Responds to the COVID-19 Pandemic through
Operational and Cost Reduction Actions
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 first quarter ended March
31, 2020.
Financial Highlights for the First Quarter of 2020
- Net revenue was $233.7 million for the three months ended March
31, 2020, compared to $236.4 million for the same period in 2019,
reflecting a decrease of 1.1 percent. Net same clinic revenue on a
day-adjusted basis declined by 3.2 percent, due primarily to a
decrease in patient volumes associated with the COVID-19
pandemic.
- Net loss was $15.7 million for the three months ended March 31,
2020, compared to $7.0 million for the same period in 2019. The
loss from operations was $9.2 million for the quarter compared to
$2.0 million for the same period in 2019.
- Adjusted EBITDA was $5.3 million in the first quarter of 2020,
compared to $11.9 million for the same period in 2019, reflecting a
decrease of $6.6 million. The decline in Adjusted EBITDA resulted
primarily from lower revenues associated with decreases in patient
volumes related to the COVID-19 pandemic which affected device
deliveries in late March.
- Income from operations and Adjusted EBITDA were also adversely
affected in the quarter by an increase in bad debt expense of $1.9
million compared to the first quarter of 2019. This increase
related to anticipated future write-offs of Products and Services
customer accounts, driven primarily by declining credit conditions
resulting from the economic impact of the COVID-19 pandemic.
- GAAP loss per share was $0.42 for the first quarter of 2020,
compared to a loss of $0.19 per share for the same period in 2019.
Adjusted diluted loss per share was $0.28 for the three months
ended March 31, 2020, compared to a loss per share of $0.16 for the
same period in 2019.
- In response to the COVID-19 pandemic, the Company implemented
operational and cost reduction measures in late March 2020,
including decreases in componentry purchases, a reduction in exempt
employee and officer salaries, the furloughing of employees,
reductions of operating hours and days of clinics, and temporarily
delaying the implementation of its supply chain and financial
systems project.
Vinit Asar, President and Chief Executive Officer of Hanger,
Inc., stated, "Our highest priorities during the COVID-19 pandemic
are to protect the safety of our patients and employees, and to
continue to provide our patients with uninterrupted access to
care." Asar continued, "We entered the year with positive momentum
and had high expectations for 2020 prior to the onset of the
COVID-19 pandemic. In response, we have taken necessary, but
painful actions in the near term to ensure our ability to manage
through this unprecedented public health crisis."
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 March 31, 2020
Patient Care Segment
For the three months ended March 31, 2020, Patient Care net
revenue was $190.2 million, a decrease of $0.4 million, or 0.2
percent, compared to the same period in 2019. Total revenue for the
segment includes $2.9 million of revenue from O&P clinics
acquired in late 2018 and 2019, net of consolidations.
Net same clinic revenue on a day-adjusted basis declined by 3.2
percent during the quarter. This decrease was due to lower patient
volumes in the last weeks of March primarily resulting from the
impact of the COVID-19 pandemic. Revenue from prosthetics declined
0.6 percent in the quarter and net revenue from orthotics declined
5.7 percent. Prosthetics comprised 52.4 percent of Patient Care
segment net revenue during the first quarter of 2020 as compared to
51.1 percent during the same period in 2019.
Income from operations in the Patient Care segment was $11.5
million during the first quarter of 2020, a decline of $4.2 million
compared to the $15.8 million reported in the prior year. Adjusted
EBITDA for the segment was $17.3 million, which reflected a $4.1
million or 19.0 percent decrease. Adjusted EBITDA margin in the
segment totaled 9.1 percent compared to 11.2 percent during the
first quarter of 2019. The decline in segment income and margin
resulted primarily from lower revenue flow relating to reduced
patient volumes. In addition, personnel costs increased $2.6
million compared to the prior year period and were primarily driven
by the effect of acquisitions and annual merit increases.
Products & Services Segment
For the three months ended March 31, 2020, Products &
Services net revenue totaled $43.6 million, a decline of 4.9
percent compared with the same period in 2019. Revenue from the
distribution of O&P componentry declined by $1.5 million, or
4.5 percent, primarily from lower sales volumes of O&P
componentry due to the COVID-19 pandemic in the final weeks of
March, and to a lesser extent, the Company's decision to exit the
distribution of certain low margin off-the-shelf orthotics into
third-party channels. The Company anticipates the exit from these
third-party distribution channels will lower distribution services
revenue for the full year of 2020 by approximately $5 million,
before any negative future impact from COVID-19. Therapeutic
Solutions revenue declined $0.8 million, or 6.0 percent, due to
client attrition.
Income from operations for the Products & Services segment
decreased by $2.0 million in the first quarter of 2020 compared to
the same period in 2019. Adjusted EBITDA for the Products &
Services segment totaled $5.0 million for the first quarter of
2020, a $1.8 million decrease compared with the same period of
2019. Products & Services segment margins and earnings were
negatively impacted by an increase in other operating costs,
specifically an increase in bad debt expense of $1.9 million when
compared to the first quarter of 2019. This increase is
attributable to higher expected write-offs of customer accounts due
primarily to declining credit conditions associated with the
anticipated economic impact of the COVID-19 pandemic.
Commencing on January 1, 2020, the Company adopted FASB ASU No.
2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments which changed
the methodology used to calculate expected credit losses.
Corporate & Other
Expenses associated with corporate and other activities
increased by $1.0 million to $22.8 million for the quarter ended
March 31, 2020 compared to the same period in 2019. The increase in
Corporate & Other expenses primarily related to implementation
costs incurred in connection with the Company's supply chain and
financial systems project.
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 $0.7 million to $17.1 million in
the first quarter of 2020. The Company does not currently
anticipate additional excess third party fees associated with
financial remediation in future periods.
Net Income; Interest Expense
Interest expense totaled $8.3 million for the three month period
ended March 31, 2020, a decline of $0.3 million from the prior year
period.
For the three month period ended March 31, 2020, net loss was
$15.7 million compared with a net loss of $7.0 million for the same
period in 2019. GAAP diluted loss per share was $0.42, compared to
a $0.19 loss per share in 2019. Adjusted diluted loss per share was
$0.28 for the three months ended March 31, 2020, compared to a
$0.16 loss per share for the same period in 2019.
Net Cash Provided by Operating Activities, Liquidity and
Indebtedness
Cash flows used in operating activities for the three months
ending March 31, 2020 were $22.0 million compared to $32.8 million
for the same period in 2019. The Company benefited from improved
cash collections during the first quarter as its days sales
outstanding decreased from 52 days as of March 31, 2019 to 50 days
as of March 31, 2020. The Company normally experiences a
consumption of operating cash flow during the first quarter due to
the payment of annual bonuses and the seasonality of its
business.
On March 31, 2020, the Company had liquidity of $131.8 million,
comprised of $115.9 million in cash and cash equivalents, and $15.8
million in available borrowing capacity under its revolving credit
facility. This compares to total liquidity of $115.3 million as of
March 31, 2019. As of May 6, 2020 the Company had liquidity of
$142.1 million.
On May 4, 2020, the Company entered into an amendment to its
Credit Agreement with lenders under its revolving credit facility
that provides for, among other things, an increase in the Company's
maximum allowable Consolidated First Lien Net Leverage Ratio to
5.25 times trailing twelve months Adjusted EBITDA for the period
beginning in the second quarter of 2020 through the first quarter
of 2021, 5.0 times for the second and third quarters of 2021 and
4.75 times for all subsequent quarters through the maturity of the
facility in March 2023.
Under the amendment to the Credit Agreement, the calculation of
Adjusted EBITDA for debt compliance purposes provides for the
add-back of the direct earnings contribution of lost revenue
attributable to the COVID-19 pandemic during the second and third
quarters of 2020 up to certain maximum amounts. The Company has
provided additional information regarding the amendment in its
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 7, 2020.
Impact of COVID-19 on the Second Quarter and Remainder of
2020
Beginning in the last weeks of March 2020, the Company's
business volumes began to be adversely affected by the COVID-19
pandemic. As federal, state and local authorities implemented
social distancing and suppression measures to respond to an
increasing number of nationwide COVID-19 infections, the Company
experienced a decrease in patient appointments at its patient care
clinics and in its general business volumes in both of its
segments. These adverse volume effects further expanded during
April. During the month of April 2020, patient appointment volumes
in our Patient Care clinics decreased by approximately 40 percent
as compared with the same period in 2019. As of the end of April
2020, we had temporarily closed 27 patient care clinics and another
179 clinics were open for reduced hours or by appointment only.
Billings for componentry delivered to independent providers of
orthotics and prosthetics by the Company's distribution services
business decreased by approximately 40 percent as well during the
month of April 2020. Due to significant geographic, product mix and
timing differences, there can be no assurance that these volumes or
billing amounts will be reflective of the Company's results for the
second quarter as a whole, and are solely provided for the purposes
of giving context to the magnitude of the effect of the COVID-19
pandemic on the Company's business during April 2020.
In response to the COVID-19 pandemic, during the last week of
March, the Company made certain changes to its operations,
implemented a broad number of cost reduction measures, and
temporarily delayed certain capital investment projects. The cost
reduction and liquidity management strategies implemented by the
Company have included, but not been limited to, reductions in
componentry purchases, average salary reductions of 32 percent for
exempt employees inclusive of officers, the voluntary and
involuntary furloughing of employees, reductions in non-exempt
employee hours, reductions in bonuses and commissions, the
temporary reduction of operating hours and days of clinics,
reductions in other operating expenses, deferral of the
implementation of the supply chain and financial systems project,
and the temporary delay of the Company's acquisitions of O&P
providers.
While the Company cannot forecast with certainty the ultimate
extent of the impacts from or the duration of the COVID-19
pandemic, or the degree to which the cost mitigation and liquidity
management strategies it has implemented will offset declines in
its cash flows caused by the COVID-19 pandemic, it does currently
believe that these measures, when accompanied if necessary by
additional funding sources, if available, and further cost
reduction actions, will enable it to maintain sufficient liquidity
throughout the remainder of 2020 and subsequent periods.
Conference and Webcast Details
The Company’s management team will host a conference call
tomorrow, Friday, May 8, at 8:30 a.m. Eastern time to discuss the
Company’s first quarter 2020 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:
www.investor.hanger.com/financial-reporting.
Additional Notes
A reconciliation of GAAP and non-GAAP financial results is
included in the tables provided at the back of this press release.
The Company has provided certain supplemental key statistics
relating to its results for certain prior periods. These key
statistics are non-GAAP measures used by the Company’s management
to analyze the Company’s business results that are being provided
for informational and analytical context.
Accompanying supplemental information will be posted to the
Investor Relations section of Hanger’s web site at
www.hanger.com/investors.
About Hanger, Inc. – Built on the legacy of James Edward
Hanger, the first amputee of the American Civil War, Hanger, Inc.
(NYSE: HNGR) delivers orthotic and prosthetic (O&P) patient
care, and distributes O&P products and rehabilitative
solutions. Hanger’s Patient Care segment is the largest owner and
operator of O&P patient care clinics with approximately 800
patient care locations nationwide. Through its Products &
Services segment, Hanger distributes O&P devices, products and
components, and provides rehabilitative solutions. With over 150
years of clinical excellence and innovation, Hanger’s vision is to
lead the orthotic & prosthetic markets by providing superior
patient care, outcomes, services and value. For more information on
Hanger, visit www.hanger.com.
This earnings release contains statements that are
forward-looking statements within the meaning of the federal
securities laws. Forward-looking statements include information
concerning our liquidity and our possible or assumed future results
of operations, including descriptions of our business strategies.
These statements often include words such as “believe,” “expect,”
“project,” “potential,” “anticipate,” “intend,” “plan,” “estimate,”
“seek,” “will,” “may,” “would,” “should,” “could,” “forecasts” or
similar words. These statements are based on certain assumptions
that we have made in light of our experience in the industry as
well as our perceptions of historical trends, current conditions,
expected future developments and other factors we believe are
appropriate in these circumstances. We believe these judgments are
reasonable, but you should understand that these statements are not
guarantees of performance or results, and our actual results could
differ materially from those expressed in the forward-looking
statements due to a variety of important factors, both positive and
negative, that may be revised or supplemented in subsequent
reports. These statements involve risks, estimates, assumptions,
and uncertainties that could cause actual results to differ
materially from those expressed in these statements and elsewhere
in this report. These uncertainties include, but are not limited
to, the financial and business impacts of COVID-19 on our
operations and the operations of our customers, suppliers,
governmental and private payers and others in the healthcare
industry and beyond; federal laws governing the health care
industry; governmental policies affecting O&P operations,
including with respect to reimbursement; failure to successfully
implement a new enterprise resource planning system or other
disruptions to information technology systems; the inability to
successfully execute our acquisition strategy, including
integration of recently acquired O&P clinics into our existing
business; changes in the demand for our O&P products and
services, including additional competition in the O&P services
market; disruptions to our supply chain; our ability to enter into
and derive benefits from managed-care contracts; our ability to
successfully attract and retain qualified O&P clinicians; and
other risks and uncertainties generally affecting the health care
industry. For additional information and risk factors that could
affect the Company, see its Form 10-K for the year ended December
31, 2019 and Quarterly Report on Form 10-Q for the three months
ended March 31, 2020, 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
March 31,
2020
2019
Net revenues
$
233,739
$
236,419
Material costs
77,241
78,377
Personnel costs
89,185
86,711
Other operating costs
35,886
33,555
General and administrative expenses
28,373
28,282
Professional accounting and legal fees
3,396
2,700
Depreciation and amortization
8,831
8,773
Loss from operations
(9,173
)
(1,979
)
Interest expense, net
8,269
8,538
Non-service defined benefit plan
expense
158
173
Loss before income taxes
(17,600
)
(10,690
)
Benefit for income taxes
(1,852
)
(3,739
)
Net loss
$
(15,748
)
$
(6,951
)
Basic and Diluted Per Common Share
Data:
Basic and diluted loss per share
$
(0.42
)
$
(0.19
)
Weighted average shares used to compute
basic and diluted earnings per common share
37,541,452
37,001,977
Table 2
Hanger, Inc.
Condensed Consolidated Balance
Sheets
(Unaudited - in thousands)
As of March 31,
As of December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
115,949
$
74,419
Accounts receivable, net
128,882
159,359
Inventories
67,255
68,204
Income taxes receivable
4,434
—
Other current assets
15,669
13,673
Total current assets
332,189
315,655
Non-current assets:
Property, plant, and equipment, net
88,835
84,057
Goodwill
232,254
232,244
Other intangible assets, net
16,586
17,952
Deferred income taxes
69,893
70,481
Operating lease right-of-use assets
115,250
110,559
Other assets
14,180
11,305
Total assets
$
869,187
$
842,253
TOTAL LIABILITIES AND SHAREHOLDERS’
(DEFICIT) EQUITY
Current liabilities:
Current portion of long-term debt
$
7,926
$
8,752
Accounts payable
47,189
48,477
Accrued expenses and other current
liabilities
58,245
55,825
Accrued compensation related costs
22,835
61,010
Current portion of operating lease
liabilities
32,878
34,342
Total current liabilities
169,073
208,406
Long-term liabilities:
Long-term debt, less current portion
568,502
490,121
Operating lease liabilities
95,200
88,418
Other liabilities
52,412
45,804
Total liabilities
885,187
832,749
Shareholders’ (deficit) equity:
Common stock
380
376
Additional paid-in capital
353,677
354,326
Accumulated other comprehensive loss
(21,424
)
(12,551
)
Accumulated deficit
(347,937
)
(331,951
)
Treasury stock, at cost
(696
)
(696
)
Total shareholders’ (deficit)
equity
(16,000
)
9,504
Total liabilities and shareholders’
(deficit) equity
$
869,187
$
842,253
Table 3
Hanger, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited - in thousands)
For the Three Months Ended
March 31,
2020
2019
Cash flows used in operating
activities:
Net loss
$
(15,748
)
$
(6,951
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
8,831
8,773
Provision (benefit) for doubtful
accounts
1,928
(20
)
Share-based compensation expense
3,501
3,265
Deferred income taxes
3,476
(3,749
)
Amortization of debt discounts and
issuance costs
409
375
Gain on sale and disposal of fixed
assets
(411
)
(481
)
Changes in operating assets and
liabilities:
Accounts receivable, net
28,229
10,395
Inventories
949
(880
)
Other current assets and other assets
(3,989
)
(1,433
)
Income taxes
(5,303
)
(355
)
Accounts payable
(4,757
)
(6,511
)
Accrued expenses and other current
liabilities
(385
)
492
Accrued compensation related costs
(38,175
)
(32,970
)
Other liabilities
(1,153
)
(1,829
)
Operating lease liabilities, net of
amortization of right-of-use assets
628
(921
)
Net cash used in operating activities
(21,970
)
(32,800
)
Cash flows used in investing
activities:
Purchase of property, plant, and
equipment
(6,526
)
(6,897
)
Purchase of therapeutic program equipment
leased to third parties under operating leases
(2,286
)
(1,429
)
Acquisitions, net of cash acquired
(26
)
(27,679
)
Purchase of company-owned life insurance
investment
(250
)
—
Proceeds from sale of property, plant, and
equipment
595
980
Net cash used in investing activities
(8,493
)
(35,025
)
Cash flows provided by (used in)
financing activities:
Repayment of term loan
(1,263
)
(1,263
)
Borrowings under revolving credit
agreement
79,000
—
Payment of employee taxes on share-based
compensation
(4,146
)
(3,626
)
Payment on seller notes
(1,446
)
(1,773
)
Payment of financing lease obligations
(152
)
(116
)
Net cash provided by (used in) financing
activities
71,993
(6,778
)
Increase (decrease) in cash and cash
equivalents
41,530
(74,603
)
Cash and cash equivalents at beginning of
period
74,419
95,114
Cash and cash equivalents at end of
period
$
115,949
$
20,511
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
March 31,
2020
2019
Net Revenue (a)
Patient Care
$
190,183
$
190,601
Products & Services
43,556
45,818
Net revenue
$
233,739
$
236,419
EBITDA (b)
Patient Care
$
16,013
$
20,309
Products & Services
4,832
6,641
Corporate & Other
(21,187
)
(20,156
)
EBITDA (Non-GAAP)
$
(342
)
$
6,794
Adjusted EBITDA (b)
Patient Care
$
17,326
$
21,392
Products & Services
5,037
6,885
Corporate & Other
(17,098
)
(16,409
)
Adjusted EBITDA (Non-GAAP)
$
5,265
$
11,868
(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
Loss and Loss Per Share to Adjusted Net Loss and Adjusted Loss 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
March 31,
2020
2019
Net loss - as reported (GAAP)
$
(15,748
)
$
(6,951
)
Adjustments:
Amortization expense
1,491
1,230
Third-party professional fees
1,638
1,649
Acquisition-related expenses
333
170
Hanger Supply Chain implementation
costs
135
—
Severance expenses
—
(10
)
Adjustments prior to tax effect
$
3,597
$
3,039
Tax effect of specified adjustments
(a)
1,509
(1,903
)
Adjustments after taxes
5,106
1,136
Adjusted net loss (Non-GAAP)
$
(10,642
)
$
(5,815
)
Basic and diluted loss per share - as
reported (GAAP)
$
(0.42
)
$
(0.19
)
Effect of above listed specified
adjustments
0.14
0.03
Adjusted basic and diluted loss per share
- as reported (Non-GAAP)
$
(0.28
)
$
(0.16
)
Shares used to compute basic and diluted
loss per share
37,541,452
37,001,977
(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 2020 and 2019 periods to the
Company's earnings from operations before taxes, after the
incorporation of the identified adjustments above.
Table 6 Hanger, Inc. Reconciliation of Net
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
March 31,
2020
2019
Net loss - as reported (GAAP)
$
(15,748
)
$
(6,951
)
Adjustments to calculate EBITDA:
Depreciation and amortization
8,831
8,773
Interest expense, net
8,269
8,538
Non-service defined benefit plan
expense
158
173
Benefit for income taxes
(1,852
)
(3,739
)
Adjustments - net (loss) income to
EBITDA
15,406
13,745
EBITDA (Non-GAAP)
(342
)
6,794
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
1,638
1,649
Equity-based compensation
3,501
3,265
Acquisition-related expenses
333
170
Hanger Supply Chain implementation
costs
135
—
Severance expenses
—
(10
)
Further adjustments - EBITDA to Adjusted
EBITDA
5,607
5,074
Adjusted EBITDA (Non-GAAP)
$
5,265
$
11,868
Table 7 Hanger, Inc. Segment Reconciliation
of (Loss) 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
March 31,
2020
2019
Patient
Care
Income from operations - as reported
(GAAP)
$
11,537
$
15,757
Depreciation & amortization
4,476
4,552
EBITDA (Non-GAAP)
16,013
20,309
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
1,178
1,094
Hanger Supply Chain implementation
costs
135
—
Severance expenses
—
(11
)
Further adjustments - EBITDA to Adjusted
EBITDA
1,313
1,083
Adjusted EBITDA (Non-GAAP)
17,326
21,392
Products &
Services
Income from operations - as reported
(GAAP)
2,080
4,098
Depreciation & amortization
2,752
2,543
EBITDA (Non-GAAP)
4,832
6,641
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
205
244
Hanger Supply Chain implementation
costs
—
—
Severance expenses
—
—
Further adjustments - EBITDA to Adjusted
EBITDA
205
244
Adjusted EBITDA (Non-GAAP)
5,037
6,885
Corporate &
Other
Loss from operations - as reported
(GAAP)
(22,790
)
(21,834
)
Depreciation & amortization
1,603
1,678
EBITDA (Non-GAAP)
(21,187
)
(20,156
)
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
1,638
1,649
Equity-based compensation
2,118
1,927
Acquisition related expenses
333
170
Severance expenses
—
1
Further adjustments - EBITDA to Adjusted
EBITDA
4,089
3,747
Adjusted EBITDA (Non-GAAP)
(17,098
)
(16,409
)
Total Adjusted EBITDA (Non-GAAP)
$
5,265
$
11,868
Table 8
Hanger, Inc.
Indebtedness
(Unaudited - in thousands)
As of March 31,
As of December 31,
2020
2019
Debt:
Term Loan B
$
494,900
$
496,163
Revolving credit facility
79,000
—
Seller notes
7,594
9,005
Finance lease liabilities and other
2,867
2,033
Total debt before unamortized discount and
debt issuance costs
584,361
507,201
Unamortized discount and debt issuance
costs, net
(7,933
)
(8,328
)
Total debt
$
576,428
$
498,873
Current portion of long-term debt:
Term Loan B
$
5,050
$
5,050
Seller notes
2,210
3,175
Finance lease liabilities and other
666
527
Total current portion of long-term
debt
7,926
8,752
Long-term debt
$
568,502
$
490,121
Net indebtedness:
Total debt before unamortized discount and
debt issuance costs
584,361
507,201
Cash and cash equivalents
(115,949
)
(74,419
)
Net indebtedness
$
468,412
$
432,782
Table 9
Hanger, Inc.
Key Operating Metrics
As of and For the Three Months
Ended March 31,
2020
2019
Same clinic revenue:
Decline rate on net revenue
(1.7)%
(1.6)%
Decline rate day adjusted (a)
(3.2)%
(0.1)%
Clinical locations:
Patient care clinics
694
697
Satellite clinics
110
104
Total clinical locations
804
801
(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/20200507005965/en/
Investor Relations Contacts: Thomas Kiraly, Executive Vice
President and Chief Financial Officer, Hanger, Inc. 512-777-3600
tkiraly@hanger.com Seth Frank, Vice President, Treasury and
Investor Relations, Hanger, Inc. 512-777-3573 sfrank@hanger.com
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