Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic ("O&P") patient care services and solutions, today announced its final financial results for the fourth quarter and year ended December 31, 2021.

Financial Highlights

  • Net revenues were $312.4 million for the three months ended December 31, 2021, compared to $277.3 million for the same period in 2020, reflecting growth of 12.6 percent.
  • Net income was $14.0 million for the three months ended December 31, 2021, compared to $16.1 million for the same period in 2020. Income from operations was $24.9 million for the quarter compared to $29.1 million for the same period in 2020, a decline of 14.6 percent.
  • Adjusted EBITDA was $37.2 million in the fourth quarter of 2021, compared to $35.5 million for the same period in 2020, reflecting an increase of $1.7 million, or 4.9 percent.
  • GAAP diluted earnings per share was $0.36 per share for the fourth quarter of 2021, compared to $0.41 per share for the same period in 2020. Adjusted diluted earnings per share was $0.40 for the three months ended December 31, 2021, compared to $0.36 for the same period in 2020, an increase of 11.1 percent.
  • Results were consistent with those included in the Company's February 7, 2022 release of preliminary financial results for the year-ended December 31, 2021.

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "While COVID-19 presented a challenge throughout 2021, I am pleased that we nevertheless achieved strong revenue and Adjusted EBITDA growth during the year. This growth, coupled with our expansion of the Company through key acquisitions of independent O&P clinics during 2021, have positioned us well for the coming year."

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 December 31, 2021

Patient Care Segment

For the three months ended December 31, 2021, Patient Care net revenues were $266.5 million, an increase of $33.6 million, or 14.4 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 $16.4 million of incremental revenue.

Net same clinic revenue on a day-adjusted basis grew 5.8 percent during the fourth quarter of 2021 compared to the same quarter in the prior year period. Patient Care results benefited from the continued improvement in patient volumes from the decreased levels of demand experienced due to the COVID pandemic during 2020. The Patient Care net revenue on a same-clinic basis achieved 95.0 percent of the level experienced in the fourth quarter of 2019 due to the effects of the Omicron variant of COVID-19 on clinic operations and patient volumes late in the quarter.

Excluding the effect of acquisitions, net revenues from prosthetics grew 7.1 percent and net revenues from orthotics grew 4.3 percent, each compared to the fourth quarter of 2020. Prosthetics comprised 56.8 percent of Patient Care segment net revenues for the quarter compared to 56.0 percent in the same period of 2020.

Income from operations in the Patient Care segment was $44.0 million during the fourth quarter of 2021, a decrease of $0.8 million compared to the $44.8 million reported in the prior year. Adjusted EBITDA for the segment was $50.8 million, which reflected a $5.5 million increase compared to the fourth quarter of 2020.

Products & Services Segment

For the three months ended December 31, 2021, Products & Services net revenues totaled $45.9 million, reflecting growth of 3.2 percent compared with the same period in 2020. Revenue from the distribution of O&P componentry totaled $35.0 million, reflecting growth of $1.9 million, or 5.8 percent. Therapeutic solutions revenue in the fourth quarter totaled $10.8 million, a decline of $0.5 million, or 4.4 percent.

Income from operations for the Products & Services segment was $4.5 million in the fourth quarter of 2021 compared to $4.8 million in the same period of 2020, a decrease of 4.7 percent. Adjusted EBITDA for the segment totaled $6.8 million for the fourth quarter of 2021, a $0.7 million decline compared with the same period of 2020. Adjusted EBITDA margin in the segment totaled 14.9 percent compared to 17.0 percent during the fourth quarter of 2020.

Corporate & Other

Expenses associated with corporate and other activities increased by $3.2 million to $23.6 million for the quarter ended December 31, 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 $3.0 million to $20.4 million in the fourth quarter of 2021. This increase related primarily to the resumption of the implementation of a new financial and supply chain system during 2021 as well as other increases in technology and personnel costs.

Net Income; Interest Expense

Interest expense totaled $7.1 million for the three month period ended December 31, 2021, a decrease of $0.5 million from the prior year period.

For the three month period ended December 31, 2021, net income was $14.0 million compared with $16.1 million for the same period in 2020. GAAP diluted income per share was $0.36 compared to $0.41 per share in 2020. Adjusted diluted income per share was $0.40 for the three months ended December 31, 2021, compared to $0.36 per share for the same period in 2020.

Financial Highlights for the Year Ended December 31, 2021

  • Net revenues were $1,120.5 million for the year ended December 31, 2021, compared to $1,001.2 million in 2020, reflecting an increase of 11.9 percent. Acquisitions of O&P clinics consummated in 2020 and 2021 contributed $41.1 million of incremental revenue.
  • Patient Care net revenues totaled $943.3 million, reflecting growth of $111.7 million, or 13.4 percent for the year, while same clinic day-adjusted net revenues per day grew 9.1 percent. Patient Care segment net revenues on a day-adjusted same-clinic basis totaled approximately 97 percent of the level reported for the equivalent period in 2019.
  • Net revenues from prosthetics, excluding acquisitions, grew 6.1 percent on a day-adjusted basis, while orthotics revenues grew 13.0 percent, also on a net day-adjusted basis and excluding acquisitions. For the year, prosthetics constituted 54.8 percent of Patient Care segment net revenues.
  • Products & Services segment net revenues totaled $177.2 million, an increase of $7.6 million, or 4.5 percent growth, driven by an increase of $9.6 million in revenue from distribution services and a $2.0 million decline in revenue from therapeutic solutions.
  • GAAP net income was $42.0 million compared to $38.2 million in 2020. Hanger's GAAP results for the year ended 2020 included a benefit of $24.0 million to other operating costs related to the Company's receipt of CARES Act healthcare provider grants as compared to $1.1 million in the 2021 period. 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 totaled $118.9 million, an increase of $13.8 million as compared to the $105.1 million reported in 2020. The increase in Adjusted EBITDA for the year resulted primarily from improvement in net revenues partially offset by the restoration of temporary cost reductions taken during the second and third quarters of 2020.
  • GAAP diluted earnings per share was $1.07, compared to $0.99 per share in 2020. Adjusted diluted earnings per share was $0.97 for the year ended 2021, compared to $0.63 for the same period in 2020.

Net Cash Provided by Operating Activities; Liquidity

Cash flows provided by operating activities for the three month period ending December 31, 2021 were $35.6 million compared to cash flows provided by operating activities of $30.3 million in the fourth quarter of 2020. The Company's days sales outstanding were 43 days as of December 31, 2021, which reflected a one day increase as compared to the same period in 2020.

On November 23, 2021, the Company amended its existing credit agreement to, among other things, increase the aggregate amount of the revolving loan commitment by $35 million to an aggregate of $135 million, extend the scheduled maturity date of the revolving loan facility to November 23, 2026, and decrease the applicable margin on LIBOR and base rate revolving loan borrowings by 0.75 percent per annum.

On December 31, 2021, the Company had liquidity of $191.0 million, comprised of $61.7 million in cash and cash equivalents, and $129.3 million in available borrowing capacity under its revolving credit facility. This compares to total liquidity of $170.5 million on September 30, 2021.

2022 Outlook

The Company's current outlook for 2022 remains unchanged since the time of its release of preliminary financial information regarding the fourth quarter and full year 2021 on February 7, 2022.

As previously disclosed, the Company anticipates 2022 net revenue will be in a range between $1.190 billion and $1.220 billion, and Adjusted EBITDA in a range between $127 million and $132 million. This reflects growth of approximately 7 percent in revenue and 9 percent in Adjusted EBITDA over 2021 using the mid-point of the guidance ranges. The Company’s revenue growth includes an estimate of approximately 5 percent in same clinic revenue growth on a day-adjusted basis related to its Patient Care segment.

The Company’s outlook for 2022 includes approximately $35 million in revenue relating to the full year effect of acquisitions consummated in 2021.

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.

Fourth Quarter and Full Year 2021 Conference and Webcast Details

Hanger’s management team will host a conference call tomorrow, Tuesday, March 1, 2022 at 8:30 a.m. Eastern time to discuss the Company’s fourth quarter and full year 2021 financial results and business outlook for 2022.

To participate in the Company’s live conference call, please dial (844) 200-6205 or +1 (929) 526-1599 for international participants and reference access code 124631. A live webcast, replay of the call, and earnings release will be available on the Company’s Investor Relations website at https://investor.hanger.com/financial-reporting/quarterly-results. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call.

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 875 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 2022, 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, 2021 and Quarterly Report on Form 10-Q for the three months ended March 31, 2021, June 30, 2021 and September 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.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

For the Three Months Ended
December 31,

 

For the Years Ended
December 31,

 

 

2021

 

2020

 

2021

 

2020

Net revenues

 

$

312,372

 

$

277,340

 

$

1,120,488

 

$

1,001,150

Material costs

 

 

97,340

 

 

86,735

 

 

354,342

 

 

315,410

Personnel costs

 

 

111,197

 

 

98,457

 

 

397,574

 

 

351,191

Other operating costs (a)

 

 

36,473

 

 

25,803

 

 

135,630

 

 

100,010

General and administrative expenses

 

 

34,119

 

 

28,867

 

 

127,752

 

 

127,785

Depreciation and amortization

 

 

8,355

 

 

8,334

 

 

32,519

 

 

34,847

Income from operations

 

 

24,888

 

 

29,144

 

 

72,671

 

 

71,907

Interest expense, net

 

 

7,059

 

 

7,527

 

 

28,864

 

 

32,445

Non-service defined benefit plan expense

 

 

166

 

 

158

 

 

667

 

 

632

Income before income taxes

 

 

17,663

 

 

21,459

 

 

43,140

 

 

38,830

Provision for income taxes

 

 

3,627

 

 

5,388

 

 

1,158

 

 

638

Net income

 

$

14,036

 

$

16,071

 

$

41,982

 

$

38,192

 

 

 

 

 

 

 

 

 

Basic and Diluted Per Common Share Data:

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.36

 

$

0.42

 

$

1.09

 

$

1.01

Weighted average shares used to compute basic earnings per common share

 

 

38,744,681

 

 

38,157,402

 

 

38,599,300

 

 

37,948,796

Diluted earnings per share

 

$

0.36

 

$

0.41

 

$

1.07

 

$

0.99

Weighted average shares used to compute diluted earnings per common share

 

 

39,141,708

 

 

38,911,299

 

 

39,225,616

 

 

38,598,330

(a) For the years ended December 31, 2021 and 2020, Hanger recognized approximately $1.1 million and $24.0 million respectively of income within other operating costs related to grant proceeds received under the CARES Act.

Table 2

Hanger, Inc.

Consolidated Balance Sheets

(in thousands)

 

 

 

As of December 31,

 

As of December 31,

 

 

2021

 

2020

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

61,692

 

 

$

144,602

 

Accounts receivable, net

 

 

152,058

 

 

 

128,596

 

Inventories

 

 

87,462

 

 

 

76,429

 

Income taxes receivable

 

 

581

 

 

 

12,888

 

Other current assets

 

 

16,536

 

 

 

12,357

 

Total current assets

 

 

318,329

 

 

 

374,872

 

 

 

 

 

 

Non-current assets:

 

 

 

 

Property, plant, and equipment, net

 

 

82,434

 

 

 

84,873

 

Goodwill

 

 

363,554

 

 

 

277,223

 

Other intangible assets, net

 

 

25,892

 

 

 

18,431

 

Deferred income taxes

 

 

45,494

 

 

 

54,877

 

Operating lease right-of-use assets

 

 

144,491

 

 

 

124,741

 

Other assets

 

 

17,945

 

 

 

15,734

 

Total assets

 

$

998,139

 

 

$

950,751

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt

 

$

14,938

 

 

$

10,085

 

Accounts payable

 

 

63,565

 

 

 

65,091

 

Accrued expenses and other current liabilities

 

 

60,399

 

 

 

62,861

 

Accrued compensation related costs

 

 

54,465

 

 

 

72,541

 

Current portion of operating lease liabilities

 

 

33,438

 

 

 

35,002

 

Total current liabilities

 

 

226,805

 

 

 

245,580

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

Long-term debt, less current portion

 

 

502,307

 

 

 

493,012

 

Operating lease liabilities

 

 

124,016

 

 

 

104,589

 

Other liabilities

 

 

34,840

 

 

 

56,593

 

Total liabilities

 

 

887,968

 

 

 

899,774

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common stock

 

 

389

 

 

 

383

 

Additional paid-in capital

 

 

373,644

 

 

 

365,503

 

Accumulated other comprehensive loss

 

 

(11,150

)

 

 

(20,215

)

Accumulated deficit

 

 

(252,016

)

 

 

(293,998

)

Treasury stock, at cost

 

 

(696

)

 

 

(696

)

Total shareholders’ equity

 

 

110,171

 

 

 

50,977

 

Total liabilities and shareholders’ equity

 

$

998,139

 

 

$

950,751

 

Table 3

Hanger, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

For the Years Ended
December 31,

 

 

2021

 

2020

Cash flows provided by operating activities:

 

 

 

 

Net income

 

$

41,982

 

 

$

38,192

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

Depreciation and amortization

 

 

32,519

 

 

 

34,847

 

(Benefit) provision for doubtful accounts

 

 

(54

)

 

 

295

 

Share-based compensation expense

 

 

12,297

 

 

 

18,448

 

Deferred income taxes

 

 

5,613

 

 

 

17,432

 

Amortization of debt discounts and issuance costs

 

 

1,932

 

 

 

2,085

 

Gain on sale and disposal of fixed assets

 

 

(1,340

)

 

 

(3,134

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable, net

 

 

(17,315

)

 

 

34,378

 

Inventories

 

 

(6,350

)

 

 

(6,258

)

Other current assets and other assets

 

 

(5,736

)

 

 

(628

)

Income taxes receivable

 

 

12,307

 

 

 

(13,757

)

Accounts payable

 

 

(1,909

)

 

 

14,674

 

Accrued expenses and other current liabilities

 

 

(6,351

)

 

 

217

 

Accrued compensation related costs

 

 

(18,420

)

 

 

11,349

 

Other liabilities

 

 

(11,079

)

 

 

4,778

 

Operating lease liabilities, net of amortization of right-of-use assets

 

 

(1,886

)

 

 

2,649

 

Net cash provided by operating activities

 

 

36,210

 

 

 

155,567

 

Cash flows used in investing activities:

 

 

 

 

Acquisitions, net of cash acquired

 

 

(80,078

)

 

 

(21,801

)

Purchase of property, plant, and equipment

 

 

(22,579

)

 

 

(24,500

)

Purchase of therapeutic program equipment leased to third parties under operating leases

 

 

(2,280

)

 

 

(3,592

)

Proceeds from sale of property, plant and equipment

 

 

2,451

 

 

 

3,890

 

Other investing activities, net

 

 

—

 

 

 

135

 

Net cash used in investing activities

 

 

(102,486

)

 

 

(45,868

)

Cash flows used in financing activities:

 

 

 

 

 

Borrowings under revolving credit agreement

 

 

—

 

 

 

79,000

 

Repayments under revolving credit agreement

 

 

—

 

 

 

(79,000

)

Repayment of term loan

 

 

(5,050

)

 

 

(5,050

)

Payment of employee taxes on stock-based compensation

 

 

(4,674

)

 

 

(7,356

)

Payment of Seller Notes and additional consideration

 

 

(4,434

)

 

 

(25,415

)

Payments under vendor financing arrangements

 

 

(1,375

)

 

 

(825

)

Payment of financing lease obligations

 

 

(1,052

)

 

 

(748

)

Payment of debt issuance costs

 

 

(573

)

 

 

(214

)

Proceeds from exercise of options

 

 

524

 

 

 

92

 

Net cash used in financing activities

 

 

(16,634

)

 

 

(39,516

)

(Decrease) increase in cash and cash equivalents

 

 

(82,910

)

 

 

70,183

 

Cash and cash equivalents at beginning of period

 

 

144,602

 

 

 

74,419

 

Cash and cash equivalents at end of period

 

$

61,692

 

 

$

144,602

 

Table 4
Hanger, Inc.
Segment Information: Revenue, EBITDA and Adjusted EBITDA
(in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as EBITDA 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
December 31,

 

For the Years Ended
December 31,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Net Revenue (a)

 

 

 

 

 

 

 

 

Patient Care

 

$

266,503

 

 

$

232,897

 

 

$

943,328

 

 

$

831,603

 

Products & Services

 

 

45,869

 

 

 

44,443

 

 

 

177,160

 

 

 

169,547

 

Net revenue

 

$

312,372

 

 

$

277,340

 

 

$

1,120,488

 

 

$

1,001,150

 

 

 

 

 

 

 

 

 

 

EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

49,117

 

 

$

49,606

 

 

$

163,599

 

 

$

166,089

 

Products & Services

 

 

6,531

 

 

 

7,056

 

 

 

25,075

 

 

 

27,898

 

Corporate & Other

 

 

(22,405

)

 

 

(19,184

)

 

 

(83,484

)

 

 

(87,233

)

EBITDA (Non-GAAP)

 

$

33,243

 

 

$

37,478

 

 

$

105,190

 

 

$

106,754

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (b)

 

 

 

 

 

 

 

 

Patient Care

 

$

50,781

 

 

$

45,314

 

 

$

167,779

 

 

$

146,042

 

Products & Services

 

 

6,833

 

 

 

7,539

 

 

 

26,183

 

 

 

29,323

 

Corporate & Other

 

 

(20,395

)

 

 

(17,381

)

 

 

(75,027

)

 

 

(70,241

)

Adjusted EBITDA (Non-GAAP)

 

$

37,219

 

 

$

35,472

 

 

$

118,935

 

 

$

105,124

 

(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
(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
December 31,

 

For the Years Ended
December 31,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Net income - as reported (GAAP)

 

$

14,036

 

 

$

16,071

 

 

$

41,982

 

 

$

38,192

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Modification of equity awards (a)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,869

 

Amortization expense

 

 

1,655

 

 

 

1,620

 

 

 

5,611

 

 

 

6,691

 

Third-party professional fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,639

 

Acquisition-related expenses

 

 

304

 

 

 

83

 

 

 

946

 

 

 

488

 

Hanger supply chain implementation costs

 

 

33

 

 

 

195

 

 

 

396

 

 

 

1,001

 

Severance expenses

 

 

484

 

 

 

209

 

 

 

511

 

 

 

3,224

 

Proceeds from grants under the CARES Act

 

 

(479

)

 

 

(3,450

)

 

 

(1,149

)

 

 

(24,026

)

Gain on sale of property

 

 

—

 

 

 

(1,925

)

 

 

—

 

 

 

(1,925

)

Loss on cancellation of education event

 

 

744

 

 

 

—

 

 

 

744

 

 

 

—

 

Adjustments prior to tax effect

 

$

2,741

 

 

$

(3,268

)

 

$

7,059

 

 

$

(7,039

)

 

 

 

 

 

 

 

 

 

Tax effect of specified adjustments (b)

 

 

(1,270

)

 

 

1,022

 

 

 

(10,890

)

 

 

(6,992

)

Adjustments after taxes

 

 

1,471

 

 

 

(2,246

)

 

 

(3,831

)

 

 

(14,031

)

 

 

 

 

 

 

 

 

 

Adjusted net income (Non-GAAP)

 

$

15,507

 

 

$

13,825

 

 

$

38,151

 

 

$

24,161

 

 

 

 

 

 

 

 

 

 

Basic earnings per share - as reported (GAAP)

 

$

0.36

 

 

$

0.42

 

 

$

1.09

 

 

$

1.01

 

Effect of above listed specified adjustments

 

 

0.04

 

 

 

(0.06

)

 

 

(0.10

)

 

 

(0.37

)

Adjusted basic earnings per share - as reported (Non-GAAP)

 

$

0.40

 

 

$

0.36

 

 

$

0.99

 

 

$

0.64

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - as reported (GAAP)

 

$

0.36

 

 

$

0.41

 

 

$

1.07

 

 

$

0.99

 

Effect of above listed specified adjustments

 

 

0.04

 

 

 

(0.05

)

 

 

(0.10

)

 

 

(0.36

)

Adjusted diluted earnings per share - as reported (Non-GAAP)

 

$

0.40

 

 

$

0.36

 

 

$

0.97

 

 

$

0.63

 

 

 

 

 

 

 

 

 

 

Shares used to compute basic earnings per share

 

 

38,744,681

 

 

 

38,157,402

 

 

 

38,599,300

 

 

 

37,948,796

 

Shares used to compute diluted earnings per share

 

 

39,141,708

 

 

 

38,911,299

 

 

 

39,225,616

 

 

 

38,598,330

 

(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
(in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as EBITDA 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
December 31,

 

For the Years Ended
December 31,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Net income - as reported (GAAP)

 

$

14,036

 

 

$

16,071

 

 

$

41,982

 

 

$

38,192

 

 

 

 

 

 

 

 

 

 

Adjustments to calculate EBITDA:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,355

 

 

 

8,334

 

 

 

32,519

 

 

 

34,847

 

Interest expense, net

 

 

7,059

 

 

 

7,527

 

 

 

28,864

 

 

 

32,445

 

Non-service defined benefit plan expense

 

 

166

 

 

 

158

 

 

 

667

 

 

 

632

 

Provision for income taxes

 

 

3,627

 

 

 

5,388

 

 

 

1,158

 

 

 

638

 

Adjustments - net income to EBITDA

 

 

19,207

 

 

 

21,407

 

 

 

63,208

 

 

 

68,562

 

EBITDA (Non-GAAP)

 

 

33,243

 

 

 

37,478

 

 

 

105,190

 

 

 

106,754

 

 

 

 

 

 

 

 

 

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,639

 

Equity-based compensation (a)

 

 

2,890

 

 

 

2,882

 

 

 

12,297

 

 

 

17,969

 

Acquisition-related expenses

 

 

304

 

 

 

83

 

 

 

946

 

 

 

488

 

Hanger supply chain implementation costs

 

 

33

 

 

 

195

 

 

 

396

 

 

 

1,001

 

Severance expenses

 

 

484

 

 

 

209

 

 

 

511

 

 

 

3,224

 

Proceeds from grants under the CARES Act

 

 

(479

)

 

 

(3,450

)

 

 

(1,149

)

 

 

(24,026

)

Gain on sale of property

 

 

—

 

 

 

(1,925

)

 

 

—

 

 

 

(1,925

)

Loss on cancellation of education event

 

 

744

 

 

 

—

 

 

 

744

 

 

 

—

 

Further adjustments - EBITDA to Adjusted EBITDA

 

 

3,976

 

 

 

(2,006

)

 

 

13,745

 

 

 

(1,630

)

Adjusted EBITDA (Non-GAAP)

 

$

37,219

 

 

$

35,472

 

 

$

118,935

 

 

$

105,124

 

(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
(in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as EBITDA 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
December 31,

 

For the Years Ended
December 31,

 

 

2021

 

2020

 

2021

 

2020

Patient Care

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

$

43,967

 

 

$

44,803

 

 

$

143,977

 

 

$

147,197

 

Depreciation & amortization

 

 

5,150

 

 

 

4,803

 

 

 

19,622

 

 

 

18,892

 

EBITDA (Non-GAAP)

 

 

49,117

 

 

 

49,606

 

 

 

163,599

 

 

 

166,089

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

925

 

 

 

874

 

 

 

3,721

 

 

 

4,055

 

Hanger supply chain implementation costs

 

 

43

 

 

 

167

 

 

 

406

 

 

 

767

 

Severance expenses

 

 

431

 

 

 

42

 

 

 

458

 

 

 

1,082

 

Proceeds from grants under the CARES Act

 

 

(479

)

 

 

(3,450

)

 

 

(1,149

)

 

 

(24,026

)

Gain on sale of property

 

 

—

 

 

 

(1,925

)

 

 

—

 

 

 

(1,925

)

Loss on cancellation of education event

 

 

744

 

 

 

—

 

 

 

744

 

 

 

—

 

Further adjustments - EBITDA to Adjusted EBITDA

 

 

1,664

 

 

 

(4,292

)

 

 

4,180

 

 

 

(20,047

)

Adjusted EBITDA (Non-GAAP)

 

 

50,781

 

 

 

45,314

 

 

 

167,779

 

 

 

146,042

 

 

 

 

 

 

 

 

 

 

Products & Services

 

 

 

 

 

 

 

 

Income from operations - as reported (GAAP)

 

 

4,543

 

 

 

4,766

 

 

 

17,215

 

 

 

17,725

 

Depreciation & amortization

 

 

1,988

 

 

 

2,290

 

 

 

7,860

 

 

 

10,173

 

EBITDA (Non-GAAP)

 

 

6,531

 

 

 

7,056

 

 

 

25,075

 

 

 

27,898

 

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

259

 

 

 

246

 

 

 

1,065

 

 

 

936

 

Hanger supply chain implementation costs

 

 

(10

)

 

 

28

 

 

 

(10

)

 

 

234

 

Severance expenses

 

 

53

 

 

 

209

 

 

 

53

 

 

 

255

 

Further adjustments - EBITDA to Adjusted EBITDA

 

 

302

 

 

 

483

 

 

 

1,108

 

 

 

1,425

 

Adjusted EBITDA (Non-GAAP)

 

 

6,833

 

 

 

7,539

 

 

 

26,183

 

 

 

29,323

 

 

 

 

 

 

 

 

 

 

Corporate & Other

 

 

 

 

 

 

 

 

Loss from operations - as reported (GAAP)

 

 

(23,622

)

 

 

(20,425

)

 

 

(88,521

)

 

 

(93,015

)

Depreciation & amortization

 

 

1,217

 

 

 

1,241

 

 

 

5,037

 

 

 

5,782

 

EBITDA (Non-GAAP)

 

 

(22,405

)

 

 

(19,184

)

 

 

(83,484

)

 

 

(87,233

)

Further adjustments to calculate Adjusted EBITDA:

 

 

 

 

 

 

 

 

Third-party professional fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,639

 

Equity-based compensation (a)

 

 

1,706

 

 

 

1,762

 

 

 

7,511

 

 

 

12,978

 

Acquisition related expenses

 

 

304

 

 

 

83

 

 

 

946

 

 

 

488

 

Severance expenses

 

 

—

 

 

 

(42

)

 

 

—

 

 

 

1,887

 

Further adjustments - EBITDA to Adjusted EBITDA

 

 

2,010

 

 

 

1,803

 

 

 

8,457

 

 

 

16,992

 

Adjusted EBITDA (Non-GAAP)

 

 

(20,395

)

 

 

(17,381

)

 

 

(75,027

)

 

 

(70,241

)

Total Adjusted EBITDA (Non-GAAP)

 

$

37,219

 

 

$

35,472

 

 

$

118,935

 

 

$

105,124

 

(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

(in thousands)

 

 

 

As of December 31,

 

As of December 31,

 

 

2021

 

2020

Debt:

 

 

 

 

Term Loan B

 

$

486,063

 

 

$

491,113

 

Seller Notes

 

 

29,812

 

 

 

11,510

 

Deferred payment obligation

 

 

4,000

 

 

 

4,000

 

Finance lease liabilities and other

 

 

3,344

 

 

 

3,869

 

Total debt before unamortized discount and debt issuance costs

 

 

523,219

 

 

 

510,492

 

Unamortized discount and debt issuance costs, net

 

 

(5,974

)

 

 

(7,395

)

Total debt

 

$

517,245

 

 

$

503,097

 

 

 

 

 

 

Current portion of long-term debt:

 

 

 

 

Term Loan B

 

$

5,050

 

 

$

5,050

 

Seller Notes

 

 

8,969

 

 

 

4,060

 

Finance lease liabilities and other

 

 

919

 

 

 

975

 

Total current portion of long-term debt

 

 

14,938

 

 

 

10,085

 

Long-term debt

 

$

502,307

 

 

$

493,012

 

 

 

 

 

 

Net indebtedness:

 

 

 

 

Total debt before unamortized discount and debt issuance costs

 

$

523,219

 

 

$

510,492

 

Cash and cash equivalents

 

 

(61,692

)

 

 

(144,602

)

Net indebtedness

 

$

461,527

 

 

$

365,890

 

Table 9

Hanger, Inc.

Key Operating Metrics

 

 

 

As of and For the Three
Months Ended December 31,

 

For the Years Ended
December 31,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Same clinic revenue:

 

 

 

 

 

 

 

 

Growth (decline) rate on net revenue

 

7.6

%

 

(10.6

)%

 

8.7

%

 

(10.7

)%

Growth (decline) rate day adjusted (a)

 

5.8

%

 

(10.6

)%

 

9.1

%

 

(11.0

)%

 

 

 

 

 

 

 

 

 

Clinical locations:

 

 

 

 

 

 

 

 

Patient care clinics

 

760

 

 

704

 

 

 

 

 

Satellite clinics

 

115

 

 

112

 

 

 

 

 

Total clinical locations

 

875

 

 

816

 

 

 

 

 

(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.