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, 2020.
Financial Highlights
- Net revenue was $233.4 million for the three months ended June
30, 2020, compared to $281.1 million for the same period in 2019,
reflecting a decrease of 17.0 percent. Net same clinic revenue on a
day-adjusted basis declined by 18.7 percent, due primarily to a
decrease in patient volumes associated with the COVID-19 pandemic.
Net revenue from prosthetic services declined at a lower rate than
net revenue from orthotic services.
- Net income was $31.1 million for the three months ended June
30, 2020, compared to $10.0 million for the same period in 2019.
Income from operations was $38.9 million for the quarter compared
to $23.1 million for the same period in 2019. Second quarter GAAP
operating and net income benefited from $20.5 million related to
the Company's receipt of healthcare provider grants from the United
States Department of Health and Human Services under the CARES
Act.
- Adjusted EBITDA was $36.5 million in the second quarter of
2020, compared to $37.4 million for the same period in 2019,
reflecting a decrease of $0.9 million. Adjusted EBITDA excludes the
benefit of the CARES Act healthcare provider grants. Adjusted
EBITDA benefited from decreases in operating costs associated with
reduced salaries, employee furloughs and other cost reduction
actions.
- GAAP diluted earnings per share was $0.81 for the second
quarter of 2020, compared to $0.26 per diluted share for the same
period in 2019. Adjusted diluted earnings per share was $0.35 for
the three months ended June 30, 2020, compared to $0.35 per share
for the same period in 2019.
- On June 30, 2020, the Company had $202.7 million in liquidity,
which reflected an increase of $70.9 million as compared with March
31, 2020.
Vinit Asar, President and Chief Executive Officer of Hanger,
Inc., stated, "During the second quarter, our primary focus was on
providing uninterrupted patient care and on the safety of patients
and employees. Through the management actions we took, we were also
able to build the liquidity necessary to support the Company
throughout a prolonged COVID-19 pandemic." Asar continued, "As a
result of the dedication and efforts of our 4,900 associates, we
enter the second half of 2020 in a position of strength and with a
collective confidence that we are prepared to return to a growth
footing once the pandemic subsides."
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, 2020
Patient Care Segment
For the three months ended June 30, 2020, Patient Care net
revenue was $195.9 million, a decrease of $35.3 million, or 15.3
percent, compared to the same period in 2019. Total revenue for the
segment includes $6.2 million of revenue from O&P clinics
acquired in 2019 and 2020, net of consolidations.
Net same clinic revenue declined by 18.7 percent during the
quarter compared to the prior year period. This decline was due
primarily to lower patient volumes during the second quarter
resulting from the impact of the COVID-19 pandemic. Excluding
acquisitions, net revenue from prosthetics declined 8.9 percent in
the quarter and net revenue from orthotics declined 30.4 percent.
Prosthetics comprised 61.3 percent of Patient Care segment net
revenue during the second quarter of 2020 as compared to 55.0
percent during the same period in 2019.
During the second quarter, the Patient Care segment experienced
a gradual reduction in the adverse effects of the pandemic on
patient appointment volumes as they decreased by approximately 40
percent in April, 34 percent in May and 24 percent in June, each as
compared with their respective prior period in 2019. The average
decline in patient appointments for the quarter was 33 percent. As
of June 30, 2020, the Company had temporarily closed 24 patient
care clinics and another 137 clinics were open for reduced hours or
by appointment only.
Income from operations in the Patient Care segment was $58.6
million during the second quarter of 2020, an increase of $16.8
million compared to the $41.8 million reported in the prior year.
GAAP Patient Care segment results included a benefit of $20.5
million to other operating costs related to the Company's receipt
of CARES Act healthcare provider grants. These grants were received
under the Public Health and Social Services Emergency fund, also
referred to as The Provider Relief Fund, established by the CARES
Act.
Adjusted EBITDA for the segment was $44.2 million, which
reflected a $3.2 million or 6.7 percent decrease. Adjusted EBITDA
excludes the benefit of the CARES Act healthcare provider grants.
Adjusted EBITDA margin in the segment totaled 22.6 percent compared
to 20.5 percent during the second quarter of 2019. The growth in
Adjusted EBITDA margin resulted primarily from temporary labor and
other cost reduction actions implemented in the quarter. These
included a decrease in exempt employee salaries, employee furloughs
and reductions in non-exempt employee hours. The Patient Care
segment also benefited from lower materials costs during the second
quarter, primarily associated with reduced business volumes and the
beneficial effect of freight savings initiatives.
Products & Services Segment
For the three months ended June 30, 2020, Products &
Services net revenue totaled $37.6 million, a decline of 24.7
percent compared with the same period in 2019. Revenue from the
distribution of O&P componentry declined by $11.1 million, or
29.6 percent, primarily from lower sales volumes of O&P
componentry due to the COVID-19 pandemic, 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.
Therapeutic Solutions revenue declined $1.2 million, or 9.9
percent.
Income from operations for the Products & Services segment
increased by $0.8 million in the second quarter of 2020 compared to
the same period in 2019. Adjusted EBITDA for the Products &
Services segment totaled $8.6 million for the second quarter of
2020, a $0.8 million increase compared with the same period of
2019. Adjusted EBITDA margin in the segment totaled 22.9 percent
compared to 15.6 percent during the second quarter of 2019.
Products & Services segment margins and earnings were
positively affected by lower operating costs associated with
temporary labor cost reductions and decreases in materials costs
associated with lower business volumes.
Corporate & Other
Expenses associated with corporate and other activities
increased by $1.9 million to $25.5 million for the quarter ended
June 30, 2020 compared to the same period in 2019. The increase in
Corporate & Other expenses arose from a non-cash increase in
equity-based compensation offset by temporary labor cost reductions
and a decrease in systems implementation costs associated with
management's decision to pause the supply chain and financial
systems project. The increase in equity-based compensation expense
related to a non-cash charge of $5.9 million associated with a
modification to the 2017 Special Equity Plan awards, which vested
in the second quarter of 2020.
Excluding the effect of depreciation and amortization, non-cash
equity-based compensation expense and certain non-recurring
expenses, the net cost of corporate and other activities decreased
by $1.5 million to $16.3 million in the second quarter of 2020.
Net Income; Interest Expense
Interest expense totaled $8.6 million for the three month period
ended June 30, 2020, an increase of $0.2 million from the prior
year period.
For the three month period ended June 30, 2020, net income was
$31.1 million compared with $10.0 million for the same period in
2019. GAAP diluted income per share was $0.81 compared to $0.26 per
share in 2019. Adjusted diluted income per share was $0.35 for the
three months ended June 30, 2020, compared to $0.35 per share for
the same period in 2019.
Financial Highlights for the Six Months Ended June 30,
2020
- Net revenue was $467.2 million for the six months ended June
30, 2020, compared to $517.5 million for the same period of 2019,
reflecting a net revenue decline of 9.7 percent. For the six month
period, acquisitions that occurred in 2019 and 2020 contributed
$9.0 million of revenue, net of consolidations.
- Patient Care net revenue declined $35.7 million, or 8.5
percent, for the year-to-date period to $386.0 million, while same
clinic day-adjusted net revenue per day declined 11.7 percent.
Revenue from prosthetics, excluding acquisitions, decreased 5.3
percent on a net day-adjusted basis, while orthotics revenue,
excluding acquisitions, declined by 18.6 percent, also on a net
day-adjusted basis.
- Products & Services segment net revenue declined $14.6
million, or 15.3 percent, driven by a decrease of $12.6 million in
distribution services and a $2.0 million decrease, or 7.9 percent
decline in revenue from therapeutic solutions.
- GAAP net income was $15.3 million for the six months ended June
30, 2020, compared to a $3.1 million for the same period in 2019.
The first six months of 2020 included a benefit of $20.5 million to
other operating costs related to the receipt of CARES grants.
- Adjusted EBITDA of $41.8 million for the first six months of
2020 was $7.5 million lower as compared to the $49.3 million
reported in the prior year period. Adjusted EBITDA excludes the
benefit of the CARES Act healthcare provider grants. The decline in
Adjusted EBITDA is a result of lower patient volumes during March
through June 2020 associated with the COVID-19 pandemic, partially
offset by temporary reductions in personnel costs and other
expense.
- For the six months ended June 30, 2020, GAAP diluted earnings
per share was $0.40, compared to $0.08 per share in 2019. Adjusted
diluted earnings per share was $0.07 for the first six months of
2020, compared to $0.20 per share for the same period in 2019.
Net Cash Provided by Operating Activities and
Liquidity
Cash flows provided by operating activities for the three months
ending June 30, 2020 were $102.0 million compared to $29.3 million
for the same period in 2019. The Company benefited from
improvements in cash collections during the second quarter of 2020
as its days sales outstanding decreased from 47 days as of June 30,
2019 to 45 days on June 30, 2020.
On June 30, 2020, the Company had liquidity of $202.7 million,
comprised of $129.9 million in cash and cash equivalents, and $72.8
million in available borrowing capacity under its revolving credit
facility. This compares to total liquidity of $131.8 million on
March 31, 2020.
Outlook Regarding the Effects of the COVID-19 Pandemic on
Prospective Results
At the onset of the second quarter, in response to the COVID-19
pandemic, the Company made certain changes to its operations,
implemented a broad number of cost reduction measures, and
temporarily delayed certain capital investment projects. While the
Company cannot forecast with certainty the ultimate extent of the
impacts from or the duration of 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 in the event the pandemic has a prolonged adverse impact
on patient volumes similar to that experienced in the second
quarter.
The Company is currently managing its staffing levels to support
continuing reduced levels of patient volumes. However, given the
successful performance of the Company's second quarter plan to
accumulate capital sufficient to endure the business effects of the
pandemic, it has chosen to implement a gradual reinstatement of
wage reductions. Salaries for exempt employees were initially
reduced by an average of 32 percent in April 2020. One-third of
this reduction was reinstated in June 2020, a further one-third was
reinstated during July 2020, and the final outstanding 11 percent
reduction in wages is currently expected to be reinstated no later
than the end of the third quarter of 2020. The Company also
commenced the gradual reduction of employee furloughs in June 2020.
These actions will increase the Company's operating costs during
future quarters, and, given the continuing adverse effects that the
COVID-19 pandemic is anticipated to have on patient volumes, it is
likely that quarterly earnings for at least the remainder of 2020
will be depressed as compared with second quarter 2020 levels.
Accordingly, the Company has currently planned for a consumption of
a portion of its cash balances to fund its operations during the
remaining two quarters of the year.
Given the continuing uncertain and material effects the COVID-19
pandemic will likely have on prospective results, the Company is
not providing guidance as to its anticipated financial results for
the current year.
Conference and Webcast Details
The Company’s management team will host a conference call
tomorrow, Thursday, August 6, at 8:30 a.m. Eastern time to discuss
the Company’s second 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. - Hanger, Inc. (NYSE: HNGR) delivers
orthotic and prosthetic (O&P) patient care, and distributes
O&P products and rehabilitative solutions to the broader
market. Hanger's Patient Care segment is the largest owner and
operator of O&P patient care clinics with approximately 800
locations nationwide. Through its Products & Services segment,
Hanger distributes branded and private label O&P devices,
products and components, and provides rehabilitative solutions.
With nearly 160 years of clinical excellence and innovation,
Hanger's vision is to lead the orthotic and 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 assumptions
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
releases or 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 release. 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 June 30, 2020, each 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
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Net revenues
$
233,434
$
281,098
$
467,173
$
517,517
Material costs
69,972
91,399
147,213
169,776
Personnel costs
73,822
91,490
163,007
178,201
Other operating costs (a)
8,277
33,741
44,163
67,296
General and administrative expenses
31,874
29,358
60,247
57,640
Professional accounting and legal fees
1,749
3,247
5,145
5,947
Depreciation and amortization
8,879
8,760
17,710
17,533
Income from operations
38,861
23,103
29,688
21,124
Interest expense, net
8,636
8,481
16,906
17,019
Non-service defined benefit plan
expense
158
173
316
346
Income before income taxes
30,067
14,449
12,466
3,759
(Benefit) provision for income taxes
(987
)
4,414
(2,840
)
675
Net income
$
31,054
$
10,035
$
15,306
$
3,084
Basic and Diluted Per Common Share
Data:
Basic earnings per share
$
0.82
$
0.27
$
0.41
$
0.08
Weighted average shares used to compute
basic earnings per common share
37,958,408
37,299,766
37,749,930
37,151,694
Diluted earnings per share
$
0.81
$
0.26
$
0.40
$
0.08
Weighted average shares used to compute
diluted earnings per common share
38,325,872
37,887,559
38,424,334
37,889,586
(a) For the three and six months ended
June 30, 2020, Hanger recognized approximately $20.5 million of
income within other operating costs related to grant proceeds
received under the CARES Act.
Table 2
Hanger, Inc.
Condensed Consolidated Balance
Sheets
(Unaudited - in thousands)
As of June 30,
As of December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
129,853
$
74,419
Accounts receivable, net
115,575
159,359
Inventories
65,152
68,204
Income taxes receivable
4,409
—
Other current assets
16,740
13,673
Total current assets
331,729
315,655
Non-current assets:
Property, plant, and equipment, net
90,195
84,057
Goodwill
271,646
232,244
Other intangible assets, net
20,841
17,952
Deferred income taxes
73,036
70,481
Operating lease right-of-use assets
127,725
110,559
Other assets
14,811
11,305
Total assets
$
929,983
$
842,253
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt
$
27,501
$
8,752
Accounts payable
51,449
48,477
Accrued expenses and other current
liabilities
68,196
55,825
Accrued compensation related costs
45,653
61,010
Current portion of operating lease
liabilities
33,839
34,342
Total current liabilities
226,638
208,406
Long-term liabilities:
Long-term debt, less current portion
516,507
490,121
Operating lease liabilities
108,489
88,418
Other liabilities
57,501
45,804
Total liabilities
909,135
832,749
Shareholders’ equity:
Common stock
383
376
Additional paid-in capital
360,014
354,326
Accumulated other comprehensive loss
(21,970
)
(12,551
)
Accumulated deficit
(316,883
)
(331,951
)
Treasury stock, at cost
(696
)
(696
)
Total shareholders’ equity
20,848
9,504
Total liabilities and shareholders’
equity
$
929,983
$
842,253
Table 3
Hanger, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited - in thousands)
For the Six Months Ended June
30,
2020
2019
Cash flows provided by (used in)
operating activities:
Net income
$
15,306
$
3,084
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
17,710
17,533
Provision for doubtful accounts
1,084
304
Share-based compensation expense
12,485
6,715
Deferred income taxes
(9
)
779
Amortization of debt discounts and
issuance costs
936
797
Gain on sale and disposal of fixed
assets
(531
)
(792
)
Changes in operating assets and
liabilities:
Accounts receivable, net
44,917
(1,010
)
Inventories
5,072
(1,862
)
Other current assets and other assets
(4,882
)
(1,100
)
Income taxes
(5,278
)
(1,339
)
Accounts payable
305
(3,208
)
Accrued expenses and other current
liabilities
2,393
(2,778
)
Accrued compensation related costs
(15,536
)
(17,901
)
Other liabilities
3,686
(1,871
)
Operating lease liabilities, net of
amortization of right-of-use assets
2,403
(890
)
Net cash provided by (used in) operating
activities
80,061
(3,539
)
Cash flows used in investing
activities:
Acquisitions, net of cash acquired
(16,788
)
(27,916
)
Purchase of property, plant, and
equipment
(15,742
)
(14,806
)
Purchase of therapeutic program equipment
leased to third parties under operating leases
(3,065
)
(3,530
)
Proceeds from sale of property, plant, and
equipment
1,134
1,476
Purchase of company-owned life insurance
investment
(250
)
—
Net cash used in investing activities
(34,711
)
(44,776
)
Cash flows provided by (used in)
financing activities:
Borrowings under revolving credit
agreement
79,000
—
Repayment of borrowings under revolving
credit agreement
(57,000
)
—
Repayment of term loan
(2,525
)
(2,525
)
Payment of employee taxes on share-based
compensation
(6,828
)
(3,654
)
Payment on seller notes
(1,799
)
(2,162
)
Payments of financing lease
obligations
(314
)
(229
)
Payments under vendor financing
arrangements
(275
)
—
Payment of debt issuance costs
(214
)
—
Proceeds from the exercise of options
39
—
Net cash provided by (used in) financing
activities
10,084
(8,570
)
Increase (decrease) in cash and cash
equivalents
55,434
(56,885
)
Cash and cash equivalents at beginning of
period
74,419
95,114
Cash and cash equivalents at end of
period
$
129,853
$
38,229
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, third-party professional
fees in excess of normal amounts incurred in connection with our
financial statement remediation, expenses associated with
equity-based compensation, severance expenses, certain expenses
incurred in connection with our acquisitions, proceeds received
from grants under the Coronavirus Aid, Relief and Economy Security
Act ("CARES Act") 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
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Net Revenue (a)
Patient Care
$
195,859
$
231,168
$
386,042
$
421,769
Products & Services
37,575
49,930
81,131
95,748
Net revenue
$
233,434
$
281,098
$
467,173
$
517,517
EBITDA (b)
Patient Care
$
63,446
$
46,276
$
79,459
$
66,585
Products & Services
8,256
7,520
13,088
14,161
Corporate & Other
(23,962
)
(21,933
)
(45,149
)
(42,089
)
EBITDA (Non-GAAP)
$
47,740
$
31,863
$
47,398
$
38,657
Adjusted EBITDA (b)
Patient Care
$
44,193
$
47,377
$
61,519
$
68,769
Products & Services
8,590
7,766
13,627
14,651
Corporate & Other
(16,258
)
(17,758
)
(33,355
)
(34,167
)
Adjusted EBITDA (Non-GAAP)
$
36,525
$
37,385
$
41,791
$
49,253
(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
and Earnings Per Share to
Adjusted Net Income and
Adjusted Earnings Per Share
(Unaudited - in thousands, except
share and per share amounts)
Earnings Per Share (or “EPS”) is defined
as net income divided by our basic or diluted common shares during
the applicable period. Adjusted EPS is defined as EPS adjusted for
certain equity-based compensation charges, third-party professional
fees in excess of normal amounts incurred in connection with our
financial statement remediation, severance expenses, certain
expenses incurred in connection with our acquisitions, proceeds
received from grants under the CARES Act, 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
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Net income - as reported (GAAP)
$
31,054
$
10,035
$
15,306
$
3,084
Adjustments:
Modification of equity awards (a)
5,869
—
5,869
—
Amortization expense
1,783
1,126
3,274
2,356
Third-party professional fees
—
1,745
1,639
3,394
Acquisition-related expenses
39
328
372
498
Hanger supply chain implementation
costs
295
—
430
—
Severance expenses
—
(1
)
—
(11
)
Proceeds from grants under the CARES
Act
(20,533
)
—
(20,533
)
—
Adjustments prior to tax effect
$
(12,547
)
$
3,198
$
(8,949
)
$
6,237
Tax effect of specified adjustments
(b)
(5,192
)
179
(3,684
)
(1,724
)
Adjustments after taxes
(17,739
)
3,377
(12,633
)
4,513
Adjusted net income (Non-GAAP)
$
13,315
$
13,412
$
2,673
$
7,597
Basic earnings per share - as reported
(GAAP)
$
0.82
$
0.27
$
0.41
$
0.08
Effect of above listed specified
adjustments
(0.47
)
0.09
(0.34
)
0.12
Adjusted basic earnings per share - as
reported (Non-GAAP)
$
0.35
$
0.36
$
0.07
$
0.20
Diluted earnings per share - as reported
(GAAP)
$
0.81
$
0.26
$
0.40
$
0.08
Effect of above listed specified
adjustments
(0.46
)
0.09
(0.33
)
0.12
Adjusted diluted earnings per share - as
reported (Non-GAAP)
$
0.35
$
0.35
$
0.07
$
0.20
Shares used to compute basic earnings per
share
37,958,408
37,299,766
37,749,930
37,151,694
Shares used to compute diluted earnings
per share
38,325,872
37,887,559
38,424,334
37,889,586
(a) Modification of equity awards reflect
a non-recurring charge in the second quarter of 2020 for
incremental equity-based compensation expense under ASC 718, Stock
Compensation, related to the modification of certain equity awards
granted in 2017.
(b) “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 Income
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, third-party professional
fees in excess of normal amounts incurred in connection with our
financial statement remediation, expenses associated with
equity-based compensation, severance expenses, certain expenses
incurred in connection with our acquisitions, proceeds received
from grants under the CARES Act 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
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Net income - as reported (GAAP)
$
31,054
$
10,035
$
15,306
$
3,084
Adjustments to calculate EBITDA:
Depreciation and amortization
8,879
8,760
17,710
17,533
Interest expense, net
8,636
8,481
16,906
17,019
Non-service defined benefit plan
expense
158
173
316
346
(Benefit) provision for income taxes
(987
)
4,414
(2,840
)
675
Adjustments - net (loss) income to
EBITDA
16,686
21,828
32,092
35,573
EBITDA (Non-GAAP)
47,740
31,863
47,398
38,657
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
—
1,745
1,639
3,394
Equity-based compensation (a)
8,984
3,450
12,485
6,715
Acquisition-related expenses
39
328
372
498
Hanger supply chain implementation
costs
295
—
430
—
Severance expenses
—
(1
)
—
(11
)
Proceeds from grants under the CARES
Act
(20,533
)
—
(20,533
)
—
Further adjustments - EBITDA to Adjusted
EBITDA
(11,215
)
5,522
(5,607
)
10,596
Adjusted EBITDA (Non-GAAP)
$
36,525
$
37,385
$
41,791
$
49,253
(a) Equity- based compensation expense
includes an incremental charge in the second quarter of 2020 under
ASC 718, Stock Compensation of approximately $5.9 million related
to the modification of certain equity awards granted in 2017.
Table 7
Hanger, Inc.
Segment Reconciliation of
Income From Operations to EBITDA and Adjusted EBITDA
(Unaudited - in thousands)
EBITDA is defined as operating income
before depreciation and amortization. Adjusted EBITDA is defined as
operating income before certain charges, third-party professional
fees in excess of normal amounts incurred in connection with our
financial statement remediation, expenses associated with
equity-based compensation, severance expenses, certain expenses
incurred in connection with our acquisitions, proceeds received
from grants under the CARES Act 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
June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Patient
Care
Income from operations - as reported
(GAAP)
$
58,619
$
41,774
$
70,156
$
57,531
Depreciation & amortization
4,827
4,502
9,303
9,054
EBITDA (Non-GAAP)
63,446
46,276
79,459
66,585
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
1,078
1,101
2,256
2,195
Hanger supply chain implementation
costs
202
—
337
—
Severance expenses
—
—
—
(11
)
Proceeds from grants under the CARES
Act
(20,533
)
—
(20,533
)
—
Further adjustments - EBITDA to Adjusted
EBITDA
(19,253
)
1,101
(17,940
)
2,184
Adjusted EBITDA (Non-GAAP)
44,193
47,377
61,519
68,769
Products &
Services
Income from operations - as reported
(GAAP)
5,758
4,924
7,838
9,022
Depreciation & amortization
2,498
2,596
5,250
5,139
EBITDA (Non-GAAP)
8,256
7,520
13,088
14,161
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
241
246
446
490
Hanger supply chain implementation
costs
93
—
93
—
Further adjustments - EBITDA to Adjusted
EBITDA
334
246
539
490
Adjusted EBITDA (Non-GAAP)
8,590
7,766
13,627
14,651
Corporate &
Other
Loss from operations - as reported
(GAAP)
(25,516
)
(23,595
)
(48,306
)
(45,429
)
Depreciation & amortization
1,554
1,662
3,157
3,340
EBITDA (Non-GAAP)
(23,962
)
(21,933
)
(45,149
)
(42,089
)
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
—
1,745
1,639
3,394
Equity-based compensation (a)
7,665
2,103
9,783
4,030
Acquisition related expenses
39
328
372
498
Severance expenses
—
(1
)
—
—
Further adjustments - EBITDA to Adjusted
EBITDA
7,704
4,175
11,794
7,922
Adjusted EBITDA (Non-GAAP)
(16,258
)
(17,758
)
(33,355
)
(34,167
)
Total Adjusted EBITDA (Non-GAAP)
$
36,525
$
37,385
$
41,791
$
49,253
(a) Equity- based compensation expense
includes an incremental charge in the second quarter of 2020 under
ASC 718, Stock Compensation of approximately $5.9 million related
to the modification of certain equity awards granted in 2017.
Table 8
Hanger, Inc.
Indebtedness
(Unaudited - in thousands)
As of June 30,
As of December 31,
2020
2019
Debt:
Term Loan B
$
493,638
$
496,163
Revolving credit facility
22,000
—
Seller notes
29,610
9,005
Deferred payment obligation
4,000
—
Finance lease liabilities and other
3,152
2,033
Total debt before unamortized discount and
debt issuance costs
552,400
507,201
Unamortized discount and debt issuance
costs, net
(8,392
)
(8,328
)
Total debt
$
544,008
$
498,873
Current portion of long-term debt:
Term Loan B
$
5,050
$
5,050
Seller notes
21,710
3,175
Finance lease liabilities and other
741
527
Total current portion of long-term
debt
27,501
8,752
Long-term debt
$
516,507
$
490,121
Net indebtedness:
Total debt before unamortized discount and
debt issuance costs
$
552,400
$
507,201
Cash and cash equivalents
(129,853
)
(74,419
)
Net indebtedness
$
422,547
$
432,782
Table 9
Hanger, Inc.
Key Operating Metrics
As of and For the Three Months
Ended June 30,
For the Six Months Ended June
30,
2020
2019
2020
2019
Same clinic revenue:
(Decline) growth rate on net revenue
(18.7)%
3.0%
(11.0)%
0.8%
(Decline) growth rate day adjusted (a)
(18.7)%
3.0%
(11.7)%
1.6%
Clinical locations:
Patient care clinics
707
696
Satellite clinics
108
109
Total clinical locations
815
805
(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/20200805005823/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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