Growth in revenue and earnings driven by
favorable patient care segment performance
Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and
prosthetic (O&P) patient care services and solutions, today
announced its financial results for the fourth quarter and year
ended December 31, 2019.
Financial Highlights for the Fourth Quarter of 2019
- Net revenue was $300.9 million for the three months ended
December 31, 2019, compared to $284.9 million for the same period
in 2018, reflecting growth of 5.6 percent. Patient Care segment net
same clinic revenue grew by 2.9 percent.
- Net income was $18.8 million for the three months ended
December 31, 2019, compared to $4.5 million for the same period in
2018. Fourth quarter 2019 net income benefited from a $7.1 million
reduction of certain tax valuation allowances relating to state tax
deferred assets.
- Adjusted EBITDA was $42.4 million in the fourth quarter,
compared to $40.0 million for the same period in 2018, reflecting
an increase of $2.3 million or 5.8 percent. Growth in Adjusted
EBITDA was driven by a $16.4 million increase in Patient Care
segment revenue and a resulting $5.2 million increase in segment
Adjusted EBITDA.
- GAAP diluted earnings per share was $0.49 for the fourth
quarter of 2019, compared to $0.12 for the same period in 2018.
Adjusted diluted earnings per share was $0.45 for the three months
ended December 31, 2019, compared to $0.40 for the same period in
2018, a 12.5 percent increase year-over-year.
- The Company introduced its 2020 financial outlook for revenue
and earnings growth (see "2020 Outlook" within this release).
Vinit Asar, President and Chief Executive Officer of Hanger,
Inc., stated, "I'm pleased with our strong finish to the year. We
accomplished the key operating and financial objectives that we
established at the start of 2019. Our patient care segment achieved
same clinic revenue growth of 2.1 percent for the year through
growth in both our prosthetics and orthotics portfolios. I believe
these results have demonstrated the benefits of our strategy to
elevate the value of our clinical care through a focus on patient
outcomes and services, positioning us for continued momentum in
2020."
Segment Results for Three Months Ended December 31,
2019
Patient Care Segment
For the three months ended December 31, 2019, Patient Care net
revenue was $253.0 million, an increase of $16.4 million or 6.9
percent, compared to the same period in 2018. Total revenue growth
for the segment includes $9.1 million of revenue from O&P
clinics acquired in late 2018 and early 2019, inclusive of
consolidations.
Net same clinic revenue grew by 2.9 percent during the quarter.
Revenue from prosthetics increased 4.4 percent and net revenue from
orthotics grew 1.3 percent. Prosthetics comprised 57.3 percent of
Patient Care segment net revenue during the fourth quarter of 2019
as compared with 56.5 percent during the same period in 2018.
Income from operations in the Patient Care segment was $47.9
million during the fourth quarter of 2019, reflecting growth of
$5.7 million or 13.6 percent compared to the $42.2 million reported
in the prior year. Adjusted EBITDA for the segment was $53.6
million, which reflected a $5.2 million or 10.7 percent increase
compared to the prior year period. Adjusted EBITDA margin in the
segment totaled 21.2 percent compared to 20.5 percent during the
fourth quarter of 2018.
Products & Services Segment
For the three months ended December 31, 2019, Products &
Services net revenue totaled $47.9 million, which reflected a
decline of $0.3 million compared with the same period in 2018.
Revenue from the distribution of O&P componentry increased by
$0.6 million and revenue from therapeutic solutions decreased by
$0.9 million.
Income from operations for the Products & Services segment
decreased by $1.5 million to $3.8 million in the fourth quarter of
2019 compared to the same period in 2018. Adjusted EBITDA for the
Products & Services segment was $6.5 million for the fourth
quarter of 2019, which reflected a $1.9 million decrease compared
with the same period of 2018. The decline in therapeutic solutions
revenue as well as lower margins within O&P distribution
impacted segment earnings in the quarter.
Corporate & Other
Corporate and other activities segment operating expenses
totaled $24.8 million for the quarter and were consistent with the
same period in 2018. An increase in costs related to information
technology, including the initial planning and design for the
implementation of new financial and supply chain systems was offset
by a decline in other overhead-related costs.
Excluding the effects of depreciation and amortization, excess
third party professional fees, non-cash equity compensation expense
and certain acquisition-related expenses, the net cost of corporate
and other activities increased by $0.9 million to $17.8 million
during the quarter, which reflected a 5.5 percent increase.
Net Income; Interest Expense
Interest expense totaled $8.3 million in the three month period
ended December 31, 2019, a decline of $0.8 million compared to the
same period of 2018.
Due primarily to favorable patient care segment results, income
before taxes grew by 36.1 percent in the quarter to $18.4 million.
After incorporating the effect of taxes, net income totaled $18.8
million compared with $4.5 million for the same period in 2018.
Growth in net income benefited in part by the reduction of a $7.1
million valuation allowance on certain state deferred tax
assets.
For the three months ended December 31, 2019, GAAP diluted
earnings per share was $0.49, compared to $0.12 per share in 2018.
Adjusted diluted earnings per share was $0.45 for the three months
ended December 31, 2019, compared to $0.40 per share for the same
period in 2018.
Financial Highlights for the Year Ended December 31,
2019
Net revenue was $1,098.0 million for the year ended December 31,
2019, compared to $1,048.8 million for the same period of 2018,
reflecting net revenue growth of 4.7 percent. For the twelve month
period, acquisitions that occurred in late 2018 and early 2019
contributed $28.9 million to net revenue growth, inclusive of
consolidations.
Patient Care net revenue grew $48.3 million, or 5.6 percent, for
the year to $905.7 million. Net same clinic revenue growth for 2019
totaled 2.1 percent. The number of clinic operating days was
equivalent for both 2019 and 2018.
For the full year of 2019, excluding the effect of acquisitions,
revenue from prosthetics increased by 3.2 percent, while orthotics
revenue increased by 0.9 percent.
Products & Services segment net revenue grew $1.0 million,
or 0.5 percent, driven by growth of $7.4 million in distribution
services, offset by a $6.4 million decrease in revenue from
therapeutic solutions. The revenue decline in therapeutic solutions
was within the range originally anticipated for 2019.
Net income was $27.5 million for the year ended December 31,
2019, compared to a $0.9 million net loss for the same period in
2018. Results for the period ending December 31, 2018 included a
$17.0 million pre-tax loss on the extinguishment of debt related to
the Company’s March 2018 refinancing, which was partially offset by
a $3.7 million one-time gain related to favorable settlements.
Adjusted EBITDA of $124.2 million for 2019 compares with the
$121.1 million reported in the prior year.
For the year ended December 31, 2019, GAAP diluted earnings per
share was $0.72, compared to a loss of $0.02 per share in 2018.
Adjusted diluted earnings per share was $0.90 for 2019, compared to
$0.78 per share for the same period in 2018.
Net Cash Provided by Operating Activities; Liquidity
Cash flows provided by operating activities for the three months
ending December 31, 2019 were $38.9 million compared to $41.4
million for the same period in 2018. This decrease related in part
to expenditures of $1.7 million incurred in the fourth quarter of
2019 related to the Company's implementation of cloud computing
systems associated with its supply chain and financial systems
project.
On December 31, 2019, the Company had liquidity of $169.2
million, comprised of $74.4 million in cash and cash equivalents,
and $94.8 million in available borrowing capacity under its
revolving credit facility, compared to liquidity of $144.8 million
on September 30, 2019.
2020 Outlook
The Company currently anticipates 2020 net revenue in a range
between $1.125 billion and $1.155 billion, and Adjusted EBITDA in a
range between $129.0 million and $134.0 million.
It is expected that revenue and earnings growth will primarily
be driven by continued same clinic growth and margin expansion in
its Patient Care segment. Products & Services segment revenue
is anticipated to decline modestly due to the discontinuance of the
distribution of some low-margin orthotics products to
podiatrists.
The Company's outlook for 2020 includes approximately $27
million in revenue relating to the full year of contribution of
acquisitions previously completed in 2019 and acquisitions having
signed definitive agreements as of March 5, 2020.
Adjusted EBITDA is provided on a non-GAAP basis only because a
reconciliation to the most comparable GAAP financial measure, net
income, is not available without unreasonable effort due to the
unpredictable nature of reconciling items that render such a
reconciliation not meaningful for investors.
Conference and Webcast Details
The Company’s management team will host a conference call
tomorrow, Thursday, March 12, at 8:30 a.m. Eastern time to discuss
the Company’s fourth quarter and full year 2019 financial results
and business outlook for 2020.
To participate, dial 866-270-1533 or 412-317-0797 outside the
U.S. and Canada, and ask to be joined into the Hanger, Inc. call. A
live webcast, replay of the call and earnings release, will be
available on the Company’s Investor Relations website:
www.investor.hanger.com/financial-reporting.
Additional Notes
A reconciliation of GAAP and non-GAAP financial results is
included in the tables provided at the back of this press release.
The Company has provided certain supplemental key statistics
relating to its results for certain prior periods. These key
statistics are non-GAAP measures used by the Company’s management
to analyze the Company’s business results that are being provided
for informational and analytical context.
Accompanying supplemental information will be posted to the
Investor Relations section of Hanger’s web site at
www.hanger.com/investors.
About Hanger, Inc. – Built on the legacy of James Edward
Hanger, the first amputee of the American Civil War, Hanger, Inc.
(NYSE: HNGR) delivers orthotic and prosthetic (O&P) patient
care, and distributes O&P products and rehabilitative
solutions. Hanger’s Patient Care segment is the largest owner and
operator of O&P patient care clinics with approximately 800
patient care locations nationwide. Through its Products &
Services segment, Hanger distributes O&P devices, products and
components, and provides rehabilitative solutions. With over 150
years of clinical excellence and innovation, Hanger’s vision is to
lead the orthotic & prosthetic markets by providing superior
patient care, outcomes, services and value. For more information on
Hanger, visit www.hanger.com.
This press release contains certain “forward-looking statements”
relating to the Company. All statements, other than statements of
historical fact included herein, are “forward looking statements.”
These forward-looking statements are often identified by the use of
forward-looking terminology such as “preliminary,” “intends,”
“expects,” “plans,” “anticipates,” “believes,” “views” or similar
expressions and involve known and unknown risks and uncertainties.
Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable, they do involve
assumptions, risks, and uncertainties, and these expectations may
prove to be incorrect. Investors should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. The Company disclaims any intention or
obligation to update or revise any forward-looking information,
whether as a result of new information, future events or otherwise,
except as required by applicable securities laws. These
uncertainties include, but are not limited to, federal laws
governing the health care industry; governmental policies affecting
O&P operations, including with respect to reimbursement;
failure to successfully implement a new enterprise resource
planning system or other disruptions to information technology
systems; the inability to successfully execute our acquisition
strategy, including integration of recently acquired O&P
clinics into our existing business; impacts of a pandemic, epidemic
or widespread outbreak of an infectious disease in the United
States; changes in the demand for the Company’s O&P products
and services, including additional competition in the O&P
services market; disruptions to the Company’s supply chain; the
Company’s ability to enter into and derive benefits from
managed-care contracts; the Company’s ability to successfully
attract and retain qualified O&P clinicians; and other risks
and uncertainties generally affecting the health care industry. For
additional information and risk factors that could affect the
Company, see its annual, quarterly and other reports filed with the
Securities and Exchange Commission from time to time. The
information contained in this press release is made only as of the
date hereof, even if subsequently made available by the Company on
its website or otherwise.
Table 1
Hanger, Inc.
Consolidated Statements of
Operations
(in thousands, except share and
per share amounts)
For the Three Months Ended
December 31,
For the Years Ended December
31,
2019
2018
2019
2018
Net revenues
$
300,891
$
284,853
$
1,098,046
$
1,048,760
Material costs
95,961
90,340
357,771
338,017
Personnel costs
99,430
97,574
372,225
364,089
Other operating costs
34,876
31,271
134,943
123,902
General and administrative expenses
30,591
29,085
118,065
109,552
Professional accounting and legal fees
4,113
4,726
13,689
16,915
Depreciation and amortization
9,019
8,903
35,925
36,455
Impairment of intangible assets
—
183
—
183
Income from operations
26,901
22,771
65,428
59,647
Interest expense, net
8,285
9,046
34,258
37,566
Loss on extinguishment of debt
—
—
—
16,998
Non-service defined benefit plan
expense
172
176
691
703
Income before income taxes
18,444
13,549
30,479
4,380
(Benefit) provision for income taxes
(306
)
9,086
2,954
5,238
Net income (loss)
$
18,750
$
4,463
$
27,525
$
(858
)
Basic and Diluted Per Common Share
Data:
Basic earnings (loss) per share
$
0.50
$
0.12
$
0.74
$
(0.02
)
Weighted average shares used to compute
basic earnings per common share
37,411,847
36,906,938
37,267,188
36,764,551
Diluted earnings (loss) per share
$
0.49
$
0.12
$
0.72
$
(0.02
)
Weighted average shares used to compute
diluted earnings per common share
38,415,108
37,721,662
38,064,617
36,764,551
Table 2
Hanger, Inc.
Consolidated Balance
Sheets
(in thousands)
As of December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
74,419
$
95,114
Accounts receivable, net
159,359
143,986
Inventories
68,204
67,690
Income taxes receivable
—
379
Other current assets
13,673
18,731
Total current assets
315,655
325,900
Non-current assets:
Property, plant, and equipment, net
84,057
89,489
Goodwill
232,244
198,742
Other intangible assets, net
17,952
15,478
Deferred income taxes
70,481
65,635
Operating lease right-of-use assets
110,559
—
Other assets
11,305
7,766
Total assets
$
842,253
$
703,010
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt
$
8,752
$
8,583
Accounts payable
48,477
55,797
Accrued expenses and other current
liabilities
55,825
51,783
Accrued compensation related costs
61,010
55,111
Current portion of operating lease
liabilities
34,342
—
Total current liabilities
208,406
171,274
Long-term liabilities:
Long-term debt, less current portion
490,121
502,090
Operating lease liabilities
88,418
—
Other liabilities
45,804
51,570
Total liabilities
832,749
724,934
Shareholders’ equity (deficit):
Common stock
376
371
Additional paid-in capital
354,326
343,955
Accumulated other comprehensive loss
(12,551
)
(4,531
)
Accumulated deficit
(331,951
)
(361,023
)
Treasury stock, at cost
(696
)
(696
)
Total shareholders’ equity
(deficit)
9,504
(21,924
)
Total liabilities and shareholders’
equity (deficit)
$
842,253
$
703,010
Table 3
Hanger, Inc.
Consolidated Statements of
Cash Flows
(in thousands)
For the Years Ended December
31,
2019
2018
Cash flows provided by operating
activities:
Net income (loss)
$
27,525
$
(858
)
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization
35,925
36,455
Provision (benefit) for doubtful
accounts
1,131
(733
)
Impairment of intangible assets
—
183
Stock-based compensation expense
13,414
13,065
Deferred income taxes
(3,226
)
3,452
Amortization of debt discounts and
issuance costs
1,623
2,837
Loss on extinguishment of debt
—
16,998
Gain on sale and disposal of fixed
assets
(1,614
)
(2,713
)
Changes in operating assets and
liabilities:
Accounts receivable, net
(12,329
)
3,238
Inventories
1,568
1,750
Other current assets and other assets
(2,611
)
4,459
Income taxes receivable
1,248
12,700
Accounts payable
(6,725
)
6,511
Accrued expenses and other current
liabilities
(1,242
)
(16,550
)
Accrued compensation related costs
5,780
1,713
Other liabilities
(1,883
)
(3,980
)
Operating lease liabilities, net of
amortization of right-of-use assets
262
—
Net cash provided by operating
activities
58,846
78,527
Cash flows used in investing
activities:
Purchase of property, plant, and
equipment
(26,433
)
(18,984
)
Purchase of therapeutic program equipment
leased to third parties under operating leases
(6,672
)
(9,835
)
Acquisitions, net of cash acquired
(36,585
)
(1,978
)
Purchase of company-owned life insurance
investment
(66
)
(598
)
Proceeds from sale of property, plant and
equipment
2,598
4,237
Net cash used in investing activities
(67,158
)
(27,158
)
Cash flows (used in) provided by
financing activities:
Borrowings under term loan, net of
discount
—
501,467
Repayment of term loan
(5,050
)
(435,660
)
Borrowings under revolving credit
agreement
—
3,000
Repayments under revolving credit
agreement
—
(8,000
)
Payment of employee taxes on stock-based
compensation
(4,137
)
(2,906
)
Payment on seller notes
(3,821
)
(2,599
)
Payment of financing lease obligations
(474
)
(1,207
)
Payment of debt issuance costs
—
(6,757
)
Payment of debt extinguishment costs
—
(8,436
)
Proceeds from exercise of options
1,099
64
Net cash (used in) provided by financing
activities
(12,383
)
38,966
(Decrease) increase in cash, cash
equivalents and restricted cash
(20,695
)
90,335
Cash, cash equivalents, and restricted
cash, at beginning of period
95,114
4,779
Cash, cash equivalents, and restricted
cash, at end of period
$
74,419
$
95,114
Reconciliation of Cash, Cash
Equivalents, and Restricted Cash
Cash and cash equivalents, at beginning of
period
$
95,114
$
1,508
Restricted cash, at beginning of
period
—
3,271
Cash, cash equivalents, and restricted
cash, at beginning of period
$
95,114
$
4,779
Cash and cash equivalents, at end of
period
$
74,419
$
95,114
Restricted cash, at end of period
—
—
Cash, cash equivalents, and restricted
cash, at end of period
$
74,419
$
95,114
Table 4
Hanger, Inc.
Segment Information: Revenue,
EBITDA and Adjusted EBITDA
(in thousands)
EBITDA is defined as operating income before depreciation and
amortization. Adjusted EBITDA is defined as operating income before
certain charges, impairments of intangible assets, third-party
professional fees in excess of normal amounts incurred in
connection with our financial statement remediation, debt
extinguishment costs, expenses associated with equity-based
compensation, severance expenses, certain expenses incurred in
connection with our acquisitions, and certain other charges.
We use EBITDA and Adjusted EBITDA as measures to assess the
relative level of our indebtedness and our compliance with certain
debt covenants which are based on these measures. Additionally, we
utilize these measures to assess our operating and financial
performance. We believe that these measures enhance a user’s
understanding of normal operating income excluding certain charges,
depreciation and amortization.
Neither EBITDA or Adjusted EBITDA are measures of financial
performance computed in accordance with Generally Accepted
Accounting Principles (“GAAP”) and should not be considered in
isolation nor as a substitute for operating income, net income,
cash flows from operations, or other statement of operations or
cash flow data prepared in conformity with GAAP, or as a measure of
profitability or liquidity. In addition, the calculation of EBITDA
and Adjusted EBITDA is susceptible to varying interpretations and
calculations, and the amounts presented may not be comparable to
similarly titled measures of other companies. EBITDA and Adjusted
EBITDA may not be indicative of historical operating results, and
we do not intend these measures to be predictive of future results
of operations.
For the Three Months Ended
December 31,
For the Years Ended December
31,
2019
2018
2019
2018
Net Revenue (a)
Patient Care
$
252,991
$
236,637
$
905,691
$
857,382
Products & Services
47,900
48,216
192,355
191,378
Net revenue
$
300,891
$
284,853
$
1,098,046
$
1,048,760
EBITDA (b)
Patient Care
$
52,459
$
46,756
$
160,117
$
145,918
Products & Services
6,620
7,980
28,615
35,720
Corporate & Other
(23,159
)
(23,062
)
(87,379
)
(85,536
)
EBITDA (Non-GAAP)
$
35,920
$
31,674
$
101,353
$
96,102
Adjusted EBITDA (b)
Patient Care
$
53,623
$
48,457
$
164,552
$
150,881
Products & Services
6,502
8,420
29,223
36,503
Corporate & Other
(17,771
)
(16,837
)
(69,532
)
(66,327
)
Adjusted EBITDA (Non-GAAP)
$
42,354
$
40,040
$
124,243
$
121,057
(a) Excludes intersegment revenue.
(b) EBITDA and Adjusted EBITDA are
"Non-GAAP" measures. Please refer to both Table 6 and Table 7 for a
reconciliation of these measures to GAAP net income.
Table 5
Hanger, Inc.
Reconciliation of Net Income
(Loss) and Earnings (Loss) Per Share to
Adjusted Net Income and
Adjusted Earnings Per Share
(in thousands, except share and
per share amounts)
Earnings Per Share (or “EPS”) is defined as net income divided
by our diluted common shares during the applicable period. Adjusted
EPS is defined as EPS adjusted for impairments of intangible
assets, third-party professional fees in excess of normal amounts
incurred in connection with our financial statement remediation,
debt extinguishment costs, severance expenses, certain expenses
incurred in connection with our acquisitions, and certain other
charges.
We utilize Adjusted EPS to assess our operating and financial
performance. We believe that this measure enhances a user’s
understanding of normal operating results excluding certain
charges.
Adjusted EPS is not a measure of financial performance computed
in accordance with GAAP and should not be considered in isolation
nor as a substitute for operating income, net income, cash flows
from operations, or other statement of operations or cash flow data
prepared in conformity with GAAP, or as a measure of profitability
or liquidity. In addition, the calculation of Adjusted EPS is
susceptible to varying interpretations and calculations, and the
amounts presented may not be comparable to similarly titled
measures of other companies. Adjusted EPS may not be indicative of
historical operating results, and we do not intend these measures
to be predictive of future results of operations.
For the Three Months Ended
December 31,
For the Years Ended December
31,
2019
2018
2019
2018
Net income (loss) - as reported (GAAP)
$
18,750
$
4,463
$
27,525
$
(858
)
Adjustments:
Impairment of intangible assets
—
183
—
183
Amortization expense
1,368
1,443
5,285
6,707
Third-party professional fees
3,018
3,591
8,548
12,461
Loss on extinguishment of debt
—
—
—
16,998
Acquisition-related expenses
91
510
939
510
Disaster recovery / unclaimed property
settlement
—
—
—
(3,729
)
Severance expenses
—
591
(11
)
957
Adjustments prior to tax effect
$
4,477
$
6,318
$
14,761
$
34,087
Tax effect of specified adjustments
(a)
(5,807
)
4,317
(7,904
)
(3,994
)
Adjustments after taxes
(1,330
)
10,635
6,857
30,093
Adjusted net income (Non-GAAP)
$
17,420
$
15,098
$
34,382
$
29,235
Basic earnings (loss) per share - as
reported (GAAP)
$
0.50
$
0.12
$
0.74
$
(0.02
)
Effect of above listed specified
adjustments
(0.03
)
0.29
0.18
0.82
Adjusted basic earnings per share - as
reported (Non-GAAP)
$
0.47
$
0.41
$
0.92
$
0.80
Diluted earnings (loss) per share - as
reported (GAAP)
$
0.49
$
0.12
$
0.72
$
(0.02
)
Effect of above listed specified
adjustments
(0.04
)
0.28
0.18
0.80
Adjusted diluted earnings per share - as
reported (Non-GAAP)
$
0.45
$
0.40
$
0.90
$
0.78
Shares used to compute basic earnings
(loss) per share
37,411,847
36,906,938
37,267,188
36,764,551
Shares used to compute diluted earnings
(loss) per share
38,415,108
37,721,662
38,064,617
37,473,860
(a) “Tax effect of specified adjustments”
reflects the difference between the Company's effective provision
for taxes and the application of a combined federal and state
statutory tax rate of 24% for the 2019 and 2018 periods to the
Company's earnings from operations before taxes, after the
incorporation of the identified adjustments above and a $7.1
million reduction of certain tax valuation allowances relating to
state deferred tax assets in the fourth quarter of 2019.
Table 6
Hanger, Inc.
Reconciliation of Net Income
(Loss) to EBITDA and Adjusted EBITDA
(in thousands)
EBITDA is defined as operating income before depreciation and
amortization. Adjusted EBITDA is defined as operating income before
certain charges, impairments of intangible assets, third-party
professional fees in excess of normal amounts incurred in
connection with our financial statement remediation, debt
extinguishment costs, expenses associated with equity-based
compensation, severance expenses, certain expenses incurred in
connection with our acquisitions, and certain other charges.
We use EBITDA and Adjusted EBITDA as measures to assess the
relative level of our indebtedness and our compliance with certain
debt covenants which are based on these measures. Additionally, we
utilize these measures to assess our operating and financial
performance. We believe that these measures enhance a user’s
understanding of normal operating income excluding certain charges,
depreciation and amortization.
Neither EBITDA or Adjusted EBITDA are measures of financial
performance computed in accordance with Generally Accepted
Accounting Principles (“GAAP”) and should not be considered in
isolation nor as a substitute for operating income, net income,
cash flows from operations, or other statement of operations or
cash flow data prepared in conformity with GAAP, or as a measure of
profitability or liquidity. In addition, the calculation of EBITDA
and Adjusted EBITDA is susceptible to varying interpretations and
calculations, and the amounts presented may not be comparable to
similarly titled measures of other companies. EBITDA and Adjusted
EBITDA may not be indicative of historical operating results, and
we do not intend these measures to be predictive of future results
of operations.
For the Three Months Ended
December 31,
For the Years Ended December
31,
2019
2018
2019
2018
Net income (loss) - as reported (GAAP)
$
18,750
$
4,463
$
27,525
$
(858
)
Adjustments to calculate EBITDA:
Depreciation and amortization
9,019
8,903
35,925
36,455
Interest expense, net
8,285
9,046
34,258
37,566
Loss on extinguishment of debt
—
—
—
16,998
Non-service defined benefit plan
expense
172
176
691
703
(Benefit) provision for income taxes
(306
)
9,086
2,954
5,238
Adjustments - net income (loss) to
EBITDA
17,170
27,211
73,828
96,960
EBITDA (Non-GAAP)
35,920
31,674
101,353
96,102
Further adjustments to calculate Adjusted
EBITDA:
Impairment of intangible assets
—
183
—
183
Third-party professional fees
3,018
3,591
8,548
12,461
Equity-based compensation
3,325
3,491
13,414
13,065
Acquisition-related expenses
91
510
939
510
Disaster recovery / unclaimed property
settlement
—
—
—
(2,221
)
Severance expenses
—
591
(11
)
957
Further adjustments - EBITDA to Adjusted
EBITDA
6,434
8,366
22,890
24,955
Adjusted EBITDA (Non-GAAP)
$
42,354
$
40,040
$
124,243
$
121,057
Table 7
Hanger, Inc.
Segment Reconciliation of
Income From Operations to EBITDA and Adjusted EBITDA
(in thousands)
EBITDA is defined as operating income before depreciation and
amortization. Adjusted EBITDA is defined as operating income before
certain charges, impairments of intangible assets, third-party
professional fees in excess of normal amounts incurred in
connection with our financial statement remediation, debt
extinguishment costs, expenses associated with equity-based
compensation, severance expenses, certain expenses incurred in
connection with our acquisitions, and certain other charges.
We use EBITDA and Adjusted EBITDA as measures to assess the
relative level of our indebtedness and our compliance with certain
debt covenants which are based on these measures. Additionally, we
utilize these measures to assess our operating and financial
performance. We believe that these measures enhance a user’s
understanding of normal operating income excluding certain charges,
depreciation and amortization.
Neither EBITDA or Adjusted EBITDA are measures of financial
performance computed in accordance with Generally Accepted
Accounting Principles (“GAAP”) and should not be considered in
isolation nor as a substitute for operating income, net income,
cash flows from operations, or other statement of operations or
cash flow data prepared in conformity with GAAP, or as a measure of
profitability or liquidity. In addition, the calculation of EBITDA
and Adjusted EBITDA is susceptible to varying interpretations and
calculations, and the amounts presented may not be comparable to
similarly titled measures of other companies. EBITDA and Adjusted
EBITDA may not be indicative of historical operating results, and
we do not intend these measures to be predictive of future results
of operations.
For the Three Months Ended
December 31,
For the Years Ended December
31,
2019
2018
2019
2018
Patient
Care
Income from operations - as reported
(GAAP)
$
47,915
$
42,190
$
141,576
$
126,805
Depreciation & amortization
4,544
4,566
18,541
19,113
EBITDA (Non-GAAP)
52,459
46,756
160,117
145,918
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
1,164
1,110
4,446
4,372
Severance expenses
—
591
(11
)
591
Further adjustments - EBITDA to Adjusted
EBITDA
1,164
1,701
4,435
4,963
Adjusted EBITDA (Non-GAAP)
53,623
48,457
164,552
150,881
Products &
Services
Income from operations - as reported
(GAAP)
3,832
5,352
17,965
25,523
Depreciation & amortization
2,788
2,628
10,650
10,197
EBITDA (Non-GAAP)
6,620
7,980
28,615
35,720
Further adjustments to calculate Adjusted
EBITDA:
Impairment of intangible assets
—
183
—
183
Equity-based compensation
(118
)
257
608
600
Further adjustments - EBITDA to Adjusted
EBITDA
(118
)
440
608
783
Adjusted EBITDA (Non-GAAP)
6,502
8,420
29,223
36,503
Corporate &
Other
Loss from operations - as reported
(GAAP)
(24,846
)
(24,771
)
(94,113
)
(92,681
)
Depreciation & amortization
1,687
1,709
6,734
7,145
EBITDA (Non-GAAP)
(23,159
)
(23,062
)
(87,379
)
(85,536
)
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
3,018
3,591
8,548
12,461
Equity-based compensation
2,279
2,124
8,360
8,093
Acquisition related expenses
91
510
939
510
Disaster recovery / unclaimed property
settlement
—
—
—
(2,221
)
Severance expenses
—
—
—
366
Further adjustments - EBITDA to Adjusted
EBITDA
5,388
6,225
17,847
19,209
Adjusted EBITDA (Non-GAAP)
(17,771
)
(16,837
)
(69,532
)
(66,327
)
Total Adjusted EBITDA (Non-GAAP)
$
42,354
$
40,040
$
124,243
$
121,057
Table 8
Hanger, Inc.
Indebtedness
(in thousands)
As of December 31,
2019
2018
Debt:
Term Loan B
$
496,163
$
501,213
Seller notes
9,005
4,506
Finance lease liabilities and other
2,033
14,361
Total debt before unamortized discount and
debt issuance costs
507,201
520,080
Unamortized discount and debt issuance
costs, net
(8,328
)
(9,407
)
Total debt
$
498,873
$
510,673
Current portion of long-term debt:
Term Loan B
$
5,050
$
5,050
Seller notes
3,175
2,513
Finance lease liabilities and other
527
1,020
Total current portion of long-term
debt
8,752
8,583
Long-term debt
$
490,121
$
502,090
Net indebtedness:
Total debt before unamortized discount and
debt issuance costs
507,201
520,080
Cash and cash equivalents
(74,419
)
(95,114
)
Net indebtedness
$
432,782
$
424,966
Table 9
Hanger, Inc.
Key Operating Metrics
As of and For the Three Months
Ended December 31,
As of and For the Years Ended
December 31,
2019
2018
2019
2018
Same clinic revenue:
Growth rate on net revenue
2.9
%
0.3
%
2.1
%
1.3
%
Growth rate day adjusted (a)
2.9
%
0.3
%
2.1
%
0.9
%
Clinical locations:
Patient care clinics
701
676
Satellite clinics
111
104
Total clinical locations
812
780
(a) Same Clinic Revenue per Day - Same
Clinic Revenue per Day normalizes revenue for the number of days a
clinic was open in each comparable period. These measures are both
non GAAP and unaudited.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200311005635/en/
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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