Hanger Reports Full Year 2017 Results
Hanger Reports Full Year 2017 Results
- Revenue of $1.041 billion, in-line with the Company's prior estimate
- GAAP net loss of $105 million, including intangible asset impairment and a reduction in deferred tax asset valuation
- Adjusted EBITDA of $120 million, an $11 million year-over-year increase
- Company to hold conference call and provide business update
AUSTIN, Texas, May 14, 2018 /PRNewswire/ -- Hanger, Inc. (OTC PINK: HNGR), the leading provider of orthotic and prosthetic patient care services and solutions, today announced the filing of its Annual Report on Form 10-K for the year ended December 31, 2017 with the Securities and Exchange Commission (SEC). The Annual Report on Form 10-K contains information pertaining to the Company's quarterly, year-to-date and annual results for 2017.
"Hanger remains on schedule to achieve the financial reporting goals we provided in January, specifically a transition to current SEC filer status in 2018," stated Thomas Kiraly, Executive Vice President and Chief Financial Officer of Hanger, Inc. "We are now focused on preparing our interim financial statements for the three months ended March 31, 2018, and our intention is to file our first quarter Form 10-Q as expeditiously as possible."
Subsequent to reporting and filing Hanger's second quarter 2018 results, the Company currently plans to commence the process of relisting on a national securities exchange, which it anticipates will occur in the autumn timeframe.
Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "Hanger stands at an important inflection point in our corporate journey. In addition to the multi-year investments made to strengthen our infrastructure, we have also dedicated substantial resources and shareholder capital to advance Hanger's leadership in the orthotics and prosthetics (O&P) industry."
Mr. Asar continued, "We are pleased to have achieved a return to same clinic revenue growth in 2017. Our patient care segment exited 2017 with fourth quarter same clinic revenue growth per day of 2.1 percent and full year net revenue growth of 1.4 percent. These results were driven by an annualized return to positive same clinic growth and higher net revenue yield after a year of investment in key revenue cycle management initiatives during 2016 and early 2017. These actions, combined with initiatives to manage costs, led to double digit growth in profitability as well as free cash flow improvements compared to 2016."
Mr. Asar concluded, "While we still have much to accomplish, we plan to prudently invest in our business to maximize our potential, and ensure Hanger successfully achieves the requirements of health care's triple aim: better care, better health and better value. Powering this goal is the hard work and dedication of our 4,600 associates who help bring life-changing improvements to the patients we serve every day."
Financial Highlights for 2017 Compared to 2016
-- Net revenue in 2017 of $1.041 billion, compared to $1.042 billion for
2016.
-- Net revenue declined by $1.3 million, or 0.1 percent. Growth in the
Patient Care segment (82 percent of net revenue) was offset by a
decline in the Company's Products and Services segment, primarily
due to decreased therapeutics solutions revenue.
-- The Patient Care segment benefited from improvements in claims
documentation processes during 2016, which reduced disallowed
revenue by $12.4 million.
-- Same clinic revenue growth was 0.8 percent for the year ended
December 31, 2017 and 2.1 percent for the three month period ended
December 31, 2017. These growth rates exclude the favorable effect
of improvements in disallowance trends.
-- GAAP loss from continuing operations was $104.7 million in 2017,
compared to $107.4 million in 2016. Non-GAAP Adjusted EBITDA was $119.6
million compared to $108.5 million in 2016, an increase of $11.1 million
year-over-year.
-- GAAP results include charges for the impairment of intangible assets,
allowance for deferred tax assets, amortization expense, third party
professional fees and severance expense.
-- The charges for the non-cash impairment of intangible assets related
to the Products and Services segment and totaled $54.7 million and
$86.2 million in 2017 and 2016, respectively.
-- Expenses for third party professional fees incurred in connection
with financial statement remediation, in excess of historical
amounts, totaled $32.3 million and $37.2 million in 2017 and 2016,
respectively.
-- Growth in earnings prior to charges and expenses for third party fees
resulted primarily from increased contribution and margin expansion
within the Patient Care segment that was partially offset by decreased
earnings from the Products and Services segment and increased bonus
expense.
-- GAAP diluted loss per share was $2.89 in 2017, compared to $2.96 in
2016. Non-GAAP adjusted diluted income per share was $0.33 in 2017,
compared to $0.39 in 2016.
-- Non-GAAP income on a per share basis was negatively impacted by a
$12.5 million increase in GAAP interest expense in 2017 compared to
2016 (or approximately $0.21 per share).
Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this press release.
Detailed Results: 2017 and 2016
For 2017, the Company's net revenue of $1.041 billion declined $1.3 million, or 0.1 percent, compared to 2016. The net revenue result was driven by an $11.8 million, or 1.4 percent increase in the Patient Care segment which was offset by a $13.1 million, or 6.5 percent, decrease in the Products & Services segment.
Patient Care Segment
For 2017, the Company's Patient Care net revenue totaled $852.0 million, an increase of $11.8 million compared to 2016. The net revenue growth was primarily the result of lower disallowed revenue and resumed same clinic revenue growth during 2017.
-- In 2016 the Company launched an initiative in the Patient Care segment to improve claims documentation and submission procedures. While these efforts impacted clinic-level productivity and lowered clinical throughput during 2016 and early 2017, the Company benefited from resulting improvements in disallowed sales during 2017. Patient Care disallowed revenue decreased by $12.4 million to $37.0 million, or 4.2 percent of segment Adjusted Gross Revenue, as compared with $49.4 million, or 5.6 percent of segment Adjusted Gross Revenue, in 2016. -- Same clinic revenue per day grew 0.8 percent for the full year 2017 and 2.1 percent during the fourth quarter of 2017, excluding the favorable effect of improvements in disallowed revenue.Income from operations before interest expenses and income taxes for the Patient Care segment were $122.4 million during 2017, which reflected an increase of $29.7 million over the $92.7 million reported in the prior year. Adjusted EBITDA for the segment was $148.0 million, which reflected a $25.9 million increase over the prior year period.
-- In addition to the favorable effect of earnings flow-through relating to the $12.4 million decrease in disallowed revenue, the Patient Care segment also benefited from a $10.6 million in net non-personnel related expense reductions. These reductions were primarily comprised of savings in lease, material costs, telecommunications and bad debt expenses. -- The Patient Care segment reflected a net personnel expense decrease of $3.2 million year-over-year, which was comprised of a $12.6 million decrease in salaries, benefits, payroll taxes and related employment costs. This was partially offset by increased bonus and commission expenses of $9.4 million. During 2016 and 2017, in connection with ongoing assessments of clinic locations and performance, the Company closed certain underperforming clinics and realigned segment administrative functions. These actions contributed to the decrease in personnel expenses achieved in 2017. -- Income from operations also benefited from a $3.5 million decrease in depreciation and amortization expense, as compared to the prior year.Products & Services Segment
For 2017, the Company's Products & Services net revenue totaled $188.8 million, a $13.1 million decrease compared to 2016. The revenue decline was due to the net loss of customer contracts for therapeutic solutions, which provides services to the post-acute market, primarily within skilled nursing facilities (SNFs).
-- Hanger recognized approximately $60.1 million in revenues from therapeutic solutions in 2017. The Company currently estimates that it could experience a decline of approximately $8 million from these services in 2018. The Company is currently pursuing strategies to stabilize and maximize -- Revenue from the distribution of O&P componentry to independent providers, which constitutes over 68 percent of total Products and Services segment revenue, increased slightly in 2017 and is anticipated to reflect modest growth in 2018.Loss from operations before interest expenses and income taxes for the Products and Services segment decreased by $24.1 million to $27.7 million in 2017 from $51.8 million in the prior year. Adjusted EBITDA for the Products and Services segment was $38.5 million in 2017 which reflected a $10.1 million decrease as compared with segment Adjusted EBITDA of $48.6 million in the prior year.
-- The decrease in the segment's loss from operations primarily related to a reduction in non-cash charges for the impairment of goodwill and intangible assets relating to the Product & Services segment. The Company recorded a charge of $54.7 million in 2017 compared to a charge of $86.2 million in 2016.Net Loss from Operations; Interest Expense
For 2017, net loss from operations was $19.7 million compared with a net loss from operations of $72.1 million in 2016.
-- In addition to the reduction of non-cash charges for the impairment of goodwill and intangible assets discussed above, the Company also benefited from decreases in its materials costs, personnel costs, other operating costs, professional accounting and legal fees, and depreciation and amortization expenses in 2017. -- Net personnel cost savings of $2.4 million were attained through a decrease in salaries, benefits and other personnel costs associated with reduction in force undertaken in the fourth quarter of 2016, as well as clinic closures, which were partially offset by increased bonus expenses.Interest expense for 2017 increased to $57.7 million from $45.2 million in 2016. This $12.5 million increase resulted from $10.7 million higher interest expense associated with the Company's debt refinancing in the third quarter of 2016 and $1.8 million related to an increase in interest rates and borrowings.
Liquidity
On December 31, 2017, the Company had liquidity of $87.9 million, comprised of $1.5 million in cash and cash equivalents, and $86.4 million in available borrowing capacity under its revolving credit facility, compared to $102.1 million of liquidity as of December 31, 2016. The $14.2 million decrease in liquidity from 2016 was the result of lower revolver capacity as well as uses of cash to reduce long-term indebtedness and other investing activity.
Business Update and Preliminary Q1 and 2018 View
The Company has not yet completed the preparation of its financial statements for the quarter ended March 31, 2018. However, it has previously provided certain preliminary estimates of its cash flows and liquidity in a Current Report on Form 8-K filed with the SEC on May 11, 2018.
The Company preliminarily estimates that consolidated net revenue for the three months ended March 31, 2018 will be approximately $234 million, which is generally consistent with net revenue reported for the first quarter of 2017. The Company's estimate of net revenue includes:
-- Modest Patient Care segment revenue growth, driven primarily by same clinic revenue per day growth of approximately 1.1 percent. -- Declines in the Products and Services segment, offsetting Patient Care growth, driven by therapeutic solutions.The Company currently anticipates modest year-over-year growth in Adjusted EBITDA in the first quarter of 2018, driven by favorable expense trends including lower benefit expense compared to the first quarter of 2017.
For the full year 2018, the Company currently anticipates net revenue and Adjusted EBITDA to be generally consistent with actual 2017 results. In addition, as a result of the Company completing its debt refinancing in the first quarter of 2018, interest expense for the full year is expected to be approximately $40 million, which reflects an approximately $18 million decrease as compared to 2017.
All amounts relating to 2018 for the first quarter and full year are preliminary and subject to material change as the Company completes the preparation and review of its financial statements for the quarter ended March 31, 2018 and otherwise further evaluates its expectations for annual results.
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 its results for the full years 2014-2016. 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.
Conference and Webcast Details
Hanger's management team will host a conference call on Tuesday, May 15, at 8:30 am Eastern Time to discuss the Company's 2017 financial results and business outlook.
To participate, dial 877-407-6184 or 201-389-0877 outside the U.S. and Canada, and use conference code number 13680014. A live webcast and replay of the call will be available at the Investor Relations section of the Company's web site at www.hanger.com/investors, and a replay of the webcast will remain available for 90 days.
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. (OTC PINK: HNGR) delivers orthotic and prosthetic (O&P) patient care, and distributes O&P products and rehabilitative solutions to the broader market. Hanger's Patient Care segment is the largest owner and operator of O&P patient care clinics with approximately 800 patient care locations nationwide. Through its Products & Services segment, Hanger distributes branded and private label O&P devices, products and components, and provides rehabilitative solutions. With over 150 years of clinical excellence and innovation, Hanger's vision is to lead the orthotic & prosthetic markets by providing superior patient care, outcomes, services and value. For more information on Hanger, visit www.hanger.com.
This press release contains certain "forward-looking statements" relating to the Company. All statements, other than statements of historical fact included herein, are "forward?looking statements," including statements regarding the timing of filing of, and the outcome of the Company's work in connection with, completing certain financial statements and other financial data. These forward-looking statements are often identified by the use of forward-looking terminology such as "preliminary," "intends," "expects," "plans" or similar expressions and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. These uncertainties include, but are not limited to, the risk that additional information may arise during the course of the Company's ongoing financial statement preparation and closing processes that would require the Company to make additional adjustments or revisions to its estimates or financial statements and other financial data, to identify additional material weaknesses, or to take any other necessary action relating to the Company's accounting practices; the time required to complete the Company's financial statements and other financial data and accounting review; the time required to prepare its periodic reports for filings with the Securities and Exchange Commission; the impact of the Tax Cuts and Jobs Act on the Company's financial statements; any regulatory review of, or litigation relating to, the Company's accounting practices, financial statements and other financial data, periodic reports or other corporate actions; changes in the demand for our O&P products and services; uncertainties relating to the results of operations or recently acquired O&P patient care clinics; the Company's ability to enter into and derive benefits from managed-care contracts; the Company's ability to successfully attract and retain qualified O&P clinicians; federal laws governing the health care industry; uncertainties inherent in investigations and legal proceedings; governmental policies affecting O&P operations; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its Form 10?K for the year ended December 31, 2017 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.
Investor Relations Contacts:
Thomas Kiraly, Executive Vice President and Chief Financial Officer, Hanger, Inc.
Seth Frank, Vice President, Treasury and Investor Relations, Hanger, Inc.
512-777-3690, InvestorRelations@hanger.com
Table 1
Hanger, Inc.
Consolidated Balance Sheets
(dollars in thousands, except par value and share amounts)
As of December 31,
------------------
2017 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $1,508 $7,157
Net accounts receivable, less allowance for doubtful accounts of $14,065 146,346 144,562
and $15,521 in 2017 and 2016, respectively
Inventories 69,138 68,225
Income taxes receivable 13,079 13,200
Other current assets 20,888 19,137
Total current assets 250,959 252,281
------- -------
Non-current assets:
Property, plant and equipment, net 93,615 100,467
Goodwill 196,343 249,678
Other intangible assets, net 21,940 32,941
Deferred income taxes 68,126 94,223
Other assets 9,440 25,514
----- ------
Total assets $640,423 $755,104
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $4,336 $30,944
Accounts payable 48,269 50,549
Accrued expenses and other current liabilities 65,838 78,950
Accrued interest payable 845 662
Accrued compensation related costs 53,005 36,162
Total current liabilities 172,293 197,267
------- -------
Long-term liabilities:
Long-term debt, less current portion 445,928 441,706
Other liabilities 50,253 50,717
Total liabilities 668,474 689,690
------- -------
Commitments and contingent liabilities
Shareholders (Deficit) Equity:
Common stock, $.01 par value; 60,000,000 shares authorized; 365 362
36,515,232 shares issued and 36,372,411 shares outstanding in 2017,
and 36,183,894 shares issued and 36,041,073 shares outstanding in 2016
Additional paid-in capital 333,738 322,191
Accumulated other comprehensive loss (1,686) (1,440)
Retained deficit (359,772) (255,003)
Treasury stock, at cost 142,821 shares at 2017 and 2016, respectively (696) (696)
Total shareholders (deficit) equity (28,051) 65,414
------- ------
Total liabilities and shareholders' (deficit) equity $640,423 $755,104
======== ========
Table 2
Hanger, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(dollars in thousands, except share and per share amounts)
For the Years Ended December 31,
--------------------------------
2017 2016 2015
---- ---- ----
Net revenue $1,040,769 $1,042,054 $1,067,172
Material costs 329,223 332,071 336,283
Personnel costs 361,090 363,537 367,094
Other operating costs 129,831 139,024 140,839
General and administrative expenses 110,078 107,224 111,761
Professional accounting and legal fees 36,239 41,233 28,647
Depreciation and amortization 39,259 44,887 46,343
Impairment of intangible assets 54,735 86,164 385,807
------ ------ -------
Loss from operations (19,686) (72,086) (349,602)
Interest expense, net 57,688 45,199 29,892
Loss on extinguishment of debt - 6,031 7,237
--- ----- -----
Loss from continuing operations before income taxes (77,374) (123,316) (386,731)
Provision (benefit) for income taxes 27,297 (15,910) (67,614)
------ ------- -------
Loss from continuing operations (104,671) (107,406) (319,117)
Income (loss) from discontinued operations, net of income taxes - 935 (7,974)
Net loss $(104,671) $(106,471) $(327,091)
========= ========= =========
Other comprehensive (loss) income:
Unrealized (loss) gain on DB SERP, net of income tax (benefit) provision $(246) $(26) $474
of $(151), $(16) and $81 for 2017, 2016, and 2015, respectively
Comprehensive loss $(104,917) $(106,497) $(326,617)
========= ========= =========
Basic and Diluted Per Common Share Data:
Loss from continuing operations $(2.89) $(2.99) $(8.96)
Income (loss) from discontinued operations, net of income taxes - 0.03 (0.22)
Basic and diluted loss per common share $(2.89) $(2.96) $(9.18)
====== ====== ======
Shares used to compute basic and diluted per common share amounts 36,270,920 35,933,222 35,635,448
========== ========== ==========
Table 3
Hanger, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
For the Years Ended December 31,
--------------------------------
2017 2016 2015
---- ---- ----
Cash flows from operating activities:
Net loss $(104,671) $(106,471) $(327,091)
Income (loss) from discontinued operations, net of income taxes - 935 (7,974)
--- --- ------
Loss from continuing operations (104,671) (107,406) (319,117)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 39,259 44,887 46,343
Provision for doubtful accounts 9,422 13,727 12,854
Impairment of long-lived and intangible assets 54,735 86,164 385,807
Stock-based compensation expense 12,930 9,763 11,134
Provision (benefit) for deferred income taxes 26,248 4,031 (48,926)
Amortization of debt issuance costs 8,876 4,921 3,371
Loss on extinguishment of debt - 6,031 7,237
Gain on sale and disposal of fixed assets (2,059) (5,055) (2,384)
Changes in operating assets and liabilities, net of effects of acquired companies:
Net accounts receivable (12,585) 17,612 (13,625)
Inventories (913) 253 2,520
Other current assets 661 849 3,913
Income taxes 121 18,725 (40,152)
Accounts payable (3,562) (3,133) 8,084
Accrued expenses and accrued interest payable (12,929) (3,045) (6,264)
Accrued compensation related costs 16,843 (12,006) 6,877
Other liabilities (2,271) (5,797) 6,940
Net cash provided by operating activities - continuing operations 30,105 70,521 64,612
Net cash used in operating activities - discontinued operations - (1,425) (5,098)
Net cash provided by operating activities 30,105 69,096 59,514
Cash flows from investing activities:
Purchase of property, plant and equipment (16,355) (21,148) (27,620)
Purchase of equipment leased to third parties under operating leases (6,000) (2,476) (4,632)
Acquisitions, net of cash acquired - - (10,215)
Restricted cash (1,016) 1,615 (54)
Proceeds from company-owned life insurance investment 17,135 - -
Purchase of company-owned life insurance investment (555) (2,543) (2,544)
Proceeds from sale of property, plant and equipment 4,909 5,960 4,954
Other investing activities, net - (10) (50)
Net cash used in investing activities - continuing operations (1,882) (18,602) (40,161)
Net cash provided by investing activities - discontinued operations - 1,425 4,987
Net cash used in investing activities (1,882) (17,177) (35,174)
Cash flows from financing activities:
Borrowings under term loan 420 274,400 -
Repayment of term loan (28,545) (19,688) (14,063)
Borrowings under revolving credit agreement 156,965 23,000 155,000
Repayments under revolving credit agreement (151,965) (155,000) (93,000)
Payment of senior notes - (200,000) -
Payment of employee taxes on stock-based compensation (1,477) (288) (2,212)
Payment on seller note and other contingent consideration (5,197) (9,128) (13,561)
Payment of capital lease obligations (1,210) (979) (1,110)
Payment of debt issuance costs and fees (2,863) (15,832) (8,340)
Net cash (used in) provided by financing activities - continuing operations (33,872) (103,515) 22,714
(Decrease) increase in cash and cash equivalents (5,649) (51,596) 47,054
Cash and cash equivalents, at beginning of year 7,157 58,753 11,699
----- ------ ------
Cash and cash equivalents, at end of year $1,508 $7,157 $58,753
====== ====== =======
Table 4
Hanger, Inc.
Segment Information: Revenue, EBITDA and Adjusted EBITDA
(dollars in thousands)
EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income
before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in
connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based
compensation, severance expenses associated with significant reductions in force and expenses incurred in connection with our acquisitions.
We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with
certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and
financial performance. We believe that these measures enhance a user's understanding of normal operating income excluding
certain charges, depreciation and amortization.
Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted
Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income,
cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a
measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying
interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other
companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these
measures to be predictive of future results of operations.
For the Years Ended December 31,
--------------------------------
2017 2016 2015
---- ---- ----
Net Revenue(a)
Patient Care $851,973 $840,130 $874,960
Products & Services 188,796 201,924 192,212
------- ------- -------
Net revenue $1,040,769 $1,042,054 $1,067,172
========== ========== ==========
EBITDA(b)
Patient Care $143,781 $117,622 $(251,394)
Products & Services (17,513) (40,172) 40,655
Corporate & Other (106,695) (104,649) (92,520)
-------- -------- -------
EBITDA (Non-GAAP) $19,573 $(27,199) $(303,259)
======= ======== =========
Adjusted EBITDA(b)
Patient Care $148,007 $122,088 $134,946
Products & Services 38,504 48,558 45,612
Corporate & Other (66,908) (62,187) (63,401)
------- ------- -------
Adjusted EBITDA (Non-GAAP) $119,603 $108,459 $117,157
======== ======== ========
(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 income and adjusted earnings per share
(dollars in thousands, except share and per share amounts)
Earnings Per Share (or "EPS") is defined as net income divided by our diluted common shares during the applicable period.
Adjusted EPS is defined as EPS adjusted for impairments of intangible assets, third-party professional fees in excess of normal
amounts incurred in connection with our financial statement remediation, debt extinguishment costs, severance expenses
associated with significant reductions in force and 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 Years Ended December 31,
--------------------------------
2017 2016 2015
---- ---- ----
Net loss - as reported (GAAP) $(104,671) $(106,471) $(327,091)
Adjustments:
Impairment of intangible assets 54,735 86,164 385,807
Amortization expense 9,527 13,918 13,800
Third party professional fees 32,301 37,244 23,475
Extinguishment of debt - 6,031 7,237
Severance expenses associated with reduction in force 64 2,487 -
(Income) loss from discontinued operations before taxes - (1,425) 11,223
--- ------ ------
Specified adjustments prior to tax effect $96,627 $144,419 $441,542
Tax effect of specified adjustments (a) 19,981 (23,974) (87,436)
------ ------- -------
Specified adjustments after taxes 116,608 120,445 354,106
Adjusted net income (Non-GAAP) $11,937 $13,974 $27,015
======= ======= =======
Basic and diluted loss per share - as reported (GAAP) $(2.89) $(2.96) $(9.18)
Effect of above listed specified adjustments 3.22 3.35 9.94
Adjusted diluted income per share (Non-GAAP) $0.33 $0.39 $0.76
===== ===== =====
Shares used to compute adjusted diluted per common share amounts 36,566,638 36,078,719 35,739,766
========== ========== ==========
(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 38% to the Company's earnings from continuing operations
before taxes, after the incorporation of the identified above adjustments.
Table 6
Hanger, Inc.
Reconciliation of net income (loss) to EBITDA and Adjusted EBITDA
(dollars in thousands)
EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income
before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in
connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based
compensation, severance expenses associated with significant reductions in force and expenses incurred in connection with our acquisitions.
We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with
certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and
financial performance. We believe that these measures enhance a user's understanding of normal operating income excluding
certain charges, depreciation and amortization.
Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with 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 Years Ended December 31,
--------------------------------
2017 2016 2015
---- ---- ----
Net loss - as reported (GAAP) $(104,671) $(106,471) $(327,091)
Adjustments to calculate EBITDA:
Depreciation and amortization 39,259 44,887 46,343
Interest expense, net 57,688 45,199 29,892
Extinguishment of debt - 6,031 7,237
Provision (benefit) for income taxes 27,297 (15,910) (67,614)
(Income) loss from discontinued operations, net of income taxes - (935) 7,974
Specified adjustments - net loss to EBITDA 124,244 79,272 23,832
------- ------ ------
EBITDA (Non-GAAP) 19,573 (27,199) (303,259)
Further adjustments to calculate Adjusted EBITDA:
Impairment of intangible assets 54,735 86,164 385,807
Third-party professional fees 32,301 37,244 23,475
Equity-based compensation 12,930 9,763 11,134
Acquisition-related expenses - - -
Severance expenses associated with reduction in force 64 2,487 -
Specified further adjustments - EBITDA to Adjusted EBITDA 100,030 135,658 420,416
------- ------- -------
Adjusted EBITDA (Non-GAAP) $119,603 $108,459 $117,157
======== ======== ========
Table 7
Hanger, Inc.
Segment reconciliation of net income (loss) to EBITDA and Adjusted EBITDA
(dollars in thousands)
For the Years Ended December 31,
--------------------------------
2017 2016 2015
---- ---- ----
Patient Care
------------
Net income (loss) - as reported (GAAP) 90,350 59,668 (310,745)
Adjustments to calculate EBITDA:
Depreciation and amortization 21,363 24,873 25,674
Interest expense, net 32,068 33,081 33,677
Extinguishment of debt - - -
Provision (benefit) for income taxes - - -
Specified adjustments - net income (loss) to EBITDA 53,431 57,954 59,351
------ ------ ------
EBITDA (Non-GAAP) 143,781 117,622 (251,394)
Further adjustments to calculate Adjusted EBITDA:
Impairment of intangible assets - - 382,860
Third-party professional fees - - -
Equity-based compensation 4,138 2,989 3,480
Acquisition-related expenses - - -
Severance expenses associated with reduction in force 88 1,477 -
Specified further adjustments - EBITDA to Adjusted EBITDA 4,226 4,466 386,340
----- ----- -------
Adjusted EBITDA (Non-GAAP) 148,007 122,088 134,946
------- ------- -------
Products & Services
-------------------
Net (loss) income - as reported (GAAP) (40,872) (64,869) 15,658
Adjustments to calculate EBITDA:
Depreciation and amortization 10,163 11,600 11,883
Interest expense, net 13,196 13,097 13,114
Extinguishment of debt - - -
Provision (benefit) for income taxes - - -
Specified adjustments - net income to EBITDA 23,359 24,697 24,997
------ ------ ------
EBITDA (Non-GAAP) (17,513) (40,172) 40,655
Further adjustments to calculate Adjusted EBITDA:
Impairment of intangible assets 54,735 86,164 2,947
Third-party professional fees - - -
Equity-based compensation 1,306 1,556 2,010
Acquisition-related expenses - - -
Severance expenses associated with reduction in force (24) 1,010 -
Specified further adjustments - EBITDA to Adjusted EBITDA 56,017 88,730 4,957
------ ------ -----
Adjusted EBITDA (Non-GAAP) 38,504 48,558 45,612
------ ------ ------
Corporate & Other
-----------------
Net loss from continuing operations - as reported (GAAP) (154,149) (102,205) (24,030)
Adjustments to calculate EBITDA:
Depreciation and amortization 7,733 8,414 8,786
Interest expense, net 12,424 (979) (16,899)
Extinguishment of debt - 6,031 7,237
Provision (benefit) for income taxes 27,297 (15,910) (67,614)
Specified adjustments - net loss from continuing operations to EBITDA 47,454 (2,444) (68,490)
------ ------ -------
EBITDA (Non-GAAP) (106,695) (104,649) (92,520)
Further adjustments to calculate Adjusted EBITDA:
Impairment of intangible assets - - -
Third-party professional fees 32,301 37,244 23,475
Equity-based compensation 7,486 5,218 5,644
Acquisition-related expenses - - -
Severance expenses associated with reduction in force - - -
Specified further adjustments - EBITDA to Adjusted EBITDA 39,787 42,462 29,119
------ ------ ------
Adjusted EBITDA (Non-GAAP) (66,908) (62,187) (63,401)
------- ------- -------
Adjusted EBITDA (Non-GAAP) $119,603 $108,459 $117,157
======== ======== ========
Table 8
Hanger, Inc.
Indebtedness
(dollars in thousands)
As of December 31,
------------------
2017 2016 2015
---- ---- ----
Term loan due June, 2018 $151,875 $180,000 $199,688
Term loan B, due August, 2019 280,000 280,000 -
Revolving credit facility 5,000 - 132,000
Senior notes due 2018 - - 200,000
Seller notes 5,912 11,110 19,838
Financing leases and other 18,169 18,245 21,134
------ ------ ------
Total debt before unamortized discount and debt issuance costs 460,956 489,355 572,660
Unamortized discount (5,556) (7,511) (1,820)
Debt issuance costs, net (5,136) (9,194) (4,407)
Total debt $450,264 $472,650 $566,433
======== ======== ========
Reported as:
Current portion of long-term debt $4,336 $30,944 $30,385
Long-term debt 445,928 441,706 536,048
------- ------- -------
Total debt $450,264 $472,650 $566,433
======== ======== ========
Table 9
Hanger, Inc.
Key Operating Metrics
As of and for the Years Ended December 31,
------------------------------------------
2017 2016 2015
---- ---- ----
Same clinic revenue growth per day (a):
Growth rate on net revenue 2.2% (2.4)% 5.7%
Growth rate excluding favorable effect of change in rate of 0.8% (3.1)% 3.1%
disallowances
Clinical locations:
Patient care clinics 682 706 721
Satellite clinics 112 115 116
Total clinical locations 794 821 837
=== === ===
(a) Same Clinic Revenue per Day - Same Clinic Revenue per Day normalizes sales for the number of days a clinic was open in
each comparable period. These measures are both non-GAAP and unaudited.
View original content:http://www.prnewswire.com/news-releases/hanger-reports-full-year-2017-results-300648016.html
SOURCE Hanger, Inc.
