Company anticipates growth in 2019 revenue and
earnings, driven by the patient care segment
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
full-year ended December 31, 2018.
Financial Highlights for the Fourth Quarter of 2018
- Net revenue was $284.9 million for the
three months ended December 31, 2018, compared to $285.7
million for the same period in 2017, reflecting a net revenue
decline of 0.3 percent. Excluding a $1.1 million reduction in
fourth quarter 2018 net revenue resulting from the adoption of ASC
606, fourth quarter net revenue was consistent with the prior
year.
- Net income totaled $4.5 million for the
three months ended December 31, 2018, compared to a net loss
of $84.4 million, for the same period in 2017. Fourth quarter 2017
results were impacted by a $57.5 million charge for impairment of
intangible assets as well as a $35 million reduction in deferred
tax assets resulting from the passage of the Tax Cuts and Jobs
Act.
- Adjusted EBITDA was $40.0 million in
the fourth quarter of 2018, compared to $39.6 million in the fourth
quarter of 2017, an increase of $0.4 million, or 1.2 percent.
Growth in Adjusted EBITDA was driven by lower Corporate G&A
expenses in the fourth quarter of 2018 compared to the same period
in 2017.
- Diluted earnings per share was $0.12
for the fourth quarter of 2018, compared to a loss of $2.32 per
share in the fourth quarter of 2017. Per share amounts in the
fourth quarter of 2017 were also impacted by the items noted above,
in the discussion of net income.
- Adjusted diluted earnings per share was
$0.40 for the three months ended December 31, 2018, compared
to earnings of $0.22 per share for the same period in 2017, due
primarily to higher income from operations and lower interest
expense in 2018.
- Net cash provided by operating
activities was $41.4 million for the three months ended
December 31, 2018, compared to $31.1 million for the same
period in 2017.
- The Company provided its initial
outlook for net revenue, same clinic revenue growth and Adjusted
EBITDA in 2019. Please see the "2019 Outlook" section of this
release for details.
Vinit Asar, President and Chief Executive Officer of Hanger,
Inc., stated, "The fourth quarter of 2018 capped off a successful
year for Hanger. We delivered financial results consistent with our
original guidance while investing in a comprehensive portfolio of
initiatives that will enable Hanger to increase its long-term rate
of growth. I am pleased with the progress to date in our Patient
Care segment, as we grow the prosthetics business, refine our
delivery strategy in certain orthotics categories, and improve our
operational effectiveness. Within Products & Services, we saw
strong performance within distribution, offset by expected declines
in therapeutic solutions. In 2019, we anticipate the investments we
have made will further differentiate Hanger's leadership in the
O&P industry."
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 the Fourth Quarter of 2018
Patient Care Segment
For the three months ended December 31, 2018, Patient Care
net revenue was $236.6 million, a decrease of $0.9 million, or 0.4
percent, compared to net revenue of $237.5 million reported during
the same period in 2017. Net Patient Care growth was reduced by
$1.1 million as a result of the impact of ASC 606.
Same clinic revenue growth was 0.3 percent on a day-adjusted
basis for the three months ended December 31, 2018. This
moderation in same clinic revenue growth was caused by two primary
factors: comparison to a strong growth performance in the fourth
quarter of 2017 when same clinic revenue per day growth totaled 2.1
percent; as well as a decline in certain lower-margin orthotic
categories that the Company continues to de-emphasize.
Income from operations in the Patient Care segment was $42.2
million during the fourth quarter of 2018, which reflected a $2.0
million decrease, compared to $44.2 million reported in the prior
year. Adjusted EBITDA for the segment was $48.5 million, which
reflected a $2.2 million or 4.4 percent decrease compared to the
prior year period. Comparative increases in material and personnel
costs impacted income from operations and Adjusted EBITDA in the
fourth quarter of 2018.
Products & Services Segment
For the three months ended December 31, 2018, Products
& Services net revenue totaled $48.2 million, which was
consistent with the $48.3 million reported in the same period of
2017. Within this segment, revenue from the distribution of O&P
componentry to independent providers increased by $1.6 million, or
4.9 percent. This growth was offset by a $1.7 million decrease in
revenue from therapeutic solutions as compared to the fourth
quarter of 2017.
Income from operations for the Products & Services segment
increased by $53.4 million to $5.4 million in the fourth quarter of
2018 compared to the same period in 2017, due primarily to
impairment of intangible assets in the prior year. Adjusted EBITDA
for the Products & Services segment was $8.4 million for the
fourth quarter of 2018, which reflected a $1.1 million decrease
compared to the same period of 2017. Earnings growth from increased
O&P distribution revenue was offset by the decrease in earnings
associated with the decline in therapeutic solutions revenue.
Corporate & Other
The loss from operations relating to corporate and other
activities declined by $6.8 million to $24.8 million for the
quarter ended December 31, 2018 compared to the same period in
2017. This decrease primarily related to a $3.5 million reduction
in bonus expense and a $2.8 million reduction in professional
accounting and legal fees as compared to the fourth quarter of the
prior year. Excluding the effect of third party professional fees
related to financial statement remediation, depreciation and
amortization, and non-cash equity compensation expense, the net
cost of Corporate and Other activities decreased year-over-year by
$3.8 million, to $16.8 million.
Net Income; Interest Expense
For the three months ended December 31, 2018, net income
was $4.5 million compared with a net loss of $84.4 million in the
same period of 2017. The $88.9 million improvement in net income
year-over-year was due primarily to the $54.7 million impairment of
intangible assets incurred in the fourth quarter of 2017, as well
as lower professional accounting and legal fees, depreciation and
amortization expense, interest expense and taxes in the fourth
quarter of 2018.
Financial Highlights for the Full Year 2018
- Net revenue of $1,048.8 million for the
twelve months ended December 31, 2018, compared to $1,040.8
million for the same period in 2017, reflecting net revenue growth
of 0.8 percent year-over-year. Excluding a $4.0 million reduction
in 2018 net revenue resulting from the adoption of ASC 606, 2018
net revenue grew by $12.0 million, or 1.2 percent.
- For the full year 2018, Patient Care
segment net revenue totaled $857.4 million, an increase of $5.4
million or 0.6 percent, compared to 2017. Net Patient Care revenue
grew 1.0 percent, excluding the impact of ASC 606. Revenue from
prosthetics increased by 3.3 percent, while revenues from
orthotics, shoes and inserts declined by 1.3 percent, primarily due
to the Company's de-emphasis of lower margin off-the-shelf
orthotics and shoes.
- Products & Services segment net
revenue totaled $191.4 million, an increase of $2.6 million or 1.4
percent, compared to 2017. Strong growth in distribution of O&P
componentry was partially offset by declines in therapeutic
solutions revenue.
- Net loss totaled $0.9 million for the
year ended December 31, 2018, compared to a net loss of $104.7
million for the same period in 2017. Prior year results were
impacted by a $57.5 million charge for impairment of intangible
assets as well as a $35 million reduction in deferred tax assets
resulting from the passage of the Tax Cuts and Jobs Act.
- Adjusted EBITDA was $121.1 million in
2018 compared to $120.3 million in 2017, an increase of $0.8
million.
- Diluted loss per share was $0.02 for
2018, compared to a loss of $2.89 per share in 2017. Per share
amounts in 2017 and 2018 were also impacted by the items noted
above, in the discussion of net loss.
- Adjusted diluted earnings per share was
$0.78 for the year ended December 31, 2018, compared to $0.33
per share for the same period in 2017, due primarily to higher
income from operations and lower interest expense during 2018.
- Net cash provided by operating
activities was $78.5 million for the year ended December 31,
2018, compared to $30.1 million for the same period in 2017,
primarily driven by reduced professional third party expenses and
cash generated from working capital as well as lower interest
expense.
Liquidity
On December 31, 2018, the Company had total liquidity of
$189.2 million, comprised of $95.1 million in cash and cash
equivalents, and $94.1 million in available borrowing capacity
under its revolving credit facility, compared to liquidity of
$155.1 million on September 30, 2018. The increase in liquidity of
$34.1 million from September 30, 2018 resulted primarily from
positive net cash flow from operations and secondarily due to
favorable working capital timing.
2019 Outlook
Hanger currently anticipates 2019 net 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 anticipates that growth and margin expansion in its
Patient Care segment will be partially offset by declines in its
Products & Services segment due to decreases in therapeutic
solutions revenue. The Company's revenue and Adjusted EBITDA
outlook also includes approximately $28 million of incremental
revenue acquired through three acquisitions completed in the fourth
quarter of 2018 and first quarter of 2019. Due to integration and
other related costs, these acquisitions are anticipated to provide
only modest contributions to earnings growth in 2019.
Hanger expects 2019 to be consistent with prior years with
regard to seasonality in its business, with sequentially lower
revenue, earnings and cash flow in the first quarter of the year.
In addition, Hanger's 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
Hanger’s management team will host a conference call tomorrow,
Friday, March 15, at 8:30 a.m. Eastern time to discuss the
Company’s fourth quarter and full year 2018 financial results and
2019 outlook.
To participate, dial 877-407-6184 or 201-389-0877 outside
the U.S. and Canada, and use conference code number 13686646.
A live webcast and replay of the call as well as accompanying
supplemental information will be available at the Investor
Relations section of the Company’s web site:
investor.hanger.com.
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 investor.hanger.com.
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 to the broader market. 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 branded and
private label 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 our
identified material weaknesses in our internal control over
financial reporting adversely affecting our ability to report our
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. Consolidated Statements of Operations
(dollars in thousands, except share and
per share amounts)
For the Three Months
EndedDecember 31,
For the Years EndedDecember
31,
2018 2017 2018
2017 Net revenues $ 284,853 $ 285,736 $ 1,048,760 $
1,040,769 Material costs 90,340 88,816 338,017 329,223 Personnel
costs 97,574 95,239 364,089 361,090 Other operating costs 31,271
32,097 123,902 129,831 General and administrative expenses 29,085
33,373 109,552 109,342 Professional accounting and legal fees 4,726
7,224 16,915 36,239 Depreciation and amortization 8,903 9,665
36,455 39,259 Impairment of intangible assets 183
54,735 183 54,735 Income
(loss) from operations 22,771 (35,413 ) 59,647 (18,950 ) Interest
expense, net 9,046 14,491 37,566 57,688 Loss on extinguishment of
debt — — 16,998 — Non-service defined benefit plan expense
176 184 703 736
Income (loss) before income taxes 13,549 (50,088 ) 4,380 (77,374 )
Provision for income taxes 9,086 34,325
5,238 27,297 Net income (loss) $ 4,463
$ (84,413 ) $ (858 ) $ (104,671 ) Basic and Diluted Per
Common Share Data: Basic earnings (loss) per share $ 0.12 $
(2.32 ) $ (0.02 ) $ (2.89 ) Shares used to compute basic and
diluted per common share amounts 36,906,938
36,410,488 36,764,551 36,270,920
Diluted earnings (loss) per share $ 0.12 $ (2.32 ) $ (0.02 )
$ (2.89 ) Weighted average shares outstanding - diluted
37,721,662 36,410,488 36,764,551
36,270,920
Table 2
Hanger, Inc. Consolidated Balance Sheets
(dollars in thousands)
As of December 31, 2018
2017 ASSETS Current assets: Cash and cash equivalents
$ 95,114 $ 1,508 Accounts receivable, net 143,986 146,346
Inventories 67,690 69,138 Income taxes receivable 379 13,079 Other
current assets 18,731 20,888 Total
current assets 325,900 250,959
Non-current assets: Property, plant, and equipment, net 89,489
93,615 Goodwill 198,742 196,343 Other intangible assets, net 15,478
21,940 Deferred income taxes 65,635 68,126 Other assets
7,766 9,440
Total assets $ 703,010
$ 640,423
TOTAL LIABILITIES AND
SHAREHOLDERS' DEFICIT Current liabilities: Current portion of
long-term debt $ 8,583 $ 4,336 Accounts payable 55,797 48,269
Accrued expenses and other current liabilities 51,783 66,308
Accrued compensation related costs 55,111
53,380 Total current liabilities 171,274
172,293 Long-term liabilities: Long-term debt,
less current portion 502,090 445,928 Other liabilities
51,570 50,253
Total liabilities
724,934 668,474 Shareholders' deficit:
Common stock, $0.01 par value; 60,000,000 shares authorized;
37,063,995 shares issued and 36,921,174 shares outstanding in 2018,
and 36,515,232 shares issued and 36,372,411 shares outstanding in
2017 371 365 Additional paid-in capital 343,955 333,738 Accumulated
other comprehensive loss (4,531 ) (1,686 ) Accumulated deficit
(361,023 ) (359,772 ) Treasury stock, at cost; 142,821 shares at
2018 and 2017, respectively (696 ) (696 ) Total
shareholders' deficit (21,924 ) (28,051 ) Total
liabilities and shareholders' deficit $ 703,010 $ 640,423
Table 3 Hanger, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Twelve MonthsEnded
December 31,
2018 2017 Cash flows from operating
activities: Net loss $ (858 ) $ (104,671 ) Adjustments to
reconcile net loss to net cash from operating activities:
Depreciation and amortization 36,455 39,259 (Benefit) provision for
doubtful accounts (733 ) 9,422 Impairment of intangible assets 183
54,735 Stock-based compensation expense 13,065 12,930 Deferred
income taxes 3,452 26,248 Amortization of debt issuance costs 2,837
8,876 Loss on extinguishment of debt 16,998 — Gain on sale and
disposal of fixed assets (2,713 ) (2,059 ) Changes in operating
assets and liabilities: Accounts receivable, net 3,238 (12,585 )
Inventories 1,750 (913 ) Other current assets and other assets
4,459 661 Income taxes receivable 12,700 121 Accounts payable 6,511
(3,562 ) Accrued expenses and other current liabilities (16,550 )
(12,929 ) Accrued compensation related costs 1,713 16,843 Other
liabilities (3,980 ) (2,271 ) Changes in operating
assets and liabilities 9,841 (14,635 ) Net
cash provided by operating activities - continuing operations
78,527 30,105
Cash flows from
investing activities: Purchase of property, plant, and
equipment (18,984 ) (16,355 ) Purchase of therapeutic program
equipment leased to third parties under operating leases (9,835 )
(6,000 ) Acquisitions, net of cash acquired (1,978 ) — Proceeds
from company-owned life insurance investment — 17,135 Purchase of
company-owned life insurance investment (598 ) (555 ) Proceeds from
sale of property, plant and equipment 4,237
4,909 Net cash used in investing activities - continuing
operations (27,158 ) (866 )
Cash flows from
financing activities: Borrowings under term loan, net of
discount 501,467 420 Repayment of term loan (435,660 ) (28,545 )
Borrowings under revolving credit agreement 3,000 156,965
Repayments under revolving credit agreement (8,000 ) (151,965 )
Payment of employee taxes on stock-based compensation (2,906 )
(1,477 ) Payment on seller notes (2,599 ) (5,197 ) Payment of
capital lease obligations (1,207 ) (1,210 ) Payment of debt
issuance costs (6,757 ) (2,863 ) Payment of debt extinguishment
costs (8,436 ) — Proceeds from exercise of options 64
— Net cash provided by (used in) financing activities
- continuing operations 38,966 (33,872 )
Increase (decrease) in cash, cash equivalents and restricted cash
90,335 (4,633 ) Cash, cash equivalents and restricted cash, at
beginning of period 4,779 9,412 Cash,
cash equivalents and restricted cash, at end of period $ 95,114
$ 4,779
Reconciliation of Cash, Cash
Equivalents, and Restricted Cash Cash and cash equivalents, at
beginning of period $ 1,508 $ 7,157 Restricted cash, at beginning
of period 3,271 2,255 Cash, cash
equivalents, and restricted cash, at beginning of period $ 4,779
$ 9,412 Cash and cash equivalents, at end of
period $ 95,114 $ 1,508 Restricted cash, at end of period —
3,271 Cash, cash equivalents, and restricted
cash, at end of period $ 95,114 $ 4,779
Table 4
Hanger, Inc.
Segment Information: Revenue, EBITDA
and Adjusted EBITDA
(dollars 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, and certain third-party expenses
incurred in connection with our acquisitions.
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
EndedDecember 31,
For the Twelve MonthsEnded
December 31,
2018 2017 2018
2017 Net Revenue (a) Patient Care $ 236,637 $ 237,478
$ 857,382 $ 851,973 Products & Services 48,216
48,258 191,378 188,796
Net revenue $ 284,853 $ 285,736 $ 1,048,760 $
1,040,769 EBITDA (b) Patient Care $ 46,756 $ 49,415 $
145,918 $ 143,781 Products & Services 7,980 (45,593 ) 35,720
(17,513 ) Corporate & Other (23,062 ) (29,570 )
(85,536 ) (105,959 ) EBITDA (Non-GAAP) $ 31,674
$ (25,748 ) $ 96,102 $ 20,309 Adjusted
EBITDA (b) Patient Care $ 48,457 $ 50,662 $ 150,881 $ 148,007
Products & Services 8,420 9,517 36,503 38,504 Corporate &
Other (16,837 ) (20,597 ) (66,327 )
(66,172 ) Adjusted EBITDA (Non-GAAP) $ 40,040 $ 39,582
$ 121,057 $ 120,339 (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
(dollars 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 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
EndedDecember 31,
For the Twelve Months
EndedDecember 31,
2018 2017 2018
2017 Net income (loss) - as reported (GAAP) $ 4,463 $
(84,413 ) $ (858 ) $ (104,671 ) Adjustments: Impairment of
intangible assets 183 54,735 183 54,735 Amortization expense 1,443
2,308 6,707 9,527 Third-party professional fees 3,591 6,358 12,461
32,301 Loss on extinguishment of debt — — 16,998 —
Acquisition-related expenses 510 — 510 — Disaster recovery /
unclaimed property settlement — — (3,729 ) — Severance expenses
591 — 957 64
Adjustments prior to tax effect $ 6,318 $ 63,401 $ 34,087 $
96,627 Tax effect of specified adjustments (a) 4,317
29,266 (3,994 ) 19,981
Adjustments after taxes 10,635 92,667 30,093 116,608
Adjusted net income (Non-GAAP) $ 15,098 $
8,254 $ 29,235 $ 11,937 Basic earnings
(loss) per share - as reported (GAAP) $ 0.12 $ (2.32 ) $ (0.02 ) $
(2.89 ) Effect of above listed specified adjustments 0.29
2.55 0.82 3.22
Adjusted basic earnings per share - as reported (Non-GAAP) $ 0.41
$ 0.23 $ 0.80 $ 0.33 Diluted
earnings (loss) per share - as reported (GAAP) $ 0.12 $ (2.32 ) $
(0.02 ) $ (2.89 ) Effect of above listed specified adjustments
0.28 2.54 0.80
3.22 Adjusted diluted earnings per share - as reported
(Non-GAAP) $ 0.40 $ 0.22 $ 0.78 $ 0.33
Shares used to compute basic earnings (loss) per share
36,906,938 36,410,488 36,764,551 36,270,920 Shares used to compute
diluted earnings (loss) per share 37,721,662 36,764,901 37,473,860
36,566,638
(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% and 38% respectively for the 2018 and
2017 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 (dollars 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, and certain third-party expenses
incurred in connection with our acquisitions.
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
EndedDecember 31,
For the Twelve Months
EndedDecember 31,
2018 2017 2018
2017 Net income (loss) - as reported (GAAP) $ 4,463 $
(84,413 ) $ (858 ) $ (104,671 ) Adjustments to calculate
EBITDA: Depreciation and amortization 8,903 9,665 36,455 39,259
Interest expense, net 9,046 14,491 37,566 57,688 Loss on
extinguishment of debt — — 16,998 — Non-service defined benefit
plan expense 176 184 703 736 Provision for income taxes
9,086 34,325 5,238 27,297
Adjustments - net income (loss) to EBITDA 27,211
58,665 96,960 124,980
EBITDA (Non-GAAP) 31,674 (25,748 ) 96,102 20,309
Further adjustments to calculate Adjusted EBITDA: Impairment of
intangible assets 183 54,735 183 54,735 Third-party professional
fees 3,591 6,358 12,461 32,301 Equity-based compensation 3,491
4,237 13,065 12,930 Transaction costs 510 — 510 — Disaster recovery
/ unclaimed property settlement — — (2,221 ) — Severance expenses
591 — 957 64
Further adjustments - EBITDA to Adjusted EBITDA 8,366
65,330 24,955 100,030
Adjusted EBITDA (Non-GAAP) $ 40,040 $ 39,582 $
121,057 $ 120,339
Table 7
Hanger, Inc. Segment Reconciliation of Income (Loss) From
Operations to EBITDA and Adjusted EBITDA (dollars 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, and certain third-party expenses
incurred in connection with our acquisitions.
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
EndedDecember 31,
For the Twelve Months
EndedDecember 31,
2018 2017 2018
2017
Patient
Care
Income from operations - as reported (GAAP) $ 42,190 $ 44,175 $
126,805 $ 122,418 Depreciation & amortization 4,566
5,240 19,113 21,363
EBITDA (Non-GAAP) 46,756 49,415 145,918 143,781 Further
adjustments to calculate Adjusted EBITDA: Equity-based compensation
1,110 1,247 4,372 4,138 Severance expenses 591
— 591 88 Further adjustments -
EBITDA to Adjusted EBITDA 1,701 1,247
4,963 4,226 Adjusted EBITDA (Non-GAAP)
48,457 50,662 150,881
148,007
Products &
Services
Income (loss) from operations - as reported (GAAP) 5,352 (48,065 )
25,523 (27,676 ) Depreciation & amortization 2,628
2,472 10,197 10,163
EBITDA (Non-GAAP) 7,980 (45,593 ) 35,720 (17,513 ) Further
adjustments to calculate Adjusted EBITDA: Impairment of intangible
assets 183 54,735 183 54,735 Equity-based compensation 257 375 600
1,306 Severance expenses — — —
(24 ) Further adjustments - EBITDA to Adjusted EBITDA
440 55,110 783
56,017 Adjusted EBITDA (Non-GAAP) 8,420
9,517 36,503 38,504
Corporate &
Other
Loss from operations - as reported (GAAP) (24,771 ) (31,523 )
(92,681 ) (113,692 ) Depreciation & amortization 1,709
1,953 7,145 7,733
EBITDA (Non-GAAP) (23,062 ) (29,570 ) (85,536 ) (105,959 ) Further
adjustments to calculate Adjusted EBITDA: Third-party professional
fees 3,591 6,358 12,461 32,301 Equity-based compensation 2,124
2,615 8,093 7,486 Acquisition-related expenses 510 — 510 — Disaster
recovery / unclaimed property settlement — — (2,221 ) — Severance
expenses — — 366 —
Further adjustments - EBITDA to Adjusted EBITDA 6,225
8,973 19,209 39,787
Adjusted EBITDA (Non-GAAP) (16,837 ) (20,597 )
(66,327 ) (66,172 ) Total Adjusted EBITDA (Non-GAAP)
$ 40,040 $ 39,582 $ 121,057 $ 120,339
Table 8 Hanger, Inc.
Indebtedness
(dollars in thousands)
As of December 31, 2018
2017 Revolving credit facility $ — $ 5,000 Term B loan, due
2025 501,213 — Term B loan, due 2019 — 280,000 Seller notes 4,506
5,912 Term loan, due June 2018 — 151,875 Financing leases and other
14,361 18,169 Total debt before
unamortized discount and debt issuance costs 520,080 460,956
Unamortized discount and debt issuance costs, net (9,407 )
(10,692 ) Total debt $ 510,673 $ 450,264
Reported as: Current portion of long-term debt $ 8,583 $
4,336 Long-term debt 502,090 445,928
Total debt $ 510,673 $ 450,264 Net
indebtedness: Total debt before unamortized discount and debt
issuance costs $ 520,080 $ 460,956 Cash and cash equivalents
(95,114 ) (1,508 ) Net indebtedness $ 424,966 $
459,448
Table
9 Hanger, Inc. Key Operating Metrics
For the Three Months
EndedDecember 31,
As of and For theTwelve Months
EndedDecember 31,
2018 2017 2018
2017 Same clinic revenue: Growth rate on net revenue
0.3 % 3.7 % 1.3 % 1.8 % Growth rate day adjusted (a) 0.3 % 3.7 %
0.9 % 2.2 % Clinical locations: Patient care clinics 676 682
Satellite clinics 104 112 Total clinical locations
780 794 (a) Same Clinic Revenue per Day - Same Clinic
Revenue per Day normalizes sales 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/20190314005543/en/
Thomas Kiraly, Executive Vice President and Chief Financial
Officer, Hanger, Inc.512-777-3600tkiraly@hanger.com
Seth Frank, Vice President, Treasury and Investor Relations,
Hanger, Inc.512-777-3573sfrank@hanger.com
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