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 second quarter ended June
30, 2019.
Financial Highlights for the Second Quarter of 2019
- Net revenue was $281.1 million for the three months ended June
30, 2019, compared to $267.0 million for the same period in 2018,
reflecting a net revenue increase of 5.3 percent. Same clinic
revenue per day in the Patient Care segment grew by 3.0
percent.
- GAAP net income totaled $10.0 million for the three months
ended June 30, 2019, compared to $12.9 million for the same period
in 2018. GAAP net income in the second quarter of 2018 benefited
from a $3.7 million pre-tax gain related to favorable
settlements.
- GAAP income from operations was $23.1 million for the three
months ended June 30, 2019, compared to $20.3 million for the same
period in 2018.
- Adjusted EBITDA was $37.4 million in the second quarter,
compared to $33.6 million for the same period in 2018, reflecting
an increase of $3.7 million or 11.1 percent. Growth in Adjusted
EBITDA was driven by higher revenue and contribution margin within
the Company's Patient Care segment. This growth was partially
offset by decreased margins within the Products & Services
segment and an increase in Corporate & Other costs relating to
the Company's financial and supply chain systems initiative.
- GAAP diluted earnings per share was $0.26 for the second
quarter of 2019, compared to $0.35 for the same period in 2018. The
reduction in GAAP earnings per share primarily relates to the gain
on favorable settlements in the second quarter of 2018 and an
increased provision for income taxes in the second quarter of
2019.
- Adjusted diluted earnings per share was $0.35 for the three
months ended June 30, 2019, compared to $0.28 for the same period
in 2018, which reflects an increase of 25.0 percent.
- The Company reaffirmed its 2019 financial outlook (see "2019
Outlook" within this release).
Vinit Asar, President and Chief Executive Officer of Hanger,
Inc., stated, "As anticipated, we benefited from the timing of
prosthetic deliveries during the quarter, which have brought our
year-to-date results in line with our original expectations. These
results, coupled with continuing stronger than anticipated growth
in our distribution business, provided us with a solid revenue
performance. The positive flow-through on this revenue growth was
also evident during the quarter, as our Patient Care segment
demonstrated a significant increase in earnings and margin. We are
encouraged by this business momentum and believe it reflects the
favorable impact our strategies and investments are having on our
drive towards clinical excellence and differentiation."
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 June 30, 2019
Patient Care Segment
For the three months ended June 30, 2019, Patient Care net
revenue was $231.2 million, an increase of $13.0 million or 6.0
percent, compared to the same period in 2018. Total revenue growth
for the segment includes $5.8 million of revenue from O&P
clinics acquired in late 2018 and early 2019.
Same clinic revenue per day grew by 3.0 percent during the
quarter. Revenue from prosthetics increased 4.3 percent and revenue
from orthotics grew by 1.6 percent. Prosthetics revenue growth
benefited during the quarter from the timing of patient deliveries,
which generally shifted from late in the first quarter of 2019 into
the second quarter when compared with the prior year periods.
Prosthetics comprised 55.0 percent of Patient Care segment net
revenue during the second quarter of 2019 as compared with 54.3
percent during the same period in 2018.
Income from operations in the Patient Care segment was $41.8
million during the second quarter of 2019, reflecting growth of
$6.8 million compared to the $35.0 million reported in the prior
year. Adjusted EBITDA for the segment was $47.4 million, which
reflected a $6.1 million or 14.9 percent increase compared to the
prior year period. Adjusted EBITDA margin in the segment totaled
20.5 percent compared to 18.9 percent during the second quarter of
2018. Margin growth was related both to flow-through on increased
revenue as well as a reduction in support and systems
implementation costs.
Products & Services Segment
For the three months ended June 30, 2019, Products &
Services net revenue totaled $49.9 million, which reflected a $1.1
million, or 2.3 percent increase compared to the same period in
2018. Revenue growth was driven by a $3.0 million, or 8.6 percent,
increase from the distribution of O&P componentry to
independent providers, which was partially offset by a $1.9 million
decrease in revenue from therapeutic solutions.
Income from operations for the Products & Services segment
decreased by $2.5 million to $4.9 million in the second quarter of
2019 compared to the same period in 2018. Adjusted EBITDA for the
Products & Services segment was $7.8 million for the second
quarter of 2019, which reflected a $2.0 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 $1.5 million to $23.6 million for the
quarter ended June 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.
The loss from operations in the second quarter of the prior year
included a $2.2 million pre-tax gain from favorable settlements.
These favorable settlements recognized in the second quarter of
2018 related to the Company's receipt of a payment for
long-standing damage claims related to the "Deepwater Horizon"
disaster as well as a benefit from the settlement of outstanding
unclaimed property claims with the State of Delaware. Excluding the
effect of the gain from these settlements, excess third party
professional fees, depreciation and amortization, certain
acquisition-related transaction costs and non-cash equity
compensation expense, the net cost of corporate and other
activities increased by $0.4 million to $17.8 million in the second
quarter of 2019.
Net Income; Interest Expense
Interest expense increased from $7.3 million in the second
quarter of 2018 to $8.5 million for the three months ended June 30,
2019, primarily due to a $1.5 million interest expense benefit
related to the unclaimed property settlement with the State of
Delaware recognized in the second quarter of 2018.
For the three months ended June 30, 2019, net income was $10.0
million compared with $12.9 million the same period in 2018. The
$2.9 million decline in net income was due primarily to the $3.7
million aggregate gain on favorable settlements recognized during
the second quarter of 2018 as well as an increase in the Company's
provision for income taxes.
Financial Highlights for the Six Months Ended June 30,
2019
Net revenue was $517.5 million for the six months ended June 30,
2019, compared to $501.0 million for the same period of 2018,
reflecting net revenue growth of 3.3 percent. For the six month
period, acquisitions that occurred in late 2018 and early 2019
contributed $10.6 million of net revenue.
Patient Care net revenue grew $15.1 million, or 3.7 percent, for
the year-to-date period to $421.8 million, driven by same clinic
day-adjusted revenue growth per day of 1.6 percent. Revenue from
prosthetics increased by 2.0 percent on a day-adjusted basis, while
orthotics revenue increased by 1.2 percent also on a day-adjusted
basis.
Products & Services segment net revenue grew $1.5 million,
or 1.5 percent, driven by growth of $4.8 million in distribution
services, offset by a $3.4 million decrease in revenue from
therapeutic solutions. The Company continues to anticipate a total
decline in therapeutic solutions net revenue of between $5 million
and $7 million in 2019 as compared to the prior year.
GAAP net income was $3.1 million for the six months ended June
30, 2019, compared to a $9.7 million net loss for the same period
in 2018. Results for the year-to-date period ending June 30, 2018
include a $17.0 million in pre-tax loss on the extinguishment of
debt related to the Company's March 2018 refinancing.
Adjusted EBITDA of $49.3 million for the first six months of
2019 was generally consistent with the $49.9 million reported in
the prior year period.
For the six months ended June 30, 2019, GAAP diluted earnings
per share was $0.08, compared to a loss of $0.26 per share in 2018.
Per share amounts in 2017 and 2018 were impacted by the items noted
above, in the discussion of net loss. Adjusted diluted earnings per
share was $0.20 for the first six months of 2019, compared to $0.16
per share for the same period in 2018 due primarily to higher
revenue and related income from operations.
Net Cash Provided by Operating Activities; Liquidity
Cash flows provided by operating activities for the three months
ending June 30, 2019 were $29.3 million, which reflected a $3.9
million, or 15.3 percent, increase over the second quarter of
2018.
On June 30, 2019, the Company had liquidity of $133.0 million,
comprised of $38.2 million in cash and cash equivalents, and $94.8
million in available borrowing capacity under its revolving credit
facility, compared to liquidity of $115.3 million on March 31,
2019.
2019 Outlook
Based on the Company's year-to-date results, Hanger 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.
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,
Thursday, August 8, at 8:30 a.m. Eastern time to discuss the
Company’s second 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 our
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 - dollars in
thousands, except share and per share amounts)
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Net revenues
$
281,098
$
266,966
$
517,517
$
500,961
Material costs
91,399
86,516
169,776
162,872
Personnel costs
91,490
89,554
178,201
175,662
Other operating costs
33,741
30,536
67,296
61,632
General and administrative expenses
29,358
26,523
57,640
52,159
Professional accounting and legal fees
3,247
4,236
5,947
9,082
Depreciation and amortization
8,760
9,272
17,533
18,602
Income from operations
23,103
20,329
21,124
20,952
Interest expense, net
8,481
7,317
17,019
19,580
Loss on extinguishment of debt
—
—
—
16,998
Non-service defined benefit plan
expense
173
176
346
352
Income (loss) before income taxes
14,449
12,836
3,759
(15,978
)
Provision (benefit) for income taxes
4,414
(92
)
675
(6,288
)
Net income (loss)
$
10,035
$
12,928
$
3,084
$
(9,690
)
Basic and Diluted Per Common Share
Data:
Basic earnings (loss) per share
$
0.27
$
0.35
$
0.08
$
(0.26
)
Weighted average shares used to compute
basic earnings per common share
37,299,766
36,790,401
37,151,694
36,645,248
Diluted earnings (loss) per share
$
0.26
$
0.35
$
0.08
$
(0.26
)
Weighted average shares used to compute
diluted earnings per common share
37,887,559
37,404,360
37,889,586
36,645,248
Table 2
Hanger, Inc.
Condensed Consolidated Balance
Sheets
(Unaudited - dollars in
thousands)
As of June 30,
As of December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
38,229
$
95,114
Accounts receivable, net
148,275
143,986
Inventories
71,110
67,690
Income taxes receivable
1,718
379
Other current assets
14,888
18,731
Total current assets
274,220
325,900
Non-current assets:
Property, plant and equipment, net
85,210
89,489
Goodwill
226,732
198,742
Other intangible assets, net
15,770
15,478
Deferred income taxes
66,682
65,635
Operating lease right-of-use assets
104,632
—
Other assets
7,589
7,766
Total assets
$
780,835
$
703,010
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current liabilities:
Current portion of long-term debt
$
8,648
$
8,583
Accounts payable
52,268
55,797
Accrued expenses and other current
liabilities
53,107
51,783
Accrued compensation related costs
37,309
55,111
Current portion of operating lease
liabilities
30,592
—
Total current liabilities
181,924
171,274
Long-term liabilities:
Long-term debt, less current portion
489,662
502,090
Operating lease liabilities
85,046
—
Other liabilities
46,033
51,570
Total liabilities
802,665
724,934
Shareholders’ deficit:
Common stock
375
371
Additional paid-in capital
347,012
343,955
Accumulated other comprehensive loss
(12,143
)
(4,531
)
Accumulated deficit
(356,378
)
(361,023
)
Treasury stock, at cost
(696
)
(696
)
Total shareholders’ deficit
(21,830
)
(21,924
)
Total liabilities and shareholders’
deficit
$
780,835
$
703,010
Table 3
Hanger, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited - dollars in
thousands)
For the Six Months Ended June
30,
2019
2018
Cash flows (used in) provided by
operating activities:
Net income (loss)
$
3,084
$
(9,690
)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation and amortization
17,533
18,602
Amortization of right-of-use assets
18,289
—
Provision (benefit) for doubtful
accounts
304
(602
)
Stock-based compensation expense
6,715
5,906
Deferred income taxes
779
(6,511
)
Amortization of debt discounts and
issuance costs
797
2,186
Loss on extinguishment of debt
—
16,998
Gain on sale and disposal of fixed
assets
(792
)
(1,349
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(1,010
)
13,029
Inventories
(1,862
)
2,699
Other current assets and other assets
(1,100
)
(119
)
Income taxes
(1,339
)
11,690
Accounts payable
(3,208
)
3,205
Accrued expenses and other current
liabilities
(2,778
)
(14,300
)
Accrued compensation related costs
(17,901
)
(22,298
)
Other liabilities
(1,871
)
(2,538
)
Operating lease liabilities
(19,179
)
—
Net cash (used in) provided by operating
activities
(3,539
)
16,908
Cash flows used in investing
activities
Purchase of property, plant, and
equipment
(14,806
)
(11,322
)
Purchase of therapeutic program equipment
leased to third parties under operating leases
(3,530
)
(3,822
)
Acquisitions, net of cash acquired
(27,916
)
—
Purchase of company-owned life insurance
investment
—
(598
)
Proceeds from sale of property, plant and
equipment
1,476
1,682
Net cash used in investing activities
(44,776
)
(14,060
)
Cash flows (used in) provided by
financing activities
Borrowings under term loan, net of
discount
—
500,204
Repayment of term loan
(2,525
)
(431,875
)
Borrowings under revolving credit
agreement
—
3,000
Repayments under revolving credit
agreement
—
(8,000
)
Payment of employee taxes on stock-based
compensation
(3,654
)
(2,463
)
Payment on seller notes
(2,162
)
(1,765
)
Payment of financing lease obligations
(229
)
(682
)
Payment of debt issuance costs
—
(6,487
)
Payment of debt extinguishment costs
—
(8,436
)
Net cash (used in) provided by financing
activities
(8,570
)
43,496
(Decrease) increase in cash, cash
equivalents, and restricted cash
(56,885
)
46,344
Cash, cash equivalents, and restricted
cash, at beginning of period
95,114
4,779
Cash, cash equivalents, and restricted
cash, at end of period
$
38,229
$
51,123
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
$
38,229
$
48,792
Restricted cash, at end of period
—
2,331
Cash, cash equivalents, and restricted
cash, at end of period
$
38,229
$
51,123
Table 4 Hanger, Inc. Segment Information:
Revenue, EBITDA and Adjusted EBITDA (Unaudited - 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 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 Ended
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Net Revenue (a)
Patient Care
$
231,168
$
218,158
$
421,769
$
406,665
Products & Services
49,930
48,808
95,748
94,296
Net revenue
$
281,098
$
266,966
$
517,517
$
500,961
EBITDA (b)
Patient Care
$
46,276
$
40,018
$
66,585
$
62,009
Products & Services
7,520
9,956
14,161
18,337
Corporate & Other
(21,933
)
(20,373
)
(42,089
)
(40,792
)
EBITDA (Non-GAAP)
$
31,863
$
29,601
$
38,657
$
39,554
Adjusted EBITDA (b)
Patient Care
$
47,377
$
41,238
$
68,769
$
64,249
Products & Services
7,766
9,790
14,651
18,441
Corporate & Other
(17,758
)
(17,386
)
(34,167
)
(32,811
)
Adjusted EBITDA (Non-GAAP)
$
37,385
$
33,642
$
49,253
$
49,879
(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 - 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 expenses
incurred in connection with our acquisitions.
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
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Net income (loss) - as reported (GAAP)
$
10,035
$
12,928
$
3,084
$
(9,690
)
Adjustments:
Amortization expense
1,126
1,814
2,356
3,767
Third-party professional fees
1,745
2,940
3,394
6,640
Loss on extinguishment of debt
—
—
—
16,998
Acquisition-related expenses
328
—
498
—
Disaster recovery / unclaimed property
settlement
—
(3,729
)
—
(3,729
)
Severance expenses
(1
)
—
(11
)
—
Adjustments prior to tax effect
$
3,198
$
1,025
$
6,237
$
23,676
Tax effect of specified adjustments
(a)
179
(3,419
)
(1,724
)
(8,136
)
Adjustments after taxes
3,377
(2,394
)
4,513
15,540
Adjusted net income (Non-GAAP)
$
13,412
$
10,534
$
7,597
$
5,850
Basic earnings (loss) per share - as
reported (GAAP)
$
0.27
$
0.35
$
0.08
$
(0.26
)
Effect of above listed specified
adjustments
0.09
(0.06
)
0.12
0.42
Adjusted basic earnings per share - as
reported (Non-GAAP)
$
0.36
$
0.29
$
0.20
$
0.16
Diluted earnings (loss) per share - as
reported (GAAP)
$
0.26
$
0.35
$
0.08
$
(0.26
)
Effect of above listed specified
adjustments
0.09
(0.07
)
0.12
0.42
Adjusted diluted earnings per share - as
reported (Non-GAAP)
$
0.35
$
0.28
$
0.20
$
0.16
Shares used to compute basic earnings
(loss) per share
37,299,766
36,790,401
37,151,694
36,645,248
Shares used to compute diluted earnings
(loss) per share
37,887,559
37,404,360
37,889,586
37,314,889
(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 -
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 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 Ended
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Net income (loss) - as reported (GAAP)
$
10,035
$
12,928
$
3,084
$
(9,690
)
Adjustments to calculate EBITDA:
Depreciation and amortization
8,760
9,272
17,533
18,602
Interest expense, net
8,481
7,317
17,019
19,580
Loss on extinguishment of debt
—
—
—
16,998
Non-service defined benefit plan
expense
173
176
346
352
Provision (benefit) for income taxes
4,414
(92
)
675
(6,288
)
Adjustments - net income (loss) to
EBITDA
21,828
16,673
35,573
49,244
EBITDA (Non-GAAP)
31,863
29,601
38,657
39,554
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
1,745
2,940
3,394
6,640
Equity-based compensation
3,450
3,322
6,715
5,906
Acquisition-related expenses
328
—
498
—
Disaster recovery / unclaimed property
settlement
—
(2,221
)
—
(2,221
)
Severance expenses
(1
)
—
(11
)
—
Further adjustments - EBITDA to Adjusted
EBITDA
5,522
4,041
10,596
10,325
Adjusted EBITDA (Non-GAAP)
$
37,385
$
33,642
$
49,253
$
49,879
Table 7 Hanger, Inc. Segment Reconciliation
of Income From Operations to EBITDA and Adjusted EBITDA
(Unaudited - 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 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 Ended
June 30,
For the Six Months Ended June
30,
2019
2018
2019
2018
Patient
Care
Income from operations - as reported
(GAAP)
$
41,774
$
35,020
$
57,531
$
52,113
Depreciation & amortization
4,502
4,998
9,054
9,896
EBITDA (Non-GAAP)
46,276
40,018
66,585
62,009
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
1,101
1,220
2,195
2,240
Severance expenses
—
—
(11
)
—
Further adjustments - EBITDA to Adjusted
EBITDA
1,101
1,220
2,184
2,240
Adjusted EBITDA (Non-GAAP)
47,377
41,238
68,769
64,249
Products &
Services
Income from operations - as reported
(GAAP)
4,924
7,453
9,022
13,332
Depreciation & amortization
2,596
2,503
5,139
5,005
EBITDA (Non-GAAP)
7,520
9,956
14,161
18,337
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
246
(166
)
490
104
Severance expenses
—
—
—
—
Further adjustments - EBITDA to Adjusted
EBITDA
246
(166
)
490
104
Adjusted EBITDA (Non-GAAP)
7,766
9,790
14,651
18,441
Corporate &
Other
Loss from operations - as reported
(GAAP)
(23,595
)
(22,144
)
(45,429
)
(44,493
)
Depreciation & amortization
1,662
1,771
3,340
3,701
EBITDA (Non-GAAP)
(21,933
)
(20,373
)
(42,089
)
(40,792
)
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
1,745
2,940
3,394
6,640
Equity-based compensation
2,103
2,268
4,030
3,562
Acquisition related expenses
328
—
498
—
Disaster recovery / unclaimed property
settlement
—
(2,221
)
—
(2,221
)
Severance expenses
(1
)
—
—
—
Further adjustments - EBITDA to Adjusted
EBITDA
4,175
2,987
7,922
7,981
Adjusted EBITDA (Non-GAAP)
(17,758
)
(17,386
)
(34,167
)
(32,811
)
Total Adjusted EBITDA (Non-GAAP)
$
37,385
$
33,642
$
49,253
$
49,879
Table 8
Hanger, Inc.
Indebtedness
(Unaudited - dollars in
thousands)
As of June 30,
As of December 31,
2019
2018
Debt:
Term Loan B
$
498,688
$
501,213
Seller notes
7,264
4,506
Financing leases and other
1,231
14,361
Total debt before unamortized discount and
debt issuance costs
507,183
520,080
Unamortized discount and debt issuance
costs, net
(8,873
)
(9,407
)
Total debt
$
498,310
$
510,673
Current portion of long-term debt:
Term Loan B
$
5,050
$
5,050
Seller notes
3,186
2,513
Financing leases and other
412
1,020
Total current portion of long-term
debt
8,648
8,583
Long-term debt:
$
489,662
$
502,090
Net indebtedness:
Total debt before unamortized discount and
debt issuance costs
507,183
520,080
Cash and cash equivalents
(38,229
)
(95,114
)
Net indebtedness
$
468,954
$
424,966
Table 9
Hanger, Inc.
Key Operating Metrics
As of and For the Three Months
Ended June 30,
As of and For the Six Months
Ended June 30,
2019
2018
2019
2018
Same clinic revenue:
Growth rate on net revenue
3.0
%
1.7
%
0.8
%
1.4
%
Growth rate day adjusted (a)
3.0
%
1.1
%
1.6
%
1.4
%
Clinical locations:
Patient care clinics
696
680
Satellite clinics
109
109
Total clinical locations
805
789
(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/20190807005732/en/
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
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