 

Adjusted EBITDA (Non-GAAP)

 

53,623

 

 

48,457

 

 

164,552

 

 

150,881

 

 

 

 

 

 

 

 

 

 

Products & Services

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

3,832

 

 

5,352

 

 

17,965

 

 

25,523

 

Depreciation & amortization

 

2,788

 

 

2,628

 

 

10,650

 

 

10,197

 

EBITDA (Non-GAAP)

 

6,620

 

 

7,980

 

 

28,615

 

 

35,720

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Impairment of intangible assets

 

 

 

183

 

 

 

 

183

 

Equity-based compensation

 

(118

)

 

257

 

 

608

 

 

600

 

Further adjustments - EBITDA to Adjusted EBITDA

 

(118

)

 

440

 

 

608

 

 

783

 

Adjusted EBITDA (Non-GAAP)

 

6,502

 

 

8,420

 

 

29,223

 

 

36,503

 

 

 

 

 

 

 

 

 

 

Corporate & Other

 

 

 

 

 

 

 

 

Loss from operations - as reported (GAAP)

 

(24,846

)

 

(24,771

)

 

(94,113

)

 

(92,681

)

Depreciation & amortization

 

1,687

 

 

1,709

 

 

6,734

 

 

7,145

 

EBITDA (Non-GAAP)

 

(23,159

)

 

(23,062

)

 

(87,379

)

 

(85,536

)

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

3,018

 

 

3,591

 

 

8,548

 

 

12,461

 

Equity-based compensation

 

2,279

 

 

2,124

 

 

8,360

 

 

8,093

 

Acquisition related expenses

 

91

 

 

510

 

 

939

 

 

510

 

Disaster recovery / unclaimed property settlement

 

 

 

 

 

 

 

(2,221

)

Severance expenses

 

 

 

 

 

 

 

366

 

Further adjustments - EBITDA to Adjusted EBITDA

 

5,388

 

 

6,225

 

 

17,847

 

 

19,209

 

Adjusted EBITDA (Non-GAAP)

 

(17,771

)

 

(16,837

)

 

(69,532

)

 

(66,327

)

Total Adjusted EBITDA (Non-GAAP)

 

$

42,354

 

 

$

40,040

 

 

$

124,243

 

 

$

121,057

 

 

Table 8

Hanger, Inc.

Indebtedness

(in thousands)

 

 

 

As of December 31,

 

 

2019

 

2018

Debt:

 

 

 

 

Term Loan B

 

$

496,163

 

 

$

501,213

 

Seller notes

 

9,005

 

 

4,506

 

Finance lease liabilities and other

 

2,033

 

 

14,361

 

Total debt before unamortized discount and debt issuance costs

 

507,201

 

 

520,080

 

Unamortized discount and debt issuance costs, net

 

(8,328

)

 

(9,407

)

Total debt

 

$

498,873

 

 

$

510,673

 

 

 

 

 

 

Current portion of long-term debt:

 

 

 

 

Term Loan B

 

$

5,050

 

 

$

5,050

 

Seller notes

 

3,175

 

 

2,513

 

Finance lease liabilities and other

 

527

 

 

1,020

 

Total current portion of long-term debt

 

8,752

 

 

8,583

 

Long-term debt

 

$

490,121

 

 

$

502,090

 

 

 

 

 

 

Net indebtedness:

 

 

 

 

Total debt before unamortized discount and debt issuance costs

 

507,201

 

 

520,080

 

Cash and cash equivalents

 

(74,419

)

 

(95,114

)

Net indebtedness

 

$

432,782

 

 

$

424,966

 

Table 9

Hanger, Inc.

Key Operating Metrics

 

 

 

As of and For the
Three Months Ended December 31,

 

As of and For the
Years Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Same clinic revenue:

 

 

 

 

 

 

 

 

Growth rate on net revenue

 

2.9

%

 

0.3

%

 

2.1

%

 

1.3

%

Growth rate day adjusted (a)

 

2.9

%

 

0.3

%

 

2.1

%

 

0.9

%

 

 

 

 

 

 

 

 

 

Clinical locations:

 

 

 

 

 

 

 

 

Patient care clinics

 

701

 

 

676

 

 

 

 

 

Satellite clinics

 

111

 

 

104

 

 

 

 

 

Total clinical locations

 

812

 

 

780

 

 

 

 

 

(a) Same Clinic Revenue per Day - Same Clinic Revenue per Day normalizes revenue for the number of days a clinic was open in each comparable period. These measures are both non GAAP and unaudited.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200311005635/en/

Contacts

Thomas Kiraly, Executive Vice President and Chief Financial Officer, Hanger, Inc.
512-777-3600
tkiraly@hanger.com

Seth Frank, Vice President, Treasury and Investor Relations, Hanger, Inc.
512-777-3573
sfrank@hanger.com