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Hanger Reports Third Quarter 2019 Financial Results

11/07/2019

AUSTIN, Texas--(BUSINESS WIRE)-- 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 third quarter and nine months ended September 30, 2019.

Financial Highlights for the Third Quarter of 2019

  • Net revenue was $279.6 million for the three months ended September 30, 2019, compared to $262.9 million for the same period in 2018, reflecting an increase of 6.3 percent. Within the Patient Care segment, net same clinic revenue on a day-adjusted basis grew by 2.1 percent.
  • GAAP net income totaled $5.7 million for the three months ended September 30, 2019, compared to $4.4 million for the same period in 2018. GAAP income from operations was $17.4 million for the quarter compared to $15.9 million for the same period in 2018.
  • Adjusted EBITDA was $32.6 million in the third quarter, compared to $31.1 million for the same period in 2018, reflecting an increase of $1.5 million or 4.8 percent. Growth in Adjusted EBITDA was driven by increased Patient Care segment revenue and contribution margin, which was partially offset by a decrease in contribution from the Products & Services segment, as well as an increase in Corporate & Other costs.
  • GAAP diluted earnings per share was $0.15 for the third quarter of 2019, compared to $0.12 for the same period in 2018. Adjusted diluted earnings per share was $0.25 for the three months ended September 30, 2019, compared to $0.22 for the same period in 2018, which reflected an increase of 13.6 percent.
  • The Company reaffirms its 2019 financial outlook (see "2019 Outlook" within this release).

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "We are pleased with the solid revenue growth our Patient Care segment achieved in the third quarter. Our results reflected same clinic revenue growth of 2.1 percent which was driven by a 4.0 percent rate of growth in prosthetics. When coupled with the effect of acquisitions, this segment achieved a 7.9 percent overall rate of growth. With nine months of the year completed, we are continuing to execute within the mid-range of our financial outlook for 2019."

Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this press release.

Segment Results for Three Months Ended September 30, 2019

Patient Care Segment

For the three months ended September 30, 2019, Patient Care net revenue was $230.9 million, an increase of $16.9 million or 7.9 percent, compared to the same period in 2018. Total revenue growth for the segment includes $8.5 million of revenue from O&P clinics acquired in late 2018 and early 2019, net of consolidations and closures.

Net same clinic revenue on a day-adjusted basis grew by 2.1 percent during the quarter. Revenue from prosthetics, excluding acquisitions, increased 4.0 percent in the quarter on a day-adjusted basis. Net revenue from orthotics, excluding acquisitions, was consistent with the same period in 2018 on a day-adjusted basis as growth in orthotics was offset by a modest decline in shoes and inserts. Prosthetics comprised 55.0 percent of Patient Care segment net revenue during the third quarter of 2019 as compared with 54.0 percent during the same period in 2018.

Income from operations in the Patient Care segment was $36.1 million during the third quarter of 2019, reflecting growth of $3.6 million compared to the $32.5 million reported in the prior year. Adjusted EBITDA for the segment was $42.2 million, which reflected a $4.0 million or 10.4 percent increase compared to the prior year period. Adjusted EBITDA margin in the segment totaled 18.3 percent compared to 17.8 percent during the third quarter of 2018. Margin growth was driven by flow-through from the year-over-year increase in revenue, partially offset by higher materials costs and an increase in other expenses.

Products & Services Segment

For the three months ended September 30, 2019, Products & Services net revenue totaled $48.7 million, which was generally consistent with the same period in 2018. Revenue from the distribution of O&P componentry increased by $1.9 million, or 5.7 percent, and this growth was offset by a $2.1 million decrease in revenue from therapeutic solutions.

Income from operations for the Products & Services segment decreased by $1.7 million to $5.1 million in the third quarter of 2019 compared to the same period in 2018. Adjusted EBITDA for the Products & Services segment was $8.1 million for the third quarter of 2019, which reflected a $1.6 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

The loss from operations relating to corporate and other activities increased by $0.4 million to $23.8 million for the quarter ended September 30, 2019 compared to the same period in 2018. The increase in Corporate & Other expenses relates to costs associated with the initial planning and design for the implementation of new financial and supply chain systems.

Excluding the effect 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 $17.6 million in the third quarter of 2019.

Net Income; Interest Expense

Interest expense totaled $9.0 million in each of the three month periods ended September 30, 2019 and 2018.

For the three months ended September 30, 2019, net income was $5.7 million compared with $4.4 million for the same period in 2018. For the three months ended September 30, 2019, GAAP diluted earnings per share was $0.15, compared to $0.12 per share in 2018. Adjusted diluted earnings per share was $0.25 for the three months ended September 30, 2019, compared to $0.22 per share for the same period in 2018.

Financial Highlights for the Nine Months Ended September 30, 2019

Net revenue was $797.2 million for the nine months ended September 30, 2019, compared to $763.9 million for the same period of 2018, reflecting net revenue growth of 4.4 percent. For the nine month period, acquisitions that occurred in late 2018 and early 2019 contributed $19.1 million to net revenue, net of consolidations and closures.

Patient Care net revenue grew $32.0 million, or 5.1 percent, for the year-to-date period to $652.7 million. Net same clinic revenue on a day-adjusted basis for the first nine months of 2019 totaled 1.8 percent. Revenue from prosthetics increased by 2.7 percent on a day-adjusted basis, while orthotics revenue increased by 0.7 percent also on a day-adjusted basis.

Products & Services segment net revenue grew $1.3 million, or 0.9 percent, driven by growth of $6.8 million in distribution services, offset by a $5.5 million decrease in revenue from therapeutic solutions.

GAAP net income was $8.8 million for the nine months ended September 30, 2019, compared to a $5.3 million net loss for the same period in 2018. Results for the year-to-date period ending September 30, 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 $81.9 million for the first nine months of 2019 compares with the $81.0 million reported in the prior year period.

For the nine months ended September 30, 2019, GAAP diluted earnings per share was $0.23, compared to a loss of $0.14 per share in 2018. Adjusted diluted earnings per share was $0.45 for the first nine months of 2019, compared to $0.38 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 September 30, 2019 were $23.5 million compared to $20.3 million for the same period in 2018.

On September 30, 2019, the Company had liquidity of $144.8 million, comprised of $49.9 million in cash and cash equivalents, and $94.8 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $133.0 million on June 30, 2019.

2019 Outlook

Based on year-to-date results, the Company reaffirms its full-year 2019 net revenue and Adjusted EBITDA outlook of: Revenue in a range between $1.075 billion and $1.105 billion, and Adjusted EBITDA in a range between $121 million and $126 million. The Company plans to provide its financial outlook for 2020 when it reports its fourth quarter and full year 2019 results in March 2020.

This financial outlook for 2019 does not incorporate contributions from potential future acquisitions. 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, Friday, November 8, at 8:30 a.m. Eastern time to discuss the Company’s third quarter 2019 financial results and business outlook.

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: 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, the risk of its identified material weaknesses in the Company’s internal control over financial reporting adversely affecting its ability to report its financial condition and results of operations in a timely and accurate manner; any litigation relating to the Company’s accounting practices, financial statements and other financial data, periodic reports or other corporate actions; changes in the demand for the Company’s O&P products and services; uncertainties relating to the results of operations or recently acquired O&P patient care clinics; 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; federal laws governing the health care industry; uncertainties inherent in investigations and legal proceedings; governmental policies affecting O&P operations; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its Form 10-K for the year ended December 31, 2018 as filed with the Securities and Exchange Commission. 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.

Condensed Consolidated Statements of Operations

(Unaudited - in thousands, except share and per share amounts)

 

 

 

For the Three Months Ended
September 30,

 

For the Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

Net revenues

 

$

279,638

 

 

$

262,946

 

 

$

797,155

 

 

$

763,907

 

Material costs

 

92,034

 

 

84,805

 

 

261,810

 

 

247,677

 

Personnel costs

 

94,594

 

 

90,853

 

 

272,795

 

 

266,515

 

Other operating costs

 

32,771

 

 

30,999

 

 

100,067

 

 

92,631

 

General and administrative expenses

 

29,834

 

 

28,308

 

 

87,474

 

 

80,467

 

Professional accounting and legal fees

 

3,629

 

 

3,107

 

 

9,576

 

 

12,189

 

Depreciation and amortization

 

9,373

 

 

8,950

 

 

26,906

 

 

27,552

 

Income from operations

 

17,403

 

 

15,924

 

 

38,527

 

 

36,876

 

Interest expense, net

 

8,954

 

 

8,939

 

 

25,973

 

 

28,519

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

16,998

 

Non-service defined benefit plan expense

 

173

 

 

176

 

 

519

 

 

528

 

Income (loss) before income taxes

 

8,276

 

 

6,809

 

 

12,035

 

 

(9,169

)

Provision (benefit) for income taxes

 

2,585

 

 

2,440

 

 

3,260

 

 

(3,848

)

Net income (loss)

 

$

5,691

 

 

$

4,369

 

 

$

8,775

 

 

$

(5,321

)

 

 

 

 

 

 

 

 

 

Basic and Diluted Per Common Share Data:

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.15

 

 

$

0.12

 

 

$

0.24

 

 

$

(0.14

)

Weighted average shares used to compute basic earnings per common share

 

37,349,144

 

 

36,856,881

 

 

37,218,234

 

 

36,716,568

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

0.15

 

 

$

0.12

 

 

$

0.23

 

 

$

(0.14

)

Weighted average shares used to compute diluted earnings per common share

 

37,986,860

 

 

37,556,594

 

 

37,921,767

 

 

36,716,568

 

Table 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited - in thousands)

 

 

 

As of September 30,

 

As of December 31,

 

 

2019

 

2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

49,947

 

 

$

95,114

 

Accounts receivable, net

 

145,378

 

 

143,986

 

Inventories

 

75,693

 

 

67,690

 

Income taxes receivable

 

 

 

379

 

Other current assets

 

14,615

 

 

18,731

 

Total current assets

 

285,633

 

 

325,900

 

Non-current assets:

 

 

 

 

Property, plant and equipment, net

 

84,490

 

 

89,489

 

Goodwill

 

226,348

 

 

198,742

 

Other intangible assets, net

 

17,985

 

 

15,478

 

Deferred income taxes

 

68,581

 

 

65,635

 

Operating lease right-of-use assets

 

109,838

 

 

 

Other assets

 

8,537

 

 

7,766

 

Total assets

 

$

801,412

 

 

$

703,010

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

8,619

 

 

$

8,583

 

Accounts payable

 

53,831

 

 

55,797

 

Accrued expenses and other current liabilities

 

55,908

 

 

51,783

 

Accrued compensation related costs

 

39,633

 

 

55,111

 

Current portion of operating lease liabilities

 

32,437

 

 

 

Total current liabilities

 

190,428

 

 

171,274

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Long-term debt, less current portion

 

488,620

 

 

502,090

 

Operating lease liabilities

 

88,719

 

 

 

Other liabilities

 

47,851

 

 

51,570

 

Total liabilities

 

815,618

 

 

724,934

 

 

 

 

 

 

Shareholders’ deficit:

 

 

 

 

Common stock

 

375

 

 

371

 

Additional paid-in capital

 

350,579

 

 

343,955

 

Accumulated other comprehensive loss

 

(13,777

)

 

(4,531

)

Accumulated deficit

 

(350,687

)

 

(361,023

)

Treasury stock, at cost

 

(696

)

 

(696

)

Total shareholders’ deficit

 

(14,206

)

 

(21,924

)

Total liabilities and shareholders’ deficit

 

$

801,412

 

$

703,010

Table 3

Hanger, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

 

 

 

For the Nine Months Ended
September 30,

 

 

2019

 

2018

Cash flows provided by operating activities:

 

 

 

 

Net income (loss)

 

$

8,775

 

 

$

(5,321

)

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

 

 

 

 

Depreciation and amortization

 

26,906

 

 

27,552

 

Amortization of right-of-use assets

 

27,657

 

 

 

Provision (benefit) for doubtful accounts

 

284

 

 

(578

)

Stock-based compensation expense

 

10,089

 

 

9,573

 

Deferred income taxes

 

(723

)

 

(4,114

)

Amortization of debt discounts and issuance costs

 

1,202

 

 

2,453

 

Loss on extinguishment of debt

 

 

 

16,998

 

Gain on sale and disposal of fixed assets

 

(1,200

)

 

(2,537

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

1,914

 

 

14,464

 

Inventories

 

(6,310

)

 

(3,463

)

Other current assets and other assets

 

(1,769

)

 

1,770

 

Income taxes

 

2,613

 

 

11,356

 

Accounts payable

 

(1,751

)

 

5,680

 

Accrued expenses and other current liabilities

 

(2,144

)

 

(13,061

)

Accrued compensation related costs

 

(15,583

)

 

(20,650

)

Other liabilities

 

(1,736

)

 

(2,963

)

Operating lease liabilities

 

(28,279

)

 

 

Net cash provided by operating activities

 

19,945

 

 

37,159

 

Cash flows used in investing activities

 

 

 

 

Purchase of property, plant, and equipment

 

(20,262

)

 

(16,435

)

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

 

(5,165

)

 

(6,390

)

Acquisitions, net of cash acquired

 

(31,585

)

 

 

Purchase of company-owned life insurance investment

 

 

 

(598

)

Proceeds from sale of property, plant and equipment

 

2,181

 

 

3,583

 

Net cash used in investing activities

 

(54,831

)

 

(19,840

)

Cash flows (used in) provided by financing activities

 

 

 

 

Borrowings under term loan, net of discount

 

 

 

501,467

 

Repayment of term loan

 

(3,788

)

 

(434,400

)

Borrowings under revolving credit agreement

 

 

 

3,000

 

Repayments under revolving credit agreement

 

 

 

(8,000

)

Payment of employee taxes on stock-based compensation

 

(3,710

)

 

(2,568

)

Payment on seller notes

 

(2,688

)

 

(2,116

)

Payment of financing lease obligations

 

(344

)

 

(942

)

Payment of debt issuance costs

 

 

 

(6,757

)

Payment of debt extinguishment costs

 

 

 

(8,436

)

Proceeds from exercise of options

 

249

 

 

 

Net cash (used in) provided by financing activities

 

(10,281

)

 

41,248

 

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

 

(45,167

)

 

58,567

 

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

 

95,114

 

 

4,779

 

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

 

$

49,947

 

 

$

63,346

 

 

 

 

 

 

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

 

$

49,947

 

 

$

61,035

 

Restricted cash, at end of period

 

 

 

2,311

 

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

 

$

49,947

 

$

63,346

Table 4

Hanger, Inc.

Segment Information: Revenue, EBITDA and Adjusted EBITDA

(Unaudited - 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
September 30,

 

For the Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net Revenue (a)

 

 

 

 

 

 

 

 

Patient Care

 

$

230,931

 

 

$

214,080

 

 

$

652,700

 

 

$

620,745

 

Products & Services

 

48,707

 

 

48,866

 

 

144,455

 

 

143,162

 

Net revenue

 

$

279,638

 

 

$

262,946

 

 

$

797,155

 

 

$

763,907

 

 

 

 

 

 

 

 

 

 

EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

41,073

 

 

$

37,153

 

 

$

107,658

 

 

$

99,162

 

Products & Services

 

7,834

 

 

9,403

 

 

21,995

 

 

27,740

 

Corporate & Other

 

(22,131

)

 

(21,682

)

 

(64,220

)

 

(62,474

)

EBITDA (Non-GAAP)

 

$

26,776

 

 

$

24,874

 

 

$

65,433

 

 

$

64,428

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

42,160

 

 

$

38,176

 

 

$

110,929

 

 

$

102,424

 

Products & Services

 

8,070

 

 

9,641

 

 

22,721

 

 

28,083

 

Corporate & Other

 

(17,594

)

 

(16,680

)

 

(51,761

)

 

(49,491

)

Adjusted EBITDA (Non-GAAP)

 

$

32,636

 

 

$

31,137

 

 

$

81,889

 

 

$

81,016

 

 

 

 

 

 

 

 

 

 

(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

(Unaudited - 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
September 30,

 

For the Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income (loss) - as reported (GAAP)

 

$

5,691

 

 

$

4,369

 

 

$

8,775

 

 

$

(5,321

)

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Amortization expense

 

1,561

 

 

1,497

 

 

3,917

 

 

5,264

 

Third-party professional fees

 

2,136

 

 

2,230

 

 

5,530

 

 

8,870

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

16,998

 

Acquisition-related expenses

 

350

 

 

 

 

848

 

 

 

Disaster recovery / unclaimed property settlement

 

 

 

 

 

 

 

(3,729

)

Severance expenses

 

 

 

366

 

 

(11

)

 

366

 

Adjustments prior to tax effect

 

$

4,047

 

 

$

4,093

 

 

$

10,284

 

 

$

27,769

 

Tax effect of specified adjustments (a)

 

(373

)

 

(176

)

 

(2,097

)

 

(8,312

)

Adjustments after taxes

 

3,674

 

 

3,917

 

 

8,187

 

 

19,457

 

Adjusted net income (Non-GAAP)

 

$

9,365

 

 

$

8,286

 

 

$

16,962

 

 

$

14,136

 

 

 

 

 

 

 

 

 

 

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

 

$

0.15

 

 

$

0.12

 

 

$

0.24

 

 

$

(0.14

)

Effect of above listed specified adjustments

 

0.10

 

 

0.10

 

 

0.22

 

 

0.53

 

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

 

$

0.25

 

 

$

0.22

 

 

$

0.46

 

 

$

0.39

 

 

 

 

 

 

 

 

 

 

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

 

$

0.15

 

 

$

0.12

 

 

$

0.23

 

 

$

(0.14

)

Effect of above listed specified adjustments

 

0.10

 

 

0.10

 

 

0.22

 

 

0.52

 

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

 

$

0.25

 

 

$

0.22

 

 

$

0.45

 

 

$

0.38

 

 

 

 

 

 

 

 

 

 

Shares used to compute basic earnings (loss) per share

 

37,349,144

 

 

36,856,881

 

 

37,218,234

 

 

36,716,568

 

Shares used to compute diluted earnings (loss) per share

 

37,986,860

 

 

37,556,594

 

 

37,921,767

 

 

37,397,012

 

 

(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 above adjustments.

Table 6

Hanger, Inc.

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

(Unaudited - 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
September 30,

 

For the Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income (loss) - as reported (GAAP)

 

$

5,691

 

 

$

4,369

 

 

$

8,775

 

 

$

(5,321

)

 

 

 

 

 

 

 

 

 

Adjustments to calculate EBITDA:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

9,373

 

 

8,950

 

 

26,906

 

 

27,552

 

Interest expense, net

 

8,954

 

 

8,939

 

 

25,973

 

 

28,519

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

16,998

 

Non-service defined benefit plan expense

 

173

 

 

176

 

 

519

 

 

528

 

Provision (benefit) for income taxes

 

2,585

 

 

2,440

 

 

3,260

 

 

(3,848

)

Adjustments - net income (loss) to EBITDA

 

21,085

 

 

20,505

 

 

56,658

 

 

69,749

 

EBITDA (Non-GAAP)

 

26,776

 

 

24,874

 

 

65,433

 

 

64,428

 

 

 

 

 

 

 

 

 

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

2,136

 

 

2,230

 

 

5,530

 

 

8,870

 

Equity-based compensation

 

3,374

 

 

3,667

 

 

10,089

 

 

9,573

 

Acquisition-related expenses

 

350

 

 

 

 

848

 

 

 

Disaster recovery / unclaimed property settlement

 

 

 

 

 

 

 

(2,221

)

Severance expenses

 

 

 

366

 

 

(11

)

 

366

 

Further adjustments - EBITDA to Adjusted EBITDA

 

5,860

 

 

6,263

 

 

16,456

 

 

16,588

 

Adjusted EBITDA (Non-GAAP)

 

$

32,636

 

 

$

31,137

 

 

$

81,889

 

 

$

81,016

 

Table 7

Hanger, Inc.

Segment Reconciliation of Income From Operations to EBITDA and Adjusted EBITDA

(Unaudited - 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
September 30,

 

For the Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

Patient Care

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

$

36,130

 

 

$

32,502

 

 

$

93,661

 

 

$

84,615

 

Depreciation & amortization

 

4,943

 

 

4,651

 

 

13,997

 

 

14,547

 

EBITDA (Non-GAAP)

 

41,073

 

 

37,153

 

 

107,658

 

 

99,162

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

1,087

 

 

1,023

 

 

3,282

 

 

3,262

 

Severance expenses

 

 

 

 

 

(11

)

 

 

Further adjustments - EBITDA to Adjusted EBITDA

 

1,087

 

 

1,023

 

 

3,271

 

 

3,262

 

Adjusted EBITDA (Non-GAAP)

 

42,160

 

 

38,176

 

 

110,929

 

 

102,424

 

 

 

 

 

 

 

 

 

 

Products & Services

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

5,111

 

 

6,839

 

 

14,133

 

 

20,171

 

Depreciation & amortization

 

2,723

 

 

2,564

 

 

7,862

 

 

7,569

 

EBITDA (Non-GAAP)

 

7,834

 

 

9,403

 

 

21,995

 

 

27,740

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

236

 

 

238

 

 

726

 

 

343

 

Severance expenses

 

 

 

 

 

 

 

 

Further adjustments - EBITDA to Adjusted EBITDA

 

236

 

 

238

 

 

726

 

 

343

 

Adjusted EBITDA (Non-GAAP)

 

8,070

 

 

9,641

 

 

22,721

 

 

28,083

 

 

 

 

 

 

 

 

 

 

Corporate & Other

 

 

 

 

 

 

 

 

Loss from operations - as reported (GAAP)

 

(23,838

)

 

(23,417

)

 

(69,267

)

 

(67,910

)

Depreciation & amortization

 

1,707

 

 

1,735

 

 

5,047

 

 

5,436

 

EBITDA (Non-GAAP)

 

(22,131

)

 

(21,682

)

 

(64,220

)

 

(62,474

)

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

2,136

 

 

2,230

 

 

5,530

 

 

8,870

 

Equity-based compensation

 

2,051

 

 

2,406

 

 

6,081

 

 

5,968

 

Acquisition related expenses

 

350

 

 

 

 

848

 

 

 

Disaster recovery / unclaimed property settlement

 

 

 

 

 

 

 

(2,221

)

Severance expenses

 

 

 

366

 

 

 

 

366

 

Further adjustments - EBITDA to Adjusted EBITDA

 

4,537

 

 

5,002

 

 

12,459

 

 

12,983

 

Adjusted EBITDA (Non-GAAP)

 

(17,594

)

 

(16,680

)

 

(51,761

)

 

(49,491

)

Total Adjusted EBITDA (Non-GAAP)

 

$

32,636

 

$

31,137

 

$

81,889

 

$

81,016

Table 8

Hanger, Inc.

Indebtedness

(Unaudited - in thousands)

 

 

 

As of September 30,

 

As of December 31,

 

 

2019

 

2018

Debt:

 

 

 

 

Term Loan B

 

$

497,425

 

 

$

501,213

 

Seller notes

 

7,138

 

 

4,506

 

Financing leases and other

 

1,192

 

 

14,361

 

Total debt before unamortized discount and debt issuance costs

 

505,755

 

 

520,080

 

Unamortized discount and debt issuance costs, net

 

(8,516

)

 

(9,407

)

Total debt

 

$

497,239

 

 

$

510,673

 

 

 

 

 

 

Current portion of long-term debt:

 

 

 

 

Term Loan B

 

$

5,050

 

 

$

5,050

 

Seller notes

 

3,152

 

 

2,513

 

Financing leases and other

 

417

 

 

1,020

 

Total current portion of long-term debt

 

8,619

 

 

8,583

 

Long-term debt:

 

$

488,620

 

 

$

502,090

 

 

 

 

 

 

Net indebtedness:

 

 

 

 

Total debt before unamortized discount and debt issuance costs

 

505,755

 

 

520,080

 

Cash and cash equivalents

 

(49,947

)

 

(95,114

)

Net indebtedness

 

$

455,808

 

 

$

424,966

 

Table 9

Hanger, Inc.

Key Operating Metrics

 

 

 

As of and For the
Three Months Ended
September 30,

 

As of and For the
Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Same clinic revenue:

 

 

 

 

 

 

 

 

Growth rate on net revenue

 

3.7%

 

2.1%

 

1.8%

 

1.7%

Growth rate day adjusted (a)

 

2.1%

 

0.5%

 

1.8%

 

1.1%

 

 

 

 

 

 

 

 

 

Clinical locations:

 

 

 

 

 

 

 

 

Patient care clinics

 

695

 

677

 

 

 

 

Satellite clinics

 

106

 

109

 

 

 

 

Total clinical locations

 

801

 

786

 

 

 

 

 

(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.

 

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

Source: Hanger, Inc.

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