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 and six
months ended June 30, 2021.
Financial Highlights
- Net revenue was $280.8 million for the three months ended June
30, 2021, compared to $233.4 million for the same period in 2020,
reflecting growth of 20.3 percent.
- Net income was $10.2 million for the three months ended June
30, 2021, compared to $31.1 million for the same period in 2020.
Income from operations was $20.1 million for the quarter compared
to $38.9 million for the same period in 2020. Second quarter 2020
GAAP income from operations and net income benefited from $20.5
million related to the Company's receipt of provider grants under
the CARES Act, as well as $35.0 million in temporary cost
reductions taken during that period in response to the COVID-19
pandemic.
- Adjusted EBITDA was $31.0 million in the second quarter of
2021, compared to $36.5 million for the same period in 2020, a
decline of $5.6 million or 15.2 percent. Results for the second
quarter of 2020 benefited from the temporary cost reductions
discussed above.
- GAAP diluted earnings per share was $0.26 per share for the
second quarter of 2021, compared to $0.81 per share for the same
period in 2020. Adjusted diluted earnings per share was $0.27 for
the three months ended June 30, 2021, compared to $0.35 for the
same period in 2020.
- The Company reaffirmed its full year guidance for 2021.
Vinit Asar, President and Chief Executive Officer of Hanger,
Inc., stated, "Our second quarter results reflected an encouraging
recovery in Hanger's business. Within the Patient Care segment, on
a same-clinic basis, second quarter net revenue was approximately
96 percent of 2019 levels. While we remain concerned, as others do,
with the lingering effects of the pandemic on the nation's business
and labor environment, we are nevertheless pleased with our
progress for the year to date and believe we are well positioned to
further restore growth as the pandemic comes to an end."
Complete reconciliations of GAAP to non-GAAP financial measures
are provided in the tables located at the end of this earnings
release.
Segment Results for Three Months Ended June 30, 2021
Patient Care Segment
For the three months ended June 30, 2021, Patient Care net
revenue was $236.8 million, an increase of $40.9 million, or 20.9
percent, compared to the same period in 2020. For the three month
period, acquisitions of O&P clinics that were consummated in
2020 and 2021 contributed $6.0 million of incremental revenue.
Net same clinic revenue on a day-adjusted basis grew 18.2
percent during the second quarter of 2021 compared to the same
quarter in the prior year period. Patient Care results benefited
from a rebound in patient volumes from the decreased levels of
demand experienced at the height of the COVID pandemic during the
second quarter of 2020. In the second quarter of 2021, Hanger's
Patient Care net revenue on a same-clinic basis, totaled
approximately 96 percent of the level experienced in the second
quarter of 2019.
Excluding the effect of acquisitions, net revenue from
prosthetics grew 4.3 percent and net revenue from orthotics grew
40.4 percent, compared to the second quarter of 2020, Prosthetics
comprised 54 percent of Patient Care segment net revenue compared
to 61 percent in the same period of 2020. The changes in sales mix
and growth in device categories for the second quarter of 2021
reflect the relative resiliency of prosthetic services during the
pandemic compared to orthotics, the latter being more significantly
impacted at the height of the pandemic.
Income from operations in the Patient Care segment was $39.6
million during the second quarter of 2021, a decrease of $19.0
million compared to the $58.6 million reported in the prior year.
Patient Care's GAAP results for second quarter of 2021 and 2020
includes the benefit of $0.7 million and $20.5 million,
respectively, 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 and are excluded from Adjusted EBITDA.
Adjusted EBITDA for the segment was $44.8 million, a $0.7
million improvement compared to the second quarter of 2020.
Adjusted EBITDA margin in the segment totaled 18.9 percent compared
to 22.6 percent during the second quarter of 2020. Segment income
from operations, Adjusted EBITDA and margins were impacted in the
quarter compared to the prior year by the restoration of temporary
labor and other cost reductions implemented during the second and
third quarters of 2020.
Products & Services Segment
For the three months ended June 30, 2021, Products &
Services net revenue totaled $44.0 million, reflecting growth of
17.2 percent compared with the same period in 2020. Revenue from
the distribution of O&P componentry totaled $33.3 million, a
growth of $6.7 million, or 25.4 percent. This growth was primarily
the result of the adverse business conditions caused by the
COVID-19 pandemic in the second quarter of 2020. Therapeutic
solutions revenue in the second quarter totaled $10.8 million, a
decline of $0.3 million, or 2.6 percent.
Income from operations for the Products & Services segment
was $3.4 million in the second quarter of 2021 compared to $5.8
million in the same period of 2020. Adjusted EBITDA for the segment
totaled $5.6 million for the second quarter of 2021, a $2.9 million
decline compared with the same period of 2020. Adjusted EBITDA
margin in the segment totaled 12.8 percent compared to 22.9 percent
during the second quarter of 2020. Products & Services segment
income from operations, Adjusted EBITDA and margin were impacted by
the restoration of temporary labor and other cost reductions taken
during the second and third quarters of 2020.
Corporate & Other
Expenses associated with corporate and other activities
increased by $2.6 million to $22.9 million for the quarter ended
June 30, 2021 compared to the same period in 2020. Excluding the
effect of depreciation and amortization, and acquisition-related
expense, the net cost of corporate and other activities increased
by $3.3 million to $19.5 million in the second quarter of 2021.
Net Income; Interest Expense
Interest expense totaled $7.2 million for the three month period
ended June 30, 2021, a decrease of $1.5 million from the prior year
period.
For the three month period ended June 30, 2021, net income was
$10.2 million compared with $31.1 million for the same period in
2020. GAAP diluted income per share was $0.26 compared to $0.81 per
share in 2020. Adjusted diluted income per share was $0.27 for the
three months ended June 30, 2021, compared to $0.35 per share for
the same period in 2020.
Financial Highlights for the Six Months Ended June 30,
2021
- For the six month period, net revenue was $518.3 million,
compared to $467.2 million in 2020, reflecting a net revenue
increase of 10.9 percent. Acquisitions of O&P clinics
consummated in 2020 and 2021 contributed $15.0 million of
incremental revenue for the six month period.
- Patient Care net revenue grew $46.4 million, or 12.0 percent,
to $432.5 million, while same clinic day-adjusted net revenue per
day grew 9.9 percent. For the six month period of 2021, Hanger's
Patient Care segment net revenue on a day-adjusted, same-clinic
basis, totaled approximately 97 percent of the level reported for
the equivalent period in 2019.
- Net revenue from prosthetics, excluding acquisitions, grew 2.9
percent on a day-adjusted basis, while orthotics revenue grew by
19.2 percent, also on a net day-adjusted basis and excluding
acquisitions. Year-to date in 2021, prosthetics constituted 53
percent of Patient Care segment net revenue.
- Products & Services segment net revenue increased $4.7
million, or 5.8 percent, to $85.8 million, driven by an increase of
$5.7 million in distribution services and a $1.0 million decline in
revenue from therapeutic solutions for the period.
- GAAP net income was $6.8 million compared to $15.3 million in
2020. Hanger's GAAP results for the first six months of 2020
included a benefit of $20.5 million to other operating costs
related to the Company's receipt of CARES Act healthcare provider
grants as compared to $0.7 million in the 2021 period.
- Adjusted EBITDA totaled $44.5 million, an increase of $2.7
million as compared to the $41.8 million reported in 2020. The
increase in Adjusted EBITDA for the six month period resulted from
the improvement in net revenue partially offset by the restoration
of temporary cost reductions taken during the second and third
quarters of 2020.
- GAAP diluted earnings per share was $0.17, compared to $0.40
per share in 2020. Adjusted diluted earnings per share was $0.19
for the first six months of 2021, compared to $0.07 for the same
period in 2020.
Net Cash Provided by Operating Activities; Liquidity
Cash flows provided by operating activities for the three months
ending June 30, 2021 were $33.1 million compared to cash flows
provided by operating activities of $102.0 million for the same
period in 2020. The Company continued to achieve strong cash
collections during the second quarter of 2021 as its days sales
outstanding decreased by five days to 40 days as of June 30, 2021
from 45 days on June 30, 2020.
On June 30, 2021, the Company had liquidity of $171.1 million,
comprised of $76.2 million in cash and cash equivalents, and $94.9
million in available borrowing capacity under its revolving credit
facility. This compares to total liquidity of $165.1 million on
March 31, 2021.
2021 Outlook
The Company re-affirmed its financial outlook for 2021 as
originally provided on March 1, 2021. Hanger anticipates net
revenue in a range between $1.145 billion and $1.175 billion, and
Adjusted EBITDA in a range between $130 million and $135
million.
The Company's outlook for 2021 includes approximately $36
million in revenue relating to the full year contribution of
acquisitions consummated in 2020 and through June 30, 2021.
Hanger's outlook assumes a continued sequential improvement in the
third and fourth quarters of the orthotic and prosthetics business
environment related to the continued cessation of the effects of
COVID-19 on patient volumes.
Adjusted EBITDA in this outlook 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, August 5, at 8:30 a.m. Eastern time to discuss
the Company’s second quarter 2021 financial results and business
outlook.
To participate, dial 844-750-4896 or 412-317-5292 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:
https://investor.hanger.com/financial-reporting/quarterly-results/default.aspx.
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. – Headquartered in Austin, Texas,
Hanger, Inc. (NYSE: HNGR) provides comprehensive, outcomes-based
orthotic and prosthetic (O&P) services through its Patient Care
segment, with approximately 800 Hanger Clinic locations nationwide.
Through its Products & Services segment, Hanger distributes
branded and private label O&P devices, products and components,
and provides rehabilitative solutions. Recognized by Forbes as one
of America’s Best Employers for 2021, and rooted in 160 years of
clinical excellence and innovation, Hanger is a purpose-driven
company with a vision to lead the O&P markets by providing
superior patient care, outcomes, services and value, aimed at
empowering human potential. For more information on Hanger, visit
investor.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; labor
shortages and increased turnover in our employee base; contractual,
inflationary and other general cost increases, including with
regard to costs of labor, raw materials and freight; 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, 2020 and Quarterly Report on Form 10-Q for the three months
ended March 31, 2021 and June 30, 2021, 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,
2021
2020
2021
2020
Net revenues
$
280,819
$
233,434
$
518,289
$
467,173
Material costs
89,271
69,972
164,441
147,213
Personnel costs
97,549
73,822
187,429
163,007
Other operating costs
32,721
8,277
64,181
44,163
General and administrative expenses
33,177
33,623
64,118
65,392
Depreciation and amortization
8,007
8,879
16,005
17,710
Income from operations
20,094
38,861
22,115
29,688
Interest expense, net
7,152
8,636
14,492
16,906
Non-service defined benefit plan
expense
167
158
334
316
Income before income taxes
12,775
30,067
7,289
12,466
Provision (benefit) before income
taxes
2,616
(987
)
460
(2,840
)
Net income
$
10,159
$
31,054
$
6,829
$
15,306
Basic and Diluted Per Common Share
Data:
Basic earnings per share
$
0.26
$
0.82
$
0.18
$
0.41
Weighted average shares used to compute
basic earnings per common share
38,647,042
37,958,408
38,458,733
37,749,930
Diluted income per share
$
0.26
$
0.81
$
0.17
$
0.40
Weighted average shares used to compute
diluted earnings per common share
39,208,155
38,325,872
39,216,725
38,424,334
Table 2
Hanger, Inc.
Condensed Consolidated Balance
Sheets
(Unaudited - in thousands)
As of June 30,
As of December 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
76,178
$
144,602
Accounts receivable, net
124,956
128,596
Inventories
83,959
76,429
Income taxes receivable
12,831
12,888
Other current assets
16,702
12,357
Total current assets
314,626
374,872
Non-current assets:
Property, plant, and equipment, net
85,241
84,873
Goodwill
318,383
277,223
Other intangible assets, net
20,751
18,431
Deferred income taxes
53,049
54,877
Operating lease right-of-use assets
122,030
124,741
Other assets
17,564
15,734
Total assets
$
931,644
$
950,751
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Current portion of long-term debt
$
12,257
$
10,085
Accounts payable
58,400
65,091
Accrued expenses and other current
liabilities
63,333
62,861
Accrued compensation related costs
51,256
72,541
Current portion of operating lease
liabilities
35,586
35,002
Total current liabilities
220,832
245,580
Long-term liabilities:
Long-term debt, less current portion
495,245
493,012
Operating lease liabilities
100,515
104,589
Other liabilities
51,160
56,593
Total liabilities
867,752
899,774
Shareholders’ equity:
Common stock
389
383
Additional paid-in capital
367,726
365,503
Accumulated other comprehensive loss
(16,358
)
(20,215
)
Accumulated deficit
(287,169
)
(293,998
)
Treasury stock, at cost
(696
)
(696
)
Total shareholders’ equity
63,892
50,977
Total liabilities and shareholders’
equity
$
931,644
$
950,751
Table 3
Hanger, Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited - in thousands)
For the Six Months Ended
June 30,
2021
2020
Cash flows (used in) provided by
operating activities:
Net income
$
6,829
$
15,306
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization
16,005
17,710
(Benefit) provision for doubtful
accounts
(292
)
1,084
Share-based compensation expense
6,418
12,485
Deferred income taxes
232
(9
)
Amortization of debt discounts and
issuance costs
948
936
Gain on sale and disposal of fixed
assets
(718
)
(531
)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net
5,363
44,917
Inventories
(5,899
)
5,072
Other current assets and other assets
(6,202
)
(4,882
)
Income taxes
57
(5,278
)
Accounts payable
(6,577
)
305
Accrued expenses and other current
liabilities
(2,765
)
2,393
Accrued compensation related costs
(21,412
)
(15,536
)
Other liabilities
(522
)
3,686
Operating lease liabilities, net of
amortization of right-of-use assets
(780
)
2,403
Net cash (used in) provided by operating
activities
(9,315
)
80,061
Cash flows used in investing
activities:
Acquisitions, net of cash acquired
(35,349
)
(16,788
)
Purchase of property, plant, and
equipment
(13,339
)
(15,742
)
Purchase of therapeutic program equipment
leased to third parties under operating leases
(870
)
(3,065
)
Proceeds from sale of property, plant, and
equipment
1,332
1,134
Purchase of company-owned life insurance
investment
—
(250
)
Net cash used in investing activities
(48,226
)
(34,711
)
Cash flows (used in) provided by
financing activities:
Borrowings under revolving credit
agreement
—
79,000
Repayment of borrowings under revolving
credit agreement
—
(57,000
)
Payment of employee taxes on share-based
compensation
(4,560
)
(6,828
)
Repayment of term loan
(2,525
)
(2,525
)
Payment on Seller Notes
(2,265
)
(1,799
)
Payments under vendor financing
arrangements
(1,375
)
(275
)
Payments of financing lease
obligations
(529
)
(314
)
Payment of debt issuance costs
—
(214
)
Proceeds from the exercise of options
371
39
Net cash (used in) provided by financing
activities
(10,883
)
10,084
(Decrease) increase in cash and cash
equivalents
(68,424
)
55,434
Cash and cash equivalents at beginning of
period
144,602
74,419
Cash and cash equivalents at end of
period
$
76,178
$
129,853
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,
2021
2020
2021
2020
Net Revenue (a)
Patient Care
$
236,787
$
195,859
$
432,469
$
386,042
Products & Services
44,032
37,575
85,820
81,131
Net revenue
$
280,819
$
233,434
$
518,289
$
467,173
EBITDA (b)
Patient Care
$
44,427
$
63,446
$
68,292
$
79,459
Products & Services
5,364
8,256
11,975
13,088
Corporate & Other
(21,690
)
(23,962
)
(42,147
)
(45,149
)
EBITDA (Non-GAAP)
$
28,101
$
47,740
$
38,120
$
47,398
Adjusted EBITDA (b)
Patient Care
$
44,845
$
44,193
$
69,793
$
61,519
Products & Services
5,647
8,590
12,517
13,627
Corporate & Other
(19,517
)
(16,258
)
(37,791
)
(33,355
)
Adjusted EBITDA (Non-GAAP)
$
30,975
$
36,525
$
44,519
$
41,791
(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,
2021
2020
2021
2020
Net income - as reported (GAAP)
$
10,159
$
31,054
$
6,829
$
15,306
Adjustments:
Modification of equity awards (a)
—
5,869
—
5,869
Amortization expense
1,315
1,783
2,549
3,274
Third-party professional fees
—
—
—
1,639
Acquisition-related expenses
170
39
330
372
Hanger supply chain implementation
costs
135
295
267
430
Severance expenses
—
—
54
—
Proceeds from grants under the CARES
Act
(670
)
(20,533
)
(670
)
(20,533
)
Adjustments prior to tax effect
$
950
$
(12,547
)
$
2,530
$
(8,949
)
Tax effect of specified adjustments
(a)
(678
)
(5,192
)
(1,897
)
(3,684
)
Adjustments after taxes
272
(17,739
)
633
(12,633
)
Adjusted net income (Non-GAAP)
$
10,431
$
13,315
$
7,462
$
2,673
Basic earnings per share - as reported
(GAAP)
$
0.26
$
0.82
$
0.18
$
0.41
Effect of above listed specified
adjustments
0.01
(0.47
)
0.01
(0.34
)
Adjusted basic earnings per share - as
reported (Non-GAAP)
$
0.27
$
0.35
$
0.19
$
0.07
Diluted earnings per share - as reported
(GAAP)
$
0.26
$
0.81
$
0.17
$
0.40
Effect of above listed specified
adjustments
0.01
(0.46
)
0.02
(0.33
)
Adjusted diluted earnings per share - as
reported (Non-GAAP)
$
0.27
$
0.35
$
0.19
$
0.07
Shares used to compute basic earnings per
share
38,647,042
37,958,408
38,458,733
37,749,930
Shares used to compute diluted earnings
per share
39,208,155
38,325,872
39,216,725
38,424,334
(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 2021 and 2020 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,
2021
2020
2021
2020
Net income - as reported (GAAP)
$
10,159
$
31,054
$
6,829
$
15,306
Adjustments to calculate EBITDA:
Depreciation and amortization
8,007
8,879
16,005
17,710
Interest expense, net
7,152
8,636
14,492
16,906
Non-service defined benefit plan
expense
167
158
334
316
Provision (benefit) for income taxes
2,616
(987
)
460
(2,840
)
Adjustments - net income to EBITDA
17,942
16,686
31,291
32,092
EBITDA (Non-GAAP)
28,101
47,740
38,120
47,398
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
—
—
—
1,639
Equity-based compensation (a)
3,239
8,984
6,418
12,485
Acquisition-related expenses
170
39
330
372
Hanger supply chain implementation
costs
135
295
267
430
Severance expenses
—
—
54
—
Proceeds from grants under the CARES
Act
(670
)
(20,533
)
(670
)
(20,533
)
Further adjustments - EBITDA to Adjusted
EBITDA
2,874
(11,215
)
6,399
(5,607
)
Adjusted EBITDA (Non-GAAP)
$
30,975
$
36,525
$
44,519
$
41,791
(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 (Loss) 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,
2021
2020
2021
2020
Patient Care
Income from operations - as reported
(GAAP)
$
39,640
$
58,619
$
58,690
$
70,156
Depreciation & amortization
4,787
4,827
9,602
9,303
EBITDA (Non-GAAP)
44,427
63,446
68,292
79,459
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
953
1,078
1,850
2,256
Hanger supply chain implementation
costs
135
202
267
337
Severance expenses
—
—
54
—
Proceeds from grants under the CARES
Act
(670
)
(20,533
)
(670
)
(20,533
)
Further adjustments - EBITDA to Adjusted
EBITDA
418
(19,253
)
1,501
(17,940
)
Adjusted EBITDA (Non-GAAP)
44,845
44,193
69,793
61,519
Products & Services
Income from operations - as reported
(GAAP)
3,401
5,758
8,077
7,838
Depreciation & amortization
1,963
2,498
3,898
5,250
EBITDA (Non-GAAP)
5,364
8,256
11,975
13,088
Further adjustments to calculate Adjusted
EBITDA:
Equity-based compensation
283
241
542
446
Hanger supply chain implementation
costs
—
93
—
93
Further adjustments - EBITDA to Adjusted
EBITDA
283
334
542
539
Adjusted EBITDA (Non-GAAP)
5,647
8,590
12,517
13,627
Corporate & Other
Loss from operations - as reported
(GAAP)
(22,947
)
(25,516
)
(44,652
)
(48,306
)
Depreciation & amortization
1,257
1,554
2,505
3,157
EBITDA (Non-GAAP)
(21,690
)
(23,962
)
(42,147
)
(45,149
)
Further adjustments to calculate Adjusted
EBITDA:
Third-party professional fees
—
—
—
1,639
Equity-based compensation
2,003
7,665
4,026
9,783
Acquisition related expenses
170
39
330
372
Further adjustments - EBITDA to Adjusted
EBITDA
2,173
7,704
4,356
11,794
Adjusted EBITDA (Non-GAAP)
(19,517
)
(16,258
)
(37,791
)
(33,355
)
Total Adjusted EBITDA (Non-GAAP)
$
30,975
$
36,525
$
44,519
$
41,791
(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,
2021
2020
Debt:
Term Loan B
$
488,588
$
491,113
Seller Notes
18,105
11,510
Deferred payment obligation
4,000
4,000
Finance lease liabilities and other
3,437
3,869
Total debt before unamortized discount and
debt issuance costs
514,130
510,492
Unamortized discount and debt issuance
costs, net
(6,628
)
(7,395
)
Total debt
$
507,502
$
503,097
Current portion of long-term debt:
Term Loan B
$
5,050
$
5,050
Seller Notes
6,303
4,060
Finance lease liabilities and other
904
975
Total current portion of long-term
debt
12,257
10,085
Long-term debt
$
495,245
$
493,012
Net indebtedness:
Total debt before unamortized discount and
debt issuance costs
$
514,130
$
510,492
Cash and cash equivalents
(76,178
)
(144,602
)
Net indebtedness
$
437,952
$
365,890
Table 9
Hanger, Inc.
Key Operating Metrics
As of and For the Three Months
Ended June 30,
For the Six Months Ended June
30,
2021
2020
2021
2020
Same clinic revenue:
Growth (decline) rate on net revenue
18.2%
(18.7)%
8.2%
(11.0)%
Growth (decline) rate day adjusted (a)
18.2%
(18.7)%
9.9%
(11.7)%
Clinical locations:
Patient care clinics
723
707
Satellite clinics
112
108
Total clinical locations
835
815
(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/20210804005782/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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