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8-K - CURRENT REPORT OF MATERIAL EVENTS OR CORPORATE CHANGES - HANGER, INC.a14-5616_18k.htm

Exhibit 99

 

 

 

GRAPHIC

 

 

 

 

 

 

 

 

 

Contacts:

 

 

George E. McHenry

(512) 777-3800

 

Russell G. Allen

(512) 777-3800

 

Hanger Reports 7% Net Sales Growth and 8% Adjusted Diluted EPS Growth for 2013

 

Austin, Texas, February 12, 2014 /PRNewswire/ —

 

·                  Reports 2013 Adjusted Diluted EPS of $1.95

·                  Reports 2013 Diluted EPS of $1.80

·                  Establishes 2014 Financial Guidance

 

Hanger, Inc. (NYSE:HGR) today announced net sales of $278.2 million for the quarter ended December 31, 2013, an increase of $8.6 million from net sales of $269.6 million for the fourth quarter of 2012.  Adjusted diluted earnings per share, which excludes non-recurring tax costs, costs related to acquisitions and costs related to implementation of the Company’s new clinic management system (which the Company refers to as “Janus”), were $0.54 for the fourth quarter of 2013 and equal to the prior year fourth quarter adjusted diluted earnings per share.  Diluted earnings per share were $0.52 for the fourth quarter of 2013 compared to $0.58 for the same period of 2012.

 

The fourth quarter net sales increase of $8.6 million, or 3.2%, was the result of an $11.1 million, or 4.9%, increase in the Patient Care segment, and a $2.5 million decline in the Products & Services segment. The $11.1 million increase in Patient Care segment sales was comprised of a $2.8 million, or 1.3%, increase in same center sales, with the remaining $8.3 million increase driven by acquisitions. The reclassification of certain accounts receivable write-offs and reserves previously classified as bad debts and subsequently classified as a reduction in net sales, first reported in the third quarter of 2013, had an impact on the calculation of same center sales growth, which would have been 2.7% under the previous classification.  The $2.5 million decline in Products & Services segment sales was principally the result of the impact on the Company’s distribution business of the acquisitions of independent O&P companies made by the Patient Care segment in 2012 and 2013, and a decline in demand for higher priced prosthetic devices (such as micro processor-controlled knees) from independent O&P practices due to pressure they are facing from Medicaid audits.

 

Income from operations for the quarter ended December 31, 2013 was $34.6 million, compared to $36.5 million in the prior year.  Adjusted income from operations for the fourth quarter, which excludes non-recurring tax costs, costs related to acquisitions and costs related to the implementation of Janus, was $35.3 million, compared to $37.4 million in the prior year.  Income from operations declined principally due to increased cost of materials and accounts receivable reserves related to operational issues experienced at a small non-clinic unit within the Company’s Patient Care segment.

 



 

Net sales for the year ended December 31, 2013 increased $72.0 million, or 7.4%, to $1,046.4 million from $974.4 million in the same period of 2012.  The sales increase was driven by an $18.8 million, or 2.4%, increase in same center sales in the Patient Care segment, a $51.1 million increase from acquired entities, as well as a $2.1 million, or 1.2%, increase in sales in the Products & Services segment.  As with the fourth quarter results, the impact of the reclassification announced in the third quarter of 2013 had an adverse impact on the calculation of same center sales growth for the year, which would have been 3.4% under the previous classification.  During 2013, the Company acquired O&P operations totaling approximately $20 million in annualized sales.  Diluted earnings per share were $1.80 for the full-year 2013 compared to $1.83 for the same period of 2012.  Adjusted diluted earnings per share, which excludes non-recurring tax benefits, costs related to acquisitions and the implementation of Janus, and debt issuance cost associated with the June 2013 refinancing of the Company’s bank credit facilities, increased 8.3% to $1.95 for the full-year 2013 compared to adjusted diluted earnings per share of $1.80 for the full-year 2012.

 

The Company’s cash flow from operations increased by $7.0 million to $88.3 million for the twelve months ended December 31, 2013 compared to an $81.3 million cash inflow for the same period in 2012.  As of December 31, 2013, the Company had $181.3 million in total liquidity, including $9.9 million of cash and $171.4 million available under its revolving credit facility, net of approximately $25.0 million of borrowings and $3.6 million in letters of credit.  The Company’s leverage ratio, as defined in its credit facilities, was 2.5 times at year-end 2013.

 

“As we reflect on 2013, we view it as both successful and challenging,” commented Vinit Asar, President and Chief Executive Officer. “We successfully grew adjusted diluted EPS by 8% while weathering sequestration, an increase in the number of Medicare audits that are affecting many health care providers and operational issues in one of our businesses.  Entering 2014 our core business remains healthy, and we are making a number of investments in our back-office which we believe will improve our future operations.”

 

The Company expects 2014 revenues of between $1.110 and $1.130 billion, resulting from 3% to 5% same center sales growth in its Patient Care Segment, and a slight decline in Products & Services Segment sales.  The decline in Products & Services Segment sales reflects the carry-over impact of a large one-time sale during 2013, continued acquisition of its O&P distribution customers by the Patient Care Segment, and increasing pressure on independent O&P customers resulting from continuing Medicare audits.  The Company anticipates adjusted diluted earnings per share to rise 8% to 13% to between $2.10 and $2.20, excluding

 



 

approximately $0.05 for training and implementation costs of Janus.  The earnings growth includes an $11 million, or $0.19 per diluted share, investment the company is making in its back-office operations, including centralization of its billing and processing activities and improvements in its finance, accounting and information technology functions.  Operational improvements and costs savings related to these investments are expected to be realized beginning in late 2014.  Despite these significant investments, the Company anticipates maintaining its adjusted operating margins at a level similar to the prior year and generating cash flow from operations of between $90 and $100 million.  The Company also plans to invest between $40 and $50 million in capital additions during the year.  In the month of January 2014, the Company acquired O&P practices with annualized sales of approximately $20 million. In view of this level of acquisitions in January, the Company’s goal in 2014 is to acquire a total of $35 to $45 million of O&P annualized revenue.

 

A conference call to discuss the Company’s 2013 results and 2014 guidance is scheduled to begin at 9:00 a.m., ET, on Thursday, February 13, 2014. Those wishing to participate should call 1-877-662-6095. A replay will be available until Friday, February 21, 2014, by dialing 1-855-859-2056 and referencing Conference ID # 36619714.

 

About Hanger, Inc. — Built on the legacy of James Edward Hanger, the first amputee of the American Civil War, Hanger, Inc. (NYSE: HGR) 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 in excess of 740 locations nationwide.  Through its Products & Services segment, Hanger distributes branded and private label O&P devices, products and components, and provides rehabilitative solutions.  Steeped in over 150 years of clinical excellence and innovation, Hanger’s vision is to be the partner of choice for products and services that enhance human physical capability.  For more information on Hanger, visit www.hanger.com and follow us at www.Facebook.com/HangerNews, www.Twitter.com/HangerNews, and www.YouTube.com/HangerNews.

 

This document contains forward-looking statements relating to the Company’s results of operations.  The United States Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements.  Statements relating to future results of operations in this document reflect the current views of management.  However, various risks, uncertainties and contingencies could cause actual results or performance to differ materially from those expressed in, or implied by, these statements, including the Company’s ability to enter into and derive benefits from managed care contracts, the demand for the Company’s orthotic and prosthetic services and products, the impact of reviews, audits and investigations conducted from time to time by governmental agencies, and the other factors identified in Item 1A, “Risk Factors” in the Company’s periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934.  The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.

 



 

Hanger, Inc.

(in thousands, except for share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Twelve Month Ended

 

 

 

December 31,

 

December 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Income Statement:

 

 

 

 

 

 

 

 

 

Net sales

 

$

278,237

 

$

269,636

 

$

1,046,438

 

$

974,429

 

Material costs

 

92,461

 

83,487

 

319,046

 

296,193

 

Personnel costs

 

91,840

 

86,605

 

369,738

 

335,328

 

Other operating expenses

 

49,870

 

53,822

 

186,304

 

178,918

 

Depreciation and amortization

 

9,468

 

9,220

 

37,486

 

34,652

 

Income from operations

 

34,598

 

36,502

 

133,864

 

129,338

 

Interest expense

 

4,973

 

7,956

 

26,475

 

31,169

 

Extinguishment of debt

 

 

 

6,645

 

 

Income before taxes

 

29,625

 

28,546

 

100,744

 

98,169

 

Provision for income taxes

 

11,269

 

8,220

 

37,160

 

34,477

 

Net income

 

$

18,356

 

$

20,326

 

$

63,584

 

$

63,692

 

 

 

 

 

 

 

 

 

 

 

Basic Per Common Share Data:

 

 

 

 

 

 

 

 

 

Net income

 

$

0.53

 

$

0.59

 

$

1.83

 

$

1.86

 

Shares used to compute basic per share amounts

 

34,922,599

 

34,453,084

 

34,818,214

 

34,282,591

 

 

 

 

 

 

 

 

 

 

 

Diluted Per Common Share Data:

 

 

 

 

 

 

 

 

 

Net income

 

$

0.52

 

$

0.58

 

$

1.80

 

$

1.83

 

Shares used to compute diluted per share amounts

 

35,463,543

 

34,945,547

 

35,394,721

 

34,832,830

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of GAAP financial measures to Non-GAAP financial measures:

 

 

 

 

 

 

 

 

 

 

Income from operations

 

$

34,598

 

$

36,502

 

$

133,864

 

$

129,338

 

Acquisition expenses

 

398

 

480

 

919

 

1,171

 

Janus expenses

 

303

 

438

 

1,394

 

533

 

Adjusted Income from operations

 

$

35,299

 

$

37,420

 

$

136,177

 

$

131,042

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

18,356

 

$

20,326

 

$

63,584

 

$

63,692

 

Acquisition expenses

 

398

 

480

 

919

 

1,171

 

Janus expenses

 

303

 

438

 

1,394

 

533

 

Extinguishment of debt

 

 

 

6,645

 

 

Tax effect of adjustments

 

(259

)

(344

)

(3,315

)

(638

)

Non-recurring tax expense (benefits)

 

234

 

(2,080

)

(183

)

(2,080

)

Adjusted net income

 

$

19,032

 

$

18,820

 

$

69,044

 

$

62,678

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income per diluted share

 

$

0.54

 

$

0.54

 

$

1.95

 

$

1.80

 

 

 

 

Three Months Ended

 

Twelve Month Ended

 

 

 

December 31,

 

December 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Income Statement as a % of Net Sales:

 

 

 

 

 

 

 

 

 

Net sales

 

100.0

%

100.0

%

100.0

%

100.0

%

Material costs

 

33.2

%

31.0

%

30.5

%

30.4

%

Personnel costs

 

33.0

%

32.1

%

35.3

%

34.4

%

Other operating expenses

 

18.0

%

20.0

%

17.7

%

18.3

%

Depreciation and amortization

 

3.4

%

3.4

%

3.6

%

3.6

%

Income from operations

 

12.4

%

13.5

%

12.9

%

13.3

%

Interest expense

 

1.8

%

2.9

%

2.6

%

3.2

%

Extinguishment of debt

 

0.0

%

0.0

%

0.7

%

0.0

%

Income before taxes

 

10.6

%

10.6

%

9.6

%

10.1

%

Provision for income taxes

 

4.1

%

3.1

%

3.5

%

3.6

%

Net income

 

6.6

%

7.5

%

6.1

%

6.5

%

 

 

 

 

 

 

 

 

 

 

Adjusted income from operations

 

12.7

%

13.9

%

13.0

%

13.4

%

Adjusted net income

 

6.8

%

7.0

%

6.6

%

6.4

%

 

Note: Financial data reflects the revised classification

 



 

Hanger, Inc.

( in thousands, except for statistical data)

(Unaudited)

 

 

 

Three Months Ended

 

Twelve Month Ended

 

 

 

December 31,

 

December 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Cash Flow Data:

 

 

 

 

 

 

 

 

 

Cash flow provided by operations

 

$

19,729

 

$

22,312

 

$

88,255

 

$

81,319

 

Capital expenditures

 

$

10,976

 

$

8,286

 

$

38,446

 

$

33,163

 

Increase/(decrease) in cash and cash equivalents

 

$

2,644

 

$

(36,409

)

$

(9,351

)

$

(23,685

)

 

 

 

December 31, 2013

 

December 31, 2012

 

Balance Sheet Data:

 

 

 

 

 

Cash and cash equivalents

 

$

9,860

 

$

19,211

 

 Days Sales Outstanding (DSO’s) *

 

65

 

60

 

Working Capital

 

$

270,003

 

$

251,465

 

Total Debt

 

$

468,259

 

$

520,646

 

Shareholders’ Equity

 

$

580,220

 

$

503,094

 

 


* excludes acquired accounts receivable balances

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2013

 

2012

 

2013

 

2012

 

Revenue Mix:

 

 

 

 

 

 

 

 

 

Patient Care

 

85.5

%

84.1

%

83.4

%

82.4

%

Products and Services

 

14.5

%

15.9

%

16.6

%

17.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patient Care Payor Mix:

 

 

 

 

 

 

 

 

 

Commercial and other

 

62.0

%

60.4

%

60.0

%

59.6

%

Medicare

 

27.4

%

28.0

%

28.5

%

28.6

%

Medicaid

 

4.6

%

5.6

%

5.2

%

5.7

%

VA

 

6.0

%

6.0

%

6.3

%

6.1

%

 

Note:  Financial data reflects the revised classification.

 

Management relies on the non-GAAP items as the primary measures to review and assess operating performance and management teams. The Company believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management.  Management and investors also review the non-GAAP items to evaluate the Company’s overall performance and to compare its current operating results with corresponding periods and with other companies in the health care industry. You should not consider the non-GAAP items in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Because the non-GAAP items are not measures of financial performance under accounting principles generally accepted in the United States and are susceptible to varying calculations, they may not be comparable to similarly titled measures of other companies.  Adjusted net income, Adjusted income from operations, and Adjusted net income per diluted share are the non-GAAP financial measures.