Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Jun. 01, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | HANGER, INC. | |
Entity Central Index Key | 722,723 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | No | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 36,797,063 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 32,913 | $ 1,508 |
Accounts receivable, net | 127,010 | 146,346 |
Inventories | 70,051 | 69,138 |
Income taxes receivable | 824 | 13,079 |
Other current assets | 20,004 | 20,888 |
Total current assets | 250,802 | 250,959 |
Non-current assets: | ||
Property, plant and equipment, net | 91,302 | 93,615 |
Goodwill | 196,343 | 196,343 |
Other intangible assets, net | 19,971 | 21,940 |
Deferred income taxes | 75,449 | 68,126 |
Other assets | 10,416 | 9,440 |
Total assets | 644,283 | 640,423 |
Current liabilities: | ||
Current portion of long-term debt | 10,312 | 4,336 |
Accounts payable | 50,722 | 48,269 |
Accrued expenses and other current liabilities | 64,695 | 66,683 |
Accrued compensation related costs | 17,216 | 53,005 |
Total current liabilities | 142,945 | 172,293 |
Long-term liabilities: | ||
Long-term debt, less current portion | 505,235 | 445,928 |
Other liabilities | 49,678 | 50,253 |
Total liabilities | 697,858 | 668,474 |
Commitments and contingent liabilities (Note O) | ||
Shareholders' deficit: | ||
Common stock, $.01 par value; 60,000,000 shares authorized; 36,887,364 shares issued and 36,744,543 shares outstanding in 2018, and 36,515,232 shares issued and 36,372,411 shares outstanding in 2017 | 369 | 365 |
Additional paid-in capital | 334,169 | 333,738 |
Accumulated other comprehensive loss | (4,268) | (1,686) |
Accumulated deficit | (383,149) | (359,772) |
Treasury stock, at cost; 142,821 shares at 2018 and 2017, respectively | (696) | (696) |
Total shareholders' deficit | (53,575) | (28,051) |
Total liabilities and shareholders' deficit | $ 644,283 | $ 640,423 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 36,887,364 | 36,515,232 |
Common stock, shares outstanding | 36,744,543 | 36,372,411 |
Treasury stock, shares | 142,821 | 142,821 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||
Net revenue | $ 233,995 | $ 233,681 |
Material costs | 76,356 | 74,405 |
Personnel expenses | 86,108 | 87,955 |
Other operating costs | 31,096 | 32,689 |
General and administrative expenses | 25,636 | 25,386 |
Professional accounting and legal fees | 4,846 | 12,650 |
Depreciation and amortization | 9,330 | 10,137 |
Income (loss) from operations | 623 | (9,541) |
Interest expense, net | 12,263 | 14,009 |
Loss on extinguishment of debt | 16,998 | |
Non-service defined benefit plan expense | 176 | 184 |
Loss before income taxes | (28,814) | (23,734) |
Benefit for income taxes | (6,196) | (6,000) |
Net loss | (22,618) | (17,734) |
Other comprehensive loss: | ||
Unrealized loss on cash flow hedges (net of tax benefit of $702 for the three months ended March 31, 2018) | (2,290) | |
Unrealized loss on defined benefit plan (net of tax benefit of $105 and $0 for the three months ended March 31, 2018 and 2017, respectively) | (292) | (17) |
Total other comprehensive loss | (2,582) | (17) |
Comprehensive loss | $ (25,200) | $ (17,751) |
Basic and Diluted Per Common Share Data: | ||
Basic and diluted loss per common share | $ (0.62) | $ (0.49) |
Weighted average shares used to compute basic and diluted earnings per common share | 36,498,482 | 36,084,630 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS | ||
Unrealized loss on cash flow hedges tax | $ 702 | |
Unrealized loss gain on defined benefit plan tax | $ 105 | $ 0 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT - 3 months ended Mar. 31, 2018 - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Treasury Stock | Total |
Balance at Dec. 31, 2017 | $ 365 | $ 333,738 | $ (1,686) | $ (359,772) | $ (696) | $ (28,051) |
Balance (in shares) at Dec. 31, 2017 | 36,372 | 36,372,411 | ||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net loss | (22,618) | $ (22,618) | ||||
Issuance of common stock upon vesting of restricted stock units | $ 4 | (4) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 372 | |||||
Stock-based compensation expense | 2,585 | 2,585 | ||||
Cumulative effect of a change in accounting for revenue recognition (Note O) | ASU 2014-09 | (759) | (759) | ||||
Effect of shares withheld to cover taxes | (2,150) | (2,150) | ||||
Total other comprehensive loss | (2,582) | (2,582) | ||||
Balance at Mar. 31, 2018 | $ 369 | $ 334,169 | $ (4,268) | $ (383,149) | $ (696) | $ (53,575) |
Balance (in shares) at Mar. 31, 2018 | 36,744 | 36,744,543 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (22,618) | $ (17,734) |
Adjustments to reconcile net loss to net cash provided from operating activities: | ||
Depreciation and amortization | 9,330 | 10,137 |
Provision for doubtful accounts | (94) | 2,360 |
Stock-based compensation expense | 2,585 | 2,164 |
Benefit for deferred income taxes | (6,355) | (6,050) |
Amortization of debt issuance costs | 1,701 | 1,952 |
Loss on extinguishment of debt | 16,998 | |
Gain on sale and disposal of fixed assets | (594) | (672) |
Changes in operating assets and liabilities | ||
Accounts receivable, net | 19,425 | 15,367 |
Inventories | 1,085 | (4,653) |
Other current assets | 650 | 39 |
Income taxes | 12,255 | 849 |
Accounts payable | 552 | 6,333 |
Accrued expenses and other current liabilities | (5,067) | (683) |
Accrued compensation related costs | (35,789) | (19,171) |
Other liabilities | (2,537) | (1,901) |
Net cash used in operating activities | (8,473) | (11,663) |
Cash flows from investing activities: | ||
Purchase of property, plant and equipment | (4,388) | (2,348) |
Purchase of therapeutic program equipment leased to third parties under operating leases | (2,034) | (629) |
Purchase of company-owned life insurance investment | (598) | (555) |
Proceeds from sale of property, plant and equipment | 840 | 2,179 |
Net cash used in investing activities | (6,180) | (1,353) |
Cash flows from financing activities: | ||
Borrowings under term loan, net of discount | 501,467 | |
Repayment of term loan | (431,875) | (5,625) |
Borrowings under revolving credit agreement | 3,000 | 49,500 |
Repayments under revolving credit agreement | (8,000) | (31,500) |
Payment of employee taxes on stock-based compensation | (2,150) | (1,338) |
Payment on seller note and other contingent consideration | (1,749) | (3,498) |
Payment of capital lease obligations | (364) | (278) |
Payment of debt issuance costs | (6,757) | |
Payment of debt extinguishment costs | (8,436) | |
Net cash provided by financing activities | 45,136 | 7,261 |
Increase (decrease) in cash, cash equivalents and restricted cash | 30,483 | (5,755) |
Cash, cash equivalents and restricted cash, at beginning of period | 4,779 | 9,412 |
Cash, cash equivalents and restricted cash, at end of period | 35,262 | 3,657 |
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 | 32,913 | 1,414 |
Restricted cash, at end of period | 2,349 | 2,243 |
Cash, cash equivalents and restricted cash, at end of period | $ 35,262 | $ 3,657 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2018 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE A — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Hanger, Inc. (“we,” “our,” or “us”) is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries. We provide orthotic and prosthetic (“O&P”) services, distribute O&P devices and components, manage O&P networks and provide therapeutic solutions to patients and businesses in acute, post-acute and clinic settings. We operate through two segments, Patient Care and Products & Services. Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”), as previously filed with the Securities and Exchange Commission (“SEC”). In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the interim period are not necessarily indicative of those to be expected for the full year. A detailed description of our significant accounting policies and management judgments is contained in our 2017 Form 10-K. Reclassifications We have reclassified certain amounts in the prior year consolidated financial statements to be consistent with the current year presentation. These relate to classifications within both the condensed consolidated statements of operations and cash flows - see “ Adoption of New Accounting Standards ” for additional information. Recent Accounting Pronouncements Adoption of New Accounting Standards On January 1, 2018, we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and related clarifying standards (“ASC 606”) on revenue recognition using the modified retrospective method for all contracts in place at January 1, 2018. This new accounting standard outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. This standard supersedes existing revenue recognition requirements. The core principle of the revenue recognition standard is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The majority of our contracts are generally short term in nature. Revenue is recognized at the point of time when we transfer control of the good or service to the patient. Under ASC 606, estimated uncollectible amounts due from self-pay patients, as well as co-pays, co-insurance and deductibles owed to us by patients with insurance are generally considered implicit price concessions and are now presented as a reduction of net revenue. Under prior guidance, these amounts were recognized as bad debt expense and were included in other operating costs. When estimating the variable consideration, we use historical collection experience to estimate amounts not expected to be collected. Conversely, subsequent changes in collectability due to a change in financial condition (i.e. bankruptcy) continues to be recognized as bad debt expense. The adoption of this standard did not have a material impact on our results of operations. The cumulative effect of implementing this guidance resulted in an increase of $0.8 million to the opening balance of accumulated deficit from establishing a contract liability of $1.0 million for certain performance obligations that must be recognized over time and an increase in deferred tax assets in the amount of $0.3 million. On January 1, 2018, we adopted two new accounting standards that clarify presentation (ASU No. 2016-18 , Statement of Cash Flows (Topic 230): Restricted Cash ) and classification (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ) in the statement of cash flows on a retrospective basis. As a result of adoption: · Amounts generally described as restricted cash and restricted cash equivalents are now presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. · We added a reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated statements of cash flows. Restricted cash balances are included in “Other Current Assets” in our condensed consolidated balance sheets - see Note G - “ Other Current Assets and Other Assets .” On January 1, 2018, we adopted ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory , which requires the recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. It was applied on a modified retrospective basis through a cumulative-effect adjustment directly to accumulated deficit as of the beginning of the period of adoption. As a result of adoption, there was no material impact to our condensed consolidated financial statements. On January 1, 2018, we adopted ASU No. 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business , which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. As a result of adoption, there was no material impact on our condensed consolidated financial statements and we will apply the guidance to any future acquisitions should they occur. On January 1, 2018, we adopted ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting , which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of the share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification (“ASC”) 718. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. As a result of adoption, there was no material impact on our condensed consolidated financial statements and we will apply the guidance to any future changes to the terms or conditions of stock-based payment awards should they occur. On January 1, 2018, we adopted ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends ASC Topic 715. The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost for an entity’s defined benefit pension and other postretirement plans. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement. The amendments in this update require that an employer report the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit costs are required to be presented in the income statement separately from the service cost component and outside of income from operations. Accordingly, we have made certain reclassifications from “General and administrative expenses” to “Non-service pension expense” of $0.2 million and $0.2 million for the three months ended March 31, 2018 and March 31, 2017, respectively. Such reclassifications did not have a material effect on our consolidated statement of operations. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities . The objective of this new guidance is to improve the financial reporting of hedging relationships by, among other things, eliminating the requirement to separately measure and record hedge ineffectiveness. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted. We adopted this guidance effective January 1, 2018. The adoption did not have a material impact on our condensed consolidated financial statements or disclosures. New Accounting Standards Issued, Not Yet Adopted In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was signed into law on December 22, 2017, from accumulated other comprehensive income to retained earnings. This new standard is effective for us beginning January 1, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our condensed consolidated financial statements and the related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The amendments in this ASU, and related clarifying standards, revise the accounting for leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases that extend beyond 12 months. The asset and liability will initially be measured at the present value of the lease payments. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for fiscal year 2019 and will be applied through a modified retrospective transition approach which includes a number of practical expedients for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. Early adoption is permitted. We have not yet concluded how the new standard will impact our condensed consolidated financial statements. Nonetheless, we anticipate that there will be a material increase to assets and lease liabilities for existing property leases representing our nationwide retail locations that are not already included on our consolidated balance sheet. Revenue Recognition Effect of Adoption of ASC 606 On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to all contracts which were not completed as of January 1, 2018. As a practical expedient, we adopted a portfolio approach in evaluating our sources of revenue for implications of adoption. In accordance with the modified retrospective method, results of operations for the reporting periods after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605, Revenue Recognition (“ASC 605”). We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. Upon adoption of ASC 606, the cumulative effect of the changes made to our condensed consolidated balance sheet as of January 1, 2018 was as follows: December 31, 2017 Effects of January 1, 2018 (in thousands) As reported Adoption After adoption Assets Deferred income taxes $ $ $ Liabilities Accrued expenses and other current liabilities $ $ $ Shareholders’ Deficit Accumulated deficit $ ) $ ) $ ) In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated statement of operations and condensed consolidated balance sheet is as follows: As of and for the three months ended March 31, 2018 (in thousands) As Reported Effects of Adoption Proforma balance Condensed Consolidated Statement of Operations Net revenue $ $ $ Other operating costs Income from operations Loss before income taxes ) ) Net loss ) ) Comprehensive loss ) ) Condensed Consolidated Balance Sheet Assets Deferred income taxes $ $ ) $ Total assets ) Liabilities Accrued expenses and other current liabilities ) Total current liabilities ) Total liabilities ) Shareholders’ Deficit Accumulated deficit ) ) Total shareholders’ deficit ) ) The adoption of ASC 606 resulted in deferring $1.1 million of net revenue from our Patient Care segment as of March 31, 2018 and recognizing net revenue for $1.0 million from satisfying performance obligations from the previous period. Estimated uncollectible amounts due from self-pay patients for the three months ended March 31, 2018 were $0.9 million and are considered implicit price concessions under ASC 606 and are recorded as a reduction to net revenue. Patient Care Segment Revenue in our Patient Care segment is primarily derived from contracts with third party payors for the provision of O&P devices and is recognized upon the transfer of control of promised products or services to the patient at the time the patient receives the device. At, or subsequent to delivery, we issue an invoice to the third party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, the U.S. Department of Veterans Affairs and private or patient pay (“Private Pay”) individuals. We recognize revenue for the amounts we expect to receive from payors based on expected contractual reimbursement rates, which are net of estimated contractual discounts and implicit price concessions. These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances. As such, these adjustments do not relate to an inability to pay, but to contractual allowances, our failure to ensure that a patient was currently eligible under a payor’s health plan, that the plan provides full O&P benefits, that we received prior authorization, that we filed or appealed the payor’s determination timely, on the basis of our coding, failure by certain classes of patients to pay their portion of a claim or other administrative issues which are considered as part of the transaction price and recorded as a reduction of revenues. Our products and services are sold with a 90-day labor and 180-day warranty for fabricated components. Warranties are not considered a separate performance obligation. We estimate warranties based on historical trends and include them in accrued expenses and other current liabilities in the condensed consolidated balance sheet. A portion of our O&P revenue comes from the provision of cranial devices. In addition to delivering the cranial device, there are patient follow up visits where we assist in treating the patient’s condition by adjusting or modifying the cranial device. We conclude that, for these devices, there are two performance obligations and use the expected cost plus margin approach to estimate for the standalone selling price of each performance obligation. The allocated portion associated with the patient’s receipt of the cranial device is recognized when the patient receives the device while the portion of revenue associated with the follow up visits is initially recorded as deferred revenue. On average, the cranial device follow up visits occur within 90 days after the patient receives the device and the deferred revenue is recognized on a straight line basis over this period. Medicare and Medicaid regulations and the various agreements we have with other third party payors, including commercial healthcare payors under which these contractual adjustments and disallowed revenue are calculated, are complex and are subject to interpretation and adjustment and may include multiple reimbursement mechanisms for different types of services. Therefore, the particular O&P devices and related services authorized and provided, and the related reimbursement, are subject to interpretation and adjustment that could result in payments that differ from our estimates. Additionally, updated regulations and reimbursement schedules, and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management. As a result, there is a reasonable possibility that recorded estimates could change and any related adjustments will be recorded as adjustments to net revenue when they become known. The following table disaggregates our Patient Care segment’s revenue from contracts with customers for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, (in thousands) 2018 2017 Patient Care Segment Medicare $ $ Medicaid Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) Veterans Administration Private Pay Total $ $ Products & Services Segment The adoption of ASC 606 did not have a material impact on our Product & Services segment. Revenue in our Products & Services segment is derived from the distribution of O&P components and the leasing and sale of rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training. Distribution services revenues are recognized when obligations under the terms of a contract with our customers are satisfied, which occurs with the transfer of control of our products. This occurs either upon shipment or delivery of goods, depending on whether the terms are FOB Origin or FOB Destination. Payment terms are typically between 30 to 90 days. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products to a customer (“transaction price”). To the extent that the transaction price includes variable consideration, such as prompt payment discounts, list price discounts, rebates, and volume discounts, we estimate the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available. We reduce revenue by estimates of potential future product returns and other allowances. Provisions for product returns and other allowances are recorded as a reduction to revenue in the period sales are recognized. We make estimates of the amount of sales returns and allowances that will eventually be incurred. Management analyzes sales programs that are in effect, contractual arrangements, market acceptance and historical trends when evaluating the adequacy of sales returns and allowance accounts. Therapeutic program equipment and related services revenue are recognized over the applicable term the customer has the right to use the equipment and as the services are provided. Equipment sales revenue is recognized upon delivery, with any related services revenue deferred and recognized as the services are performed. Sales of consumables are recognized upon delivery. In addition, we estimate amounts recorded to bad debt expense using historical trends and these are presented as a bad debt expense under the operating expense section of our condensed consolidated financial statements. The following table disaggregates our Product & Services segment’s revenue from contracts with customers for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, (in thousands) 2018 2017 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ $ Therapeutic solutions Total $ $ |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE B — EARNINGS PER SHARE Basic earnings per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common shares outstanding during the period plus any potentially dilutive common shares, such as stock options, restricted stock units and performance-based units calculated using the treasury stock method. Total anti-dilutive shares excluded from the diluted earnings per share were 208,510 of as March 31, 2018 and 368,796 as of March 31, 2017. Our credit agreement restricts the payment of dividends or other distributions to our shareholders with respect to Hanger, Inc., the parent company, or any of its subsidiaries. The reconciliation of the numerators and denominators used to calculate basic and diluted net loss per share are as follows: Three Months Ended March 31, (in thousands, except share and per share data) 2018 2017 Net loss $ ) $ ) Weighted average shares used to compute basic earnings per common share Effect of potentially dilutive restricted stock units and options (1) — — Weighted average shares used to compute diluted earnings per common share Basic and diluted loss per common share $ ) $ ) (1) As we are recognizing a loss for the periods presented, shares used to compute diluted per common share amounts excludes 537,497 shares for 2018 and 401,204 shares for 2017 of potentially dilutive shares related to unvested restricted stock units and unexercised options in accordance with ASC 260 - Earnings Per Share. |
ACCOUNTS RECEIVABLE, NET
ACCOUNTS RECEIVABLE, NET | 3 Months Ended |
Mar. 31, 2018 | |
ACCOUNTS RECEIVABLE, NET | |
ACCOUNTS RECEIVABLE, NET | NOTE C — ACCOUNTS RECEIVABLE, NET Accounts receivable, net represent outstanding amounts we expect to collect from the transfer of our products and services. Principally, these amounts are comprised of receivables from Medicare, Medicaid and commercial insurance plans. Under ASC 606, our accounts receivables represent amounts outstanding from our gross billings, net of contractual discounts and other implicit price concessions including estimates for payor disallowances, sales returns and patient non-payments. Under both ASC 606 and ASC 605, disallowed revenue is considered an adjustment to the transaction price. However, upon adoption of ASC 606, estimated uncollectible amounts due to us by patients are generally considered implicit price concessions and are now presented as a reduction of net revenue. Under prior guidance, these amounts were recognized as bad debt expense in other operating expenses. An allowance for doubtful accounts is also recorded for our Products & Services segment which is deducted from gross accounts receivable to arrive at “Accounts receivable, net.” Accounts receivable, net as of March 31, 2018, and December 31, 2017 is comprised of the following: As of March 31, 2018 As of December 31, 2017 (in thousands) Patient Care Products & Consolidated Patient Care Products & Consolidated Accounts receivable, before allowances $ $ $ $ $ $ Allowances for estimated implicit price concessions arising from: Allowance for estimated payor disallowances ) — ) ) — ) Allowance for estimated patient non-payments ) — ) — — — Accounts receivable, gross Allowance for doubtful accounts — ) ) ) ) ) Accounts receivable, net $ $ $ $ $ $ |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2018 | |
INVENTORIES | |
INVENTORIES | NOTE D — INVENTORIES Our inventories are comprised of the following: (in thousands) March 31, 2018 December 31, 2017 Raw materials $ $ Work in process Finished goods Total inventories $ $ |
PROPERTY PLANT AND EQUIPMENT, N
PROPERTY PLANT AND EQUIPMENT, NET | 3 Months Ended |
Mar. 31, 2018 | |
PROPERTY PLANT AND EQUIPMENT, NET | |
PROPERTY PLANT AND EQUIPMENT, NET | NOTE E — PROPERTY PLANT AND EQUIPMENT, NET Property, plant and equipment, net were comprised of the following: (in thousands) March 31, 2018 December 31, 2017 Land $ $ Buildings Furniture and fixtures Machinery and equipment Therapeutic program equipment leased to third parties under operating leases Leasehold improvements Computers and software Total property, plant, and equipment, gross Less: accumulated depreciation ) ) Total property, plant, and equipment, net $ $ Total depreciation expense was approximately $7.4 million and $7.7 million for the three months ended March 31, 2018 and 2017, respectively. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE F — GOODWILL AND OTHER INTANGIBLE ASSETS We assess goodwill and indefinite lived intangible assets for impairment annually on October 1st, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. The carrying value of goodwill at March 31, 2018 and December 31, 2017 was $196.3 million. The balances related to intangible assets as of March 31, 2018 and December 31, 2017 are as follows: March 31, 2018 December 31, 2017 (in thousands) Gross Accumulated Accumulated Net Gross Accumulated Accumulated Net Customer lists $ $ ) $ — $ $ $ ) $ — $ Other intangible assets ) — ) — Definite-lived intangible assets ) — ) — Indefinite life - trade name — ) — ) Total other intangible assets $ $ ) $ ) $ $ $ ) $ ) $ Total intangible amortization expense was approximately $2.0 million and $2.4 million for the three months ended March 31, 2018 and 2017, respectively. Estimated aggregate amortization expense for definite lived intangible assets for each of the next five years ended December 31 st and thereafter is as follows: (in thousands) 2018 (remainder of year) $ 2019 2020 2021 2022 Thereafter Total $ |
OTHER CURRENT ASSETS AND OTHER
OTHER CURRENT ASSETS AND OTHER ASSETS | 3 Months Ended |
Mar. 31, 2018 | |
OTHER CURRENT ASSETS AND OTHER ASSETS | |
OTHER CURRENT ASSETS AND OTHER ASSETS | NOTE G — OTHER CURRENT ASSETS AND OTHER ASSETS Other current assets consist of the following: (in thousands) March 31, 2018 December 31, 2017 Non-trade receivables $ $ Prepaid rent Prepaid maintenance Restricted cash Prepaid other Prepaid insurance Other Total other current assets $ $ Other assets consist of the following: (in thousands) March 31, 2018 December 31, 2017 Cash surrender value of COLI $ $ Non-trade receivables Deposits Other Total other assets $ $ |
ACCRUED EXPENSES, OTHER CURRENT
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | 3 Months Ended |
Mar. 31, 2018 | |
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | |
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | NOTE H — ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES Accrued expenses and other current liabilities consist of: (in thousands) March 31, 2018 December 31, 2017 Patient prepayments, deposits and refunds payable $ $ Accrued professional fees Insurance and self-insurance accruals Accrued sales taxes and other taxes Accrued interest payable Other current liabilities Total $ $ Other liabilities consist of: (in thousands) March 31, 2018 December 31, 2017 Supplemental executive retirement plan obligations $ $ Long-term insurance accruals Deferred tenant improvement allowances Unrecognized tax benefits Deferred rent Other Total $ $ |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE I — INCOME TAXES We recorded a benefit from income tax of $6.2 million and $6.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively. The effective tax rate was 21.5% and 25.3% for the three months ended March 31, 2018 and March 31, 2017, respectively. We typically determine our interim income tax provision by using the estimated annual effective tax rate and applying that rate to income/loss on a current year-to-date basis. We have determined that since small changes in estimated ordinary income for 2018 would result in significant changes in the estimated annual effective tax rate, this method would not provide reliable results for the quarter ended March 31, 2018. Therefore, a discrete year-to-date method of reporting was used for the quarter ended March 31, 2018. Under the discrete method, we determined the income tax provision based upon actual results as if the interim period were an annual period. The decrease in the effective tax rate for the three months ended March 31, 2018 compared with the three months ended March 31, 2017 is primarily attributable to the changes enacted by the Tax Act and using the discrete method for interim reporting for the three months ended March 31, 2018. Our effective tax rate for the three months ended March 31, 2018 differed from the federal statutory tax rate of 21% primarily due to non-deductible expenses and the shortfall from stock-based compensation recorded as a discrete item during the period. Our effective tax rate for the three months ended March 31, 2017 differed from the federal statutory tax rate of 35% primarily due to non-deductible expenses and the shortfall from stock-based compensation recorded as a discrete item during the period. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. In the fourth quarter of 2017, we recorded a provisional amount of $35.0 million of tax expense related to re-measurement of our deferred tax assets and liabilities. For the three months ended March 31, 2018, there were no significant adjustments to this amount although it remains provisional. Additional work is still necessary for a more detailed analysis of our deferred tax assets and liabilities. The future issuance of U.S. Treasury Regulations, administrative interpretations or court decisions interpreting the Tax Act may require further adjustments and changes in our estimate. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete. |
LONG TERM DEBT
LONG TERM DEBT | 3 Months Ended |
Mar. 31, 2018 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE J — LONG-TERM DEBT Long-term debt consists of the following: (in thousands) March 31, 2018 December 31, 2017 Credit Agreement, dated March 6, 2018 Revolving credit facility $ — $ — Term loan B — Prior Credit Agreement, dated August 1, 2016 Term loan B $ — $ Prior Credit Agreement, dated June 17, 2013 Revolving credit facility — Term loan — Seller notes Financing leases and other Total debt before unamortized discount and debt issuance costs $ $ Unamortized discount and debt issuance costs, net ) ) Total debt $ $ Less: Current portion of long-term debt Long-term debt $ $ Refinancing of Credit Agreement and Term B Borrowings On March 6, 2018, we entered into a new $605.0 million Senior Credit Facility (the “Credit Agreement”). The Credit Agreement provides for (i) a revolving credit facility with an initial maximum aggregate amount of availability of $100.0 million that matures in March 2023 and (ii) a $505.0 million Term loan B facility due in quarterly principal installments commencing June 29, 2018, with all remaining outstanding principal due at maturity in March 2025. Availability under the revolving credit facility is reduced by outstanding letters of credit, which were approximately $5.9 million as of March 31, 2018. We may (a) increase the aggregate principal amount of any outstanding tranche of term loans or add one or more additional tranches of term loans under the loan documents, and/or (b) increase the aggregate principal amount of revolving commitments or add one or more additional revolving loan facilities under the loan documents by an aggregate amount of up to the sum of (1) $125.0 million and (2) an amount such that, after giving effect to such incurrence of such amount (but excluding the cash proceeds of such incremental facilities and certain other indebtedness, and treating all commitments in respect of revolving indebtedness as fully drawn), the consolidated first lien net leverage ratio is equal to or less than 3.80 to 1.00, if certain conditions are satisfied, including the absence of a default or an event of default under the Credit Agreement at the time of the increase and that we obtain the consent of each lender providing any incremental facility. Net proceeds from the borrowings under the Credit Agreement, which totaled approximately $501.5 million, were used in part to repay in full all previously existing loans outstanding under our previous credit agreement and Term B credit agreement. Proceeds were also used to pay various transaction costs including fees paid to respective lenders and accrued and unpaid interest. The remainder of the proceeds are being used to provide ongoing working capital and capital for other general corporate purposes. In connection with the Credit Agreement, we paid debt issuance costs of approximately $6.8 million. As part of the repayment of amounts outstanding under our prior credit agreements, we paid a call premium totaling approximately $8.4 million and expensed outstanding unamortized discount and debt issuance costs totaling approximately $8.6 million. The call Our obligations under the Credit Agreement are currently guaranteed by our material domestic subsidiaries and will from time to time be guaranteed by, subject in each case to certain exceptions, any domestic subsidiaries that may become material in the future. Subject to certain exceptions, the Credit Agreement is secured by first-priority perfected liens and security interests in substantially all of our personal property and each subsidiary guarantor. Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) Bank of America, N.A.’s prime rate, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin. At March 31, 2018, the weighted average interest rate on outstanding borrowings under our Term loan B facility was approximately 5.4%. We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note L - “ Derivative Financial Instruments .” We must also pay (i) an unused commitment fee ranging from 0.375% to 0.500% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement, and (ii) a per annum fee equal to (a) for each performance standby letter of credit outstanding under the Credit Agreement with respect to nonfinancial contractual obligations, 50% of the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit, and (b) for each other letter of credit outstanding under the Credit Agreement, the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn for such letter of credit. The Credit Agreement contains various restrictions and covenants, including requirements that we maintain certain financial ratios at prescribed levels and restrictions on our ability and certain of our subsidiaries to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, consummate acquisitions, make investments and pay dividends and other distributions. The Credit Agreement includes the following financial covenants applicable for so long as any revolving loans and/or revolving commitments remain outstanding under the Credit Agreement: (i) a maximum consolidated first lien net leverage ratio (defined as, with certain adjustments and exclusions, the ratio of consolidated first-lien indebtedness to consolidated net income before interest, taxes, depreciation, amortization, non-cash charges and certain other items (“EBITDA”) for the most recently ended period of four fiscal quarters for which financial statements are available) of 5.00 to 1.00 for the fiscal quarters ended June 30, 2018, September 30, 2018, December 31, 2018 and March 31, 2019; 4.75 to 1.00 for the fiscal quarters ended June 30, 2019 through March 31, 2020; 4.50 to 1.00 for the fiscal quarters ended June 30, 2020 through March 31, 2021; 4.25 to 1.00 for the fiscal quarters ended June 30, 2021 through March 31, 2022; and 3.75 to 1.00 for the fiscal quarter ended June 30, 2022 and the last day of each fiscal quarter thereafter; and (ii) a minimum interest coverage ratio (defined as, with certain adjustments, the ratio of our EBITDA to consolidated interest expense to the extent paid or payable in cash) of 2.75 to 1.00 as of the last day of any fiscal quarter. The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable; provided, however, that the occurrence of an event of default as a result of a breach of a financial covenant under the Credit Agreement does not constitute a default or event of default with respect to any term facility under the Credit Agreement unless and until the required revolving lenders shall have terminated their revolving commitments and declared all amounts outstanding under the revolving credit facility to be due and payable. In addition, if we or any subsidiary guarantor becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable. Loans outstanding under the Credit Agreement will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) upon acceleration of such loans, (ii) while a payment event of default exists or (iii) upon the lenders’ request, during the continuance of any other event of default. Scheduled maturities of debt at March 31, 2018 were as follows (in thousands): 2018 (remainder of year) $ 2019 2020 2021 2022 Thereafter Total debt before unamortized discount and debt issuance costs, net Unamortized discount and debt issuance costs, net ) Total debt $ |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2018 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE K — FAIR VALUE MEASUREMENTS Fair Value Measurements We follow the authoritative guidance for financial assets and liabilities, which establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. The authoritative guidance requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy by which these assets and liabilities must be categorized, based on significant levels of inputs as follows: Level 1 consists of securities for which there are quoted prices in active markets for identical securities; Level 2 consists of securities for which observable inputs other than Level 1 inputs are used, such as quoted prices for similar securities in active markets or quoted prices for identical securities in less active markets and model-derived valuations for which the variables are derived from, or corroborated by, observable market data; and Level 3 consists of securities for which there are no observable inputs to the valuation methodology that are significant to the measurement of the fair value. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Financial Instruments We hold investments in money market funds which are measured at fair value on a recurring basis. As of March 31, 2018 and December 31, 2017, $2.3 million and $3.3 million, respectively, of money market funds which are restricted from general use are presented within “Other current assets.” The fair values of our money market funds are based on Level 1 observable market prices and are equivalent to one dollar per share. The carrying value of accounts receivable and accounts payable approximate their fair values based on the short-term nature of these instruments. In March 2018, we refinanced our credit facilities with the Credit Agreement. The carrying value of our outstanding term loan as of March 31, 2018 was $505.0 million which approximates its fair value. The carrying value of our outstanding term loan as of December 31, 2017 was $151.9 million compared to its fair value of $149.4 million. The carrying value of our outstanding Term Loan B as of December 31, 2017 was $280.0 million compared to its fair value of $283.5 million. Our estimates of fair value are based on a discounted cash flow model and indicative quote using unobservable inputs, primarily, our risk-adjusted credit spread, which represents a Level 3 measurement. As of March 31, 2018, we had no amounts outstanding on our revolving credit facility. The carrying value of the amount outstanding on our revolving credit facilities as of December 31, 2017 was $5.0 million compared to the fair value $4.9 million. Our estimates of fair value are based on a discounted cash flow model using unobservable inputs, primarily, our risk-adjusted credit spread, which represents a Level 3 measurement. In March 2018, we entered into interest rate swap agreements with notional values of $325 million, at inception, which reduces $12.5 million annually until the swaps mature on March 6, 2024. The interest rate swap agreements are designated as cash flow hedges and are measured at fair value based on inputs other than quoted market prices that are observable, which Long-Term Debt ” and Note L - “Derivative Financial Instruments” for further information. The carrying value of our outstanding subordinated promissory notes issued in connection with acquisitions (“Seller Notes”) as of March 31, 2018 and December 31, 2017 was $4.2 million and $5.9 million, respectively. We believe that the carrying value of the Seller Notes approximates their fair values based on a discounted cash flow model using unobservable inputs, primarily, our credit spread for subordinated debt, which represents a Level 3 measurement. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended |
Mar. 31, 2018 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE L — DERIVATIVE FINANCIAL INSTRUMENTS We are exposed to certain risks arising from both our business operations and economic conditions. We manage economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash payments principally related to our borrowings. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counter-party in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The change in the fair value of derivatives designated and that qualify as cash flow hedges is recorded on our consolidated balance sheet in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2018, such derivatives were used to hedge certain variable cash flows associated with existing variable-rate debt. As of March 31, 2018, our swaps had a notional value outstanding of $325.0 million. We had no swaps outstanding as of December 31, 2017. Changes in Net Gain or Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Loss The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss (“AOCI”) as of December 31, 2017 and March 31, 2018: (in thousands) Cash Flow Hedges Balance at December 31, 2017 $ — Unrealized loss recognized in other comprehensive loss, net of tax Reclassification of loss to interest expense, net ) Balance at March 31, 2018 $ The following table presents the fair value of derivative liabilities within the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017: March 31, 2018 December 31, 2017 (in thousands) Assets Liabilities Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities $ — $ $ — $ — Other liabilities — — — |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2018 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE M — STOCK - BASED COMPENSATION The Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”) as originally adopted by our Board of Directors (the “Board”) in April 2016 authorized 2,250,000 shares of Common Stock, plus (1) the number of shares available for issuance under our prior equity incentive plan, the Hanger, Inc. 2010 Omnibus Incentive Plan (the “2010 Plan”) that had not been made subject to outstanding awards as of the effective date of the 2016 Plan and (2) any shares that would have become available again for new grants under the terms of the 2010 Plan if such plan were still in effect. We have estimated that the shares available for issuance under the 2016 Plan would not be sufficient to cover the equity award grants expected to be made to our directors, officers and employees through the remainder of 2018 and in connection with our annual equity award grants in March 2019. Therefore, on May 9, 2018, the Board adopted an amendment to the 2016 Plan that authorized the issuance of up to an additional 375,000 shares of our common stock. For the three months ended March 31, 2018 and 2017, we recognized a total of approximately $2.6 million and $2.2 million, respectively, of stock-based compensation expense. Stock compensation expense, net of forfeitures, relates to restricted stock units, performance-based restricted stock units, and stock options. The summary of restricted stock units, performance-based restricted stock units, and weighted average grant date fair values are as follows: Employee Service-Based Employee Performance-Based Awards Director Awards Units Weighted Units Weighted Units Weighted Nonvested at December 31, 2017 $ $ $ Granted — — Vested ) ) ) Forfeited ) ) — — Nonvested at March 31, 2018 $ $ $ There was no option activity during the three months ended March 31, 2018. |
SUPPLEMENTAL EXECUTIVE RETIREME
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) | 3 Months Ended |
Mar. 31, 2018 | |
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERP) | |
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) | NOTE N — SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS Defined Benefit Supplemental Executive Retirement Plan Our unfunded noncontributory defined benefit plan (“DB SERP”) covers certain senior executives, is administered by us and calls for annual payments upon retirement based on years of service and final average salary. Benefit costs and liability balances are calculated based on certain assumptions including benefits earned, discount rates, interest costs, mortality rates and other factors. Actual results that differ from the assumptions are accumulated and amortized over future periods, affecting the recorded obligation and expense in future periods. We believe the assumptions used are appropriate; however, changes in assumptions or differences in actual experience may affect our benefit obligation and future expenses. The DB SERP’s change in net benefit cost and obligation at March 31, 2018 and 2017 is as follows: Change in Benefit Obligation (in thousands) Benefit obligation at December 31, 2017 $ Service cost Interest cost Payments ) Benefit obligation at March 31, 2018 $ Benefit obligation at December 31, 2016 $ Service cost Interest cost Payments ) Benefit obligation at March 31, 2017 $ Amounts Recognized in the Condensed Consolidated Balance Sheets: March 31, December 31, (in thousands) 2018 2017 Accrued expenses and other current liabilities $ $ Other liabilities Total accrued liabilities $ $ Defined Contribution Supplemental Executive Retirement Plan We have a defined contribution plan (“DC SERP”) that covers certain of our senior executives. Each participant is given a notional account to manage his or her annual distributions and allocate the funds among various investment options (e.g. mutual funds). These accounts are tracking accounts only for the purpose of calculating the participant’s benefit. The participant does not have ownership of the underlying mutual funds. When a participant initiates or changes the allocation of his or her notional account, we will generally make an allocation of our investments, to match those chosen by the participant. While the allocation of our sub accounts is generally intended to mirror the participant’s account records (i.e. the distributions and gains or losses on those funds), the employee does not have legal ownership of any funds until payout upon retirement. The underlying investments are owned by the insurance company (and we own an insurance policy). As of March 31, 2018 and 2017, the estimated accumulated obligation benefit is $3.2 million and $2.3 million, respectively, of which $2.9 million and $2.0 million is funded and $0.3 million and $0.3 million is unfunded at March 31, 2018 and 2017, respectively. In connection with the DC SERP benefit obligation, we maintain a company owned life insurance (“COLI”) policy which is measured at its cash surrender value and is presented within “Other assets” in our consolidated balance sheets. See Note G - “ Other Current Assets and Other Assets ” for additional information. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE O — COMMITMENTS AND CONTINGENCIES Commitments In April 2014, in connection with the settlement of a patent infringement dispute, our wholly-owned subsidiary, Southern Prosthetic Supply, Inc. (“SPS”), entered into a non-cancellable agreement to purchase a total of $4.5 million of prosthetic gel liners in five installments. We determined that a portion of the prosthetic gel liners should be reserved as excess and slow-moving inventory, and we accrued a liability and expensed $3.4 million in 2014. As of March 31, 2018, $1.5 million of the non-cancellable purchase commitment was outstanding with $1.0 million and $0.5 million of purchases due by April of 2018 and 2019, respectively. As of March 31, 2018, our reserve associated with the non-cancellable purchase commitment was $2.7 million. Legal Proceedings Securities and Derivative Litigation In November 2014, a securities class action complaint, City of Pontiac General Employees’ Retirement System v. Hanger, et al., C.A. No. 1:14-cv-01026-SS, was filed against us in the United States District Court for the Western District of Texas. The complaint named us and certain of our current and former officers for allegedly making materially false and misleading statements regarding, inter alia, our financial statements, RAC audit success rate, the implementation of new financial systems, same-store sales growth, and the adequacy of our internal processes and controls. The complaint alleged violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The complaint sought unspecified damages, costs, attorneys’ fees, and equitable relief. On April 1, 2016, the court granted our motion to dismiss the lawsuit for failure to state a claim upon which relief can be granted, and permitted plaintiffs to file an amended complaint. On July 1, 2016, plaintiffs filed an amended complaint. On September 15, 2016, we and certain of the individual defendants filed motions to dismiss the lawsuit. On January 26, 2017, the court granted the defendants’ motions and dismissed with prejudice all claims against all defendants for failure to state a claim. On February 24, 2017, plaintiffs filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit. Appellate briefing was completed on August 18, 2017 and the appeal remains pending. The Court of Appeals held oral argument for the appeal on March 5, 2018. We are now awaiting a ruling from the Court of Appeals. In February and August of 2015, two separate shareholder derivative suits were filed in Texas state court against us related to the announced restatement of certain of our financial statements. The cases were subsequently consolidated into Judy v. Asar, et. al., Cause No. D-1-GN-15-000625. On October 25, 2016, plaintiffs in that action filed an amended complaint, and the case is currently pending before the 345 Judicial District Court of Travis County, Texas. The amended complaint in the consolidated derivative action names us and certain of our current and former officers and directors as defendants. It alleges claims for breach of fiduciary duty based, inter alia, on the defendants’ alleged failure to exercise good faith to ensure that we had in place adequate accounting and financial controls and that disclosures regarding our business, financial performance and internal controls were truthful and accurate. The complaint seeks unspecified damages, costs, attorneys’ fees, and equitable relief. As disclosed in our Current Report on Form 8-K filed with the SEC on June 6, 2016, the Board of Directors appointed a Special Litigation Committee of the Board (the “Special Committee”). The Board delegated to the Special Committee the authority to (1) determine whether it is in our best interests to pursue any of the allegations made in the derivative cases filed in Texas state court (which cases were consolidated into the Judy case discussed above), (2) determine whether it is in our best interests to pursue any remedies against any of our current or former employees, officers or directors as a result of the conduct discovered in the Audit Committee investigation concluded on June 6, 2016 (the “Investigation”), and (3) otherwise resolve claims or matters relating to the findings of the Investigation. The Special Committee retained independent legal counsel to assist and advise it in carrying out its duties and reviewed and considered the evidence and various factors relating to our best interests. In accordance with its findings and conclusions, the Special Committee determined that it is not in our best interest to pursue any of the claims in the Judy derivative case. Also in accordance with its findings and conclusions, the Special Committee determined that it is not in our best interests to pursue legal remedies against any of our current or former employees, officers, or directors. On April 14, 2017, we filed a motion to dismiss the consolidated derivative action based on the resolution by the Special Committee that it is not in our best interest to pursue the derivative claims. Counsel for the derivative plaintiffs opposed that motion and moved to compel discovery. In a hearing held on June 12, 2017, the Travis County court denied plaintiffs’ motion to compel, and held that the motion to dismiss would be considered only after appropriate discovery was concluded. The plaintiffs have since subpoenaed counsel for the Special Committee, seeking a copy of the full report prepared by the Special Committee and its independent counsel. Counsel for the Special Committee, as well as our counsel, take the position that the full report is not discoverable under Texas law. Plaintiffs’ counsel has filed a motion to compel the Special Committee’s counsel to produce the report. The hearing on the motion to compel is scheduled for June 28, 2018. We intend to vigorously oppose the motion to compel. Upon resolution of the discovery dispute and completion of discovery, we intend to file a motion to dismiss the consolidated derivative action. Management intends to continue to vigorously defend against the shareholder derivative action and the appeal in the securities class action. At this time, we cannot predict how the Courts will rule on the merits of the claims and/or the scope of the potential loss in the event of an adverse outcome. Should we ultimately be found liable, the resulting damages could have a material adverse effect on our consolidated financial position, liquidity or results of our operations. Other Matters In May 2015, one of our clinics received a civil investigative demand for records relating to a sample of claims submitted to Medicare and Medicaid for reimbursement, and we provided records in response to the subpoena. In May 2017, we were informed by an Assistant United States Attorney that it was investigating whether we properly provided and claimed reimbursement for prosthesis skins and covers from July 2013 (after an industry announcement) to the present. We have reviewed the claims, and have cooperated with the government’s investigation. This matter was resolved in March 2018 and did not have a material impact on the first quarter of 2018. From time to time we are subject to legal proceedings and claims which arise in the ordinary course of our business, including additional payments under business purchase agreements. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a materially adverse effect on our consolidated financial position, liquidity or results of our operations. We are in a highly regulated industry and receive regulatory agency inquiries from time to time in the ordinary course of our business, including inquiries relating to our billing activities. No assurance can be given that any discrepancies identified during a regulatory review will not have a material adverse effect on our consolidated financial statements. Guarantees and Indemnifications In the ordinary course of our business, we may enter into service agreements with service providers in which we agree to indemnify or limit the service provider against certain losses and liabilities arising from the service provider’s performance of the agreement. We have reviewed our existing contracts containing indemnification or clauses of guarantees and do not believe that our liability under such agreements is material. |
SEGMENT AND RELATED INFORMATION
SEGMENT AND RELATED INFORMATION | 3 Months Ended |
Mar. 31, 2018 | |
SEGMENT AND RELATED INFORMATION | |
SEGMENT AND RELATED INFORMATION | NOTE P — SEGMENT AND RELATED INFORMATION We have identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each operating segment’s income from operations. The operating segments are described further below: Patient Care - This segment consists of (i) our owned and operated patient care clinics, and (ii) our contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care and maintenance of the devices. The principal reimbursement sources for our services are: · Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, HMOs, PPOs, hospitals, vocational rehabilitation, workers’ compensation programs and similar sources; · Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain disabled persons, which provides reimbursement for O&P products and services based on prices set forth in published fee schedules with 10 regional pricing areas for prosthetics and orthotics and by state for durable medical equipment; · Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons in financial need, regardless of age, which may supplement Medicare benefits for financially needy persons aged 65 or older; and · U.S. Department of Veterans Affairs. Our contract and network management business, known as Linkia, is the only network management company dedicated solely to serving the O&P market and is focused on managing the O&P services of national and regional insurance companies. We partner with healthcare insurance companies by securing a national or regional contract either as a preferred provider or to manage their O&P network of providers. Products & Services - This segment consists of our distribution services business, which distributes and fabricates O&P products and components to sell to both the O&P industry and our own patient care clinics, and our therapeutic solutions business. The therapeutic solutions business provides and sells rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training. This segment also develops emerging neuromuscular technologies for the O&P and rehabilitation markets. Corporate & Other - This consists of corporate overhead and includes unallocated expense such as personnel costs, professional fees and corporate offices expenses. The accounting policies of the segments are the same as those described in Note B - “ Significant Accounting Policies ” in our 2017 Form 10-K. Intersegment revenue primarily relates to sales of O&P components from the Products & Services segment to the Patient Care segment. The sales are priced at the cost of the related materials plus overhead. Summarized financial information concerning our reporting segments is shown in the following tables. Total assets for each of the segments has not materially changed from December 31, 2017. (in thousands) Patient Care Products & Corporate & Consolidating Total March 31, 2018 Net revenue Third party $ $ $ — $ — $ Intersegments — — ) — Total net revenue — ) Material costs Third party suppliers — — Intersegments — ) — Total material costs — ) Personnel expenses — — Other expenses — Depreciation & amortization — Income (loss) from operations ) — Interest expense, net — Loss on extinguishment of debt — — — Non-service defined benefit plan expense — — — Income (loss) before income taxes ) — ) Benefit for income taxes — — ) — ) Net income (loss) $ $ $ ) $ — $ ) (in thousands) Patient Care Products & Corporate & Consolidating Total March 31, 2017 Net revenue Third Party $ $ $ — $ — $ Intersegments — — ) — Total net revenue — ) Material costs Third party suppliers — — Intersegments — ) — Total material costs — ) Personnel expenses — — Other expenses — Depreciation & amortization — Income (loss) from operations ) — ) Interest expense, net — Loss on extinguishment of debt — — — — — Non-service defined benefit plan expense — — — Income (loss) before income taxes ) — ) Benefit for income taxes — — ) — ) Net income (loss) $ $ $ ) $ — $ ) |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 3 Months Ended |
Mar. 31, 2018 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
SUPPLEMENTAL CASH FLOW INFORMATION | NOTE Q — SUPPLEMENTAL CASH FLOW INFORMATION The supplemental disclosure requirements for the statements of cash flows are as follows: Three Months Ended March 31, (in thousands) 2018 2017 Additions to property, plant and equipment acquired through financing obligations $ $ Retirements of financed property, plant and equipment and related obligations — Purchase of property, plant and equipment in accounts payable at period end |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE R — SUBSEQUENT EVENTS On May 15, 2018, we received a favorable net settlement of $1.7 million in connection with our long standing damage claims relating to the “Deepwater Horizon” disaster, and the prior adverse effect which it had on our clinic operations along the Gulf Coast in April 2010. We anticipate the receipt of no further payments in connection with this matter as this settlement constituted a full and final satisfaction of our claims. Given that this amount is considered a gain contingency, we did not record income associated with this settlement during the period ending March 31, 2018, or in any prior period. We intend to recognize this settlement amount as income in our condensed consolidated financial statements for the quarter ending June 30, 2018. On May 9, 2018, the Board adopted an amendment to the 2016 Plan, which authorized the issuance of up to an additional 375,000 shares of our common stock. See Note M - “ Stock-based Compensation” for more information. |
ORGANIZATION AND SUMMARY OF S26
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Description of Business | Description of Business Hanger, Inc. (“we,” “our,” or “us”) is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries. We provide orthotic and prosthetic (“O&P”) services, distribute O&P devices and components, manage O&P networks and provide therapeutic solutions to patients and businesses in acute, post-acute and clinic settings. We operate through two segments, Patient Care and Products & Services. |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”), as previously filed with the Securities and Exchange Commission (“SEC”). In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the interim period are not necessarily indicative of those to be expected for the full year. A detailed description of our significant accounting policies and management judgments is contained in our 2017 Form 10-K. |
Reclassifications | Reclassifications We have reclassified certain amounts in the prior year consolidated financial statements to be consistent with the current year presentation. These relate to classifications within both the condensed consolidated statements of operations and cash flows - see “ Adoption of New Accounting Standards ” for additional information. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adoption of New Accounting Standards On January 1, 2018, we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and related clarifying standards (“ASC 606”) on revenue recognition using the modified retrospective method for all contracts in place at January 1, 2018. This new accounting standard outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. This standard supersedes existing revenue recognition requirements. The core principle of the revenue recognition standard is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The majority of our contracts are generally short term in nature. Revenue is recognized at the point of time when we transfer control of the good or service to the patient. Under ASC 606, estimated uncollectible amounts due from self-pay patients, as well as co-pays, co-insurance and deductibles owed to us by patients with insurance are generally considered implicit price concessions and are now presented as a reduction of net revenue. Under prior guidance, these amounts were recognized as bad debt expense and were included in other operating costs. When estimating the variable consideration, we use historical collection experience to estimate amounts not expected to be collected. Conversely, subsequent changes in collectability due to a change in financial condition (i.e. bankruptcy) continues to be recognized as bad debt expense. The adoption of this standard did not have a material impact on our results of operations. The cumulative effect of implementing this guidance resulted in an increase of $0.8 million to the opening balance of accumulated deficit from establishing a contract liability of $1.0 million for certain performance obligations that must be recognized over time and an increase in deferred tax assets in the amount of $0.3 million. On January 1, 2018, we adopted two new accounting standards that clarify presentation (ASU No. 2016-18 , Statement of Cash Flows (Topic 230): Restricted Cash ) and classification (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ) in the statement of cash flows on a retrospective basis. As a result of adoption: · Amounts generally described as restricted cash and restricted cash equivalents are now presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. · We added a reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated statements of cash flows. Restricted cash balances are included in “Other Current Assets” in our condensed consolidated balance sheets - see Note G - “ Other Current Assets and Other Assets .” On January 1, 2018, we adopted ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory , which requires the recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. It was applied on a modified retrospective basis through a cumulative-effect adjustment directly to accumulated deficit as of the beginning of the period of adoption. As a result of adoption, there was no material impact to our condensed consolidated financial statements. On January 1, 2018, we adopted ASU No. 2017-01 , Business Combinations (Topic 805): Clarifying the Definition of a Business , which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. As a result of adoption, there was no material impact on our condensed consolidated financial statements and we will apply the guidance to any future acquisitions should they occur. On January 1, 2018, we adopted ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting , which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of the share-based payment awards to which an entity would be required to apply modification accounting under Accounting Standards Codification (“ASC”) 718. The amendments in ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. As a result of adoption, there was no material impact on our condensed consolidated financial statements and we will apply the guidance to any future changes to the terms or conditions of stock-based payment awards should they occur. On January 1, 2018, we adopted ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends ASC Topic 715. The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost for an entity’s defined benefit pension and other postretirement plans. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement. The amendments in this update require that an employer report the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit costs are required to be presented in the income statement separately from the service cost component and outside of income from operations. Accordingly, we have made certain reclassifications from “General and administrative expenses” to “Non-service pension expense” of $0.2 million and $0.2 million for the three months ended March 31, 2018 and March 31, 2017, respectively. Such reclassifications did not have a material effect on our consolidated statement of operations. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities . The objective of this new guidance is to improve the financial reporting of hedging relationships by, among other things, eliminating the requirement to separately measure and record hedge ineffectiveness. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted. We adopted this guidance effective January 1, 2018. The adoption did not have a material impact on our condensed consolidated financial statements or disclosures. New Accounting Standards Issued, Not Yet Adopted In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was signed into law on December 22, 2017, from accumulated other comprehensive income to retained earnings. This new standard is effective for us beginning January 1, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our condensed consolidated financial statements and the related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The amendments in this ASU, and related clarifying standards, revise the accounting for leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases that extend beyond 12 months. The asset and liability will initially be measured at the present value of the lease payments. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for fiscal year 2019 and will be applied through a modified retrospective transition approach which includes a number of practical expedients for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements. Early adoption is permitted. We have not yet concluded how the new standard will impact our condensed consolidated financial statements. Nonetheless, we anticipate that there will be a material increase to assets and lease liabilities for existing property leases representing our nationwide retail locations that are not already included on our consolidated balance sheet. |
Revenue Recognition | Revenue Recognition Effect of Adoption of ASC 606 On January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to all contracts which were not completed as of January 1, 2018. As a practical expedient, we adopted a portfolio approach in evaluating our sources of revenue for implications of adoption. In accordance with the modified retrospective method, results of operations for the reporting periods after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605, Revenue Recognition (“ASC 605”). We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. Upon adoption of ASC 606, the cumulative effect of the changes made to our condensed consolidated balance sheet as of January 1, 2018 was as follows: December 31, 2017 Effects of January 1, 2018 (in thousands) As reported Adoption After adoption Assets Deferred income taxes $ $ $ Liabilities Accrued expenses and other current liabilities $ $ $ Shareholders’ Deficit Accumulated deficit $ ) $ ) $ ) In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated statement of operations and condensed consolidated balance sheet is as follows: As of and for the three months ended March 31, 2018 (in thousands) As Reported Effects of Adoption Proforma balance Condensed Consolidated Statement of Operations Net revenue $ $ $ Other operating costs Income from operations Loss before income taxes ) ) Net loss ) ) Comprehensive loss ) ) Condensed Consolidated Balance Sheet Assets Deferred income taxes $ $ ) $ Total assets ) Liabilities Accrued expenses and other current liabilities ) Total current liabilities ) Total liabilities ) Shareholders’ Deficit Accumulated deficit ) ) Total shareholders’ deficit ) ) The adoption of ASC 606 resulted in deferring $1.1 million of net revenue from our Patient Care segment as of March 31, 2018 and recognizing net revenue for $1.0 million from satisfying performance obligations from the previous period. Estimated uncollectible amounts due from self-pay patients for the three months ended March 31, 2018 were $0.9 million and are considered implicit price concessions under ASC 606 and are recorded as a reduction to net revenue. Patient Care Segment Revenue in our Patient Care segment is primarily derived from contracts with third party payors for the provision of O&P devices and is recognized upon the transfer of control of promised products or services to the patient at the time the patient receives the device. At, or subsequent to delivery, we issue an invoice to the third party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, the U.S. Department of Veterans Affairs and private or patient pay (“Private Pay”) individuals. We recognize revenue for the amounts we expect to receive from payors based on expected contractual reimbursement rates, which are net of estimated contractual discounts and implicit price concessions. These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances. As such, these adjustments do not relate to an inability to pay, but to contractual allowances, our failure to ensure that a patient was currently eligible under a payor’s health plan, that the plan provides full O&P benefits, that we received prior authorization, that we filed or appealed the payor’s determination timely, on the basis of our coding, failure by certain classes of patients to pay their portion of a claim or other administrative issues which are considered as part of the transaction price and recorded as a reduction of revenues. Our products and services are sold with a 90-day labor and 180-day warranty for fabricated components. Warranties are not considered a separate performance obligation. We estimate warranties based on historical trends and include them in accrued expenses and other current liabilities in the condensed consolidated balance sheet. A portion of our O&P revenue comes from the provision of cranial devices. In addition to delivering the cranial device, there are patient follow up visits where we assist in treating the patient’s condition by adjusting or modifying the cranial device. We conclude that, for these devices, there are two performance obligations and use the expected cost plus margin approach to estimate for the standalone selling price of each performance obligation. The allocated portion associated with the patient’s receipt of the cranial device is recognized when the patient receives the device while the portion of revenue associated with the follow up visits is initially recorded as deferred revenue. On average, the cranial device follow up visits occur within 90 days after the patient receives the device and the deferred revenue is recognized on a straight line basis over this period. Medicare and Medicaid regulations and the various agreements we have with other third party payors, including commercial healthcare payors under which these contractual adjustments and disallowed revenue are calculated, are complex and are subject to interpretation and adjustment and may include multiple reimbursement mechanisms for different types of services. Therefore, the particular O&P devices and related services authorized and provided, and the related reimbursement, are subject to interpretation and adjustment that could result in payments that differ from our estimates. Additionally, updated regulations and reimbursement schedules, and contract renegotiations occur frequently, necessitating regular review and assessment of the estimation process by management. As a result, there is a reasonable possibility that recorded estimates could change and any related adjustments will be recorded as adjustments to net revenue when they become known. The following table disaggregates our Patient Care segment’s revenue from contracts with customers for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, (in thousands) 2018 2017 Patient Care Segment Medicare $ $ Medicaid Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) Veterans Administration Private Pay Total $ $ Products & Services Segment The adoption of ASC 606 did not have a material impact on our Product & Services segment. Revenue in our Products & Services segment is derived from the distribution of O&P components and the leasing and sale of rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training. Distribution services revenues are recognized when obligations under the terms of a contract with our customers are satisfied, which occurs with the transfer of control of our products. This occurs either upon shipment or delivery of goods, depending on whether the terms are FOB Origin or FOB Destination. Payment terms are typically between 30 to 90 days. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products to a customer (“transaction price”). To the extent that the transaction price includes variable consideration, such as prompt payment discounts, list price discounts, rebates, and volume discounts, we estimate the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available. We reduce revenue by estimates of potential future product returns and other allowances. Provisions for product returns and other allowances are recorded as a reduction to revenue in the period sales are recognized. We make estimates of the amount of sales returns and allowances that will eventually be incurred. Management analyzes sales programs that are in effect, contractual arrangements, market acceptance and historical trends when evaluating the adequacy of sales returns and allowance accounts. Therapeutic program equipment and related services revenue are recognized over the applicable term the customer has the right to use the equipment and as the services are provided. Equipment sales revenue is recognized upon delivery, with any related services revenue deferred and recognized as the services are performed. Sales of consumables are recognized upon delivery. In addition, we estimate amounts recorded to bad debt expense using historical trends and these are presented as a bad debt expense under the operating expense section of our condensed consolidated financial statements. The following table disaggregates our Product & Services segment’s revenue from contracts with customers for the three months ended March 31, 2018 and 2017: For the Three Months Ended March 31, (in thousands) 2018 2017 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ $ Therapeutic solutions Total $ $ |
ORGANIZATION AND SUMMARY OF S27
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
ASU 2014-09 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of impact of adoption on our condensed consolidated balance sheet and condensed consolidated statement of operations | December 31, 2017 Effects of January 1, 2018 (in thousands) As reported Adoption After adoption Assets Deferred income taxes $ $ $ Liabilities Accrued expenses and other current liabilities $ $ $ Shareholders’ Deficit Accumulated deficit $ ) $ ) $ ) As of and for the three months ended March 31, 2018 (in thousands) As Reported Effects of Adoption Proforma balance Condensed Consolidated Statement of Operations Net revenue $ $ $ Other operating costs Income from operations Loss before income taxes ) ) Net loss ) ) Comprehensive loss ) ) Condensed Consolidated Balance Sheet Assets Deferred income taxes $ $ ) $ Total assets ) Liabilities Accrued expenses and other current liabilities ) Total current liabilities ) Total liabilities ) Shareholders’ Deficit Accumulated deficit ) ) Total shareholders’ deficit ) ) |
Patient Care | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregates of revenue from contracts with customers | For the Three Months Ended March 31, (in thousands) 2018 2017 Patient Care Segment Medicare $ $ Medicaid Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) Veterans Administration Private Pay Total $ $ |
Products & Services | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregates of revenue from contracts with customers | For the Three Months Ended March 31, (in thousands) 2018 2017 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ $ Therapeutic solutions Total $ $ |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
EARNINGS PER SHARE | |
Schedule of reconciliation of numerators and denominators used to calculate basic and diluted net loss per share | Three Months Ended March 31, (in thousands, except share and per share data) 2018 2017 Net loss $ ) $ ) Weighted average shares used to compute basic earnings per common share Effect of potentially dilutive restricted stock units and options (1) — — Weighted average shares used to compute diluted earnings per common share Basic and diluted loss per common share $ ) $ ) (1) As we are recognizing a loss for the periods presented, shares used to compute diluted per common share amounts excludes 537,497 shares for 2018 and 401,204 shares for 2017 of potentially dilutive shares related to unvested restricted stock units and unexercised options in accordance with ASC 260 - Earnings Per Share. |
ACCOUNTS RECEIVABLE, NET (Table
ACCOUNTS RECEIVABLE, NET (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
ACCOUNTS RECEIVABLE, NET | |
Schedule of accounts receivable allowances | As of March 31, 2018 As of December 31, 2017 (in thousands) Patient Care Products & Consolidated Patient Care Products & Consolidated Accounts receivable, before allowances $ $ $ $ $ $ Allowances for estimated implicit price concessions arising from: Allowance for estimated payor disallowances ) — ) ) — ) Allowance for estimated patient non-payments ) — ) — — — Accounts receivable, gross Allowance for doubtful accounts — ) ) ) ) ) Accounts receivable, net $ $ $ $ $ $ |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
INVENTORIES | |
Schedule of inventories | (in thousands) March 31, 2018 December 31, 2017 Raw materials $ $ Work in process Finished goods Total inventories $ $ |
PROPERTY PLANT AND EQUIPMENT,31
PROPERTY PLANT AND EQUIPMENT, NET (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
PROPERTY PLANT AND EQUIPMENT, NET | |
Schedule of property, plant and equipment, net | (in thousands) March 31, 2018 December 31, 2017 Land $ $ Buildings Furniture and fixtures Machinery and equipment Therapeutic program equipment leased to third parties under operating leases Leasehold improvements Computers and software Total property, plant, and equipment, gross Less: accumulated depreciation ) ) Total property, plant, and equipment, net $ $ |
GOODWILL AND OTHER INTANGIBLE32
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of balances related to intangible assets | March 31, 2018 December 31, 2017 (in thousands) Gross Accumulated Accumulated Net Gross Accumulated Accumulated Net Customer lists $ $ ) $ — $ $ $ ) $ — $ Other intangible assets ) — ) — Definite-lived intangible assets ) — ) — Indefinite life - trade name — ) — ) Total other intangible assets $ $ ) $ ) $ $ $ ) $ ) $ |
Schedule of estimated aggregate amortization expense for definite lived intangible assets | (in thousands) 2018 (remainder of year) $ 2019 2020 2021 2022 Thereafter Total $ |
OTHER CURRENT ASSETS AND OTHE33
OTHER CURRENT ASSETS AND OTHER ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
OTHER CURRENT ASSETS AND OTHER ASSETS | |
Schedule of other current assets | (in thousands) March 31, 2018 December 31, 2017 Non-trade receivables $ $ Prepaid rent Prepaid maintenance Restricted cash Prepaid other Prepaid insurance Other Total other current assets $ $ |
Schedule of other assets | (in thousands) March 31, 2018 December 31, 2017 Cash surrender value of COLI $ $ Non-trade receivables Deposits Other Total other assets $ $ |
ACCRUED EXPENSES, OTHER CURRE34
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | |
Schedule of accrued expenses and other current liabilities | (in thousands) March 31, 2018 December 31, 2017 Patient prepayments, deposits and refunds payable $ $ Accrued professional fees Insurance and self-insurance accruals Accrued sales taxes and other taxes Accrued interest payable Other current liabilities Total $ $ |
Schedule of other liabilities | (in thousands) March 31, 2018 December 31, 2017 Supplemental executive retirement plan obligations $ $ Long-term insurance accruals Deferred tenant improvement allowances Unrecognized tax benefits Deferred rent Other Total $ $ |
LONG TERM DEBT (Tables)
LONG TERM DEBT (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
LONG-TERM DEBT | |
Schedule of long-term debt | (in thousands) March 31, 2018 December 31, 2017 Credit Agreement, dated March 6, 2018 Revolving credit facility $ — $ — Term loan B — Prior Credit Agreement, dated August 1, 2016 Term loan B $ — $ Prior Credit Agreement, dated June 17, 2013 Revolving credit facility — Term loan — Seller notes Financing leases and other Total debt before unamortized discount and debt issuance costs $ $ Unamortized discount and debt issuance costs, net ) ) Total debt $ $ Less: Current portion of long-term debt Long-term debt $ $ |
Schedule of maturities of debt | Scheduled maturities of debt at March 31, 2018 were as follows (in thousands): 2018 (remainder of year) $ 2019 2020 2021 2022 Thereafter Total debt before unamortized discount and debt issuance costs, net Unamortized discount and debt issuance costs, net ) Total debt $ |
DERIVATIVE FINANCIAL INSTRUME36
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of activity of cash flow hedges included in accumulated other comprehensive loss | (in thousands) Cash Flow Hedges Balance at December 31, 2017 $ — Unrealized loss recognized in other comprehensive loss, net of tax Reclassification of loss to interest expense, net ) Balance at March 31, 2018 $ |
Schedule of fair value of derivative assets and liabilities within the condensed consolidated balance sheets | March 31, 2018 December 31, 2017 (in thousands) Assets Liabilities Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities $ — $ $ — $ — Other liabilities — — — |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
STOCK-BASED COMPENSATION | |
Summary of restricted stock units, performance-based stock units, and weighted average grant date fair values | Employee Service-Based Employee Performance-Based Awards Director Awards Units Weighted Units Weighted Units Weighted Nonvested at December 31, 2017 $ $ $ Granted — — Vested ) ) ) Forfeited ) ) — — Nonvested at March 31, 2018 $ $ $ |
SUPPLEMENTAL EXECUTIVE RETIRE38
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP) (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERP) | |
Schedule of Change in Benefit Obligation | (in thousands) Benefit obligation at December 31, 2017 $ Service cost Interest cost Payments ) Benefit obligation at March 31, 2018 $ Benefit obligation at December 31, 2016 $ Service cost Interest cost Payments ) Benefit obligation at March 31, 2017 $ |
Schedule of Amounts Recognized in the Consolidated Balance Sheets | March 31, December 31, (in thousands) 2018 2017 Accrued expenses and other current liabilities $ $ Other liabilities Total accrued liabilities $ $ |
SEGMENT AND RELATED INFORMATI39
SEGMENT AND RELATED INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
SEGMENT AND RELATED INFORMATION | |
Summary of financial information concerning the Company's reporting segments | (in thousands) Patient Care Products & Corporate & Consolidating Total March 31, 2018 Net revenue Third party $ $ $ — $ — $ Intersegments — — ) — Total net revenue — ) Material costs Third party suppliers — — Intersegments — ) — Total material costs — ) Personnel expenses — — Other expenses — Depreciation & amortization — Income (loss) from operations ) — Interest expense, net — Loss on extinguishment of debt — — — Non-service defined benefit plan expense — — — Income (loss) before income taxes ) — ) Benefit for income taxes — — ) — ) Net income (loss) $ $ $ ) $ — $ ) (in thousands) Patient Care Products & Corporate & Consolidating Total March 31, 2017 Net revenue Third Party $ $ $ — $ — $ Intersegments — — ) — Total net revenue — ) Material costs Third party suppliers — — Intersegments — ) — Total material costs — ) Personnel expenses — — Other expenses — Depreciation & amortization — Income (loss) from operations ) — ) Interest expense, net — Loss on extinguishment of debt — — — — — Non-service defined benefit plan expense — — — Income (loss) before income taxes ) — ) Benefit for income taxes — — ) — ) Net income (loss) $ $ $ ) $ — $ ) |
SUPPLEMENTAL CASH FLOW INFORM40
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
Schedule of supplemental disclosure requirements for the statements of cash flows | Three Months Ended March 31, (in thousands) 2018 2017 Additions to property, plant and equipment acquired through financing obligations $ $ Retirements of financed property, plant and equipment and related obligations — Purchase of property, plant and equipment in accounts payable at period end |
ORGANIZATION AND SUMMARY OF S41
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2018USD ($)segment | Mar. 31, 2017USD ($) | Jan. 01, 2018USD ($) | Dec. 31, 2017USD ($) | |
Description of Business | ||||
Number of operating segments | segment | 2 | |||
Effect of Adoption of ASC Topic 606 | ||||
Deferred tax assets | $ 75,449 | $ 68,394 | $ 68,126 | |
Accrued expenses and other current liabilities | 64,695 | 67,710 | 66,683 | |
Accumulated deficit | (383,149) | (360,531) | $ (359,772) | |
General and administrative expenses | 25,636 | $ 25,386 | ||
Non-service defined benefit plan expense | 176 | 184 | ||
ASU 2017-07 | ||||
Effect of Adoption of ASC Topic 606 | ||||
General and administrative expenses | (200) | (200) | ||
Non-service defined benefit plan expense | 200 | $ 200 | ||
Before adoption of ASC 606 | ASU 2014-09 | ||||
Effect of Adoption of ASC Topic 606 | ||||
Deferred tax assets | 75,173 | |||
Accrued expenses and other current liabilities | 63,638 | |||
Accumulated deficit | (382,368) | |||
Adjustments | ASU 2014-09 | ||||
Effect of Adoption of ASC Topic 606 | ||||
Contract liability | 1,000 | |||
Deferred tax assets | (276) | 268 | ||
Accrued expenses and other current liabilities | (1,057) | 1,027 | ||
Accumulated deficit | $ 781 | $ (759) |
ORGANIZATION AND SUMMARY OF S42
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Effect of Topic 606 on Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Condensed Consolidated Statement of Operations | ||
Net revenue | $ 233,995 | |
Other operating costs | 31,096 | $ 32,689 |
Income from operations | 623 | (9,541) |
Loss from operations before income taxes | (28,814) | (23,734) |
Net loss | (22,618) | (17,734) |
Comprehensive loss | (25,200) | (17,751) |
Before adoption of ASC 606 | ASU 2014-09 | ||
Condensed Consolidated Statement of Operations | ||
Net revenue | 234,893 | |
Other operating costs | 31,964 | |
Income from operations | 653 | |
Loss from operations before income taxes | (28,784) | |
Net loss | (22,588) | |
Comprehensive loss | (25,170) | |
Adjustments | ASU 2014-09 | ||
Condensed Consolidated Statement of Operations | ||
Net revenue | 898 | |
Other operating costs | 868 | |
Income from operations | 30 | |
Loss from operations before income taxes | 30 | |
Net loss | 30 | |
Comprehensive loss | 30 | |
Cranial revenue from satisfying performance obligations coming from previous period | 1,000 | |
Estimated uncollectible amounts due from self-pay patients | 900 | |
Patient Care | ||
Condensed Consolidated Statement of Operations | ||
Net revenue | 188,507 | |
Income from operations | 17,093 | 14,543 |
Loss from operations before income taxes | 9,104 | 6,380 |
Net loss | 9,104 | 6,380 |
Patient Care | Before adoption of ASC 606 | ||
Condensed Consolidated Statement of Operations | ||
Net revenue | 187,637 | |
Patient Care | Adjustments | ASU 2014-09 | ||
Condensed Consolidated Statement of Operations | ||
Net revenue | $ (900) | |
Cranial revenue deferred | $ 1,100 |
ORGANIZATION AND SUMMARY OF S43
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Effect of Topic 606 on Balance Sheet (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Assets | |||
Deferred tax assets | $ 75,449 | $ 68,394 | $ 68,126 |
Total assets | 644,283 | 640,423 | |
Liabilities | |||
Accrued expenses and other current liabilities | 64,695 | 67,710 | 66,683 |
Total current liabilities | 142,945 | 172,293 | |
Total liabilities | 697,858 | 668,474 | |
Shareholders' Deficit | |||
Accumulated deficit | (383,149) | (360,531) | (359,772) |
Total shareholders' (deficit) equity | (53,575) | $ (28,051) | |
Before adoption of ASC 606 | ASU 2014-09 | |||
Assets | |||
Deferred tax assets | 75,173 | ||
Total assets | 644,007 | ||
Liabilities | |||
Accrued expenses and other current liabilities | 63,638 | ||
Total current liabilities | 141,888 | ||
Total liabilities | 696,801 | ||
Shareholders' Deficit | |||
Accumulated deficit | (382,368) | ||
Total shareholders' (deficit) equity | (52,794) | ||
Adjustments | ASU 2014-09 | |||
Assets | |||
Deferred tax assets | (276) | 268 | |
Total assets | (276) | ||
Liabilities | |||
Accrued expenses and other current liabilities | (1,057) | 1,027 | |
Total current liabilities | (1,057) | ||
Total liabilities | (1,057) | ||
Shareholders' Deficit | |||
Accumulated deficit | 781 | $ (759) | |
Total shareholders' (deficit) equity | $ 781 |
ORGANIZATION AND SUMMARY OF S44
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($)item | Mar. 31, 2017USD ($) | |
Summary of Significant Accounting Policies | ||
Labor warranty | 90 days | |
Manufacturer warranty | 180 days | |
Number of performance obligations | item | 2 | |
Maximum cranial device follow up visit period | 90 days | |
Net revenue | $ 233,995 | |
Patient Care | ||
Summary of Significant Accounting Policies | ||
Net revenue | 188,507 | |
Patient Care | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | $ 187,637 | |
Patient Care | Medicare | ||
Summary of Significant Accounting Policies | ||
Net revenue | 57,531 | |
Patient Care | Medicare | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 55,245 | |
Patient Care | Medicaid | ||
Summary of Significant Accounting Policies | ||
Net revenue | 29,711 | |
Patient Care | Medicaid | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 28,292 | |
Patient Care | Commercial insurance (excluding Medicare and Medicaid Managed Care) | ||
Summary of Significant Accounting Policies | ||
Net revenue | 70,582 | |
Patient Care | Commercial insurance (excluding Medicare and Medicaid Managed Care) | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 74,166 | |
Patient Care | Veterans Administration | ||
Summary of Significant Accounting Policies | ||
Net revenue | 16,731 | |
Patient Care | Veterans Administration | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 15,572 | |
Patient Care | Private pay | ||
Summary of Significant Accounting Policies | ||
Net revenue | 13,952 | |
Patient Care | Private pay | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 14,362 | |
Products & Services | ||
Summary of Significant Accounting Policies | ||
Net revenue | $ 45,488 | |
Products & Services | Minimum | ||
Summary of Significant Accounting Policies | ||
Payment terms | 30 days | |
Products & Services | Maximum | ||
Summary of Significant Accounting Policies | ||
Payment terms | 90 days | |
Products & Services | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 46,044 | |
Products & Services | Distribution, net of intersegment revenue eliminations | ||
Summary of Significant Accounting Policies | ||
Net revenue | $ 31,351 | |
Products & Services | Distribution, net of intersegment revenue eliminations | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | 30,624 | |
Products & Services | Therapeutic solutions | ||
Summary of Significant Accounting Policies | ||
Net revenue | $ 14,137 | |
Products & Services | Therapeutic solutions | Before adoption of ASC 606 | ||
Summary of Significant Accounting Policies | ||
Net revenue | $ 15,420 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Earnings Per Share | ||
Total anti-dilutive shares (in shares) | 208,510 | 368,796 |
Net loss | $ (22,618) | $ (17,734) |
Weighted average shares used to compute basic earnings per common share | 36,498,482 | 36,084,630 |
Weighted average shares used to compute diluted earnings per common share | 36,498,482 | 36,084,630 |
Basic and Diluted: | ||
Basic and diluted loss per common share | $ (0.62) | $ (0.49) |
Unvested restricted stock units and unexercised options | ||
Earnings Per Share | ||
Total anti-dilutive shares (in shares) | 537,497 | 401,204 |
ACCOUNTS RECEIVABLE, NET - (Det
ACCOUNTS RECEIVABLE, NET - (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Accounts Receivable, net | ||
Accounts receivable, before allowances | $ 193,453 | $ 216,644 |
Allowances for estimated implicit price concessions arising from: | ||
Allowance for estimated payor disallowances | (53,370) | (56,233) |
Allowance for estimated patient non-payments | (8,848) | |
Accounts receivable, gross | 131,235 | 160,411 |
Allowance for doubtful accounts | (4,225) | (14,065) |
Accounts receivable, net | 127,010 | 146,346 |
Patient Care | ||
Accounts Receivable, net | ||
Accounts receivable, before allowances | 170,274 | 193,150 |
Allowances for estimated implicit price concessions arising from: | ||
Allowance for estimated payor disallowances | (53,370) | (56,233) |
Allowance for estimated patient non-payments | (8,848) | |
Accounts receivable, gross | 108,056 | 136,917 |
Allowance for doubtful accounts | (9,894) | |
Accounts receivable, net | 108,056 | 127,023 |
Products & Services | ||
Accounts Receivable, net | ||
Accounts receivable, before allowances | 23,179 | 23,494 |
Allowances for estimated implicit price concessions arising from: | ||
Accounts receivable, gross | 23,179 | 23,494 |
Allowance for doubtful accounts | (4,225) | (4,171) |
Accounts receivable, net | $ 18,954 | $ 19,323 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Raw materials | $ 20,161 | $ 19,929 |
Work in process | 11,543 | 8,996 |
Finished goods | 38,347 | 40,213 |
Total inventories | $ 70,051 | $ 69,138 |
PROPERTY PLANT AND EQUIPMENT,48
PROPERTY PLANT AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | $ 266,813 | $ 266,184 | |
Less: accumulated depreciation | (175,511) | (172,569) | |
Total property, plant, and equipment, net | 91,302 | 93,615 | |
Depreciation expense | 7,400 | $ 7,700 | |
Land | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 644 | 644 | |
Buildings | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 26,458 | 28,180 | |
Furniture and fixtures | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 13,448 | 12,968 | |
Machinery and equipment | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 26,963 | 26,838 | |
Therapeutic program equipment leased to third parties under operating leases | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 30,317 | 31,100 | |
Leasehold improvements | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 103,136 | 100,999 | |
Computers and software | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | $ 65,847 | $ 65,455 |
GOODWILL AND OTHER INTANGIBLE49
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Goodwill carrying value | $ 196,343 | $ 196,343 | |
Gross Carrying Amount | 51,803 | 52,259 | |
Accumulated Amortization | (36,132) | (34,619) | |
Net Carrying Amount | 15,671 | 17,640 | |
Gross Carrying Amount | 60,873 | 61,329 | |
Accumulated Impairment | (4,770) | (4,770) | |
Net Carrying Amount | 19,971 | 21,940 | |
Amortization expense | 2,000 | $ 2,400 | |
Trade Name | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Indefinite life, Gross Carrying Amount | 9,070 | 9,070 | |
Indefinite life, Accumulated Impairment | (4,770) | (4,770) | |
Indefinite life, Net Carrying Amount | 4,300 | 4,300 | |
Customer Lists | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Gross Carrying Amount | 36,250 | 36,439 | |
Accumulated Amortization | (25,705) | (24,267) | |
Net Carrying Amount | 10,545 | 12,172 | |
Other intangible assets | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Gross Carrying Amount | 15,553 | 15,820 | |
Accumulated Amortization | (10,427) | (10,352) | |
Net Carrying Amount | $ 5,126 | $ 5,468 |
GOODWILL AND OTHER INTANGIBLE50
GOODWILL AND OTHER INTANGIBLE ASSETS - Estimated Amortization (Details) $ in Thousands | Mar. 31, 2018USD ($) |
Estimated aggregate amortization expense for definite-lived intangible assets | |
2018 (remainder of year) | $ 4,721 |
2,019 | 3,714 |
2,020 | 3,457 |
2,021 | 879 |
2,022 | 817 |
Thereafter | 2,083 |
Total | $ 15,671 |
OTHER CURRENT ASSETS AND OTHE51
OTHER CURRENT ASSETS AND OTHER ASSETS - Other Current Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
OTHER CURRENT ASSETS AND OTHER ASSETS | ||||
Non-trade receivables | $ 6,379 | $ 7,668 | ||
Prepaid rent | 4,442 | 4,248 | ||
Prepaid maintenance | 2,896 | 3,134 | ||
Restricted cash | 2,349 | 3,271 | $ 2,243 | $ 2,255 |
Prepaid other | 1,160 | 1,436 | ||
Prepaid insurance | 1,627 | 271 | ||
Other | 1,151 | 860 | ||
Total other current assets | $ 20,004 | $ 20,888 |
OTHER CURRENT ASSETS AND OTHE52
OTHER CURRENT ASSETS AND OTHER ASSETS - Other Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
OTHER CURRENT ASSETS AND OTHER ASSETS | ||
Cash surrender value of COLI | $ 2,986 | $ 2,340 |
Non-trade receivables | 2,417 | 2,407 |
Deposits | 2,221 | 2,193 |
Other | 2,792 | 2,500 |
Total other assets | $ 10,416 | $ 9,440 |
ACCRUED EXPENSES, OTHER CURRE53
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES - Accrued expenses and other current liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | |||
Patient prepayments deposits and refunds payable | $ 30,803 | $ 30,194 | |
Accrued professional fees | 6,069 | 11,612 | |
Insurance and self-insurance accruals | 9,050 | 8,901 | |
Accrued sales taxes and other taxes | 5,991 | 6,335 | |
Accrued interest payable | 486 | 845 | |
Other current liabilities | 12,296 | 8,796 | |
Total accrued expenses and other current liabilities | $ 64,695 | $ 67,710 | $ 66,683 |
ACCRUED EXPENSES, OTHER CURRE54
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES - Other liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | ||
Supplemental executive retirement plan obligations | $ 20,396 | $ 21,842 |
Long-term insurance accruals | 9,531 | 9,531 |
Deferred tenant improvement allowances | 7,601 | 7,361 |
Unrecognized tax benefits | 5,271 | 5,219 |
Deferred rent | 4,735 | 4,909 |
Other | 2,144 | 1,391 |
Total other liabilities | $ 49,678 | $ 50,253 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 | |
INCOME TAXES | |||
Benefit for income taxes | $ (6,196) | $ (6,000) | |
Effective tax rate | 21.50% | 25.30% | |
Federal statutory rate | 35.00% | ||
Provisional amount of tax expenses related to re-measurement of deferred tax assets and liabilities | $ 35,000 |
LONG TERM DEBT (Details)
LONG TERM DEBT (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | $ 525,975 | $ 460,956 |
Unamortized discount | (10,428) | (10,692) |
Total Debt | 515,547 | 450,264 |
Less: Current portion of long-term debt | 10,312 | 4,336 |
Long-term debt | 505,235 | 445,928 |
Revolving Credit Facility | Prior Credit Agreement, dated June 17, 2013 | ||
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | 5,000 | |
Term Loan B | Credit Agreement, dated March 6, 2018 | ||
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | 505,000 | |
Term Loan B | Prior Credit Agreement, dated August 1, 2016 | ||
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | 280,000 | |
Term Loan B | Prior Credit Agreement, dated June 17, 2013 | ||
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | 151,875 | |
Seller notes | ||
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | 4,163 | 5,912 |
Financing leases and other | ||
Long-Term Debt | ||
Total debt before unamortized discount and debt issuance costs | $ 16,812 | $ 18,169 |
LONG-TERM DEBT - Refinancing of
LONG-TERM DEBT - Refinancing of Credit Agreement and Term B Borrowings (Details) - USD ($) $ in Thousands | Mar. 06, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Long-Term Debt | |||
Outstanding amount of debt | $ 525,975 | $ 460,956 | |
Debt issuance costs | 6,757 | ||
Debt call premium | $ 8,436 | ||
Credit Agreement | |||
Long-Term Debt | |||
Maximum borrowing capacity | $ 605,000 | ||
Weighted average interest rate | 5.40% | ||
Interest rate in excess of applicable rate upon acceleration and default ( as a percent) | 2.00% | ||
Credit Agreement | One-month LIBOR | |||
Long-Term Debt | |||
Interest rate margin (as a percent) | 1.00% | ||
Credit Agreement | Federal funds rate | |||
Long-Term Debt | |||
Interest rate margin (as a percent) | 0.50% | ||
Credit Agreement | Fiscal quarters ended June 30, 2018, September 30, 2018, December 31, 2018 and March 31, 2019 | |||
Long-Term Debt | |||
Consolidated leverage ratio | 5.00% | ||
Credit Agreement | Fiscal quarters ended June 30, 2019 through March 31, 2020 | |||
Long-Term Debt | |||
Consolidated leverage ratio | 4.75% | ||
Credit Agreement | Fiscal quarters ended June 30, 2020 through March 31, 2021 | |||
Long-Term Debt | |||
Consolidated leverage ratio | 4.50% | ||
Credit Agreement | Fiscal quarters ended June 30, 2021 through March 31, 2022 | |||
Long-Term Debt | |||
Consolidated leverage ratio | 4.25% | ||
Credit Agreement | Fiscal quarters ended June 30, 2022 and the last day of each fiscal quarter thereafter | |||
Long-Term Debt | |||
Consolidated leverage ratio | 3.75% | ||
Credit Agreement | Last day of any fiscal quarter | |||
Long-Term Debt | |||
Consolidated leverage ratio | 2.75% | ||
Credit Agreement | Term Loan | |||
Long-Term Debt | |||
Outstanding amount of debt | $ 505,000 | ||
Credit Agreement | Revolving Credit Facility | |||
Long-Term Debt | |||
Maximum borrowing capacity | 100,000 | ||
Letters of credit outstanding amount | 5,900 | ||
Increase in additional borrowing capacity | $ 125,000 | ||
Maximum leverage ratio to use maximum credit facility | 3.80 | ||
Increase in margin(as a percent) | 50.00% | ||
Credit Agreement | Revolving Credit Facility | Minimum | |||
Long-Term Debt | |||
Unused commitment fee (as a percent) | 0.375% | ||
Credit Agreement | Revolving Credit Facility | Maximum | |||
Long-Term Debt | |||
Unused commitment fee (as a percent) | 0.50% | ||
Credit Agreement, dated March 6, 2018 | |||
Long-Term Debt | |||
Proceeds from borrowing | $ 501,500 | ||
Debt issuance costs | 6,800 | ||
Prior Credit Agreement, dated August 1, 2016 | |||
Long-Term Debt | |||
Debt call premium | 8,400 | ||
Unamortized discount and debt issuance costs expensed | $ 8,600 | ||
Prior Credit Agreement, dated June 17, 2013 | Revolving Credit Facility | |||
Long-Term Debt | |||
Outstanding amount of debt | $ 5,000 |
LONG-TERM DEBT - Maturities of
LONG-TERM DEBT - Maturities of Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Maturities of long-term debt | ||
2018 (remainder of year) | $ 7,320 | |
2,019 | 8,095 | |
2,020 | 7,011 | |
2,021 | 5,619 | |
2,022 | 5,720 | |
Thereafter | 492,210 | |
Total debt before unamortized discount and debt issuance costs, net | 525,975 | $ 460,956 |
Unamortized discount and debt issuance costs, net | (10,428) | |
Total Debt | $ 515,547 | $ 450,264 |
FAIR VALUE MEASUREMENTS - Finan
FAIR VALUE MEASUREMENTS - Financial Instruments (Details) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Credit Agreement | Term Loan | ||
FAIR VALUE MEASUREMENTS | ||
Debt | $ 505 | $ 151.9 |
Credit Agreement | Term Loan B | Carrying Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 280 | |
Credit Agreement | Revolving Credit Facility | Carrying Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 5 | |
Outstanding amount | 0 | |
Seller notes | Carrying Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 4.2 | 5.9 |
Recurring basis | Level 1 | Fair Value | Other current assets | ||
FAIR VALUE MEASUREMENTS | ||
Money market funds | 2.3 | 3.3 |
Recurring basis | Level 3 | Credit Agreement | Term Loan | Fair Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 505 | 149.4 |
Recurring basis | Level 3 | Credit Agreement | Term Loan B | Fair Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 283.5 | |
Recurring basis | Level 3 | Credit Agreement | Revolving Credit Facility | Fair Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 4.9 | |
Interest rate swap agreements | Cash flow hedges | ||
FAIR VALUE MEASUREMENTS | ||
Notional amount of derivative instrument | 325 | $ 0 |
Annual reduction in notional amount of derivative | $ 12.5 |
DERIVATIVE FINANCIAL INSTRUME60
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - Interest rate swap agreements - Cash flow hedges - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
DERIVATIVE FINANCIAL INSTRUMENTS | ||
Notional amount of derivative instrument | $ 325 | $ 0 |
Annual reduction in notional amount of derivative | $ 12.5 |
DERIVATIVE FINANCIAL INSTRUME61
DERIVATIVE FINANCIAL INSTRUMENTS - Changes in Net Gain or Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Loss (Details) - Interest rate swap agreements - Cash flow hedges $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Changes in Net Gain or Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Loss | |
Unrealized loss recognized in other comprehensive loss, net of tax | $ 2,538 |
Reclassification of loss to interest expense, net | (248) |
Balance at the end of the period | $ 2,290 |
DERIVATIVE FINANCIAL INSTRUME62
DERIVATIVE FINANCIAL INSTRUMENTS - Fair Value of Derivative Assets and Liabilities (Details) - Cash flow hedges $ in Thousands | Mar. 31, 2018USD ($) |
Accrued expenses and other current liabilities | |
Derivatives designated as cash flow hedging instruments: | |
Liabilities | $ 2,053 |
Other liabilities | |
Derivatives designated as cash flow hedging instruments: | |
Liabilities | $ 939 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) $ in Millions | May 09, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Apr. 30, 2016 |
STOCK BASED COMPENSATION | ||||
Stock-based compensation expense | $ 2.6 | $ 2.2 | ||
2016 Omnibus Incentive Plan | ||||
STOCK BASED COMPENSATION | ||||
Shares of common stock authorized for issuance under the share-based compensation plan | 2,250,000 | |||
2016 Omnibus Incentive Plan | Forecast | ||||
STOCK BASED COMPENSATION | ||||
Number of additional shares authorized for issuance | 375,000 |
STOCK-BASED COMPENSATION - Summ
STOCK-BASED COMPENSATION - Summary of activity (Details) | 3 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Restricted stock units | Employee Awards | |
Units | |
Nonvested at the beginning of the year (in units) | shares | 1,183,039 |
Granted (in units) | shares | 560,657 |
Vested (in units) | shares | (352,106) |
Forfeited (in units) | shares | (47,808) |
Nonvested at the end of the year (in units) | shares | 1,343,782 |
Weighted Average Grant Date Fair Value | |
Nonvested at the beginning of the year (in dollars per unit) | $ / shares | $ 14.30 |
Granted (in dollars per unit) | $ / shares | 15.68 |
Vested (in dollars per unit) | $ / shares | 16.14 |
Forfeited (in dollars per unit) | $ / shares | 12.58 |
Nonvested at the end of the year (in dollars per unit) | $ / shares | $ 14.45 |
Restricted stock units | Director Awards | |
Units | |
Nonvested at the beginning of the year (in units) | shares | 98,406 |
Vested (in units) | shares | (21,928) |
Nonvested at the end of the year (in units) | shares | 76,478 |
Weighted Average Grant Date Fair Value | |
Nonvested at the beginning of the year (in dollars per unit) | $ / shares | $ 12.66 |
Vested (in dollars per unit) | $ / shares | 12.77 |
Nonvested at the end of the year (in dollars per unit) | $ / shares | $ 12.63 |
Performance-based stock awards | Employee Awards | |
Units | |
Nonvested at the beginning of the year (in units) | shares | 632,636 |
Granted (in units) | shares | 267,522 |
Vested (in units) | shares | (135,200) |
Forfeited (in units) | shares | (26,479) |
Nonvested at the end of the year (in units) | shares | 738,479 |
Weighted Average Grant Date Fair Value | |
Nonvested at the beginning of the year (in dollars per unit) | $ / shares | $ 18.87 |
Granted (in dollars per unit) | $ / shares | 17.93 |
Vested (in dollars per unit) | $ / shares | 25.95 |
Forfeited (in dollars per unit) | $ / shares | 18.38 |
Nonvested at the end of the year (in dollars per unit) | $ / shares | $ 17.25 |
SUPPLEMENTAL EXECUTIVE RETIRE65
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERP) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Change in Benefit Obligation | |||
Benefit obligation at the beginning of the period | $ 20,793 | $ 21,304 | |
Service cost | 92 | 85 | |
Interest cost | 150 | 167 | |
Payments | (1,877) | (1,811) | |
Benefit obligation at the end of the period | 19,158 | 19,745 | |
Amounts Recognized in the Consolidated Balance Sheets: | |||
Current accrued expenses and other current liabilities | 1,913 | $ 1,913 | |
Non-current other liabilities | 17,245 | 18,880 | |
Total accrued liabilities | 19,158 | $ 20,793 | |
Estimated accumulated obligation benefit | 3,200 | 2,300 | |
Funded estimated accumulated obligation benefit | 2,900 | 2,000 | |
Unfunded estimated accumulated obligation benefit | $ 300 | $ 300 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Commitments (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Apr. 30, 2014 | Mar. 31, 2018 | Dec. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES | |||
Outstanding purchase commitments | $ 4.5 | $ 1.5 | |
Covered period of purchase commitment | 5 years | ||
Estimated loss on purchase commitment | $ 3.4 | ||
Reserve associated with non-cancellable purchase commitment | 2.7 | ||
Due in April 2018 | 1 | ||
Due in April 2019 | $ 0.5 |
COMMITMENTS AND CONTINGENCIES67
COMMITMENTS AND CONTINGENCIES - Contingencies (Details) | 7 Months Ended | |
Aug. 31, 2015lawsuit | May 31, 2015clinic | |
COMMITMENTS AND CONTINGENCIES | ||
Number of law suits filed | lawsuit | 2 | |
Number of clinics that received investigative demand for record | clinic | 1 |
SEGMENT AND RELATED INFORMATI68
SEGMENT AND RELATED INFORMATION - SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018USD ($)segmentarea | Mar. 31, 2017USD ($) | Dec. 31, 2017USD ($) | |
SEGMENT AND RELATED INFORMATION | |||
Number of operating segments | segment | 2 | ||
Net revenue | $ 233,995 | $ 233,681 | |
Material costs | 76,356 | 74,405 | |
Personnel expenses | 86,108 | 87,955 | |
Other expenses | 61,578 | 70,725 | |
Depreciation & amortization | 9,330 | 10,137 | |
Income (loss) from operations | 623 | (9,541) | |
Interest expense, net | 12,263 | 14,009 | |
Loss on extinguishment of debt | 16,998 | ||
Non-service defined benefit plan | 176 | 184 | |
Income (loss) from operations before income taxes | (28,814) | (23,734) | |
Benefit for income taxes | (6,196) | (6,000) | |
Net income (loss) | (22,618) | (17,734) | |
Total assets | 644,283 | $ 640,423 | |
Purchase of property, plant and equipment | 4,388 | 2,348 | |
Corporate & Other | |||
SEGMENT AND RELATED INFORMATION | |||
Other expenses | 20,419 | 28,115 | |
Depreciation & amortization | 1,930 | 2,038 | |
Income (loss) from operations | (22,349) | (30,153) | |
Interest expense, net | 1,009 | 2,514 | |
Loss on extinguishment of debt | 16,998 | ||
Non-service defined benefit plan | 176 | 184 | |
Income (loss) from operations before income taxes | (40,532) | (32,851) | |
Benefit for income taxes | (6,196) | (6,000) | |
Net income (loss) | (34,336) | (26,851) | |
Intersegments | |||
SEGMENT AND RELATED INFORMATION | |||
Net revenue | (42,522) | (41,201) | |
Material costs | (42,522) | (41,201) | |
Consolidating Adjustments | |||
SEGMENT AND RELATED INFORMATION | |||
Net revenue | (42,522) | (41,201) | |
Material costs | $ (42,522) | (41,201) | |
Patient Care | |||
SEGMENT AND RELATED INFORMATION | |||
Medicare reimbursement for O&P products and services based on prices set forth in fee schedules, number of regional pricing areas | area | 10 | ||
Net revenue | $ 188,507 | 187,637 | |
Material costs | 57,899 | 56,433 | |
Personnel expenses | 73,613 | 75,515 | |
Other expenses | 35,004 | 35,717 | |
Depreciation & amortization | 4,898 | 5,429 | |
Income (loss) from operations | 17,093 | 14,543 | |
Interest expense, net | 7,989 | 8,163 | |
Income (loss) from operations before income taxes | 9,104 | 6,380 | |
Net income (loss) | 9,104 | 6,380 | |
Patient Care | Operating segments | |||
SEGMENT AND RELATED INFORMATION | |||
Net revenue | 188,507 | 187,637 | |
Material costs | 52,175 | 50,609 | |
Patient Care | Intersegments | |||
SEGMENT AND RELATED INFORMATION | |||
Material costs | 5,724 | 5,824 | |
Products & Services | |||
SEGMENT AND RELATED INFORMATION | |||
Net revenue | 88,010 | 87,245 | |
Material costs | 60,979 | 59,173 | |
Personnel expenses | 12,495 | 12,440 | |
Other expenses | 6,155 | 6,893 | |
Depreciation & amortization | 2,502 | 2,670 | |
Income (loss) from operations | 5,879 | 6,069 | |
Interest expense, net | 3,265 | 3,332 | |
Income (loss) from operations before income taxes | 2,614 | 2,737 | |
Net income (loss) | 2,614 | 2,737 | |
Products & Services | Operating segments | |||
SEGMENT AND RELATED INFORMATION | |||
Net revenue | 45,488 | 46,044 | |
Material costs | 24,181 | 23,796 | |
Products & Services | Intersegments | |||
SEGMENT AND RELATED INFORMATION | |||
Net revenue | 42,522 | 41,201 | |
Material costs | $ 36,798 | $ 35,377 |
SUPPLEMENTAL CASH FLOW INFORM69
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Non-cash financing and investing activities: | ||
Additions to property, plant and equipment acquired through finance obligations | $ 1,208 | $ 623 |
Retirements of financed property, plant and equipment and related obligations | 2,246 | |
Purchase of property, plant and equipment in accounts payable at period end | $ 545 | $ 1,337 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions | May 15, 2018 | May 09, 2018 | Apr. 30, 2016 |
Subsequent Events | Forecast | |||
SUBSEQUENT EVENTS | |||
Net gain on settlement | $ 1.7 | ||
2016 Omnibus Incentive Plan | |||
SUBSEQUENT EVENTS | |||
Shares of common stock authorized for issuance under the share-based compensation plan | 2,250,000 | ||
2016 Omnibus Incentive Plan | Subsequent Events | |||
SUBSEQUENT EVENTS | |||
Shares of common stock authorized for issuance under the share-based compensation plan | 375,000 |