Hanger Announces Financial Results for the Third Quarter of 2018

Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic patient care services and solutions, today announced its financial results for the third quarter ended September 30, 2018.

Financial Highlights for the Third Quarter of 2018

  • Net revenue of $262.9 million for the three months ended September 30, 2018, compared to $258.0 million for the same period in 2017, reflecting net revenue growth of 1.9 percent year-over-year.
  • GAAP net income totaled $4.4 million for the three months ended September 30, 2018, compared to a net loss of $4.2 million for the same period in 2017.
  • Adjusted EBITDA was $31.1 million in the third quarter of 2018 compared to $29.6 million in the third quarter of 2017, an increase of $1.5 million, or 5.1 percent. Growth in Adjusted EBITDA was driven by margin improvement, resulting primarily from higher revenue flow-through within the Patient Care segment.
  • GAAP diluted earnings per share was $0.12 for the third quarter of 2018, compared to a loss of $0.11 per share in the third quarter of 2017.
  • Adjusted diluted earnings per share was $0.22 for the three months ended September 30, 2018, compared to earnings of $0.06 per share for the same period in 2017, due primarily to growth in Patient Care segment earnings as well as lower interest expense.
  • Net cash provided by operating activities was $20.3 million for the three months ended September 30, 2018, compared to $5.3 million for the same period in 2017.
  • The Company reaffirms its 2018 outlook that it anticipates net revenue and Adjusted EBITDA to be generally consistent with 2017 results.

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, Hanger’s third quarter results were in-line with our expectations, as we achieved revenue growth in both of Hanger’s business segments and overall Adjusted EBITDA growth, driven by our Patient Care segment. The third quarter was a memorable one for Hanger as we re-listed on the New York Stock Exchange, a key milestone in our efforts to re-establish the Company with investors. Looking ahead, we remain focused on strategies and investment priorities that drive growth through superior patient outcomes.”

Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this press release.

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Segment Results for Three Months Ended September 30, 2018

Patient Care Segment

For the three months ended September 30, 2018, Patient Care net revenue was $214.1 million, an increase of $3.4 million or 1.6 percent, compared to the same period of 2017. Same clinic revenue growth was 2.1 percent, or 0.5 percent on a day-adjusted basis, for the three months ended September 30, 2018. Growth was primarily driven by a 3.1 percent increase in revenue from prosthetic services in the third quarter compared to the prior year.

Income from operations in the Patient Care segment was $32.5 million during the third quarter of 2018, which reflects an increase of $4.0 million, compared to $28.5 million reported in the prior year. Adjusted EBITDA for the segment was $38.2 million, which reflected a $3.1 million or 9.0 percent increase over the prior year period. Earnings flow-through benefited from decreases in bad debt and personnel expenses.

Products & Services Segment

For the three months ended September 30, 2018, Products & Services net revenue totaled $48.9 million, which reflected a $1.5 million, or 3.2 percent, increase compared to the same period in 2017. Revenue growth was driven by a $2.2 million, or 6.9 percent, growth from distribution of O&P componentry to independent providers, which was partially offset by a $0.7 million decrease in revenue from therapeutic solutions when compared to the prior year.

Income from operations for the Products & Services segment decreased by $0.3 million to $6.8 million in the third quarter of 2018 compared to the same period in 2017. Adjusted EBITDA for the Products & Services segment was $9.6 million for the third quarter of 2018, which reflected a $0.3 million decrease compared with the same period of 2017. Earnings flow-through from increased O&P distribution revenue was offset by a decrease in therapeutic solutions revenue and associated income and by higher personnel costs, primarily incentive compensation.

Corporate & Other

The loss from operations relating to corporate and other activities decreased by $2.7 million to $23.4 million for the quarter ended September 30, 2018 compared to the same period in 2017. This decrease primarily related to a $4.7 million reduction in professional accounting and legal fees year-over-year. Excluding the effect of third party professional fees related to financial statement remediation, depreciation and amortization, and non-cash equity compensation expense, the net cost of corporate and other activities increased by $1.4 million to a $16.7 million burden on Adjusted EBITDA in the third quarter of 2018. Increases in costs for Corporate & Other activities related primarily to continuing investments in growth and other corporate initiatives.

Net Income; Interest Expense

For the three months ended September 30, 2018, net income was $4.4 million compared with a net loss of $4.2 million in the same period of 2017. The $8.5 million improvement in net income year-over-year was due primarily to lower interest expense, professional accounting and legal fees, and depreciation and amortization expense.

Liquidity

On September 30, 2018, the Company had liquidity of $155.1 million, comprised of $61.0 million in cash and cash equivalents, and $94.1 million in available borrowing capacity under its revolving credit facility, compared to liquidity of $142.9 million on June 30, 2018. The increase in liquidity of $12.2 million from June 30, 2018 resulted from the positive cash flow from operations of $20.3 million in the third quarter of 2018 after the impact of capital expenditures and debt service.

2018 Outlook

The Company reaffirms its 2018 outlook, as first provided on May 14, 2018, that it anticipates net revenue and Adjusted EBITDA to be generally consistent with 2017 results. Hanger expects to provide its financial outlook for 2019 on its fourth quarter and full year 2018 conference call to be held during the first quarter of 2019.

Conference and Webcast Details

Hangers management team will host a conference call tomorrow, Friday, November 9, at 8:30 a.m. Eastern time to discuss the Companys third quarter 2018 financial results and business outlook.

To participate, dial 877-407-6184 or 201-389-0877 outside the U.S. and Canada, and use conference code number 13682163. A live webcast and replay of the call will be available at the Investor Relations section of the Companys web site at www.hanger.com/investors, and a replay of the webcast will remain available for 90 days.

Accompanying supplemental information will be posted to the Investor Relations section of Hangers web site at www.hanger.com/investors.

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 Companys management to analyze the Companys business results that are being provided for informational and analytical context.

Accompanying supplemental information will be posted to the Investor Relations section of Hangers web site at www.hanger.com/investors.

About Hanger, Inc. “ Built on the legacy of James Edward Hanger, the first amputee of the American Civil War, Hanger, Inc. (NYSE: HNGR) delivers orthotic and prosthetic (O&P) patient care, and distributes O&P products and rehabilitative solutions to the broader market. Hanger’s Patient Care segment is the largest owner and operator of O&P patient care clinics with approximately 800 patient care locations nationwide. Through its Products & Services segment, Hanger distributes branded and private label O&P devices, products and components, and provides rehabilitative solutions. With over 150 years of clinical excellence and innovation, Hanger’s vision is to lead the orthotic & prosthetic markets by providing superior patient care, outcomes, services and value. For more information on Hanger, visit www.hanger.com.

This press release contains certain forward-looking statements relating to the Company. All statements, other than statements of historical fact included herein, are forwardlooking statements. These forward-looking statements are often identified by the use of forward-looking terminology such as preliminary, intends, expects, plans, anticipates, believes, views or similar expressions and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks, and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. These uncertainties include, but are not limited to, the risk that additional information may arise during the course of the Companys ongoing financial statement preparation and closing processes that would require the Company to make additional adjustments or revisions to its estimates or financial statements and other financial data, to identify additional material weaknesses, or to take any other necessary action relating to the Companys accounting practices; the time required to complete the Companys financial statements and other financial data and accounting review; the time required to prepare its periodic reports for filings with the Securities and Exchange Commission; the impact of the Tax Cuts and Jobs Act on the Companys financial statements; any regulatory review of, or litigation relating to, the Companys accounting practices, financial statements and other financial data, periodic reports or other corporate actions; changes in the demand for the Companys O&P products and services; uncertainties relating to the results of operations or recently acquired O&P patient care clinics; the Companys ability to enter into and derive benefits from managed-care contracts; the Companys ability to successfully attract and retain qualified O&P clinicians; federal laws governing the health care industry; uncertainties inherent in investigations and legal proceedings; governmental policies affecting O&P operations; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its Form 10K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission. The information contained in this press release is made only as of the date hereof, even if subsequently made available by the Company on its website or otherwise.

         

Table 1

Hanger, Inc.

Condensed Consolidated Statements of Operations

(Unaudited – dollars in thousands, except share and per share amounts)

 
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2018   2017 2018   2017
Net revenues $ 262,946 $ 257,966 $ 763,907 $ 755,033
Material costs 84,805 82,345 247,677 240,407
Personnel costs 90,853 90,065 266,515 265,851
Other operating costs 30,999 33,184 92,631 97,734
General and administrative expenses 28,308 25,356 80,467 75,969
Professional accounting and legal fees 3,107 7,844 12,189 29,015
Depreciation and amortization   8,950   9,632     27,552     29,594  
Income from operations 15,924 9,540 36,876 16,463
Interest expense, net 8,939 15,097 28,519 43,197
Loss on extinguishment of debt 16,998
Non-service defined benefit plan expense   176   184     528     552  
Income (loss) before income taxes 6,809 (5,741 ) (9,169 ) (27,286 )
Provision (benefit) for income taxes   2,440   (1,580 )   (3,848 )   (7,028 )
Net income (loss) $ 4,369 $ (4,161 ) $ (5,321 ) $ (20,258 )
 
Per share data:
Basic earnings (loss) per share $ 0.12 $ (0.11 ) $ (0.14 ) $ (0.56 )
Weighted average shares outstanding – basic   36,856,881   36,340,089     36,716,568     36,238,816  
Diluted earnings (loss) per share $ 0.12 $ (0.11 ) $ (0.14 ) $ (0.56 )
Weighted average shares outstanding – diluted   37,556,594   36,340,089     36,716,568     36,238,816  
 
         

Table 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited – dollars in thousands)

 
As of September 30, As of December 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 61,035 $ 1,508
Accounts receivable, net 132,446 146,346
Inventories 72,601 69,138
Income taxes receivable 1,723 13,079
Other current assets   20,742     20,888  

Total current assets

  288,547     250,959  
Non-current assets:
Property, plant and equipment, net 89,424 93,615
Goodwill 196,343 196,343
Other intangible assets, net 16,637 21,940
Deferred income taxes 71,967 68,126
Other assets   12,711     9,440  

Total assets

$ 675,629   $ 640,423  
 
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Current portion of long-term debt $ 9,027 $ 4,336
Accounts payable 52,325 48,269
Accrued expenses and other current liabilities 54,790 66,308
Accrued compensation related costs   32,730     53,380  
Total current liabilities   148,872     172,293  
 
Long-term liabilities:
Long-term debt, less current portion 502,966 445,928
Other liabilities   49,395     50,253  

Total liabilities

  701,233     668,474  
 
Shareholders’ deficit:
Common stock 370 365
Additional paid-in capital 340,738 333,738
Accumulated other comprehensive loss (164 ) (1,686 )
Accumulated deficit (365,852 ) (359,772 )
Treasury stock, at cost   (696 )   (696 )
Total shareholders’ deficit   (25,604 )   (28,051 )
Total liabilities and shareholders’ deficit $ 675,629   $ 640,423  
 
     

Table 3

Hanger, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited – dollars in thousands)

 

For the Nine Months Ended September 30,

2018     2017
Cash flows from operating activities:
Net loss $ (5,321 ) $ (20,258 )
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization 27,552 29,594
(Benefit) provision for doubtful accounts (578 ) 6,850
Stock-based compensation expense 9,573 8,693
Deferred income taxes (4,114 ) (7,179 )
Amortization of debt discounts and issuance costs 2,453 6,348
Loss on extinguishment of debt 16,998
Gain on sale and disposal of fixed assets (2,537 ) (1,664 )
Changes in operating assets and liabilities:
Accounts receivable, net 14,464 1,772
Inventories (3,463 ) (5,870 )
Other current assets 1,770 1,510
Income taxes 11,356 (584 )
Accounts payable 5,680 (348 )
Accrued expenses and other current liabilities (13,061 ) (9,690 )
Accrued compensation related costs (20,650 ) (6,942 )
Other liabilities   (2,963 )   (3,240 )
Total changes in operating assets and liabilities   (6,867 )   (23,392 )
Net cash provided by (used in) operating activities   37,159     (1,008 )
Cash flows from investing activities:
Purchase of property, plant and equipment (16,435 ) (11,237 )
Purchase of therapeutic program equipment leased to third parties under operating leases (6,390 ) (3,714 )
Purchase of company-owned life insurance investment (598 ) (555 )
Proceeds from sale of property, plant and equipment   3,583     4,185  
Net cash used in investing activities   (19,840 )   (11,321 )
Cash flows from financing activities:
Borrowings under term loan, net of discount 501,467
Repayment of term loan (434,400 ) (19,688 )
Borrowings under revolving credit agreement 3,000 140,965
Repayments under revolving credit agreement (8,000 ) (105,965 )
Payment of employee taxes on stock-based compensation (2,568 ) (1,367 )
Payment on seller notes (2,116 ) (4,633 )
Payment of capital lease obligations (942 ) (873 )
Payment of debt issuance costs (6,757 ) (2,863 )
Payment of debt extinguishment costs   (8,436 )    
Net cash provided by financing activities   41,248     5,576  
Increase (decrease) in cash, cash equivalents and restricted cash 58,567 (6,753 )
Cash, cash equivalents and restricted cash, at beginning of period   4,779     9,412  
Cash, cash equivalents and restricted cash, at end of period $ 63,346   $ 2,659  
 
Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents, at beginning of period $ 1,508 $ 7,157
Restricted cash, at beginning of period   3,271     2,255  
Cash, cash equivalents, and restricted cash, at beginning of period $ 4,779   $ 9,412  
Cash and cash equivalents, at end of period $ 61,035 $ 460
Restricted cash, at end of period   2,311     2,199  
Cash, cash equivalents, and restricted cash, at end of period $ 63,346   $ 2,659  
 

Table 4

Hanger, Inc.

Segment Information: Revenue, EBITDA and Adjusted EBITDA

(Unaudited – dollars in thousands)

 

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses and expenses incurred in connection with our acquisitions.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a users 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 September 30,

For the Nine Months Ended September 30,
2018   2017 2018   2017
 
Net Revenue (a)
Patient Care $ 214,080 $ 210,637 $ 620,745 $ 614,495
Products & Services   48,866     47,329     143,162     140,538  
Net revenue $ 262,946   $ 257,966   $ 763,907   $ 755,033  
 
EBITDA (b)
Patient Care $ 37,153 $ 33,870 $ 99,162 $ 94,366
Products & Services 9,403 9,574 27,740 28,080
Corporate & Other   (21,682 )   (24,272 )   (62,474 )   (76,389 )
EBITDA (Non-GAAP) $ 24,874   $ 19,172   $ 64,428   $ 46,057  
 
Adjusted EBITDA (b)
Patient Care $ 38,176 $ 35,029 $ 102,424 $ 97,345
Products & Services 9,641 9,918 28,083 28,987
Corporate & Other   (16,680 )   (15,323 )   (49,491 )   (45,575 )
Adjusted EBITDA (Non-GAAP) $ 31,137   $ 29,624   $ 81,016   $ 80,757  

(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 (Loss) and Earnings (Loss) Per Share to

Adjusted Net Income and Adjusted Earnings Per Share

(Unaudited – dollars in thousands, except share and per share amounts)

 

Earnings Per Share (or EPS) is defined as net income divided by our diluted common shares during the applicable period. Adjusted EPS is defined as EPS adjusted for impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, severance expenses and certain other charges.

We utilize Adjusted EPS to assess our operating and financial performance. We believe that this measure enhances a users 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 September 30, For the Nine Months Ended September 30,
2018   2017 2018   2017
 
Net income (loss) – as reported (GAAP) $ 4,369 $ (4,161 ) $ (5,321 ) $ (20,258 )
 
Adjustments:
Amortization expense 1,497 2,343 5,264 7,220
Third-party professional fees 2,230 6,839 8,870 25,943
Loss on extinguishment of debt 16,998
Disaster recovery / unclaimed property settlement (3,729 )
Severance expenses   366         366     64  
Adjustments prior to tax effect $ 4,093 $ 9,182 $ 27,769 $ 33,227
Tax effect of specified adjustments (a)   (176 )   (2,888 )   (8,312 )   (9,286 )
Adjustments after taxes   3,917     6,294     19,457     23,941  
Adjusted net income (Non-GAAP) $ 8,286   $ 2,133   $ 14,136   $ 3,683  
 
Basic earnings (loss) per share – as reported (GAAP) $ 0.12 $ (0.11 ) $ (0.14 ) $ (0.56 )
Effect of above listed specified adjustments   0.10     0.17     0.53     0.66  
Adjusted basic earnings per share – as reported (Non-GAAP) $ 0.22   $ 0.06   $ 0.39   $ 0.10  
 
Diluted earnings (loss) per share – as reported (GAAP) $ 0.12 $ (0.11 ) $ (0.14 ) $ (0.56 )
Effect of above listed specified adjustments   0.10     0.17     0.52     0.66  
Adjusted diluted earnings per share – as reported (Non-GAAP) $ 0.22   $ 0.06   $ 0.38   $ 0.10  
 
Shares used to compute basic earnings (loss) per share 36,856,881 36,340,089 36,716,568 36,238,816
Shares used to compute diluted earnings (loss) per share 37,556,594 36,564,752 37,397,012 36,533,905
 

(a) “Tax effect of specified adjustments” reflects the difference between the Company’s effective provision for taxes and the application of a combined federal and state statutory tax rate of 24% and 38% respectively for the 2018 and 2017 periods to the Company’s earnings from operations before taxes, after the incorporation of the identified above adjustments.

 

Table 6

Hanger, Inc.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

(Unaudited – dollars in thousands)
 

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses and expenses incurred in connection with our acquisitions.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a users 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 September 30, For the Nine Months Ended September 30,
2018   2017 2018   2017
 
Net income (loss) – as reported (GAAP) $ 4,369 $ (4,161 ) $ (5,321 ) $ (20,258 )
 
Adjustments to calculate EBITDA:
Depreciation and amortization 8,950 9,632 27,552 29,594
Interest expense, net 8,939 15,097 28,519 43,197
Loss on extinguishment of debt 16,998
Non-service defined benefit plan expense 176 184 528 552
Provision (benefit) for income taxes   2,440   (1,580 )   (3,848 )   (7,028 )
Adjustments – net income (loss) to EBITDA   20,505   23,333     69,749     66,315  

EBITDA (Non-GAAP)

24,874 19,172 64,428 46,057
 
Further adjustments to calculate Adjusted EBITDA:
Third-party professional fees 2,230 6,839 8,870 25,943
Equity-based compensation 3,667 3,613 9,573 8,693
Disaster recovery / unclaimed property settlement (2,221 )
Severance expenses   366       366     64  
Further adjustments – EBITDA to Adjusted EBITDA   6,263   10,452     16,588     34,700  
Adjusted EBITDA (Non-GAAP) $ 31,137 $ 29,624   $ 81,016   $ 80,757  
 
 

Table 7

Hanger, Inc.

Segment Reconciliation of Income From Operations to EBITDA and Adjusted EBITDA

(Unaudited – dollars in thousands)
 

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, impairments of intangible assets, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, debt extinguishment costs, expenses associated with equity-based compensation, severance expenses and expenses incurred in connection with our acquisitions.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a users 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 September 30, For the Nine Months Ended September 30,
2018   2017 2018   2017

Patient Care

Income from operations – as reported (GAAP) $ 32,502 $ 28,546 $ 84,615 $ 78,243
Depreciation & amortization   4,651     5,324     14,547     16,123  
EBITDA (Non-GAAP) 37,153 33,870 99,162 94,366
Further adjustments to calculate Adjusted EBITDA:
Equity-based compensation 1,023 1,159 3,262 2,891
Severance expenses               88  
Further adjustments – EBITDA to Adjusted EBITDA   1,023     1,159     3,262     2,979  
Adjusted EBITDA (Non-GAAP)   38,176     35,029     102,424     97,345  
 

Products & Services

Income from operations – as reported (GAAP) 6,839 7,145 20,171 20,389
Depreciation & amortization   2,564     2,429     7,569     7,691  
EBITDA (Non-GAAP) 9,403 9,574 27,740 28,080
Further adjustments to calculate Adjusted EBITDA:
Equity-based compensation 238 344 343 931
Severance expenses               (24 )
Further adjustments – EBITDA to Adjusted EBITDA   238     344     343     907  
Adjusted EBITDA (Non-GAAP)   9,641     9,918     28,083     28,987  
 

Corporate & Other

Loss from operations – as reported (GAAP) (23,417 ) (26,151 ) (67,910 ) (82,169 )
Depreciation & amortization   1,735     1,879     5,436     5,780  
EBITDA (Non-GAAP) (21,682 ) (24,272 ) (62,474 ) (76,389 )
Further adjustments to calculate Adjusted EBITDA:
Third-party professional fees 2,230 6,839 8,870 25,943
Equity-based compensation 2,406 2,110 5,968 4,871
Disaster recovery / unclaimed property settlement (2,221 )
Severance expenses   366         366      
Further adjustments – EBITDA to Adjusted EBITDA   5,002     8,949     12,983     30,814  
Adjusted EBITDA (Non-GAAP)   (16,680 )   (15,323 )   (49,491 )   (45,575 )
Total Adjusted EBITDA (Non-GAAP) $ 31,137   $ 29,624   $ 81,016   $ 80,757  
 
         

Table 8

Hanger, Inc.

Indebtedness

(Unaudited – dollars in thousands)

 
As of September 30, As of December 31,
2018 2017
Revolving credit facility $ $ 5,000
Term B loan, due 2025 502,475
Term B loan, due 2019 280,000
Seller notes 3,796 5,912
Term loan, due June 2018 151,875
Financing leases and other   15,424     18,169  
Total debt before unamortized discount and debt issuance costs 521,695 460,956
Unamortized discount (3,682 ) (5,556 )
Debt issuance costs, net   (6,020 )   (5,136 )
Total debt $ 511,993   $ 450,264  
 
Reported as:
Current portion of long-term debt $ 9,027 $ 4,336
Long-term debt   502,966     445,928  
Total debt $ 511,993   $ 450,264  
 
       

Table 9

Hanger, Inc.

Key Operating Metrics

 

As of and For the Three Months Ended September 30,

As of and For the Nine Months Ended September 30,
2018   2017 2018   2017
 
Same clinic revenue:
Growth rate on net revenue 2.1 % 0.9 % 1.7 % 0.2 %
Growth rate day adjusted (a) 0.5 % 3.1 % 1.1 % 1.6 %
 
Clinical locations:
Patient care clinics 677 689 677 689
Satellite clinics 109   109   109   109  
Total clinical locations 786   798   786   798  
 

(a) Same Clinic Revenue per Day – Same Clinic Revenue per Day normalizes sales for the number of days a clinic was open in each comparable period. These measures are both non-GAAP and unaudited.

Hanger, Inc.
Investor Relations Contacts:
Thomas Kiraly,
512-777-3600
Executive Vice President and Chief Financial Officer
[email protected]
or
Seth
Frank, 512-777-3573
Vice President, Treasury and Investor Relations
[email protected]

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