Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 01, 2019 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | HANGER, INC. | ||
Entity Central Index Key | 0000722723 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 612.3 | ||
Entity Common Stock, Shares Outstanding | 36,893,029 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 95,114 | $ 1,508 |
Accounts receivable, net | 143,986 | 146,346 |
Inventories | 67,690 | 69,138 |
Income taxes receivable | 379 | 13,079 |
Other current assets | 18,731 | 20,888 |
Total current assets | 325,900 | 250,959 |
Non-current assets: | ||
Property, plant, and equipment, net | 89,489 | 93,615 |
Goodwill | 198,742 | 196,343 |
Other intangible assets, net | 15,478 | 21,940 |
Deferred income taxes | 65,635 | 68,126 |
Other assets | 7,766 | 9,440 |
Total assets | 703,010 | 640,423 |
Current liabilities: | ||
Current portion of long-term debt | 8,583 | 4,336 |
Accounts payable | 55,797 | 48,269 |
Accrued expenses and other current liabilities | 51,783 | 66,308 |
Accrued compensation related costs | 55,111 | 53,380 |
Total current liabilities | 171,274 | 172,293 |
Long-term liabilities: | ||
Long-term debt, less current portion | 502,090 | 445,928 |
Other liabilities | 51,570 | 50,253 |
Total liabilities | 724,934 | 668,474 |
Shareholders' deficit: | ||
Common stock, $0.01 par value; 60,000,000 shares authorized; 37,063,995 shares issued and 36,921,174 shares outstanding in 2018, and 36,515,232 shares issued and 36,372,411 shares outstanding in 2017 | 371 | 365 |
Additional paid-in capital | 343,955 | 333,738 |
Accumulated other comprehensive loss | (4,531) | (1,686) |
Accumulated deficit | (361,023) | (359,772) |
Treasury stock, at cost; 142,821 shares at 2018 and 2017, respectively | (696) | (696) |
Total shareholders' deficit | (21,924) | (28,051) |
Total liabilities and shareholders' deficit | $ 703,010 | $ 640,423 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
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 | 37,063,995 | 36,515,232 |
Common stock, shares outstanding | 36,921,174 | 36,372,411 |
Treasury stock, shares | 142,821 | 142,821 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Net revenues | $ 1,048,760 | $ 1,040,769 | $ 1,042,054 |
Material costs | 338,017 | 329,223 | 332,071 |
Personnel costs | 364,089 | 361,090 | 363,537 |
Other operating costs | 123,902 | 129,831 | 139,024 |
General and administrative expenses | 109,552 | 109,342 | 106,438 |
Professional accounting and legal fees | 16,915 | 36,239 | 41,233 |
Depreciation and amortization | 36,455 | 39,259 | 44,887 |
Impairment of intangible assets | 183 | 54,735 | 86,164 |
Income (loss) from operations | 59,647 | (18,950) | (71,300) |
Interest expense, net | 37,566 | 57,688 | 45,199 |
Loss on extinguishment of debt | 16,998 | 6,031 | |
Non-service defined benefit plan expense | 703 | 736 | 786 |
Income (loss) from continuing operations before income taxes | 4,380 | (77,374) | (123,316) |
Provision (benefit) for income taxes | 5,238 | 27,297 | (15,910) |
Loss from continuing operations | (858) | (104,671) | (107,406) |
Income from discontinued operations, net of income taxes | 935 | ||
Net loss | $ (858) | $ (104,671) | $ (106,471) |
Basic and Diluted Per Common Share Data: | |||
Loss from continuing operations | $ (0.02) | $ (2.89) | $ (2.99) |
Earnings from discontinued operations, net of income | 0.03 | ||
Basic and diluted loss per common share | $ (0.02) | $ (2.89) | $ (2.96) |
Shares used to compute basic and diluted per common share amounts | 36,764,551 | 36,270,920 | 35,933,222 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||||||||
Net loss | $ 4,463 | $ 4,369 | $ 12,928 | $ (22,618) | $ (84,413) | $ (4,161) | $ 1,637 | $ (17,734) | $ (858) | $ (104,671) | $ (106,471) |
Other comprehensive loss: | |||||||||||
Unrealized loss on cash flow hedges, net of tax benefit of $(922), $0, and $0, respectively | (4,698) | 1,738 | 2,314 | (2,290) | (2,936) | ||||||
Unrealized gain (loss) on defined benefit plan, net of tax expense (benefit) of $142, $(151), and $(16) respectively | 694 | 26 | 26 | (292) | (195) | (17) | (17) | (17) | 454 | (246) | (26) |
Total other comprehensive loss | (2,482) | (246) | (26) | ||||||||
Comprehensive loss | $ 459 | $ 6,133 | $ 15,268 | $ (25,200) | $ (84,608) | $ (4,178) | $ 1,620 | $ (17,751) | $ (3,340) | $ (104,917) | $ (106,497) |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||
Unrealized loss on cash flow hedges tax | $ (922) | $ 0 | $ 0 |
Unrealized gain (loss) on defined benefit plan tax | $ 142 | $ (151) | $ (16) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Treasury Stock | Total |
Balance at Dec. 31, 2015 | $ 359 | $ 315,529 | $ (1,414) | $ (148,532) | $ (696) | $ 165,246 |
Balance (in shares) at Dec. 31, 2015 | 35,711,000 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (106,471) | (106,471) | ||||
Issuance of common stock upon vesting of restricted stock units | $ 3 | (3) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 330,000 | |||||
Stock-based compensation expense | 9,763 | 9,763 | ||||
Tax expense associated with vesting of restricted stock units | (2,810) | (2,810) | ||||
Adjustments Related to Tax Withholding for Share-based Compensation | 288 | 288 | ||||
Total other comprehensive loss | (26) | (26) | ||||
Balance at Dec. 31, 2016 | $ 362 | 322,191 | (1,440) | (255,003) | (696) | 65,414 |
Balance (in shares) at Dec. 31, 2016 | 36,041,000 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | $ (104,671) | (104,671) | ||||
Issuance of common stock upon vesting of restricted stock units | $ 3 | (3) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 331,000 | |||||
Stock-based compensation expense | $ 12,929 | 12,929 | ||||
Cumulative effect of a change in accounting for stock-based payments (Note A) | ASU 2016-09 | 98,000 | (98,000) | ||||
Adjustments Related to Tax Withholding for Share-based Compensation | $ 1,477 | 1,477 | ||||
Total other comprehensive loss | (246) | (246) | ||||
Balance at Dec. 31, 2017 | $ 365 | 333,738 | (1,686) | $ (359,772) | (696) | $ (28,051) |
Balance (in shares) at Dec. 31, 2017 | 36,372,000 | 36,372,411 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative effect of a change in accounting | ASU 2014-09 | (756) | $ (756) | ||||
Balance at Jan. 01, 2018 | $ 365 | 333,738 | (1,686) | (360,528) | (696) | (28,807) |
Balance (in shares) at Jan. 01, 2018 | 36,372,000 | |||||
Balance at Dec. 31, 2017 | $ 365 | 333,738 | (1,686) | (359,772) | (696) | $ (28,051) |
Balance (in shares) at Dec. 31, 2017 | 36,372,000 | 36,372,411 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net loss | (858) | $ (858) | ||||
Issuance of common stock upon vesting of restricted stock units | $ 6 | (6) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 544,000 | |||||
Stock-based compensation expense | 13,065 | 13,065 | ||||
Issuance of common stock in connection with the exercise of stock options | 64 | 64 | ||||
Issuance in connection with the exercise of stock options (in shares) | 5,000 | |||||
Adjustments Related to Tax Withholding for Share-based Compensation | 2,906 | 2,906 | ||||
Reclassification of certain tax effects from Accumulated Other Comprehensive Loss (Note A) | ASU 2018-02 | (363) | 363 | ||||
Total other comprehensive loss | (2,482) | (2,482) | ||||
Balance at Dec. 31, 2018 | $ 371 | $ 343,955 | $ (4,531) | $ (361,023) | $ (696) | $ (21,924) |
Balance (in shares) at Dec. 31, 2018 | 36,921,000 | 36,921,174 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | |||
Net loss | $ (858) | $ (104,671) | $ (106,471) |
Income from discontinued operations, net of income taxes | 935 | ||
Loss from continuing operations | (858) | (104,671) | (107,406) |
Adjustments to reconcile net loss to net cash from operating activities: | |||
Depreciation and amortization | 36,455 | 39,259 | 44,887 |
(Benefit) provision for doubtful accounts | (733) | 9,422 | 13,727 |
Impairment of intangible assets | 183 | 54,735 | 86,164 |
Stock-based compensation expense | 13,065 | 12,930 | 9,763 |
Deferred income taxes | 3,452 | 26,248 | 4,031 |
Amortization of debt issuance costs | 2,837 | 8,876 | 4,921 |
Loss on extinguishment of debt | 16,998 | 6,031 | |
Gain on sale and disposal of fixed assets | (2,713) | (2,059) | (5,055) |
Changes in operating assets and liabilities (Note T): | 9,841 | (14,635) | 13,458 |
Net cash provided by operating activities - continuing operations | 78,527 | 30,105 | 70,521 |
Net cash used in operating activities - discontinued operations | (1,425) | ||
Net cash provided by operating activities | 78,527 | 30,105 | 69,096 |
Cash flows from investing activities: | |||
Purchase of property, plant, and equipment | (18,984) | (16,355) | (21,148) |
Purchase of therapeutic program equipment leased to third parties under operating leases | (9,835) | (6,000) | (2,476) |
Acquisitions, net of cash acquired | (1,978) | ||
Proceeds from company-owned life insurance investment | 17,135 | ||
Purchase of company-owned life insurance investment | (598) | (555) | (2,543) |
Proceeds from sale of property, plant and equipment | 4,237 | 4,909 | 5,960 |
Other investing activities, net | (10) | ||
Net cash used in investing activities - continuing operations | (27,158) | (866) | (20,217) |
Net cash provided by investing activities - discontinued operations | 1,425 | ||
Net cash used in investing activities | (27,158) | (866) | (18,792) |
Cash flows from financing activities: | |||
Borrowings under term loan, net of discount | 501,467 | 420 | 274,400 |
Repayment of term loan | (435,660) | (28,545) | (19,688) |
Borrowings under revolving credit agreement | 3,000 | 156,965 | 23,000 |
Repayments under revolving credit agreement | (8,000) | (151,965) | (155,000) |
Payment of senior notes | (200,000) | ||
Payment of employee taxes on stock-based compensation | (2,906) | (1,477) | (288) |
Payment on seller notes | (2,599) | (5,197) | (9,128) |
Payment of capital lease obligations | (1,207) | (1,210) | (979) |
Payment of debt issuance costs | (6,757) | (2,863) | (15,832) |
Payment of debt extinguishment costs | (8,436) | ||
Proceeds from exercise of options | 64 | ||
Net cash provided by (used in) financing activities - continuing operations | 38,966 | (33,872) | (103,515) |
Increase (decrease) in cash, cash equivalents and restricted cash | 90,335 | (4,633) | (53,211) |
Cash, cash equivalents and restricted cash, at beginning of period | 4,779 | 9,412 | 62,623 |
Cash, cash equivalents and restricted cash, at end of period | 95,114 | 4,779 | 9,412 |
Reconciliation of Cash, Cash Equivalents and Restricted Cash | |||
Cash and cash equivalents, at beginning of period | 1,508 | 7,157 | 58,753 |
Restricted cash, at beginning of period | 3,271 | 2,255 | 3,870 |
Cash, cash equivalents and restricted cash, at beginning of period | 4,779 | 9,412 | 62,623 |
Cash and cash equivalents, at end of period | 95,114 | 1,508 | 7,157 |
Restricted cash, at end of period | 3,271 | 2,255 | |
Cash, cash equivalents and restricted cash, at end of period | $ 95,114 | $ 4,779 | $ 9,412 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 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. (“the Company,” “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. Our Patient Care segment is primarily comprised of Hanger Clinic, which specializes in the design, fabrication, and delivery of custom O&P devices through 676 patient care clinics and 104 satellite locations in 45 states and the District of Columbia as of December 31, 2018. On a regular basis, we have been opening, closing, and merging patient care locations and satellite locations. During the year ended December 31, 2018, we have opened or acquired 42 and closed or consolidated 56 patient care locations. Our Products & Services segment is comprised of our distribution and therapeutic solutions businesses. As a leading provider of O&P products in the United States, we coordinate through our distribution business the procurement and distribution of a broad catalog of O&P parts, componentry, and devices to independent O&P providers nationwide. The other business in our Products & Services segment is our therapeutic solutions business, which develops specialized rehabilitation technologies and provides evidence-based clinical programs for post-acute rehabilitation to patients at approximately 3,900 skilled nursing and post-acute providers nationwide. Principles of Consolidation Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying consolidated financial statements. Use of Estimates and Assumptions The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and contingencies. Although actual results in subsequent periods may differ from these estimates, such estimates are developed based on the best information available to management and based on management’s best judgments at the time. We base our estimates on historical experience, observable trends and various other assumptions that we believe are reasonable under the circumstances. All significant assumptions and estimates underlying the amounts reported in the consolidated financial statements and accompanying notes are regularly reviewed and updated when necessary. Changes in estimates are reflected prospectively in the consolidated financial statements based upon on-going actual trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Interim changes in estimates related to annual operating costs are applied prospectively within annual periods. Although we believe that our estimates are reasonable, actual results could differ from these estimates. The most significant assumptions and estimates underlying these consolidated financial statements and accompanying notes involve revenue recognition and accounts receivable valuation, inventories, accounts payable and accrued liabilities (including self-insurance reserves and contingencies), impairments of long-lived assets including goodwill, income taxes, business combinations, leases and stock-based compensation. Reclassifications We have reclassified certain amounts in the prior year consolidated financial statements to be consistent with the current year presentation. These primarily relate to classifications within the consolidated statements of operations, consolidated statements of changes in shareholders' (deficit) equity, and consolidated statements of cash flows; see “Adoption of New Accounting Standards” for additional information. Revenue Recognition Effect of Adoption of ASC 606, Revenue from Contracts with Customers (“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 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 $ 68,126 $ 271 $ 68,397 Liabilities Accrued expenses and other current liabilities $ 66,308 $ 1,027 $ 67,335 Shareholders' Deficit Accumulated deficit $ (359,772) $ (756) $ (360,528) In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statement of operations and consolidated balance sheet is as follows: As of and for the year ended December 31, 2018 Proforma balance without the Effects of adoption of (in thousands) As Reported Adoption ASC 606 Consolidated Statements of Operations Net revenues $ 1,048,760 $ 4,014 $ 1,052,774 Other operating costs 123,902 4,243 128,145 Income from operations 59,647 (229) 59,418 Income from continuing operations before income taxes 4,380 (229) 4,151 Net loss (858) (229) (1,087) Comprehensive loss (3,340) (229) (3,569) Consolidated Balance Sheets Assets Deferred income taxes $ 65,635 $ (211) $ 65,424 Total assets 703,010 (211) 702,799 Liabilities Accrued expenses and other current liabilities 51,783 (798) 50,985 Total current liabilities 171,274 (798) 170,476 Total liabilities 724,934 (798) 724,136 Shareholders' deficit: Accumulated deficit (361,023) 587 (360,436) Total shareholders' deficit (21,924) 587 (21,337) The adoption of ASC 606 resulted in deferring $0.8 million of net revenue from our Patient Care segment as of December 31, 2018 and recognizing deferred revenue of $1.0 million from satisfying performance obligations from the previous period. Estimated uncollectible amounts due from self-pay patients for the year ended December 31, 2018 were $4.2 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 consolidated balance sheet. The warranty liability was $2.1 million at December 31, 2018 and $2.4 million at December 31, 2017. 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 revenue from contracts with customers in our Patient Care segment for years ended December 31, 2018, 2017, and 2016: For the Years EndedDecember 31, (in thousands) 2018 2017 2016 Patient Care Segment Medicare $ 273,833 $ 260,275 $ 256,240 Medicaid 132,938 132,707 124,339 Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) 316,243 325,639 329,331 Veterans Administration 78,328 74,435 73,931 Private Pay 56,040 58,917 56,289 Total $ 857,382 $ 851,973 $ 840,130 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 shipment, with any related services revenue deferred and recognized as the services are performed. Sales of consumables are recognized upon shipment. 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 costs section of our consolidated financial statements. The following table disaggregates revenue from contracts with customers in our Product & Services segment for the years ended December 31, 2018, 2017, and 2016: For the Years Ended December 31, (in thousands) 2018 2017 2016 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 135,995 $ 128,686 $ 127,510 Therapeutic solutions 55,383 60,110 74,414 Total $ 191,378 $ 188,796 $ 201,924 Material Costs Material costs in our Patient Care segment reflect purchases of orthotics and prosthetic componentry and other related costs in connection with the delivery of care through our clinics and other patient care operations. Material costs in our Products & Services segment reflect purchases of orthotics and prosthetic materials and other related costs in connection with the distribution of products and services to third party customers. Personnel Costs Personnel costs reflect salaries, benefits, incentive compensation, contract labor, and other personnel costs we incur in connection with our delivery of care through our clinics and other patient care operations, or distribution of products and services, and exclude similar costs incurred in connection with general and administrative activities. Other Operating Costs Other operating costs reflect costs we incur in connection with our delivery of care through our clinics and other patient care operations or distribution of products and services. Marketing costs, including advertising, are expensed as incurred and are presented within this financial statement caption. We incurred approximately $3.8 million, $3.8 million, and $4.0 million in advertising costs during the years ended December 31, 2018, 2017, and 2016, respectively. Other costs include rent, utilities, and other occupancy costs, general office expenses, bad debt expense, and travel and clinical professional education costs, and exclude similar costs incurred in connection with general and administrative activities. General and Administrative Expenses General and administrative expenses reflect costs we incur in the management and administration of our businesses that are not directly related to the operation of our clinics or provision of products and services. These include personnel costs and other operating costs supporting our general and administrative functions. We incurred approximately $1.5 million, $0.7 million, and $0.6 million in advertising costs during the years ended December 31, 2018, 2017, and 2016, respectively. Professional Accounting and Legal Fees We recognize fees associated with audits of our financial statements in the fiscal period to which the audit relates. All other professional fees are generally recognized as an expense in the periods in which services are performed. Please see the “Accounts Payable and Accrued Liabilities” section for legal fees associated with legal contingencies. Depreciation and Amortization Depreciation and amortization expenses reflect all depreciation and amortization expenses, whether incurred in connection with our delivery of care through our clinics, our distribution of products and services, or in the general management and administration of our business. Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. We maintain cash balances in excess of Federal Deposit Insurance Corporation (“FDIC”) limits at certain financial institutions. We manage this credit risk by concentrating our cash balances in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions holding such deposits. With short maturities, the investments present insignificant risk of changes in value because of interest rate changes and are readily convertible to cash. Historically, no losses have been incurred due to such cash concentrations. Restricted cash balances are presented within “Other current assets” in the consolidated balance sheets. See Note H - “Other Current Assets and Other Assets” within these consolidated financial statements. Accounts Receivable, Net Patient Care Segment We establish allowances for accounts receivable to reduce the carrying value of such receivables to their estimated net realizable value. The Patient Care segment's accounts receivables are recorded net of unapplied cash, estimated allowances for implicit price concessions such as disallowed revenue and patient non-payments, as described in the revenue recognition accounting policy above. Both the allowance for disallowed revenue and the allowance for patient non-payments consider historical collection experience by each of the Medicare and non-Medicare (commercial insurance, Medicaid, U.S. Department of Veteran’s Affairs and Private Pay) primary payor class groupings. For each payor class grouping, liquidation analysis of historical period end receivable balances are performed to ascertain collections experience by aging category. We believe the use of historical collection experience applied to current period end receivable balances is reasonable. In the absence of an evident adverse trend, we use historical experience rates calculated using an average of four quarters of data with at least twelve months of adjudication. We believe the time periods analyzed provide sufficient time for most balances to adjudicate in the normal course of operations. We will modify the time periods analyzed when significant trends indicate that adjustments should be made. In addition, estimates are adjusted when appropriate for information available up through the issuance of the consolidated financial statements. Products & Services Segment Products & Services segment's allowance for doubtful accounts is estimated based on the analysis of the segment’s historical write-offs experience, accounts receivable aging and economic status of its customers. Accounts receivable that are deemed uncollectible are written-off to the allowance for doubtful accounts. Accounts receivable are also recorded net of an allowance for estimated sales returns. Inventories Inventories are valued at the lower of estimated cost or net realizable value with cost determined on a first-in, first out (“FIFO”) basis. Provisions have also been made to reduce the carrying value of inventories for excess, obsolete, or otherwise impaired inventory on hand at period-end. The reserve for excess and obsolete inventory is $7.2 million and $6.2 million at December 31, 2018 and 2017, respectively. Patient Care Segment Substantially all of our Patient Care segment inventories are recorded through a periodic approach whereby inventory quantities are adjusted on the basis of a quarterly physical count. Segment inventories relate primarily to raw materials and work-in-process (“WIP”) at Hanger Clinics. Inventories at Hanger Clinics totaled $27.5 million and $27.7 million at December 31, 2018 and 2017, respectively, with WIP inventory representing $9.3 million and $9.0 million of the total inventory, respectively. Raw materials consist of purchased parts, components, and supplies which are used in the assembly of O&P devices for delivery to patients. In some cases, purchased parts and components are also sold directly to patients. Raw materials are valued based on recent vendor invoices, reduced by estimated vendor rebates. Such rebates are recognized as a reduction of cost of materials in the consolidated statements of operations when the related devices or components are delivered to the patient. Approximately 74% and 71% of raw materials at December 31, 2018 and 2017, respectively were purchased from our Products & Services segment. Raw material inventory was $18.2 million and $18.7 million at December 31, 2018 and 2017, respectively. WIP consists of devices which are in the process of assembly at our clinics or fabrication centers. WIP quantities were determined by the physical count of patient orders at the end of every quarter of 2018 and 2017 while the related stage of completion of each order was established by clinic personnel. We do not have an inventory costing system and as a result, the identified WIP quantities were valued on the basis of estimated raw materials, labor, and overhead costs. To estimate such costs, we develop bills of materials for certain categories of devices that we assemble and deliver to patients. Within each bill of material, we estimate (i) the typical types of component parts necessary to assemble each device; (ii) the points in the assembly process when such component parts are added; (iii) the estimated cost of such parts based on historical purchasing data; (iv) the estimated labor costs incurred at each stage of assembly; and (v) the estimated overhead costs applicable to the device. Products & Services Segment Product & Service segment inventories consist primarily of finished goods at its distribution centers as well as raw materials at fabrication facilities, and totaled $40.2 million and $41.4 million as of December 31, 2018 and 2017, respectively. Finished goods include products that are available for sale to third party customers as well as to our Patient Care segment as described above. Such inventories were determined on the basis of perpetual records and a physical count at year end. Inventories in connection with therapeutic services are valued at a weighted average cost. 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. 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. 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. 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. 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. In accordance with ASC 815, “Derivatives and Hedging,” we record all derivatives in the consolidated balance sheets as either assets or liabilities measured at fair value. 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 loss net of tax and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2018, such derivatives were used to hedge certain variable cash flows associated with existing variable-rate debt. Insurance Recoveries Receivable We incur legal and other costs with respect to a variety of issues on an ongoing basis. We record a related receivable when costs are reimbursable under applicable insurance policies, we believe it is probable such costs will be reimbursed and such reimbursements can be reasonably estimated. We record the benefit of related receivables from the insurer as a reduction of costs in the same financial statement caption in which the related loss was recognized in our consolidated statements of operations. Loss contingency reserves, which are recorded within accrued liabilities, are not reduced by estimated insurance recoveries. Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Equipment acquired under a capital lease is recorded at the present value of the future minimum lease payments. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the consolidated statements of operations. Depreciation is computed for financial reporting purposes using the straight-line method over the useful lives of the related assets estimated as follows: furniture and fixtures, equipment and information systems, principally five years, buildings ten to forty years, capital leases over the shorter of the useful life or lease term, and leasehold improvements over the shorter of ten years or the lease term. We record maintenance and repairs, including the cost of minor replacements, to maintenance expense. Costs of major repairs that extend the effective useful life of property are capitalized and depreciated accordingly. We capitalize the costs of obtaining or developing internal use software, including external direct costs of materials and services and directly related payroll costs. Amortization begins when the internal use software is ready for its intended use. Costs incurred during the preliminary project and post-implementation stages, as well as maintenance and training costs, are expensed as incurred. Business Combinations We record tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. Acquisition consideration typically includes cash payments, the issuance of Seller Notes and in certain instances contingent consideration with payment terms based on the achievement of certain targets of the acquired business. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition inclusive of identifiable intangible assets. The estimated fair value of identifiable assets and liabilities, including intangibles, are based on valuations that use information and assumptions available to management. We allocate any excess purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed to goodwill. Significant management judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, including estimated useful lives. The valuation of purchased intangible assets is based upon estimates of the future performance and discounted cash flows of the acquired business. Each asset acquired or liability assumed is measured at estimated fair value from the perspective of a market participant. Subsequent changes in the estimated fair value of contingent consideration are recognized as “General and administrative expenses” within the consolidated statements of operations. Goodwill and Other Intangible Assets, Net Goodwill represents the excess of the purchase price over the estimated fair value of net identifiable assets acquired and liabilities assumed from purchased businesses. We assess goodwill for impairment annually during the fourth quarter, 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 amount. We have the option to first assess qualitative factors for a reporting unit to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If we choose to bypass this qualitative assessment or alternatively determine that a quantitative goodwill impairment test is required, our annual goodwill impairment test is performed by comparing the estimated fair value of a reporting unit with its carrying amount (including attributed goodwill). We measure the fair value of the reporting units using a combination of income and market approaches. Any impairment would be recognized by a charge to income from operations and a reduction in the carrying value of the goodwill. On October 1, 2018, we performed a qualitative assessment of the Patient Care reporting unit, which resulted in no indicators of goodwill impairment. We apply judgment in determining the fair value of our reporting units and the implied fair value of goodwill which is dependent on significant assumptions and estimates regarding expected future cash flows, terminal value, changes in working capital requirements, and discount rates. For the years ended December 31, 2017 and 2016, we recorded impairments of our goodwill totaling $53.3 million and $86.0 million, respectively. We did not have any goodwill impairment during 2018. For the years ended December 31, 2018, 2017, and 2016, we recorded impairments of our indefinite-lived trade name totaling $0.2 million, $1.4 million, and $0.2 million, respectively. See Note G - “Goodwill and Other Intangible Assets” to our consolidated financial statements in this Annual Report on Form 10-K for additional information regarding these charges. As described, we apply judgment in the selection of key assumptions used in the goodwill impairment test and as part of our evaluation of intangible assets tested annually and at interim testing dates as necessary. If these assumptions differ from actual, we could incur additional impairment charges and those char |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 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 17,894 as of December 31, 2018, and 473,037, and 342,369 as of December 31, 2017, and 2016, respectively. Our credit agreement restricts the payment of dividends or other distributions to our shareholders with respect to the parent company or any of its subsidiaries. See Note M – “Long-Term Debt” within these consolidated financial statements. The reconciliation of the numerators and denominators used to calculate basic and diluted net (loss) income per share are as follows: For the Years Ended December 31, (in thousands, except per share data) 2018 2017 2016 Loss from continuing operations applicable to common shareholders $ (858) $ (104,671) $ (107,406) Income from discontinued operations, net of income taxes — — 935 Net loss applicable to common shareholders $ (858) $ (104,671) $ (106,471) Weighted average shares outstanding - basic 36,764,551 36,270,920 35,933,222 Effect of potentially dilutive restricted stock units and options (1) — — — Weighted average shares outstanding - diluted 36,764,551 36,270,920 35,933,222 Basic and diluted: Loss from continuing operations per share applicable to common stock $ (0.02) $ (2.89) $ (2.99) Income from discontinued operations per share applicable to common stock — — 0.03 Net loss per share applicable to common shareholders $ (0.02) $ (2.89) $ (2.96) (1) As we are recognizing a loss for the years ended December 31, 2018, 2017, and 2016, shares used to compute diluted per share amounts excludes 709,309 shares, 295,718 shares, and 145,497 shares, respectively, 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 | 12 Months Ended |
Dec. 31, 2018 | |
ACCOUNTS RECEIVABLE, NET | |
ACCOUNTS RECEIVABLE, NET | NOTE C — ACCOUNTS RECEIVABLE, NET Accounts receivable, net represents 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 receivable 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 costs. 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 December 31, 2018 and 2017 is comprised of the following: As of December 31, 2018 As of December 31, 2017 Products & Products & (in thousands) Patient Care Services Consolidated Patient Care Services Consolidated Accounts receivable, before allowances $ 182,338 $ 24,542 $ 206,880 $ 193,150 $ 23,494 $ 216,644 Allowances for estimated implicit price concessions arising from: Payor disallowances (53,378) — (53,378) (56,233) — (56,233) Patient non-payments (7,244) — (7,244) — — — Accounts receivable, gross 121,716 24,542 146,258 136,917 23,494 160,411 Allowance for doubtful accounts — (2,272) (2,272) (9,894) (4,171) (14,065) Accounts receivable, net $ 121,716 $ 22,270 $ 143,986 $ 127,023 $ 19,323 $ 146,346 Approximately 48.4% and 49.2% of accounts receivable, before allowances, is due from the Federal Government (Medicare, Medicaid, and U.S. Veterans Affairs) at December 31, 2018 and 2017, respectively. The following table summarizes activities by year for implicit price concessions and the allowance for doubtful accounts: Payor Disallowances Allowance for and Patient Non- Doubtful (in thousands) Payments Accounts Balance at December 31, 2015 $ 81,306 $ 15,027 Additions 48,961 13,727 Reductions (69,130) (13,233) Balance at December 31, 2016 61,137 15,521 Additions 36,962 9,423 Reductions (41,866) (10,879) Balance at December 31, 2017 56,233 14,065 Cumulative Effect of ASC 606 9,894 (9,894) Additions 42,653 630 Reductions (48,158) (1,155) Recoveries — (1,374) Balance at December 31, 2018 $ 60,622 $ 2,272 The following tables represent accounts receivable, before allowances, by major payor classification and by aging categories reduced by implicit price concessions and allowance for doubtful accounts to accounts receivable, net as of December 31, 2018 and 2017, respectively: December 31, 2018 0-60 61-120 121-180 Over 180 (in thousands) Days Days Days Days Total Patient Care Commercial insurance (excluding Medicare and Medicaid Managed Care) $ 44,918 $ 11,495 $ 6,467 $ 17,172 $ 80,052 Private pay 951 437 343 483 2,214 Medicaid 12,690 2,964 1,855 6,629 24,138 VA 4,786 859 526 784 6,955 Non-Medicare 63,345 15,755 9,191 25,068 113,359 Medicare 32,339 5,483 3,002 28,155 68,979 Products & Services 14,768 6,507 1,641 1,626 24,542 Accounts receivable, before allowances 110,452 27,745 13,834 54,849 206,880 Allowance for disallowed revenue and patient non-payment (60,622) Allowance for doubtful accounts (2,272) Accounts receivable, net $ 143,986 December 31, 2017 0-60 61-120 121-180 Over 180 (in thousands) Days Days Days Days Total Patient Care Commercial insurance (excluding Medicare and Medicaid Managed Care) $ 50,310 $ 11,649 $ 6,302 $ 15,279 $ 83,540 Private pay 880 447 381 1,311 3,019 Medicaid 13,785 3,561 1,832 5,684 24,862 VA 4,578 1,193 552 694 7,017 Non-Medicare 69,553 16,850 9,067 22,968 118,438 Medicare 34,197 5,725 3,396 31,394 74,712 Products & Services 14,316 5,075 1,219 2,884 23,494 Accounts receivable, before allowances 118,066 27,650 13,682 57,246 216,644 Allowance for disallowed revenue (56,233) Allowance for doubtful accounts (14,065) Accounts receivable, net $ 146,346 |
INVENTORIES
INVENTORIES | 12 Months Ended |
Dec. 31, 2018 | |
INVENTORIES | |
INVENTORIES | NOTE D — INVENTORIES Our inventories are comprised of the following: As of December 31, (in thousands) 2018 2017 Raw materials $ 19,632 $ 19,929 Work in process 9,278 8,996 Finished goods 38,780 40,213 Total inventories $ 67,690 $ 69,138 |
PROPERTY PLANT AND EQUIPMENT, N
PROPERTY PLANT AND EQUIPMENT, NET | 12 Months Ended |
Dec. 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: As of December 31, (in thousands) 2018 2017 Land $ 644 $ 644 Buildings 24,558 28,180 Furniture and fixtures 13,121 12,968 Machinery and equipment 27,452 26,838 Equipment leased to third parties under operating leases 30,093 31,100 Leasehold improvements 111,247 100,999 Computers and software 69,173 65,455 Total property, plant, and equipment, gross 276,288 266,184 Less: accumulated depreciation and amortization (186,799) (172,569) Total property, plant, and equipment, net $ 89,489 $ 93,615 Total depreciation expense was approximately $29.7 million, $29.7 million, and $31.0 million for the years ended December 31, 2018, 2017, and 2016, respectively. Included within Buildings was $20.4 million and $24.1 million recorded as an asset for certain build-to-suit leases as of December 31, 2018 and 2017, respectively. Accumulated depreciation on these assets was $9.3 million and $8.9 million as of December 31, 2018 and 2017, respectively. The following table summarizes our investment in equipment leased to third parties under operating leases: As of December 31, (in thousands) 2018 2017 Program equipment $ 30,093 $ 31,100 Less: Accumulated depreciation (14,712) (19,954) Net book value $ 15,381 $ 11,146 |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 2018 | |
ACQUISITIONS | |
ACQUISITIONS | NOTE F — ACQUISITIONS In the fourth quarter of 2018, we acquired two O&P businesses for an aggregate purchase price of $3.1 million, net of cash acquired. These acquisitions were accounted for using the acquisition method of accounting whereby assets acquired and liabilities assumed were recognized at fair value on the date of the transaction. We made no acquisitions in 2017 or 2016. Purchase Price Allocation The aggregate purchase price of these acquisitions was allocated on a preliminary basis as follows: For The Year Ended December 31, (in thousands) 2018 Cash paid, net of cash acquired $ 1,978 Issuance of seller notes 1,120 Aggregate purchase price 3,098 Net accounts receivable 256 Inventories 302 Intangible assets, excluding goodwill 474 Other assets 90 Accounts payable and accrued expenses (59) Other liabilities assumed (364) Net assets acquired 699 Goodwill $ 2,399 Acquisition-related expenses related to the two acquired O&P businesses for the year ended December 31, 2018 are included in General and administrative expenses in our consolidated statements of operations and are not significant. Substantially all of the Goodwill associated with the acquisition of the two O&P businesses for the year ended December 31, 2018, which has been assigned to our Patient Care reporting unit, is not deductible for tax purposes. The acquisitions undertaken in the fourth quarter of 2018 do not have a material impact on our consolidated financial statements. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE G — GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Under the provisions of ASC 350-10, Intangibles-Goodwill and Other, goodwill is not amortized. Rather, an entity’s goodwill is subject to periodic impairment testing. ASC 350 requires that an entity assign its goodwill to reporting units and test each reporting unit’s goodwill for impairment at least on an annual basis 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 amount. Accordingly, we perform our goodwill test annually as of October 1 and between annual tests whenever we identify certain triggering events or circumstances that would more likely than not reduce the fair value of any of our reporting units below its respective carrying value. Additionally, we consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Prior to our adoption of ASU 2017-04, our goodwill impairment testing for 2016 was based on a two-step approach, with the second step of the goodwill impairment test requiring an assignment of the reporting unit’s fair value to the reporting unit’s assets and liabilities, including any unrecognized intangible assets, using the acquisition method accounting guidance in ASC 805, to determine the implied fair value of the reporting unit’s goodwill. The difference between the reporting unit’s fair value and the fair values assigned to the reporting unit’s individual assets and liabilities, is the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared with the carrying amount of the reporting unit’s goodwill to determine the goodwill impairment loss to be recognized, if any. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value. The goodwill impairment test compares a reporting unit’s fair value to its carrying amount to identify any potential impairment. We apply judgment in determining the fair value of our reporting units for purposes of performing the goodwill impairment test. We rely on widely accepted valuation techniques, including discounted cash flow and market multiple analysis approaches, which capture both the future income potential of the reporting unit and the market behaviors and actions of market participants in the industry that includes the reporting unit. These types of analyses require us to make assumptions and estimates regarding future cash flows, industry-specific economic factors and the profitability of future business strategies. The discounted cash flow approach uses a projection of estimated operating results and cash flows that are discounted using a weighted average cost of capital. Under the discounted cash flow approach, the projection uses management’s best estimates of the amount and timing of expected future cash flows impacted by economic and market conditions over the projected period for each reporting unit. Significant estimates and assumptions include terminal value growth rates, changes in working capital requirements and weighted average cost of capital. The market multiple analysis estimates fair value by applying revenue and earnings multiples to the reporting unit’s operating results. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting units. We evaluate the reasonableness of the estimated fair value of our reporting units by reconciling the aggregate fair value of all three of our reporting units to our total market capitalization as of our impairment testing date, taking into account an appropriate control premium. The determination of a control premium requires the use of judgment and is based upon control premiums observed in comparable market transactions. The changes in the carrying value of goodwill for the years ended December 31, 2018 and 2017 are as follows: Patient Care Products & Services Consolidated Goodwill, Accum. Goodwill, Goodwill, Accum. Goodwill, Goodwill, Accum. Goodwill, (in thousands) Gross Impairment Net Gross Impairment Net Gross Impairment Net Balance at December 31, 2016 $ 625,011 $ (428,668) $ 196,343 $ 139,299 $ (85,964) $ $ $ (514,632) $ 249,678 Goodwill impairment — — — — (53,335) (53,335) — (53,335) Balance at December 31, 2017 625,011 (428,668) 196,343 139,299 — (567,967) 196,343 Additions from acquisitions — 2,399 — — — — 2,399 Balance at December 31, 2018 $ 627,410 $ (428,668) $ 198,742 $ 139,299 $ (139,299) $ — $ 766,709 $ (567,967) $ 198,742 See Note F – “Acquisitions” within these consolidated financial statements for details surrounding goodwill acquired during the year ended December 31, 2018. As of October 1, 2018, we performed a qualitative assessment of the Patient Care reporting unit, which resulted in no indicators of goodwill impairment. As of October 1, 2017, we tested each of our three reporting units as part of our annual goodwill impairment test. Due to the nature and magnitude of events adversely impacting the reimbursement environment within the skilled nursing facility industry (our primary customer source for our Therapeutic solutions business) and the O&P industry (our primary source for our Distribution services business), combined with customer losses and related margin pressures, which increased in the fourth quarter of 2017, our evaluation of our Therapeutic and Distribution reporting units' long-term outlook resulted in our conclusion that the carrying amounts of these two reporting units exceeded their respective estimated fair values. We recorded non-cash goodwill impairment charges of $32.8 million for our Therapeutic reporting unit and $20.5 million for our Distribution reporting unit which is included in “Impairment of intangible assets” in the consolidated statements of operations. The fair value of our Patient Care reporting unit exceeded its carrying amount. These goodwill impairment charges had no impact on our cash flow or compliance with debt covenants for 2017. As of October 1, 2016, we tested each of our three reporting units as part of our annual goodwill impairment test. We concluded that the carrying amounts of the Therapeutic and Distribution reporting units within our Products & Services segment exceeded their respective estimated fair values. The second step of the test was then performed to measure the impairment loss, resulting in non-cash goodwill impairment charges of $64.9 million for our Therapeutic reporting unit and $21.1 million for our Distribution reporting unit which is included in “Impairment of intangible assets” in the consolidated statements of operations. The fair value of our Patient Care reporting unit exceeded its carrying amount. Other Intangible Assets Under the provisions of ASC 360-10, Property, plant, and equipment, an intangible asset that has a finite life should be amortized over its estimated useful life and should be tested for recoverability by comparing the net carrying value of the asset or asset group to the undiscounted net cash flows to be generated from the use and eventual disposition of that asset or asset group when events or changes in circumstances indicate that its carrying amount may not be recoverable. If the carrying amount of a definite-lived asset or asset group is not recoverable, the fair value of the asset or asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized. Under the provisions of ASC 350, Intangibles-goodwill and other, an indefinite-lived intangible asset is not amortized but should be tested for impairment annually and between annual tests if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The indefinite-lived intangible asset impairment standard allows an entity first to assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. We perform our annual test for recoverability on October 1 of each fiscal year. The balances related to intangible assets as of December 31, 2018 and 2017 are as follows: December 31, 2018 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 26,036 $ (19,051) $ — $ 6,985 Trade name 255 (125) — 130 Patents and other intangibles 9,391 (5,145) — 4,246 Definite-lived intangible assets 35,682 (24,321) — 11,361 Indefinite life - trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 44,752 $ (24,321) $ (4,953) $ 15,478 December 31, 2017 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 36,439 $ (24,267) $ — $ 12,172 Trade name 462 (302) — 160 Patents and other intangibles 15,358 (10,050) — 5,308 Definite-lived intangible assets 52,259 (34,619) — 17,640 Indefinite life - trade name 9,070 — (4,770) 4,300 Total other intangible assets $ 61,329 $ (34,619) $ (4,770) $ 21,940 The fair value of acquired customer list intangibles is estimated using an excess earnings model. Key assumptions utilized in the valuation model include pro-forma projected cash flows adjusted for market-participant assumptions, forecasted customer retention curve, and discount rate. Customer intangibles are amortized, using the straight-line method over an estimated useful life of four to ten years. The fair value of non-compete agreements are estimated using a discounted cash flow model. The related intangible assets are amortized, using the straight-line method, over their term which ranges from one to five years. Other definite-lived intangible assets are recorded at cost and are amortized, using the straight-line method, over their estimated useful lives of up to seventeen years. The fair value associated with trade names is estimated using the relief-from-royalty method with the primary assumptions being the royalty rate and expected revenues associated with the trade names. These assets, some of which have indefinite lives, are primarily included in the Products & Services segment. Indefinite lived trade name intangible assets are assessed for impairment in the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment on our indefinite-lived trade name was $0.2 million, $1.4 million, and $0.2 million for the years ended December 31, 2018, 2017, and 2016, respectively. Trade name intangible assets with definite lives are amortized over their estimated useful lives of one to ten years. Total intangible amortization expense was approximately $6.7 million, $9.5 million, and $13.9 million for the years ended December 31, 2018, 2017, and 2016, respectively. Estimated aggregate amortization expense for definite lived intangible assets for each of the next five years ended December 31 and thereafter is as follows: (in thousands) December 31, 2019 $ 3,895 2020 3,598 2021 1,016 2022 944 2023 804 Thereafter 1,104 Total $ 11,361 |
OTHER CURRENT ASSETS AND OTHER
OTHER CURRENT ASSETS AND OTHER ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
OTHER CURRENT ASSETS AND OTHER ASSETS | |
OTHER CURRENT ASSETS AND OTHER ASSETS | NOTE H — OTHER CURRENT ASSETS AND OTHER ASSETS Other current assets consist of the following: As of December 31, 2018 (in thousands) 2018 2017 Non-trade receivables $ 7,848 $ 7,668 Prepaid rent 4,442 4,248 Prepaid maintenance 3,330 3,134 Restricted cash — 3,271 Prepaid other 1,101 1,436 Prepaid purchase orders 998 99 Prepaid education and training 597 582 Prepaid insurance 258 271 Other 157 179 Total other current assets $ 18,731 $ 20,888 Non-trade receivables primarily relate to vendor rebate receivables, tenant improvement allowance receivables, and other non-trade receivables. Prepaid rent relates to amounts of future rent expense paid in advance of the rental period. Prepaid maintenance primarily relates to prepaid software and hardware maintenance and software license fees. Restricted cash related to funds held by our captive insurance subsidiary and whose use for general purposes is restricted by Nevada state insurance regulations. The captive insurance subsidiary was dissolved as of December 31, 2018. Prepaid other includes the employer's portion of health savings accounts, board member fees, and tax and accounting services. Prepaid purchase orders relate to unit commitments to fulfill our obligation with one of our product suppliers. Prepaid education and training is for our annual Education Fair event held in the first quarter of each fiscal year. Prepaid insurance is for product and general liability insurance. Other includes prepaid expenses for telecommunication, broker fees, and other miscellaneous prepaid expenses. Other assets consist of the following: As of December 31, (in thousands) 2018 2017 Cash surrender value of company owned life insurance $ 2,918 $ 2,340 Non-trade receivables 1,904 2,407 Deposits 1,698 2,193 Other 1,246 2,500 Total other assets $ 7,766 $ 9,440 The cash surrender value of company owned life insurance (“COLI”) funded our Defined Contribution Supplemental Executive Retirement Plan (“DC SERP”) at December 31, 2018 and December 31, 2017. See Note K - “Employee Benefits” for additional information. Non-trade receivables primarily relate to estimated receivables due from our various business insurance policies. Deposits primarily relate to security deposits made in connection with property leases. Other relates to cash collateral posted for surety bonds and revolver facility fees. |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | NOTE I — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES Accrued expenses and other current liabilities consist of: As of December 31, (in thousands) 2018 2017 Patient prepayments, deposits and refunds payable $ 24,563 $ 30,194 Insurance and self-insurance accruals 8,886 8,901 Accrued sales taxes and other taxes 6,810 6,335 Accrued professional fees 3,751 11,612 Derivative liability 724 — Accrued interest payable 332 845 Other current liabilities 6,717 8,421 Total $ 51,783 $ 66,308 Patient prepayment deposits and refunds includes funds received for devices not yet delivered to a patient and refunds for overpayments. Accrued insurance primarily relates to accruals for estimated losses for certain self-insured risks including property, professional liability, and general liability, and employee health care costs. Accrued professional fees primarily relate to accruals for professional accounting and legal fees. Taxes primarily includes accrued sales tax liabilities and other taxes payable. Derivative liability relates to our cash flow hedge; refer to Note O - “Derivative Financial Instruments.” Other current liabilities are primarily related to accruals for deferred revenue and warranty liabilities. Other liabilities consist of: As of December 31, (in thousands) 2018 2017 Supplemental executive retirement plan obligations $ 20,195 $ 21,842 Long-term insurance accruals 8,713 9,531 Deferred tenant improvement allowances 8,570 7,361 Unrecognized tax benefits, and related interest and penalties 5,458 5,219 Deferred rent 4,455 4,909 Derivative liability 3,134 — Other 1,045 1,391 Total $ 51,570 $ 50,253 Supplemental executive retirement plan obligations includes obligations due on both the Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) and DC SERP. See Note K - “Employee Benefits” within these consolidated financial statements. Unrecognized tax benefits represent the difference between tax positions that we expect to take, or take on our income tax returns and the benefit we recognize on our financial statements. Deferred tenant improvement allowance represents deferred credits associated with receiving lease incentives. Deferred rent represents net deferred credits associated with recognizing rent expense on a straight-line basis for property operating leases whose lease payments escalate over the life of the lease. Both deferred credits are recognized as reductions of rent expense over the term of the associated lease. Derivative liability relates to our cash flow hedge; refer to Note O - “Derivative Financial Instruments.” Other includes asset retirement obligations, which is the liability to return a leased building to the state before it was occupied, fair market value lease differential liability, build-to-suit tenant interest accrual, and other long-term accrued expenses. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE J — INCOME TAXES Components of provision (benefit) for income taxes are as follows: Years Ended December 31, (in thousands) 2018 2017 2016 Current: Federal $ 669 $ 541 $ (18,812) State 1,117 574 694 Total current 1,786 1,115 (18,118) Deferred: Federal 1,497 28,905 3,008 State 1,955 (2,723) (800) Total deferred 3,452 26,182 2,208 Provision (benefit) for income taxes from continuing operations $ 5,238 $ 27,297 $ (15,910) Income tax provision (benefit) attributable to discontinued operations $ — $ — $ 490 A reconciliation of the federal statutory tax rate to our effective tax rate applicable to continuing operations is as follows: Years Ended December 31, 2018 2017 2016 Federal statutory tax rate 21.0 % 35.0 % 35.0 % State and local income taxes 26.6 % 0.9 % 0.5 % Change in valuation allowance 9.5 % (0.7) % — % Federal statutory tax rate change effect on deferred balance — % (45.0) % — % State tax rate change effect on deferred balance 27.7 % (0.2) % (0.1) % Change in uncertain tax positions 5.5 % (0.3) % 0.9 % Goodwill impairment — % (21.1) % (22.3) % Permanent Items 27.9 % (2.7) % (0.3) % Tax audit adjustments 8.7 % — % — % Tax credits (5.6) % 0.1 % — % Other (1.7) % (1.3) % (0.8) % Tax provision 119.6 % (35.3) % 12.9 % The significant components of the net deferred income tax asset are as follows: As of December 31, (in thousands) 2018 2017 Deferred tax liabilities: Goodwill $ 5,821 $ 3,883 Intangible — 4 Prepaid expenses 1,030 1,029 Sec. 481(a) adjustments — 56 6,851 4,972 Deferred tax assets: Deferred benefit plan compensation 6,269 5,786 Provision for doubtful accounts and implicit price concessions 16,529 18,243 Property, plant and equipment 10,829 12,216 Net operating loss carryforwards 10,975 15,191 Accrued expenses 15,352 17,974 Intangibles 1,063 — Inventory reserves 2,710 2,123 Stock-based compensation 3,902 3,972 Capital leases 150 210 Deferred rent 1,136 1,265 Refund liabilities 2,517 2,895 Interest on seller notes 1,029 1,010 Interest expense 7,798 — Other 1,157 967 81,416 81,852 Valuation allowance (8,930) (8,754) 72,486 73,098 Net deferred tax asset $ 65,635 $ 68,126 We provide a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have $10.7 million and $24.2 million of U.S. federal and $166.0 million and $195.0 million of state net operating loss carryforwards available at December 31, 2018 and 2017, respectively. These carryforwards will be used to offset future income but may be limited by the change in ownership rules in Section 382 of the Internal Revenue Code. These net operating loss carryforwards will expire in varying amounts between 2019 and 2038. We establish valuation allowances when necessary to reduce deferred tax assets to amounts expected to be realized. As of December 31, 2018 and 2017, we have recorded a valuation allowance of approximately $8.9 million and $8.8 million, respectively, primarily related to various state jurisdictions. The following schedule presents the activity in the valuation allowance: (in thousands) Balance at Balance at End of Year Beginning of Year Acquisitions Provision Released Year 2018 $ 8,754 $ — $ 204 $ 28 $ 8,930 2017 $ 6,895 $ — $ 2,306 $ 447 $ 8,754 2016 $ 6,853 $ — $ 377 $ 335 $ 6,895 A reconciliation of our liability for unrecognized tax benefits is as follows: (in thousands) 2018 2017 2016 Unrecognized tax benefits, at beginning of the year $ 4,860 $ 4,664 $ 7,567 Additions for tax positions related to the current year 257 466 456 Additions for tax positions of prior years — — — Decrease related to prior year positions (352) (270) (409) Decrease for lapse of applicable statute of limitations — — (2,950) Unrecognized tax benefits, at end of the year $ 4,765 $ 4,860 $ 4,664 As of December 31, 2018, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $2.8 million. We expect unrecognized tax benefits to decrease by $0.2 million within the next twelve months due to the lapse of statute limitations. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2018, 2017, and 2016, the amount of accrued interest and penalties was approximately $0.8 million, $0.6 million, and $0.4 million, respectively. We are subject to income tax in the U.S. federal, state, and local jurisdictions. With few exceptions, we are no longer subject to U.S. federal income tax examinations for years prior to 2013 as the statute of limitations has lapsed for 2012 and all preceding years. However, due to net operating loss carryforwards, tax authorities have the ability to adjust those net operating losses related to closed years. We are currently under income tax audits by the IRS and various state jurisdictions for tax years ended 2013-2016. We believe we have adequate accruals for additional taxes and related interest expense which could result. We believe the ultimate resolution of income tax examinations will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity. The Tax Act reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018. Based on a reduced U.S. federal corporate tax rate of 21% from the Tax Act, we re-measured deferred tax assets and liabilities at the tax rates at which they are expected to reverse in the future. For the items for which we were able to determine a reasonable estimate, we recognized a provisional amount in 2017 in accordance with Staff Accounting Bulletin 118 of approximately $35.0 million of tax expense related to re-measurement of our deferred tax assets and liabilities, which is recorded as a component of income tax expense from continuing operations resulting in the above impact to our 2017 effective income tax rate. During the fourth quarter of 2018, we finalized the provisional amounts for all the enactment-dates income tax effects of the Tax Act, which did not have material impact to the consolidated financial statements. |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended |
Dec. 31, 2018 | |
EMPLOYEE BENEFITS | |
EMPLOYEE BENEFITS | NOTE K — EMPLOYEE BENEFITS Savings Plan We maintain a 401(k) Savings and Retirement plan that covers all of our employees. Under the plan, employees may defer a portion of their compensation up to the levels permitted by the Internal Revenue Service. We recorded matching contributions of approximately $5.8 million, $5.9 million, and $6.7 million under this plan during 2018, 2017, and 2016, respectively, which were included within “Personnel costs” and “General and administrative expenses” in our consolidated statements of operations. Defined Benefit Supplemental Executive Retirement Plan Effective January 2004, we implemented an unfunded noncontributory DB SERP for certain senior executives. The DB SERP, which we administer, calls for fifteen annual payments upon retirement with the payment amount 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. We engaged an actuary to calculate the related benefit obligation at December 31, 2018 and 2017 as well as net periodic benefit plan expense for the years ended December 31, 2018, 2017, and 2016. As of December 31, 2018 and 2017, the average remaining service period of plan participants is 10.5 and 11.5 years, respectively. We believe the assumptions used are appropriate; however, changes in assumptions or differences in actual experience may affect our benefit obligation and future expenses. Actual results that differ from the assumptions are accumulated and amortized over future periods, affecting the recorded obligation and expense in future periods. The DB SERP's net benefit obligation is as follows: Change in Benefit Obligation (in thousands) Benefit obligation as of December 31, 2015 $ 21,885 Service cost 390 Interest cost 740 Payments (1,847) Actuarial loss 136 Benefit obligation as of December 31, 2016 21,304 Service cost 340 Interest cost 711 Payments (1,913) Actuarial loss 351 Benefit obligation at December 31, 2017 20,793 Service cost 367 Interest cost 600 Payments (1,913) Actuarial gain (920) Benefit obligation as of December 31, 2018 $ 18,927 The funded status of the DB SERP's net benefit obligation is as follows: December 31, (in thousands) 2018 2017 Unfunded status $ 16,740 $ 20,793 Unamortized net (gain) loss 2,187 — Net amount recognized $ 18,927 $ 20,793 Amounts Recognized in the Consolidated Balance Sheets: December 31, (in thousands) 2018 2017 Current accrued expenses and other current liabilities $ 1,913 $ 1,913 Non-current other liabilities 17,014 18,880 Total accrued liabilities $ 18,927 $ 20,793 We recorded gross actuarial (gains) losses under the DB SERP of approximately ($0.9) million, $0.4 million, and $0.1 million in 2018, 2017, and 2016, respectively, in other comprehensive loss. There were no other components such as prior service costs or transition obligations relating to the DB SERP costs recorded within other comprehensive loss during 2018, 2017, or 2016. The following weighted average assumptions were used to determine the benefit obligation as of December 31 of each year. Net periodic benefit cost for each year was determined using the weighted average assumptions as of the prior year. We used a third party actuarial specialist to assist in determining, among other things, the discount rate for all three years presented. Previously, the cash surrender value of a COLI funded our DB SERP. However, we received the cash surrender value of the DB SERP COLI in the amount of $17.1 million in 2017, resulting in the benefit obligation being unfunded at December 31 2018 and 2017. Our assumed weighted average discount rate for the defined benefit plan reflects the hypothetical rate at which the projected benefit obligation could be effectively settled or paid out to participants. We determine our discount rate based on a range of factors, including a yield curve composed of rates of return on high-quality, fixed income corporate bonds. 2018 2017 2016 Discount rate 4.0 % 3.3 % 3.5 % Average rate of increase in compensation 3.0 % 3.0 % 3.0 % At December 31, 2018, the estimated accumulated benefit obligation is $18.9 million. Future payments under the Plan are as follows: (in thousands) 2019 $ 1,913 2020 1,913 2021 1,913 2022 1,913 2023 1,913 Thereafter 9,362 $ 18,927 Defined Contribution Supplemental Executive Retirement Plan In 2013, we established 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 with which we own an insurance policy. As of December 31, 2018 and 2017, the estimated accumulated benefit obligation is $3.0 million and $3.0 million, respectively, of which $2.4 million and $2.3 million is funded and $0.6 million and $0.7 million is unfunded at December 31, 2018 and 2017, respectively. In connection with the DC SERP benefit obligation, we maintain a COLI policy. The carrying value of the COLI is measured at its cash surrender value and is presented within “Other assets” in our consolidated balance sheets. See Note H - “Other Current Assets and Other Assets” for additional information. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2018 | |
LEASES | |
LEASES | NOTE L — LEASES Rent expense under operating leases was approximately $47.5 million, $47.3 million, and $48.1 million for the years ended December 31, 2018, 2017, and 2016, respectively, which was included within “Other operating costs” and “General and administrative expenses” in our consolidated statements of operations. Sublease rental income is not material. The net book value of office equipment under capital leases was approximately $0.5 million and $0.7 million at December 31, 2018 and 2017, respectively. Equipment capital lease obligations are included in long-term debt as a part of “Financing leases and other” in Note M - “Long-Term Debt.” Future minimum rental payments, by year and in the aggregate, under operating and financing obligations with terms of one year or more at December 31, 2018 are as follows: Operating Capital (in thousands) Leases Leases 2019 $ 39,378 $ 249 2020 29,641 175 2021 21,303 109 2022 14,479 28 2023 9,193 — Thereafter 10,008 — $ 124,002 $ 561 |
LONG-TERM DEBT
LONG-TERM DEBT | 12 Months Ended |
Dec. 31, 2018 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | NOTE M — LONG-TERM DEBT Long‑term debt consists of the following: As of December 31, As of December 31, (in thousands) 2018 2017 Credit Agreement, dated March 6, 2018 Revolving credit facility $ — $ — Term Loan B 501,213 — Prior Credit Agreement, dated August 1, 2016 Term Loan B — 280,000 Prior Credit Agreement, dated June 17, 2013 Revolving credit facility — 5,000 Term loan — 151,875 Seller notes 4,506 5,912 Financing leases and other 14,361 18,169 Total debt before unamortized discount and debt issuance costs 520,080 460,956 Unamortized discount and debt issuance costs, net (9,407) (10,692) Total debt 510,673 $ 450,264 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 December 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 our initial 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 premium and unamortized debt issuance costs on the prior credit agreements are included in “Loss on Extinguishment of Debt” in the consolidated statements of operations for the year ended December 31, 2018. 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. For the year ended December 31, 2018, the weighted average interest rate on outstanding borrowings under our Term Loan B facility was approximately 5.6%. We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note O - “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 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. We were in compliance with all covenants at December 31, 2018. 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. Subsidiary Guarantees The obligations under the Credit Agreement are guaranteed by our material domestic subsidiaries, which incorporates subsidiaries that both make up no less than 90% of our total net revenues and make up no less than 90% of our total assets. Separate condensed consolidating information is not included as the parent company does not have independent assets or operations, and the guarantees are full and unconditional and joint and several. Other Restrictions The Credit Agreement limits our ability to, among other things, purchase capital assets, incur additional indebtedness, create liens, pay dividends on or redeem capital stock, make certain investments, make restricted payments, make certain dispositions of assets, engage in transactions with affiliates, engage in certain business activities, and engage in mergers, consolidations and certain sales of assets. Seller Notes We typically issue subordinated promissory notes (“Seller Notes”) as a part of the consideration transferred when making acquisitions. The Seller Notes are unsecured and are presented net of unamortized discount of $0.2 million and $0.3 million as of December 31, 2018 and 2017, respectively. In accordance with ASC 805, Accounting for Business Combinations, we measure these instruments at their estimated fair values as of the respective acquisition dates. The stated interest rates on these instruments range from 2.00% to 3.00%. Principal and interest are payable in monthly, quarterly, or annual installments and mature through November 2023. Scheduled maturities of debt at December 31, 2018 were as follows (in thousands): (in thousands) 2019 $ 8,678 2020 8,517 2021 6,719 2022 6,324 2023 6,456 Thereafter 483,386 Total debt before unamortized discount and debt issuance costs, net 520,080 Unamortized discount and debt issuance costs, net (9,407) Total debt $ 510,673 Financing Leases and Other Financing leases relate to agreements when we are deemed the owner of a leased building, typically due to significant involvement during the construction period, and which do not qualify for de-recognition under the sale-leaseback accounting guidance due to one or more prohibited forms of continuing involvement in the property. Such forms of continuing involvement include us paying for a more than insignificant portion of project construction costs, us providing a security interest in the tenant's personal property located at the premises, and/or we have renewal options for a term that comprises 90% or more of the remaining economic life of the property at a price other than estimated fair value. These liabilities have remaining terms ranging from 1 to 16 years with an average inherent interest rate of approximately 16%. Other obligations include equipment under capital leases. The following table summarizes for the year ended December 31, 2018 , the aggregate contractual payments associated with the financing leases and other obligations over the next 5 years and thereafter, including both principal and interest. Included in these amounts are payments for optional renewal periods for which management believes we will exercise our rights to renew, as well as the final non-monetary payment made with the return of the property at the end of the financing term: (in thousands) 2019 $ 3,134 2020 2,764 2021 2,775 2022 2,492 2023 2,425 Thereafter 12,005 Less: amount representing interest (11,234) Total $ 14,361 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2018 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE N — FAIR VALUE MEASUREMENTS Financial Instruments We previously held investments in money market funds which were measured at fair value on a recurring basis. As of December 31, 2018, we had no amounts in money market funds. As of December 31, 2017, $3.3 million of money market funds, which were restricted from general use, were presented within “Other current assets.” The fair values of our money market funds were based on Level 1 observable market prices and were 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 (excluding unamortized discounts and debt issuance costs of $9.4 million) of our outstanding term loan as of December 31, 2018 was $501.2 million compared to its fair value of $491.2 million. 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 quotes using unobservable inputs, primarily, our risk-adjusted credit spread, which represents a Level 3 measurement. As of December 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 $325.0 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 represents a Level 2 measurement. See Note M - “Long-Term Debt” and Note O - “Derivative Financial Instruments” for further information. The carrying value of our outstanding subordinated promissory notes issued in connection with acquisitions (“Seller Notes”) as of December 31, 2018 and December 31, 2017 was $4.5 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 | 12 Months Ended |
Dec. 31, 2018 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE O — DERIVATIVE FINANCIAL INSTRUMENTS Cash Flow Hedges of Interest Rate Risk As of December 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”) for the year ended December 31, 2018: (in thousands) Cash Flow Hedges Balance as of January 1, 2018 $ — Unrealized loss recognized in other comprehensive loss, net of tax 4,838 Reclassification to interest expense, net of tax (1,902) Balance as of December 31, 2018 $ 2,936 The following table presents the fair value of derivative liabilities within the consolidated balance sheets as of December 31, 2018. There were no derivative assets or liabilities as of December 31, 2017: As of December 31, 2018 (in thousands) Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities — 724 Other liabilities — 3,134 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2018 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | NOTE P — STOCK-BASED COMPENSATION On May 19, 2017, the Board of Directors approved the Hanger, Inc. Special Equity Plan (the “Special Equity Plan”). The Special Equity Plan authorized up to 1.5 million shares of Common Stock and operates completely independent from our 2016 Omnibus Incentive Plan. All awards under the Special Equity Plan were made on May 19, 2017 which consisted of 0.8 million stock options and 0.3 million performance-based stock awards. No further grants of awards will be authorized or issued under the Special Equity Plan. On April 15, 2016, our Board of Directors approved the Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”). The 2016 Plan as amended by our Board of Directors (the “Board”) in May 2018 authorizes the issuance of up to (a) 2.6 million shares of Common Stock, plus (b) 0.4 million shares available for issuance under the 2010 Plan that had not been subject to outstanding awards as of the effective date of the 2016 Plan and (c) any shares that would have become available again for new grants under the terms of the 2010 Omnibus Plan (“2010 Plan”) if such plan were still in effect. Upon approval of the 2016 Plan, our 2010 Plan was no longer available for future awards. As of December 31, 2018, approximately 0.8 million shares were available for future issuance. The available shares consisted of (a) 2.6 million shares of common stock authorized for issuance under the amended 2016 Plan, plus (b) 0.4 million shares rolled forward from the 2010 Plan, plus (c) 0.5 million shares forfeited and added back to the pool, less (d) 2.7 million shares issued for awards. In 2018, shares issued under equity plans are issued from authorized and unissued shares. For the years ended December 31, 2018, 2017, and 2016, we recognized a total of approximately $13.1 million, $12.9 million, and $9.8 million, respectively, of stock-based compensation expense for the 2010 and 2016 plans. Stock compensation expense, net of forfeitures, relates to restricted stock units, performance-based restricted stock units, and options. Restricted Stock Units The summary of restricted stock units, performance-based stock units, and weighted average grant date fair values are as follows: Employee Service-Based Employee Performance- Awards Based Awards Director Awards Weighted Weighted Weighted Average Average Average Grant Date Grant Date Grant Date Units Fair Value Units Fair Value Units Fair Value Nonvested at December 31, 2016 1,066,598 $ 16.30 125,729 $ 26.11 71,465 $ 6.72 Granted 555,280 13.74 512,458 17.21 98,406 12.66 Vested (363,834) 19.27 (5,551) 29.66 (71,465) 6.72 Forfeited (75,005) 14.58 — — — — Nonvested at December 31, 2017 1,183,039 14.30 632,636 18.87 98,406 12.66 Granted 569,571 15.70 204,181 15.76 61,376 18.25 Vested (422,884) 16.07 (199,395) 22.16 (98,406) 12.66 Forfeited (121,098) 13.02 (75,750) 18.06 — — Nonvested at December 31, 2018 1,208,628 $ 14.47 561,672 $ 16.68 61,376 $ 18.25 During the years ended December 31, 2018, 2017, and 2016, approximately 0.7 million, 0.4 million, and 0.4 million of restricted common stock units with an intrinsic value of $12.0 million, $5.9 million, and $2.1 million, respectively, became fully vested. As of December 31, 2018, total unrecognized compensation expense related to unvested restricted stock units and unvested performance based restricted stock units for which we have concluded the performance condition was probable of achievement was approximately $30.8 million and the related weighted‑average period over which it is expected to be recognized is approximately 1.5 years. The aggregate granted units have vesting dates through June 2022. The 2018, 2017, and 2016 aggregate grants had total estimated grant date fair values of $13.3 million, $17.7 million, and $6.2 million, respectively. A special equity grant of performance-based restricted stock units was granted on May 19, 2017 and vests 100% three years after the date of issuance, assuming the performance goal is achieved. The financial target for this grant is to achieve a compounded annual growth rate (“CAGR”) of our common stock price of 20% as of market close on May 18, 2020. This equates to a share price on that date of $22.07 compared to the closing price on the eve of grant of $12.77. The grant provides for the vesting of 50% of the original targeted shares if a CAGR of 10% (a stock price of $17.00 ) is achieved. The grant also provides for the vesting of up to 200% of the original targeted shares if a CAGR of 30% (a stock price of $28.06) or more is achieved. The percentage of vested shares will be interpolated on a linear basis between 50% and 200% for a CAGR between 10% and 30%. The stock price at time of award was $12.77, but given market condition performance criteria the Monte Carlo Simulation valuation was used to calculate a fair value of $19.29 per share. The key assumptions used were a volatility rate of 109.5%, a risk-free interest rate of 1.44%, and a performance period of 3 years. Options The fair value of each employee stock option award was estimated on the date of grant using the Black-Scholes option-pricing model and calculated a grant date fair value of $8.67 per option. The key assumptions used were an expected dividend yield of zero, an expected stock volatility of 92.48%, a risk-free interest rate of 1.68%, and an expected term of 4.38 years. The summary of option activity and weighted average exercise prices are as follows: Weighted Average Remaining Weighted Average Aggregate Contractual Term Shares Exercise Price Intrinsic Value (Years) Outstanding at December 31, 2016 — $ — $ — Granted 798,020 12.77 2,378,100 9.4 Terminated — — Exercised — — Outstanding at December 31, 2017 798,020 12.77 2,378,100 Granted — — Terminated (111,203) 12.77 Exercised (4,948) 12.77 Outstanding at December 31, 2018 681,869 $ 12.77 $ 4,213,950 8.4 At December 31, 2018, 0.7 million options were outstanding but not yet exercisable with a weighted average exercise price of $12.77, average remaining contractual terms of 8.4 years and aggregate intrinsic values of approximately $4.2 million. As of December 31, 2018, there was unrecognized compensation cost related to stock option awards of $2.7 million. At December 31, 2017, 0.8 million options were outstanding but not yet exercisable with a weighted average exercise price of $12.77, average remaining contractual terms of 9.4 years and aggregate intrinsic values of approximately $2.4 million. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE Q — 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, as such we accrued a liability and expensed $3.4 million in 2014. As of December 31, 2018, there is no remaining purchase commitment. As of December 31, 2018, our reserve associated with the inventory was $2.2 million. Guarantees and Indemnification 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. 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 Court of Appeals held oral argument for the appeal on March 5, 2018. On August 6, 2018, the Court of Appeals affirmed in part and reversed in part. The Court of Appeals affirmed the dismissal of the case against individual defendants Vinit Asar, our current President and Chief Executive Officer, and Thomas Kirk, our former President and Chief Executive Officer, but reversed the dismissal of the case against George McHenry, our former Chief Financial Officer, and Hanger, Inc. On August 20, 2018, Hanger, Inc. and George McHenry filed a petition for panel rehearing and a petition for rehearing en banc with the Court of Appeals. On September 10, 2018, the Court of Appeals asked plaintiffs to file a response to the petition for rehearing en banc, and plaintiffs filed an opposition to the petition for rehearing en banc on September 17, 2018. Both petitions are pending with the Court of Appeals. We believe the remaining claims are without merit, and intend to continue to vigorously defend against these claims. 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 459th 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 subsequently 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, took the position that the full report is not discoverable under Texas law. Plaintiffs’ counsel filed a motion to compel the Special Committee’s counsel to produce the full report. We opposed the motion. On July 20, 2018, the Travis County court ruled that only a redacted version of the report is discoverable, and counsel for the Special Committee provided a redacted version of the report to plaintiffs' counsel. Plaintiffs objected to the redacted version of the report, and on February 4, 2019, the Travis County court appointed a Special Master to review plaintiffs' objections to the redacted report. Upon completion of discovery we intend to file a motion to dismiss the consolidated derivative action. Management intends to continue to vigorously defend against the securities class action and the shareholder derivative 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 our results of operations. Other Matters 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 operate 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. Favorable Settlements For the year ended December 31, 2018, our results of operations and net income benefited from the favorable resolution of two matters. On May 15, 2018, we received a net favorable 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 of 2010. We do not anticipate further payments in connection with this matter as this settlement constituted a full and final satisfaction of our claims. The benefit of this settlement has been recognized as a reduction to our general and administrative expenses. On June 28, 2018, we entered into an agreement with the State of Delaware, and made payment, to satisfy all of the State's abandoned or unclaimed property claims transactions represented within the period of January 1, 2001 through December 31, 2012 which were reportable through December 31, 2017 in the amount of $2.2 million. This agreed upon payment amount was favorable by $0.5 million to the amount we had previously estimated for these liabilities and had the effect of reducing our general and administrative expenses by this amount. Additionally, under the terms of the agreement, we were not required to pay interest on the previously unremitted cumulative abandoned or unclaimed property relating to this twelve year period in the amount of $1.5 million, which had the effect of lowering our interest expense in the year by this accrued interest amount. |
SHAREHOLDERS' DEFICIT
SHAREHOLDERS' DEFICIT | 12 Months Ended |
Dec. 31, 2018 | |
SHAREHOLDERS' DEFICIT | |
SHAREHOLDERS' (DEFICIT) EQUITY | NOTE R — SHAREHOLDERS' DEFICIT Shareholder's Rights Plan On February 28, 2016, the Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share (the “Common Stock”). The dividend was payable to the shareholders of record on March 10, 2016 (the “Record Date”). The Rights would not be exercisable until after the public announcement that a person or group of affiliated or associated persons has acquired or obtained the right or obligation to acquire beneficial ownership of 10% or more of our outstanding Common Stock (“Acquiring Person”) or following the commencement of a tender offer or exchange offer that, if consummated, would result in a person or group becoming an Acquiring Person. If a shareholder’s beneficial ownership of our Common Stock as of the time of the public announcement of the Rights Agreement and associated dividend declaration was at or above the applicable threshold, as defined by the Rights Agreement (including through entry into certain derivative positions), that shareholder’s then-existing ownership percentage would be grandfathered, but the rights would become exercisable if at any time after such announcement, the shareholder increases its ownership percentage. Once exercisable, each Right allowed its holder to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), for $65.00 (the “Purchase Price”), subject to adjustment. Prior to exercise, the Right did not give its holder any dividend, voting, or liquidation rights. The description and terms of the Rights were set forth in a Rights Agreement, dated as of February 28, 2016, between us and Computershare Inc., as the Rights Agent. The Rights had certain anti-takeover effects. The Rights would have caused a substantial dilution to any person or group that attempted to acquire us without the approval of our Board of Directors. As a result, the overall effect of the Rights may have been to render more difficult or discourage any attempt to acquire us even if such acquisition may be favorable to the interests of our shareholders. Because our Board of Directors could redeem the Rights and amend the Rights Agreement in any respect prior to a person or group becoming an Acquiring Person, the Rights should not interfere with a merger or other business combination approved by the Board of Directors. The Rights were originally set to expire on August 28, 2017. Rights Agreement Amendment On June 23, 2017, we entered into an amendment (the “Rights Agreement Amendment”) to the Rights Agreement to extend the “Final Expiration Date” under the Rights Agreement to December 31, 2018. Pursuant to the terms of the Rights Agreement as amended, we had the ability to redeem the rights prior to the “Final Expiration Date” or to further amend the Rights Agreement to provide for an earlier “Final Expiration Date”. The “Final Expiration Date” under the Rights Agreement was not extended in response to any specific takeover bid or other proposal to acquire control. The Rights Agreement expired on its terms on December 31, 2018 and is no longer of any force or effect. |
SEGMENT AND RELATED INFORMATION
SEGMENT AND RELATED INFORMATION | 12 Months Ended |
Dec. 31, 2018 | |
SEGMENT AND RELATED INFORMATION | |
SEGMENT AND RELATED INFORMATION | NOTE S — 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 Dosteon, and (ii) our contracting and network management business. Dosteon is presented as a discontinued operation and has therefore been excluded from the summarized financial information below. See Note U - “Discontinued Operations” within these consolidated financial statements. 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 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 leases 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 A - “ Organization and Summary of Significant Accounting Policies.” 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. We had no foreign and export sales and assets for the years ended December 31, 2018, 2017, and 2016. For the Patient Care segment, government reimbursement, comprised of Medicare, Medicaid, and the U.S. Department of Veterans Affairs, in the aggregate, accounted for approximately, 56.5%, 54.8%, and 54.1% of their net revenue in 2018, 2017, and 2016, respectively. Additionally, for the Products & Services segment, no single customer accounted for more than 10% of net revenues in 2018, 2017, or 2016, respectively. Summarized financial information concerning our reporting segments is shown in the following tables. Patient Care Products & Services For the Year Ended December 31, For the Year Ended December 31, (in thousands) 2018 2017 2016 2018 2017 2016 Net revenue Third party $ 857,382 $ 851,973 $ 840,130 $ 191,378 $ 188,796 $ 201,924 Intersegments — — — 192,096 178,768 175,539 Total net revenue 857,382 851,973 840,130 383,474 367,564 377,463 Material costs Third party suppliers 234,409 228,091 230,957 103,608 101,132 101,114 Intersegments 23,792 23,808 25,055 168,304 154,960 150,484 Total material costs 258,201 251,899 256,012 271,912 256,092 251,598 Personnel expenses 312,736 312,695 315,892 51,353 48,395 47,645 Other expenses 140,527 143,598 150,604 24,306 25,855 32,228 Depreciation & amortization 19,113 21,363 24,873 10,197 10,163 11,600 Impairment of intangible assets — — — 183 54,735 86,164 Segment income (loss) from operations $ 126,805 $ 122,418 $ 92,749 $ 25,523 $ (27,676) $ (51,772) Purchase of property, plant and equipment $ 12,781 $ 8,163 $ 14,581 $ 1,890 $ 2,153 $ 820 A reconciliation of the total of the reportable segments' income (loss) from operations to consolidated loss from operations is as follows: (in thousands) 2018 2017 2016 Income (loss) from operations Patient Care $ 126,805 $ 122,418 $ 92,749 Products & Services 25,523 (27,676) (51,772) Corporate & other (92,681) (113,692) (112,277) Consolidated income (loss) from operations 59,647 (18,950) (71,300) Interest expense, net 37,566 57,688 45,199 Loss on extinguishment of debt 16,998 — 6,031 Non-service defined benefit plan expense 703 736 786 Income (loss) from continuing operations before income taxes 4,380 (77,374) (123,316) Provision (benefit) for income taxes 5,238 27,297 (15,910) Consolidated loss from continuing operations $ (858) $ (104,671) $ (107,406) A reconciliation of the reportable segment net revenue to consolidated net revenue is as follows: (in thousands) 2018 2017 2016 Net Revenue Patient Care $ 857,382 $ 851,973 $ 840,130 Products & Services 383,474 367,564 377,463 Corporate & other — — — Consolidating adjustments (192,096) (178,768) (175,539) Consolidated net revenue $ 1,048,760 $ 1,040,769 $ 1,042,054 A reconciliation of the reportable segment material costs to consolidated material costs is as follows: (in thousands) 2018 2017 2016 Material costs Patient Care $ 258,201 $ 251,899 $ 256,012 Products & Services 271,912 256,092 251,598 Corporate & other — — — Consolidating adjustments (192,096) (178,768) (175,539) Consolidated material costs $ 338,017 $ 329,223 $ 332,071 A reconciliation of the reportable segment purchase of property, plant and equipment to consolidated purchase of property, plant and equipment is as follows: (in thousands) 2018 2017 2016 Purchase of property, plant and equipment Patient Care $ 12,781 $ 8,163 $ 14,581 Products & Services 1,890 2,153 820 Corporate & other 4,313 6,039 5,747 Total consolidated purchase of property, plant and equipment $ 18,984 $ 16,355 $ 21,148 A reconciliation of the total of the reportable segments' assets to consolidated assets is as follows: (in thousands) 2018 2017 Assets Patient Care $ 415,469 $ 413,759 Products & Services 100,953 97,536 Corporate & other 186,588 129,128 Total consolidated assets $ 703,010 $ 640,423 |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 12 Months Ended |
Dec. 31, 2018 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
SUPPLEMENTAL CASH FLOW INFORMATION | NOTE T — SUPPLEMENTAL CASH FLOW INFORMATION Changes in operating assets and liabilities on cash flows from operating activities is as follows: For the Years Ended December 31, (in thousands) 2018 2017 2016 Accounts receivable, net $ 3,238 $ (12,585) $ 17,612 Inventories 1,750 (913) 253 Other current assets and other assets 4,459 661 849 Income taxes receivable 12,700 121 18,725 Accounts payable 6,511 (3,562) (3,133) Accrued expenses and other current liabilities (16,550) (12,929) (3,045) Accrued compensation related costs 1,713 16,843 (12,006) Other liabilities (3,980) (2,271) (5,797) Changes in operating assets and liabilities on cash flows from operating activities $ 9,841 $ (14,635) $ 13,458 The supplemental disclosure requirements for the statements of cash flows are as follows: For the Years Ended December 31, (in thousands) 2018 2017 2016 Cash paid during the period for: Interest paid $ 31,312 $ $ 42,345 Income tax (refunds received) paid (11,131) (35,092) Non-cash financing and investing activities: Issuance of seller notes in connection with acquisitions 1,120 — — Additions to property, plant and equipment acquired through financing obligations 1,523 374 Retirements of financed property, plant and equipment and related financing obligations 4,460 2,381 Purchase of property, plant and equipment in accounts payable $ 5,018 $ $ 728 |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended |
Dec. 31, 2018 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | NOTE U — DISCONTINUED OPERATIONS On November 5, 2014, the Audit Committee of the Board of Directors approved a plan to sell and/or otherwise dispose of the Dosteon distribution product group (“Dosteon”), a component of our Patient Care segment. This action was taken following the conclusion of our strategic evaluation of this business in the fourth quarter of 2014. In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations , ASC 360-10, Property, Plant and Equipment - Overall, and ASC 350-20 , Intangibles - Goodwill and Other - Goodwill, the operating results and cash flows of Dosteon have been presented separately as discontinued operations in the consolidated statements of operations and the consolidated statements of cash flows, respectively, for the year ended December 31, 2016. We had no activities related to discontinued operations in 2018 or 2017. The remaining portions of Dosteon businesses were sold in 2015. Costs associated with exit and disposal related to Dosteon were immaterial in 2016. In 2016, $1.4 million of contingent consideration gains resulting from the disposal of Dosteon in prior years was recorded in “Income (loss) before income taxes from discontinued operations” in our consolidated statements of operations. The following is a summary of our operating results for discontinued operations: Years Ended December 31, (in thousands) 2018 2017 2016 Net revenue $ — $ — $ — Income before income taxes from discontinued operations — — 1,425 Income tax provision — — 490 Income from discontinued operations, net of income taxes $ — $ — $ 935 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE V — SUBSEQUENT EVENTS On January 28, 2019, we completed the acquisition of a prosthetic and orthotic business for a total purchase price of $33.2 million, of which $28.5 million was cash consideration and $4.8 million in notes to the shareholders, payable in quarterly installments over a period of three years. Due to the proximity of the completion of the acquisition to the filing of this form 10-K, it is not practicable to provide a preliminary purchase price allocation of the fair value of the assets purchased and liabilities assumed in the transaction. During the fourth quarter of 2018, acquisition-related expenses related to this transaction totaled approximately $0.5 million and are included in “General and administrative expenses” in our consolidated statements of operations. |
QUARTERLY FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) | 12 Months Ended |
Dec. 31, 2018 | |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) | |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) | NOTE W — QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following table presents our unaudited quarterly consolidated results of operations for each of the eight quarters in the two-year period ended December 31, 2018. The unaudited quarterly consolidated information has been derived from our unaudited quarterly financial statements on Forms 10-Q, which were prepared on the same basis as our audited consolidated financial statements. Amounts are computed independently each quarter, therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding. Three Months Ended March 31, June 30, September 30, December31, (dollars in thousands, except per share amounts) 2018 2018 2018 2018 Net revenues $ 233,995 $ 266,966 $ 262,946 $ 284,853 Material costs 76,356 86,516 84,805 90,340 Personnel costs 86,108 89,554 90,853 97,574 Other operating costs 31,096 30,536 30,999 31,271 General and administrative expenses 25,636 26,523 28,308 29,085 Professional accounting and legal fees 4,846 4,236 3,107 4,726 Depreciation and amortization 9,330 9,272 8,950 8,903 Impairment of intangible assets — — — 183 Income from operations 623 20,329 15,924 22,771 Interest expense, net 12,263 7,317 8,939 9,046 Loss on extinguishment of debt 16,998 — — — Non-service defined benefit plan expense 176 176 176 176 (Loss) income before income taxes (28,814) 12,836 6,809 13,549 (Benefit) provision for income taxes (6,196) (92) 2,440 9,086 Net (loss) income $ (22,618) $ 12,928 $ 4,369 $ 4,463 Other comprehensive loss: Unrealized (loss) gain on cash flow hedges, net of tax (2,290) 2,314 1,738 (4,698) Unrealized (loss) gain on defined benefit plan, net of tax (292) 26 26 694 Comprehensive (loss) income $ (25,200) $ 15,268 $ 6,133 $ 459 Basic Per Common Share Data: Basic (loss) earnings per share $ (0.62) $ 0.35 $ 0.12 $ 0.12 Weighted average shares outstanding - basic 36,498,482 36,790,401 36,856,881 36,906,938 Diluted Per Common Share Data: Diluted (loss) earnings per share $ (0.62) $ 0.35 $ 0.12 $ 0.12 Weighted average shares outstanding - diluted 36,498,482 37,404,360 37,556,594 37,721,662 Three Months Ended March 31, June 30, September 30, December 31, (dollars in thousands, except per share amounts) 2017 2017 2017 2017 Net revenues $ 233,681 $ 263,386 $ 257,966 $ 285,736 Material costs 74,405 83,657 82,345 88,816 Personnel costs 87,955 87,831 90,065 95,239 Other operating costs 32,689 31,861 33,184 32,097 General and administrative expenses 25,386 25,227 25,356 33,373 Professional accounting and legal fees 12,650 8,521 7,844 7,224 Depreciation and amortization 10,137 9,825 9,632 9,665 Impairment of intangible assets — — — 54,735 (Loss) income from operations (9,541) 16,464 9,540 (35,413) Interest expense, net 14,009 14,091 15,097 14,491 Non-service defined benefit plan expense 184 184 184 184 (Loss) income from continuing operations before income taxes (23,734) 2,189 (5,741) (50,088) (Benefit) provision for income taxes (6,000) 552 (1,580) 34,325 Net (loss) income $ (17,734) $ 1,637 $ (4,161) $ (84,413) Other comprehensive loss: Unrealized loss on DB SERP, net of tax (17) (17) (17) (195) Comprehensive (loss) income $ (17,751) $ 1,620 $ (4,178) $ (84,608) Basic Per Common Share Data: Basic (loss) earnings per share $ (0.49) $ 0.05 $ (0.11) $ (2.32) Weighted average shares outstanding - basic 36,084,630 36,286,528 36,340,089 36,410,488 Diluted Per Common Share Data: Diluted (loss) earnings per share $ (0.49) $ 0.04 $ (0.11) $ (2.32) Weighted average shares outstanding - diluted 36,084,630 36,543,740 36,340,089 36,410,488 |
ORGANIZATION AND SUMMARY OF S_2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | Principles of Consolidation Our consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying consolidated financial statements. |
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the use of estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and contingencies. Although actual results in subsequent periods may differ from these estimates, such estimates are developed based on the best information available to management and based on management’s best judgments at the time. We base our estimates on historical experience, observable trends and various other assumptions that we believe are reasonable under the circumstances. All significant assumptions and estimates underlying the amounts reported in the consolidated financial statements and accompanying notes are regularly reviewed and updated when necessary. Changes in estimates are reflected prospectively in the consolidated financial statements based upon on-going actual trends, or subsequent settlements and realizations depending on the nature and predictability of the estimates and contingencies. Interim changes in estimates related to annual operating costs are applied prospectively within annual periods. Although we believe that our estimates are reasonable, actual results could differ from these estimates. The most significant assumptions and estimates underlying these consolidated financial statements and accompanying notes involve revenue recognition and accounts receivable valuation, inventories, accounts payable and accrued liabilities (including self-insurance reserves and contingencies), impairments of long-lived assets including goodwill, income taxes, business combinations, leases and stock-based compensation. |
Reclassifications | Reclassifications We have reclassified certain amounts in the prior year consolidated financial statements to be consistent with the current year presentation. These primarily relate to classifications within the consolidated statements of operations, consolidated statements of changes in shareholders' (deficit) equity, and consolidated statements of cash flows; see “Adoption of New Accounting Standards” for additional information. |
Revenue Recognition | Revenue Recognition Effect of Adoption of ASC 606, Revenue from Contracts with Customers (“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 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 $ 68,126 $ 271 $ 68,397 Liabilities Accrued expenses and other current liabilities $ 66,308 $ 1,027 $ 67,335 Shareholders' Deficit Accumulated deficit $ (359,772) $ (756) $ (360,528) In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statement of operations and consolidated balance sheet is as follows: As of and for the year ended December 31, 2018 Proforma balance without the Effects of adoption of (in thousands) As Reported Adoption ASC 606 Consolidated Statements of Operations Net revenues $ 1,048,760 $ 4,014 $ 1,052,774 Other operating costs 123,902 4,243 128,145 Income from operations 59,647 (229) 59,418 Income from continuing operations before income taxes 4,380 (229) 4,151 Net loss (858) (229) (1,087) Comprehensive loss (3,340) (229) (3,569) Consolidated Balance Sheets Assets Deferred income taxes $ 65,635 $ (211) $ 65,424 Total assets 703,010 (211) 702,799 Liabilities Accrued expenses and other current liabilities 51,783 (798) 50,985 Total current liabilities 171,274 (798) 170,476 Total liabilities 724,934 (798) 724,136 Shareholders' deficit: Accumulated deficit (361,023) 587 (360,436) Total shareholders' deficit (21,924) 587 (21,337) The adoption of ASC 606 resulted in deferring $0.8 million of net revenue from our Patient Care segment as of December 31, 2018 and recognizing deferred revenue of $1.0 million from satisfying performance obligations from the previous period. Estimated uncollectible amounts due from self-pay patients for the year ended December 31, 2018 were $4.2 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 consolidated balance sheet. The warranty liability was $2.1 million at December 31, 2018 and $2.4 million at December 31, 2017. 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 revenue from contracts with customers in our Patient Care segment for years ended December 31, 2018, 2017, and 2016: For the Years EndedDecember 31, (in thousands) 2018 2017 2016 Patient Care Segment Medicare $ 273,833 $ 260,275 $ 256,240 Medicaid 132,938 132,707 124,339 Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) 316,243 325,639 329,331 Veterans Administration 78,328 74,435 73,931 Private Pay 56,040 58,917 56,289 Total $ 857,382 $ 851,973 $ 840,130 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 shipment, with any related services revenue deferred and recognized as the services are performed. Sales of consumables are recognized upon shipment. 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 costs section of our consolidated financial statements. The following table disaggregates revenue from contracts with customers in our Product & Services segment for the years ended December 31, 2018, 2017, and 2016: For the Years Ended December 31, (in thousands) 2018 2017 2016 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 135,995 $ 128,686 $ 127,510 Therapeutic solutions 55,383 60,110 74,414 Total $ 191,378 $ 188,796 $ 201,924 |
Material Costs | Material Costs Material costs in our Patient Care segment reflect purchases of orthotics and prosthetic componentry and other related costs in connection with the delivery of care through our clinics and other patient care operations. Material costs in our Products & Services segment reflect purchases of orthotics and prosthetic materials and other related costs in connection with the distribution of products and services to third party customers. |
Personnel Costs | Personnel Costs Personnel costs reflect salaries, benefits, incentive compensation, contract labor, and other personnel costs we incur in connection with our delivery of care through our clinics and other patient care operations, or distribution of products and services, and exclude similar costs incurred in connection with general and administrative activities. |
Other Operating Costs | Other Operating Costs Other operating costs reflect costs we incur in connection with our delivery of care through our clinics and other patient care operations or distribution of products and services. Marketing costs, including advertising, are expensed as incurred and are presented within this financial statement caption. We incurred approximately $3.8 million, $3.8 million, and $4.0 million in advertising costs during the years ended December 31, 2018, 2017, and 2016, respectively. Other costs include rent, utilities, and other occupancy costs, general office expenses, bad debt expense, and travel and clinical professional education costs, and exclude similar costs incurred in connection with general and administrative activities. |
General and Administrative Expenses | General and Administrative Expenses General and administrative expenses reflect costs we incur in the management and administration of our businesses that are not directly related to the operation of our clinics or provision of products and services. These include personnel costs and other operating costs supporting our general and administrative functions. We incurred approximately $1.5 million, $0.7 million, and $0.6 million in advertising costs during the years ended December 31, 2018, 2017, and 2016, respectively. |
Professional Accounting and Legal Fees | Professional Accounting and Legal Fees We recognize fees associated with audits of our financial statements in the fiscal period to which the audit relates. All other professional fees are generally recognized as an expense in the periods in which services are performed. Please see the “Accounts Payable and Accrued Liabilities” section for legal fees associated with legal contingencies. |
Depreciation and Amortization | Depreciation and Amortization Depreciation and amortization expenses reflect all depreciation and amortization expenses, whether incurred in connection with our delivery of care through our clinics, our distribution of products and services, or in the general management and administration of our business. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. We maintain cash balances in excess of Federal Deposit Insurance Corporation (“FDIC”) limits at certain financial institutions. We manage this credit risk by concentrating our cash balances in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions holding such deposits. With short maturities, the investments present insignificant risk of changes in value because of interest rate changes and are readily convertible to cash. Historically, no losses have been incurred due to such cash concentrations. Restricted cash balances are presented within “Other current assets” in the consolidated balance sheets. See Note H - “Other Current Assets and Other Assets” within these consolidated financial statements. |
Accounts Receivable, Net | Accounts Receivable, Net Patient Care Segment We establish allowances for accounts receivable to reduce the carrying value of such receivables to their estimated net realizable value. The Patient Care segment's accounts receivables are recorded net of unapplied cash, estimated allowances for implicit price concessions such as disallowed revenue and patient non-payments, as described in the revenue recognition accounting policy above. Both the allowance for disallowed revenue and the allowance for patient non-payments consider historical collection experience by each of the Medicare and non-Medicare (commercial insurance, Medicaid, U.S. Department of Veteran’s Affairs and Private Pay) primary payor class groupings. For each payor class grouping, liquidation analysis of historical period end receivable balances are performed to ascertain collections experience by aging category. We believe the use of historical collection experience applied to current period end receivable balances is reasonable. In the absence of an evident adverse trend, we use historical experience rates calculated using an average of four quarters of data with at least twelve months of adjudication. We believe the time periods analyzed provide sufficient time for most balances to adjudicate in the normal course of operations. We will modify the time periods analyzed when significant trends indicate that adjustments should be made. In addition, estimates are adjusted when appropriate for information available up through the issuance of the consolidated financial statements. Products & Services Segment Products & Services segment's allowance for doubtful accounts is estimated based on the analysis of the segment’s historical write-offs experience, accounts receivable aging and economic status of its customers. Accounts receivable that are deemed uncollectible are written-off to the allowance for doubtful accounts. Accounts receivable are also recorded net of an allowance for estimated sales returns. |
Inventories | Inventories Inventories are valued at the lower of estimated cost or net realizable value with cost determined on a first-in, first out (“FIFO”) basis. Provisions have also been made to reduce the carrying value of inventories for excess, obsolete, or otherwise impaired inventory on hand at period-end. The reserve for excess and obsolete inventory is $7.2 million and $6.2 million at December 31, 2018 and 2017, respectively. Patient Care Segment Substantially all of our Patient Care segment inventories are recorded through a periodic approach whereby inventory quantities are adjusted on the basis of a quarterly physical count. Segment inventories relate primarily to raw materials and work-in-process (“WIP”) at Hanger Clinics. Inventories at Hanger Clinics totaled $27.5 million and $27.7 million at December 31, 2018 and 2017, respectively, with WIP inventory representing $9.3 million and $9.0 million of the total inventory, respectively. Raw materials consist of purchased parts, components, and supplies which are used in the assembly of O&P devices for delivery to patients. In some cases, purchased parts and components are also sold directly to patients. Raw materials are valued based on recent vendor invoices, reduced by estimated vendor rebates. Such rebates are recognized as a reduction of cost of materials in the consolidated statements of operations when the related devices or components are delivered to the patient. Approximately 74% and 71% of raw materials at December 31, 2018 and 2017, respectively were purchased from our Products & Services segment. Raw material inventory was $18.2 million and $18.7 million at December 31, 2018 and 2017, respectively. WIP consists of devices which are in the process of assembly at our clinics or fabrication centers. WIP quantities were determined by the physical count of patient orders at the end of every quarter of 2018 and 2017 while the related stage of completion of each order was established by clinic personnel. We do not have an inventory costing system and as a result, the identified WIP quantities were valued on the basis of estimated raw materials, labor, and overhead costs. To estimate such costs, we develop bills of materials for certain categories of devices that we assemble and deliver to patients. Within each bill of material, we estimate (i) the typical types of component parts necessary to assemble each device; (ii) the points in the assembly process when such component parts are added; (iii) the estimated cost of such parts based on historical purchasing data; (iv) the estimated labor costs incurred at each stage of assembly; and (v) the estimated overhead costs applicable to the device. Products & Services Segment Product & Service segment inventories consist primarily of finished goods at its distribution centers as well as raw materials at fabrication facilities, and totaled $40.2 million and $41.4 million as of December 31, 2018 and 2017, respectively. Finished goods include products that are available for sale to third party customers as well as to our Patient Care segment as described above. Such inventories were determined on the basis of perpetual records and a physical count at year end. Inventories in connection with therapeutic services are valued at a weighted average cost. |
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. 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. 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. |
Derivative Financial Instruments | 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. 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. In accordance with ASC 815, “Derivatives and Hedging,” we record all derivatives in the consolidated balance sheets as either assets or liabilities measured at fair value. 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 loss net of tax and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the year ended December 31, 2018, such derivatives were used to hedge certain variable cash flows associated with existing variable-rate debt. |
Insurance Recoveries Receivable | Insurance Recoveries Receivable We incur legal and other costs with respect to a variety of issues on an ongoing basis. We record a related receivable when costs are reimbursable under applicable insurance policies, we believe it is probable such costs will be reimbursed and such reimbursements can be reasonably estimated. We record the benefit of related receivables from the insurer as a reduction of costs in the same financial statement caption in which the related loss was recognized in our consolidated statements of operations. Loss contingency reserves, which are recorded within accrued liabilities, are not reduced by estimated insurance recoveries. |
Property, Plant and Equipment, Net | Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and amortization. Equipment acquired under a capital lease is recorded at the present value of the future minimum lease payments. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the consolidated statements of operations. Depreciation is computed for financial reporting purposes using the straight-line method over the useful lives of the related assets estimated as follows: furniture and fixtures, equipment and information systems, principally five years, buildings ten to forty years, capital leases over the shorter of the useful life or lease term, and leasehold improvements over the shorter of ten years or the lease term. We record maintenance and repairs, including the cost of minor replacements, to maintenance expense. Costs of major repairs that extend the effective useful life of property are capitalized and depreciated accordingly. We capitalize the costs of obtaining or developing internal use software, including external direct costs of materials and services and directly related payroll costs. Amortization begins when the internal use software is ready for its intended use. Costs incurred during the preliminary project and post-implementation stages, as well as maintenance and training costs, are expensed as incurred. |
Business Combinations | Business Combinations We record tangible and intangible assets acquired and liabilities assumed in business combinations under the acquisition method of accounting. Acquisition consideration typically includes cash payments, the issuance of Seller Notes and in certain instances contingent consideration with payment terms based on the achievement of certain targets of the acquired business. Amounts paid for each acquisition are allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition inclusive of identifiable intangible assets. The estimated fair value of identifiable assets and liabilities, including intangibles, are based on valuations that use information and assumptions available to management. We allocate any excess purchase price over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed to goodwill. Significant management judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed, particularly acquired intangible assets, including estimated useful lives. The valuation of purchased intangible assets is based upon estimates of the future performance and discounted cash flows of the acquired business. Each asset acquired or liability assumed is measured at estimated fair value from the perspective of a market participant. Subsequent changes in the estimated fair value of contingent consideration are recognized as “General and administrative expenses” within the consolidated statements of operations. |
Goodwill and Other Intangible Assets, Net | Goodwill and Other Intangible Assets, Net Goodwill represents the excess of the purchase price over the estimated fair value of net identifiable assets acquired and liabilities assumed from purchased businesses. We assess goodwill for impairment annually during the fourth quarter, 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 amount. We have the option to first assess qualitative factors for a reporting unit to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If we choose to bypass this qualitative assessment or alternatively determine that a quantitative goodwill impairment test is required, our annual goodwill impairment test is performed by comparing the estimated fair value of a reporting unit with its carrying amount (including attributed goodwill). We measure the fair value of the reporting units using a combination of income and market approaches. Any impairment would be recognized by a charge to income from operations and a reduction in the carrying value of the goodwill. On October 1, 2018, we performed a qualitative assessment of the Patient Care reporting unit, which resulted in no indicators of goodwill impairment. We apply judgment in determining the fair value of our reporting units and the implied fair value of goodwill which is dependent on significant assumptions and estimates regarding expected future cash flows, terminal value, changes in working capital requirements, and discount rates. For the years ended December 31, 2017 and 2016, we recorded impairments of our goodwill totaling $53.3 million and $86.0 million, respectively. We did not have any goodwill impairment during 2018. For the years ended December 31, 2018, 2017, and 2016, we recorded impairments of our indefinite-lived trade name totaling $0.2 million, $1.4 million, and $0.2 million, respectively. See Note G - “Goodwill and Other Intangible Assets” to our consolidated financial statements in this Annual Report on Form 10-K for additional information regarding these charges. As described, we apply judgment in the selection of key assumptions used in the goodwill impairment test and as part of our evaluation of intangible assets tested annually and at interim testing dates as necessary. If these assumptions differ from actual, we could incur additional impairment charges and those charges could be material. |
Long-Lived Asset Impairment | Long-Lived Asset Impairment We evaluate the carrying value of long-lived assets to be held and used for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The carrying value of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. We measure impairment as the amount by which the carrying value exceeds the estimated fair value. Estimated fair value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Long-lived assets to be disposed of by sale are classified as held for sale when the applicable criteria are met, and recognized within the consolidated balance sheet at the lower of carrying value or fair value less cost to sell. Depreciation on such assets is ceased. |
Long-Term Debt | Long-Term Debt Long-term debt is recorded on our consolidated balance sheets at amortized cost, net of discounts and issuance expenses. Debt issuance costs incurred in connection with long-term debt are amortized utilizing the effective interest method, through the maturity of the related debt instrument. Discounts and costs incurred pertaining to the long-term debt are classified as a reduction of debt, and the costs incurred to obtain the revolving credit facility are recorded as deferred charges and are classified within other assets in the consolidated balance sheets. Amortization of these costs is included within “Interest expense, net” in the consolidated statements of operations. |
Accounts Payable and Accrued Liabilities | Accounts Payable and Accrued Liabilities Accounts payable relating to goods or services received is based on various factors including payments made subsequent to period end, vendor invoice dates, shipping terms confirmed by certain vendors or other third party documentation. Accrued liabilities are recorded based on estimates of services received or amounts expected to be paid to third parties. Accrued legal costs for legal contingencies are recorded when they are probable and estimable. |
Self-Insurance Reserves | Self-Insurance Reserves We maintain insurance programs which include employee health insurance, workers' compensation, and product, professional and general liability. Our employee health insurance program is self-funded, with a stop-loss coverage on claims that exceed $0.5 million for any individually covered claim. We are responsible for workers' compensation, product, professional and general liability claims up to $0.5 million per individual incident. The insurance and self-insurance accruals reflect the estimate of incurred but not reported losses, historical claims experience and expected costs to settle unpaid claims and are undiscounted. We record amounts due from insurance policies in “Other assets” while recording the estimated liability in “Accrued expenses and other current liabilities” in our consolidated balance sheets. |
Leases | Leases We lease a majority of our patient care clinics under lease arrangements, certain of which contain renewal options, rent escalation clauses, and/or landlord incentives. Rent expense for noncancellable leases with scheduled rent increases and/or landlord incentives is recognized on a straight-line basis over the lease term, including any applicable rent holidays, beginning on the earlier of the lease commencement date or the date we take control of the leased space. We have certain building leases that are accounted for as financing transactions. In these instances, pursuant to ASC 840-40-55, The Effect of Lessee Involvement in Asset Construction, we are the deemed owner of the property during the construction phase and the associated building assets and financing obligations are recognized on our consolidated balance sheet. Subsequent to construction, the arrangement is evaluated in accordance with ASC 840-40-25 to determine whether the arrangement qualifies as a sale leaseback. Sale leasebacks of real estate require an analysis to identify indicators of continuing involvement and other factors. If no indicators of continuing involvement are found, the lease is considered to have passed the sales-leaseback criteria and both the asset and the related financing obligation are derecognized. These leases are then assessed for classification at lease inception and reported in accordance with ASC 840. If indicators of continuing involvement are present, these transactions do not qualify for sale accounting and are accounted for as a failed sale-leaseback. In accordance with ASC 840-40, Leases - Sale-Leaseback Transactions, the buildings and related assets, as well as their associated financing obligations, continue to be reflected in our consolidated balance sheet, with the assets depreciated over their remaining useful lives. Payments required under the arrangement are recognized as reductions of the financing obligation and interest expense. At the end of the lease term, the corresponding financing obligation and the remaining net book value of the building are derecognized. When applicable, any associated gain is recognized within “Other operating costs” in our consolidated statements of operations. |
Income Taxes | Income Taxes We recognize deferred tax assets and liabilities for net operating loss and other credit carry forwards and the expected tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts using enacted tax rates in effect for the year the differences are expected to reverse. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns, and future profitability by tax jurisdiction. We provide a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have experienced losses from 2014 to 2017 due to impairments of our intangible assets, increased professional fees in relation to our restatement and related remediation procedures for identified material weaknesses, and increased interest and bank fees. These losses have necessitated that we evaluate the sufficiency of our valuation allowance. We are in a taxable income position in 2018 and are able to utilize net operating loss. We have $10.7 million and $24.2 million of U.S. federal and $166.0 million and $195.0 million of state net operating loss carryforwards available at December 31, 2018 and 2017, respectively. These carryforwards will be used to offset future income but may be limited by the change in ownership rules in Section 382 of the Internal Revenue Code. These net operating loss carryforwards will expire in varying amounts between 2018 and 2038. We have $65.6 million of net deferred tax assets as of December 31, 2018. We expect to generate income before taxes in future periods at a level that would allow for the full realization of the majority of our net deferred tax assets. We continue to maintain a valuation allowance of approximately $8.9 million as of December 31, 2018, against net deferred tax assets, primarily related to various state jurisdictions. We evaluate our deferred tax assets quarterly to determine whether adjustments to the valuation allowance are appropriate in light of changes in facts or circumstances, such as changes in expected future pre-tax earnings, tax law, interactions with taxing authorities, and developments in case law. Our material assumptions are our forecasts of future pre-tax earnings and the nature and timing of future deductions and income represented by the deferred tax assets and liabilities, all of which involve the exercise of significant judgment. Although we believe our estimates are reasonable, the ultimate determination of the appropriate amount of valuation allowance involves significant judgment. If expected future taxable income is not achieved a larger valuation allowance against our deferred tax assets could be required and could be significant, which could materially increase our expenses in the period the allowance is recognized and materially adversely affect our results of operations and statement of financial condition. We believe that our tax positions are consistent with applicable tax law, but certain positions may be challenged by taxing authorities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, we are subject to periodic audits and examinations by the Internal Revenue Service and other state and local taxing authorities. In these cases, we record the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. We record the largest amount of tax benefit that is greater than fifty percent likely of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. If not paid, the liability for uncertain tax positions is reversed as a reduction of income tax expense at the earlier of the period when the position is effectively settled or when the statute of limitations has expired. Although we believe that our estimates are reasonable, actual results could differ from these estimates. Interest and penalties, when applicable, are recorded within the income tax provision. The Tax Cuts and Jobs Act (the “Tax Act”) reduced the U.S. federal corporate tax rate from 35% to 21% beginning in 2018. Based on a reduced U.S. federal corporate tax rate of 21% from the Tax Act, we re-measured deferred tax assets and liabilities at the tax rates at which they are expected to reverse in the future in 2017. For the items for which we were able to determine a reasonable estimate, in 2017, we recognized a provisional amount, in accordance with Staff Accounting Bulletin 118, of approximately $35 million of tax expense related to re-measurement of our deferred tax assets and liabilities, which was recorded as a component of income tax expense from continuing operations resulting in the above impact to our 2018 effective income tax rate. As of the fourth quarter of 2018, we finalized the provisional amounts for all the enactment-dates income tax effects of the Tax Act. |
Interest Expense, Net | Interest Expense, Net We record interest expense net of interest income. In our consolidated statements of operations, interest income was $ 0.1 million in each of the years ended December 31, 2018, 2017, and 2016. |
Stock-Based Compensation | Stock‑Based Compensation We primarily issue restricted common stock units under one active stock-based compensation plan. Shares of common stock issued under this plan are issued from our authorized and unissued shares. We measure and recognize compensation expense, net of actual forfeitures, for all stock-based payments at fair value. Prior to the adoption of ASU 2016-09, compensation expense was measured and recognized net of estimated forfeitures. Our outstanding awards are comprised of restricted stock units, performance-based restricted stock units, and stock options. The restricted stock units are subject to a service condition or vesting period ranging from one to four years. The performance-based restricted stock units include performance or market and service conditions. The performance conditions are primarily based on annual earnings per share targets and the market condition utilized in the Special Equity Plan is based on the three year absolute Common Stock price compounded annual growth rate (“CAGR”). The fair value of each employee stock option award is estimated on the date of grant using the Black-Scholes option-pricing model. The expected dividend yield is derived from the annual dividend rate on the date of grant. The expected stock volatility is based on an assessment of our historical weekly stock prices as well as implied volatility. The risk-free interest rate is based on U.S. government zero coupon bonds with maturities similar to the expected holding period. The expected holding period was determined by examining historical and projected post-vesting exercise behavior activity. Forfeitures are recognized as they occur. Compensation expense associated with restricted stock units and options is recognized on a straight-line basis over the requisite service period. Compensation expense associated with performance-based restricted stock units is primarily recognized on a graded vesting over the requisite service period when the performance condition is probable of being achieved. The compensation expense associated with the performance-based restricted stock subject to market conditions is recognized on a straight-line basis over the requisite service period. |
Segment Information | Segment Information We have two segments, Patient Care and Products & Services. Except for the segment specific policies described above, the segments follow the same accounting policies as followed in the consolidated financial statements. We apply the “management approach” to disclosure of segment information. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of our reportable segments. The description of our reportable segments and the disclosure of segment information are presented in Note S - “Segment and Related Information” to these consolidated financial statements. Intersegment revenue represents sales of O&P components from our Products & Services segment to our Patient Care segment and are recorded at prices that approximate material cost plus overhead. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adoption of New Accounting Standards During 2018 we adopted the following: 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 - see “Revenue Recognition” above for additional information. · 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. As a result of adoption, there was no material impact on our consolidated financial statements. · ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash and 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 on January 1, 2018: · 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 consolidated statements of cash flows. Restricted cash balances are included in “Other Current Assets” in our consolidated balance sheets - see Note H - “Other Current Assets and Other Assets.” · 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 on January 1, 2018, there was no impact on our consolidated financial statements and we have applied the guidance to subsequent acquisitions. · 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 on January 1, 2018 there was no material impact on our 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. · 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 defined benefit plan expense” of $0.7 million, $0.7 million, and $0.8 million for the years ended December 31, 2018, 2017, and 2016, respectively. Such reclassifications did not have a material effect on our consolidated statements of operations. · ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, and related clarifying standards. 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. The adoption did not have a material impact on our consolidated financial statements or disclosures. · ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , was issued on February 14, 2018 and permits a reclassification of the disproportionate income tax effects of the Tax Act on items within Accumulated Other Comprehensive Income (“AOCI”) to retained earnings. The standard is effective beginning January 1, 2019, with early adoption permitted. We elected to reclassify the stranded income tax effects from AOCI to retained earnings in the fourth quarter of 2018 in accordance with ASU 2018-02. As a result of the election, we recorded a decrease in AOCI in the amount of $0.4 million and an increase in retained earnings on the balance sheet for the period ended December 31, 2018. There was no other income tax effect related to the application of the Tax Act that was reclassified from AOCI to retained earnings, and no income tax effect other than the effect of the changes in US federal corporate income tax rate on the gross deferred tax amounts. New Accounting Standards Issued, Not Yet Adopted In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 220) . The ASU is intended to improve the recognition and measurement of financial instruments. The new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures. In August 2018, the FASB issued ASU No. 2018-14 , Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715) . This ASU modifies the disclosure requirements for defined benefit and other postretirement plans. This ASU eliminates certain disclosures associated with accumulated other comprehensive income, plan assets, related parties, and the effects of interest rate basis point changes on assumed health care costs; while other disclosures have been added to address significant gains and losses related to changes in benefit obligations. This ASU also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. The amendments in this ASU are effective for fiscal years ending after December 15, 2020 and for interim periods therein with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures. In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-13, Fair Value Measurement (Topic 820), which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income. The ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” (ASU 2018-10), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard, and ASU No. 2018-11, “Leases (Topic 842) - Targeted Improvements” (ASU 2018-11), which addresses implementation issues related to the new lease standard. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related clarifying standards, replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This new standard is effective for us beginning December 15, 2019, with early adoption permitted. We are currently evaluating the effects that the adoption of this guidance will have on our consolidated financial statements and the related disclosures. In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, and related clarifying standards, which requires lessees to recognize lease right-of-use assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The standard was effective for us as of January 1, 2019. Our adoption will use the modified retrospective method that allows us to apply the standard as of the adoption date and record a cumulative-effect adjustment to the opening balance of Accumulated deficit, which we believe will not be material. We have elected the package of practical expedients permitted under the transition guidance, which among other things, allows us to carryforward the historical lease classification. We have elected to keep leases with an initial term of 12 months or less off of the balance sheet and will continue to recognize those lease payments in the consolidated statements of income on a straight-line basis over the lease term. We have also elected the practical expedient to not separate lease and non-lease components for medical equipment and real estate. In addition, the new lease standard changes the current build-to-suit lease accounting guidance and is expected to result in the derecognition of our build-to-suit assets and liabilities and subsequent recognition of operating leases. We estimate the adoption of this standard will result in recognition of lease liabilities and right-of-use assets of approximately $115 to $125 million on our consolidated balance sheets as of January 1, 2019. We do not expect the standard will materially affect our consolidated net operations, cash flows, or debt covenant compliance under our current debt agreements. |
ORGANIZATION AND SUMMARY OF S_3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 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 | Upon adoption of ASC 606, the cumulative effect of the changes made to our 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 $ 68,126 $ 271 $ 68,397 Liabilities Accrued expenses and other current liabilities $ 66,308 $ 1,027 $ 67,335 Shareholders' Deficit Accumulated deficit $ (359,772) $ (756) $ (360,528) In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated statement of operations and consolidated balance sheet is as follows: As of and for the year ended December 31, 2018 Proforma balance without the Effects of adoption of (in thousands) As Reported Adoption ASC 606 Consolidated Statements of Operations Net revenues $ 1,048,760 $ 4,014 $ 1,052,774 Other operating costs 123,902 4,243 128,145 Income from operations 59,647 (229) 59,418 Income from continuing operations before income taxes 4,380 (229) 4,151 Net loss (858) (229) (1,087) Comprehensive loss (3,340) (229) (3,569) Consolidated Balance Sheets Assets Deferred income taxes $ 65,635 $ (211) $ 65,424 Total assets 703,010 (211) 702,799 Liabilities Accrued expenses and other current liabilities 51,783 (798) 50,985 Total current liabilities 171,274 (798) 170,476 Total liabilities 724,934 (798) 724,136 Shareholders' deficit: Accumulated deficit (361,023) 587 (360,436) Total shareholders' deficit (21,924) 587 (21,337) |
Patient Care | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregates of revenue from contracts with customers | For the Years EndedDecember 31, (in thousands) 2018 2017 2016 Patient Care Segment Medicare $ 273,833 $ 260,275 $ 256,240 Medicaid 132,938 132,707 124,339 Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) 316,243 325,639 329,331 Veterans Administration 78,328 74,435 73,931 Private Pay 56,040 58,917 56,289 Total $ 857,382 $ 851,973 $ 840,130 |
Products & Services | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregates of revenue from contracts with customers | For the Years Ended December 31, (in thousands) 2018 2017 2016 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 135,995 $ 128,686 $ 127,510 Therapeutic solutions 55,383 60,110 74,414 Total $ 191,378 $ 188,796 $ 201,924 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
EARNINGS PER SHARE | |
Schedule of reconciliation of numerators and denominators used to calculate basic and diluted net (loss) income per share | For the Years Ended December 31, (in thousands, except per share data) 2018 2017 2016 Loss from continuing operations applicable to common shareholders $ (858) $ (104,671) $ (107,406) Income from discontinued operations, net of income taxes — — 935 Net loss applicable to common shareholders $ (858) $ (104,671) $ (106,471) Weighted average shares outstanding - basic 36,764,551 36,270,920 35,933,222 Effect of potentially dilutive restricted stock units and options (1) — — — Weighted average shares outstanding - diluted 36,764,551 36,270,920 35,933,222 Basic and diluted: Loss from continuing operations per share applicable to common stock $ (0.02) $ (2.89) $ (2.99) Income from discontinued operations per share applicable to common stock — — 0.03 Net loss per share applicable to common shareholders $ (0.02) $ (2.89) $ (2.96) (1) As we are recognizing a loss for the years ended December 31, 2018, 2017, and 2016, shares used to compute diluted per share amounts excludes 709,309 shares, 295,718 shares, and 145,497 shares, respectively, 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) | 12 Months Ended |
Dec. 31, 2018 | |
ACCOUNTS RECEIVABLE, NET | |
Schedule of accounts receivable allowances | As of December 31, 2018 As of December 31, 2017 Products & Products & (in thousands) Patient Care Services Consolidated Patient Care Services Consolidated Accounts receivable, before allowances $ 182,338 $ 24,542 $ 206,880 $ 193,150 $ 23,494 $ 216,644 Allowances for estimated implicit price concessions arising from: Payor disallowances (53,378) — (53,378) (56,233) — (56,233) Patient non-payments (7,244) — (7,244) — — — Accounts receivable, gross 121,716 24,542 146,258 136,917 23,494 160,411 Allowance for doubtful accounts — (2,272) (2,272) (9,894) (4,171) (14,065) Accounts receivable, net $ 121,716 $ 22,270 $ 143,986 $ 127,023 $ 19,323 $ 146,346 |
Schedule of activities by year for the allowance for disallowed revenue and the allowance for doubtful accounts | Payor Disallowances Allowance for and Patient Non- Doubtful (in thousands) Payments Accounts Balance at December 31, 2015 $ 81,306 $ 15,027 Additions 48,961 13,727 Reductions (69,130) (13,233) Balance at December 31, 2016 61,137 15,521 Additions 36,962 9,423 Reductions (41,866) (10,879) Balance at December 31, 2017 56,233 14,065 Cumulative Effect of ASC 606 9,894 (9,894) Additions 42,653 630 Reductions (48,158) (1,155) Recoveries — (1,374) Balance at December 31, 2018 $ 60,622 $ 2,272 |
Schedule of net accounts receivable by major payor classification | December 31, 2018 0-60 61-120 121-180 Over 180 (in thousands) Days Days Days Days Total Patient Care Commercial insurance (excluding Medicare and Medicaid Managed Care) $ 44,918 $ 11,495 $ 6,467 $ 17,172 $ 80,052 Private pay 951 437 343 483 2,214 Medicaid 12,690 2,964 1,855 6,629 24,138 VA 4,786 859 526 784 6,955 Non-Medicare 63,345 15,755 9,191 25,068 113,359 Medicare 32,339 5,483 3,002 28,155 68,979 Products & Services 14,768 6,507 1,641 1,626 24,542 Accounts receivable, before allowances 110,452 27,745 13,834 54,849 206,880 Allowance for disallowed revenue and patient non-payment (60,622) Allowance for doubtful accounts (2,272) Accounts receivable, net $ 143,986 December 31, 2017 0-60 61-120 121-180 Over 180 (in thousands) Days Days Days Days Total Patient Care Commercial insurance (excluding Medicare and Medicaid Managed Care) $ 50,310 $ 11,649 $ 6,302 $ 15,279 $ 83,540 Private pay 880 447 381 1,311 3,019 Medicaid 13,785 3,561 1,832 5,684 24,862 VA 4,578 1,193 552 694 7,017 Non-Medicare 69,553 16,850 9,067 22,968 118,438 Medicare 34,197 5,725 3,396 31,394 74,712 Products & Services 14,316 5,075 1,219 2,884 23,494 Accounts receivable, before allowances 118,066 27,650 13,682 57,246 216,644 Allowance for disallowed revenue (56,233) Allowance for doubtful accounts (14,065) Accounts receivable, net $ 146,346 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INVENTORIES | |
Schedule of inventories | As of December 31, (in thousands) 2018 2017 Raw materials $ 19,632 $ 19,929 Work in process 9,278 8,996 Finished goods 38,780 40,213 Total inventories $ 67,690 $ 69,138 |
PROPERTY PLANT AND EQUIPMENT,_2
PROPERTY PLANT AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY PLANT AND EQUIPMENT, NET | |
Schedule of property, plant and equipment, net | As of December 31, (in thousands) 2018 2017 Land $ 644 $ 644 Buildings 24,558 28,180 Furniture and fixtures 13,121 12,968 Machinery and equipment 27,452 26,838 Equipment leased to third parties under operating leases 30,093 31,100 Leasehold improvements 111,247 100,999 Computers and software 69,173 65,455 Total property, plant, and equipment, gross 276,288 266,184 Less: accumulated depreciation and amortization (186,799) (172,569) Total property, plant, and equipment, net $ 89,489 $ 93,615 |
Schedule of investment in equipment leased to third parties under operating leases | As of December 31, (in thousands) 2018 2017 Program equipment $ 30,093 $ 31,100 Less: Accumulated depreciation (14,712) (19,954) Net book value $ 15,381 $ 11,146 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ACQUISITIONS | |
Summary of assets acquired and liabilities assumed | For The Year Ended December 31, (in thousands) 2018 Cash paid, net of cash acquired $ 1,978 Issuance of seller notes 1,120 Aggregate purchase price 3,098 Net accounts receivable 256 Inventories 302 Intangible assets, excluding goodwill 474 Other assets 90 Accounts payable and accrued expenses (59) Other liabilities assumed (364) Net assets acquired 699 Goodwill $ 2,399 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of goodwill allocated to the Company's reportable segments | Patient Care Products & Services Consolidated Goodwill, Accum. Goodwill, Goodwill, Accum. Goodwill, Goodwill, Accum. Goodwill, (in thousands) Gross Impairment Net Gross Impairment Net Gross Impairment Net Balance at December 31, 2016 $ 625,011 $ (428,668) $ 196,343 $ 139,299 $ (85,964) $ $ $ (514,632) $ 249,678 Goodwill impairment — — — — (53,335) (53,335) — (53,335) Balance at December 31, 2017 625,011 (428,668) 196,343 139,299 — (567,967) 196,343 Additions from acquisitions — 2,399 — — — — 2,399 Balance at December 31, 2018 $ 627,410 $ (428,668) $ 198,742 $ 139,299 $ (139,299) $ — $ 766,709 $ (567,967) $ 198,742 |
Schedule of balances related to intangible assets | December 31, 2018 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 26,036 $ (19,051) $ — $ 6,985 Trade name 255 (125) — 130 Patents and other intangibles 9,391 (5,145) — 4,246 Definite-lived intangible assets 35,682 (24,321) — 11,361 Indefinite life - trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 44,752 $ (24,321) $ (4,953) $ 15,478 December 31, 2017 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 36,439 $ (24,267) $ — $ 12,172 Trade name 462 (302) — 160 Patents and other intangibles 15,358 (10,050) — 5,308 Definite-lived intangible assets 52,259 (34,619) — 17,640 Indefinite life - trade name 9,070 — (4,770) 4,300 Total other intangible assets $ 61,329 $ (34,619) $ (4,770) $ 21,940 |
Schedule of estimated aggregate amortization expense for definite lived intangible assets | (in thousands) December 31, 2019 $ 3,895 2020 3,598 2021 1,016 2022 944 2023 804 Thereafter 1,104 Total $ 11,361 |
OTHER CURRENT ASSETS AND OTHE_2
OTHER CURRENT ASSETS AND OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OTHER CURRENT ASSETS AND OTHER ASSETS | |
Schedule of other current assets | As of December 31, 2018 (in thousands) 2018 2017 Non-trade receivables $ 7,848 $ 7,668 Prepaid rent 4,442 4,248 Prepaid maintenance 3,330 3,134 Restricted cash — 3,271 Prepaid other 1,101 1,436 Prepaid purchase orders 998 99 Prepaid education and training 597 582 Prepaid insurance 258 271 Other 157 179 Total other current assets $ 18,731 $ 20,888 |
Schedule of other assets | As of December 31, (in thousands) 2018 2017 Cash surrender value of company owned life insurance $ 2,918 $ 2,340 Non-trade receivables 1,904 2,407 Deposits 1,698 2,193 Other 1,246 2,500 Total other assets $ 7,766 $ 9,440 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | |
Schedule of accrued expenses and other current liabilities | As of December 31, (in thousands) 2018 2017 Patient prepayments, deposits and refunds payable $ 24,563 $ 30,194 Insurance and self-insurance accruals 8,886 8,901 Accrued sales taxes and other taxes 6,810 6,335 Accrued professional fees 3,751 11,612 Derivative liability 724 — Accrued interest payable 332 845 Other current liabilities 6,717 8,421 Total $ 51,783 $ 66,308 |
Schedule of other liabilities | As of December 31, (in thousands) 2018 2017 Supplemental executive retirement plan obligations $ 20,195 $ 21,842 Long-term insurance accruals 8,713 9,531 Deferred tenant improvement allowances 8,570 7,361 Unrecognized tax benefits, and related interest and penalties 5,458 5,219 Deferred rent 4,455 4,909 Derivative liability 3,134 — Other 1,045 1,391 Total $ 51,570 $ 50,253 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
Schedule of components of provision (benefit) for income taxes | Years Ended December 31, (in thousands) 2018 2017 2016 Current: Federal $ 669 $ 541 $ (18,812) State 1,117 574 694 Total current 1,786 1,115 (18,118) Deferred: Federal 1,497 28,905 3,008 State 1,955 (2,723) (800) Total deferred 3,452 26,182 2,208 Provision (benefit) for income taxes from continuing operations $ 5,238 $ 27,297 $ (15,910) Income tax provision (benefit) attributable to discontinued operations $ — $ — $ 490 |
Schedule of reconciliation of the federal statutory tax rate to our effective tax rate applicable to continuing operations | Years Ended December 31, 2018 2017 2016 Federal statutory tax rate 21.0 % 35.0 % 35.0 % State and local income taxes 26.6 % 0.9 % 0.5 % Change in valuation allowance 9.5 % (0.7) % — % Federal statutory tax rate change effect on deferred balance — % (45.0) % — % State tax rate change effect on deferred balance 27.7 % (0.2) % (0.1) % Change in uncertain tax positions 5.5 % (0.3) % 0.9 % Goodwill impairment — % (21.1) % (22.3) % Permanent Items 27.9 % (2.7) % (0.3) % Tax audit adjustments 8.7 % — % — % Tax credits (5.6) % 0.1 % — % Other (1.7) % (1.3) % (0.8) % Tax provision 119.6 % (35.3) % 12.9 % |
Schedule of significant components of the net deferred income tax asset | As of December 31, (in thousands) 2018 2017 Deferred tax liabilities: Goodwill $ 5,821 $ 3,883 Intangible — 4 Prepaid expenses 1,030 1,029 Sec. 481(a) adjustments — 56 6,851 4,972 Deferred tax assets: Deferred benefit plan compensation 6,269 5,786 Provision for doubtful accounts and implicit price concessions 16,529 18,243 Property, plant and equipment 10,829 12,216 Net operating loss carryforwards 10,975 15,191 Accrued expenses 15,352 17,974 Intangibles 1,063 — Inventory reserves 2,710 2,123 Stock-based compensation 3,902 3,972 Capital leases 150 210 Deferred rent 1,136 1,265 Refund liabilities 2,517 2,895 Interest on seller notes 1,029 1,010 Interest expense 7,798 — Other 1,157 967 81,416 81,852 Valuation allowance (8,930) (8,754) 72,486 73,098 Net deferred tax asset $ 65,635 $ 68,126 |
Schedule of activity in the valuation allowance | (in thousands) Balance at Balance at End of Year Beginning of Year Acquisitions Provision Released Year 2018 $ 8,754 $ — $ 204 $ 28 $ 8,930 2017 $ 6,895 $ — $ 2,306 $ 447 $ 8,754 2016 $ 6,853 $ — $ 377 $ 335 $ 6,895 |
Summary of reconciliation of liability for unrecognized tax benefits | (in thousands) 2018 2017 2016 Unrecognized tax benefits, at beginning of the year $ 4,860 $ 4,664 $ 7,567 Additions for tax positions related to the current year 257 466 456 Additions for tax positions of prior years — — — Decrease related to prior year positions (352) (270) (409) Decrease for lapse of applicable statute of limitations — — (2,950) Unrecognized tax benefits, at end of the year $ 4,765 $ 4,860 $ 4,664 |
EMPLOYEE BENEFITS (Tables)
EMPLOYEE BENEFITS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
EMPLOYEE BENEFITS | |
Schedule of Change in Benefit Obligation | Change in Benefit Obligation (in thousands) Benefit obligation as of December 31, 2015 $ 21,885 Service cost 390 Interest cost 740 Payments (1,847) Actuarial loss 136 Benefit obligation as of December 31, 2016 21,304 Service cost 340 Interest cost 711 Payments (1,913) Actuarial loss 351 Benefit obligation at December 31, 2017 20,793 Service cost 367 Interest cost 600 Payments (1,913) Actuarial gain (920) Benefit obligation as of December 31, 2018 $ 18,927 |
Schedule of funded status of the DB SERP's net benefit obligation | December 31, (in thousands) 2018 2017 Unfunded status $ 16,740 $ 20,793 Unamortized net (gain) loss 2,187 — Net amount recognized $ 18,927 $ 20,793 |
Schedule of Amounts Recognized in the Consolidated Balance Sheets | December 31, (in thousands) 2018 2017 Current accrued expenses and other current liabilities $ 1,913 $ 1,913 Non-current other liabilities 17,014 18,880 Total accrued liabilities $ 18,927 $ 20,793 |
Schedule of weighted average assumptions were used to determine the benefit obligation | 2018 2017 2016 Discount rate 4.0 % 3.3 % 3.5 % Average rate of increase in compensation 3.0 % 3.0 % 3.0 % |
Schedule of future payments under the Plan | (in thousands) 2019 $ 1,913 2020 1,913 2021 1,913 2022 1,913 2023 1,913 Thereafter 9,362 $ 18,927 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
LEASES | |
Schedule of future minimum rental payments, by year and in the aggregate, under operating and financing obligations with terms of one year or more | Operating Capital (in thousands) Leases Leases 2019 $ 39,378 $ 249 2020 29,641 175 2021 21,303 109 2022 14,479 28 2023 9,193 — Thereafter 10,008 — $ 124,002 $ 561 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
LONG-TERM DEBT | |
Schedule of long-term debt | As of December 31, As of December 31, (in thousands) 2018 2017 Credit Agreement, dated March 6, 2018 Revolving credit facility $ — $ — Term Loan B 501,213 — Prior Credit Agreement, dated August 1, 2016 Term Loan B — 280,000 Prior Credit Agreement, dated June 17, 2013 Revolving credit facility — 5,000 Term loan — 151,875 Seller notes 4,506 5,912 Financing leases and other 14,361 18,169 Total debt before unamortized discount and debt issuance costs 520,080 460,956 Unamortized discount and debt issuance costs, net (9,407) (10,692) Total debt 510,673 $ 450,264 Current portion of long-term debt Long-term debt $ $ |
Schedule of maturities of debt | (in thousands) 2019 $ 8,678 2020 8,517 2021 6,719 2022 6,324 2023 6,456 Thereafter 483,386 Total debt before unamortized discount and debt issuance costs, net 520,080 Unamortized discount and debt issuance costs, net (9,407) Total debt $ 510,673 |
Schedule of aggregate contractual payments associated with the financing leases and other obligations | (in thousands) 2019 $ 3,134 2020 2,764 2021 2,775 2022 2,492 2023 2,425 Thereafter 12,005 Less: amount representing interest (11,234) Total $ 14,361 |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of activity of cash flow hedges included in accumulated other comprehensive loss | (in thousands) Cash Flow Hedges Balance as of January 1, 2018 $ — Unrealized loss recognized in other comprehensive loss, net of tax 4,838 Reclassification to interest expense, net of tax (1,902) Balance as of December 31, 2018 $ 2,936 |
Schedule of fair value of derivative liabilities within the consolidated balance sheets | As of December 31, 2018 (in thousands) Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities — 724 Other liabilities — 3,134 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 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- Awards Based Awards Director Awards Weighted Weighted Weighted Average Average Average Grant Date Grant Date Grant Date Units Fair Value Units Fair Value Units Fair Value Nonvested at December 31, 2016 1,066,598 $ 16.30 125,729 $ 26.11 71,465 $ 6.72 Granted 555,280 13.74 512,458 17.21 98,406 12.66 Vested (363,834) 19.27 (5,551) 29.66 (71,465) 6.72 Forfeited (75,005) 14.58 — — — — Nonvested at December 31, 2017 1,183,039 14.30 632,636 18.87 98,406 12.66 Granted 569,571 15.70 204,181 15.76 61,376 18.25 Vested (422,884) 16.07 (199,395) 22.16 (98,406) 12.66 Forfeited (121,098) 13.02 (75,750) 18.06 — — Nonvested at December 31, 2018 1,208,628 $ 14.47 561,672 $ 16.68 61,376 $ 18.25 |
Summary of option activity and weighted average exercise prices | Weighted Average Remaining Weighted Average Aggregate Contractual Term Shares Exercise Price Intrinsic Value (Years) Outstanding at December 31, 2016 — $ — $ — Granted 798,020 12.77 2,378,100 9.4 Terminated — — Exercised — — Outstanding at December 31, 2017 798,020 12.77 2,378,100 Granted — — Terminated (111,203) 12.77 Exercised (4,948) 12.77 Outstanding at December 31, 2018 681,869 $ 12.77 $ 4,213,950 8.4 |
SEGMENT AND RELATED INFORMATI_2
SEGMENT AND RELATED INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
SEGMENT AND RELATED INFORMATION | |
Summary of financial information concerning the Company's reporting segments | Patient Care Products & Services For the Year Ended December 31, For the Year Ended December 31, (in thousands) 2018 2017 2016 2018 2017 2016 Net revenue Third party $ 857,382 $ 851,973 $ 840,130 $ 191,378 $ 188,796 $ 201,924 Intersegments — — — 192,096 178,768 175,539 Total net revenue 857,382 851,973 840,130 383,474 367,564 377,463 Material costs Third party suppliers 234,409 228,091 230,957 103,608 101,132 101,114 Intersegments 23,792 23,808 25,055 168,304 154,960 150,484 Total material costs 258,201 251,899 256,012 271,912 256,092 251,598 Personnel expenses 312,736 312,695 315,892 51,353 48,395 47,645 Other expenses 140,527 143,598 150,604 24,306 25,855 32,228 Depreciation & amortization 19,113 21,363 24,873 10,197 10,163 11,600 Impairment of intangible assets — — — 183 54,735 86,164 Segment income (loss) from operations $ 126,805 $ 122,418 $ 92,749 $ 25,523 $ (27,676) $ (51,772) Purchase of property, plant and equipment $ 12,781 $ 8,163 $ 14,581 $ 1,890 $ 2,153 $ 820 |
Schedule of reconciliation of reportable segments | A reconciliation of the total of the reportable segments' income (loss) from operations to consolidated loss from operations is as follows: (in thousands) 2018 2017 2016 Income (loss) from operations Patient Care $ 126,805 $ 122,418 $ 92,749 Products & Services 25,523 (27,676) (51,772) Corporate & other (92,681) (113,692) (112,277) Consolidated income (loss) from operations 59,647 (18,950) (71,300) Interest expense, net 37,566 57,688 45,199 Loss on extinguishment of debt 16,998 — 6,031 Non-service defined benefit plan expense 703 736 786 Income (loss) from continuing operations before income taxes 4,380 (77,374) (123,316) Provision (benefit) for income taxes 5,238 27,297 (15,910) Consolidated loss from continuing operations $ (858) $ (104,671) $ (107,406) A reconciliation of the reportable segment net revenue to consolidated net revenue is as follows: (in thousands) 2018 2017 2016 Net Revenue Patient Care $ 857,382 $ 851,973 $ 840,130 Products & Services 383,474 367,564 377,463 Corporate & other — — — Consolidating adjustments (192,096) (178,768) (175,539) Consolidated net revenue $ 1,048,760 $ 1,040,769 $ 1,042,054 A reconciliation of the reportable segment material costs to consolidated material costs is as follows: (in thousands) 2018 2017 2016 Material costs Patient Care $ 258,201 $ 251,899 $ 256,012 Products & Services 271,912 256,092 251,598 Corporate & other — — — Consolidating adjustments (192,096) (178,768) (175,539) Consolidated material costs $ 338,017 $ 329,223 $ 332,071 A reconciliation of the reportable segment purchase of property, plant and equipment to consolidated purchase of property, plant and equipment is as follows: (in thousands) 2018 2017 2016 Purchase of property, plant and equipment Patient Care $ 12,781 $ 8,163 $ 14,581 Products & Services 1,890 2,153 820 Corporate & other 4,313 6,039 5,747 Total consolidated purchase of property, plant and equipment $ 18,984 $ 16,355 $ 21,148 A reconciliation of the total of the reportable segments' assets to consolidated assets is as follows: (in thousands) 2018 2017 Assets Patient Care $ 415,469 $ 413,759 Products & Services 100,953 97,536 Corporate & other 186,588 129,128 Total consolidated assets $ 703,010 $ 640,423 |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
Schedule of changes in operating assets and liabilities on cash flows from operating activities and supplemental disclosure requirements for the statements of cash flows | Changes in operating assets and liabilities on cash flows from operating activities is as follows: For the Years Ended December 31, (in thousands) 2018 2017 2016 Accounts receivable, net $ 3,238 $ (12,585) $ 17,612 Inventories 1,750 (913) 253 Other current assets and other assets 4,459 661 849 Income taxes receivable 12,700 121 18,725 Accounts payable 6,511 (3,562) (3,133) Accrued expenses and other current liabilities (16,550) (12,929) (3,045) Accrued compensation related costs 1,713 16,843 (12,006) Other liabilities (3,980) (2,271) (5,797) Changes in operating assets and liabilities on cash flows from operating activities $ 9,841 $ (14,635) $ 13,458 The supplemental disclosure requirements for the statements of cash flows are as follows: For the Years Ended December 31, (in thousands) 2018 2017 2016 Cash paid during the period for: Interest paid $ 31,312 $ $ 42,345 Income tax (refunds received) paid (11,131) (35,092) Non-cash financing and investing activities: Issuance of seller notes in connection with acquisitions 1,120 — — Additions to property, plant and equipment acquired through financing obligations 1,523 374 Retirements of financed property, plant and equipment and related financing obligations 4,460 2,381 Purchase of property, plant and equipment in accounts payable $ 5,018 $ $ 728 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DISCONTINUED OPERATIONS | |
Schedule of operating results of discontinued operations | Years Ended December 31, (in thousands) 2018 2017 2016 Net revenue $ — $ — $ — Income before income taxes from discontinued operations — — 1,425 Income tax provision — — 490 Income from discontinued operations, net of income taxes $ — $ — $ 935 |
QUARTERLY FINANCIAL INFORMATI_2
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) | |
Schedule of quarterly financial information | Three Months Ended March 31, June 30, September 30, December31, (dollars in thousands, except per share amounts) 2018 2018 2018 2018 Net revenues $ 233,995 $ 266,966 $ 262,946 $ 284,853 Material costs 76,356 86,516 84,805 90,340 Personnel costs 86,108 89,554 90,853 97,574 Other operating costs 31,096 30,536 30,999 31,271 General and administrative expenses 25,636 26,523 28,308 29,085 Professional accounting and legal fees 4,846 4,236 3,107 4,726 Depreciation and amortization 9,330 9,272 8,950 8,903 Impairment of intangible assets — — — 183 Income from operations 623 20,329 15,924 22,771 Interest expense, net 12,263 7,317 8,939 9,046 Loss on extinguishment of debt 16,998 — — — Non-service defined benefit plan expense 176 176 176 176 (Loss) income before income taxes (28,814) 12,836 6,809 13,549 (Benefit) provision for income taxes (6,196) (92) 2,440 9,086 Net (loss) income $ (22,618) $ 12,928 $ 4,369 $ 4,463 Other comprehensive loss: Unrealized (loss) gain on cash flow hedges, net of tax (2,290) 2,314 1,738 (4,698) Unrealized (loss) gain on defined benefit plan, net of tax (292) 26 26 694 Comprehensive (loss) income $ (25,200) $ 15,268 $ 6,133 $ 459 Basic Per Common Share Data: Basic (loss) earnings per share $ (0.62) $ 0.35 $ 0.12 $ 0.12 Weighted average shares outstanding - basic 36,498,482 36,790,401 36,856,881 36,906,938 Diluted Per Common Share Data: Diluted (loss) earnings per share $ (0.62) $ 0.35 $ 0.12 $ 0.12 Weighted average shares outstanding - diluted 36,498,482 37,404,360 37,556,594 37,721,662 Three Months Ended March 31, June 30, September 30, December 31, (dollars in thousands, except per share amounts) 2017 2017 2017 2017 Net revenues $ 233,681 $ 263,386 $ 257,966 $ 285,736 Material costs 74,405 83,657 82,345 88,816 Personnel costs 87,955 87,831 90,065 95,239 Other operating costs 32,689 31,861 33,184 32,097 General and administrative expenses 25,386 25,227 25,356 33,373 Professional accounting and legal fees 12,650 8,521 7,844 7,224 Depreciation and amortization 10,137 9,825 9,632 9,665 Impairment of intangible assets — — — 54,735 (Loss) income from operations (9,541) 16,464 9,540 (35,413) Interest expense, net 14,009 14,091 15,097 14,491 Non-service defined benefit plan expense 184 184 184 184 (Loss) income from continuing operations before income taxes (23,734) 2,189 (5,741) (50,088) (Benefit) provision for income taxes (6,000) 552 (1,580) 34,325 Net (loss) income $ (17,734) $ 1,637 $ (4,161) $ (84,413) Other comprehensive loss: Unrealized loss on DB SERP, net of tax (17) (17) (17) (195) Comprehensive (loss) income $ (17,751) $ 1,620 $ (4,178) $ (84,608) Basic Per Common Share Data: Basic (loss) earnings per share $ (0.49) $ 0.05 $ (0.11) $ (2.32) Weighted average shares outstanding - basic 36,084,630 36,286,528 36,340,089 36,410,488 Diluted Per Common Share Data: Diluted (loss) earnings per share $ (0.49) $ 0.04 $ (0.11) $ (2.32) Weighted average shares outstanding - diluted 36,084,630 36,543,740 36,340,089 36,410,488 |
ORGANIZATION AND SUMMARY OF S_4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2018statesegmentitemcliniclocation | |
Number of segments | segment | 2 |
Patient Care | |
Patient care clinics | clinic | 676 |
Satellite locations | 104 |
Number of states where satellite's are located | state | 45 |
Locations opened or acquired | 42 |
Locations closed or consolidated | 56 |
Products & Services | |
Skilled nursing and post-acute providers receiving programs | item | 3,900 |
ORGANIZATION AND SUMMARY OF S_5
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Effect of Topic 606 on Balance Sheet (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Assets | |||||
Deferred income taxes | $ 65,635 | $ 68,126 | |||
Total assets | 703,010 | 640,423 | |||
Liabilities | |||||
Accrued expenses and other current liabilities | 51,783 | 66,308 | |||
Total current liabilities | 171,274 | 172,293 | |||
Total liabilities | 724,934 | 668,474 | |||
Shareholders' deficit: | |||||
Accumulated deficit | (361,023) | (359,772) | |||
Total shareholders' deficit | (21,924) | $ (28,807) | $ (28,051) | $ 65,414 | $ 165,246 |
ASU 2014-09 | |||||
Assets | |||||
Deferred income taxes | 68,397 | ||||
Liabilities | |||||
Accrued expenses and other current liabilities | 67,335 | ||||
Shareholders' deficit: | |||||
Accumulated deficit | (360,528) | ||||
Proforma balance without the adoption of ASC 606 | ASU 2014-09 | |||||
Assets | |||||
Deferred income taxes | 65,424 | ||||
Total assets | 702,799 | ||||
Liabilities | |||||
Accrued expenses and other current liabilities | 50,985 | ||||
Total current liabilities | 170,476 | ||||
Total liabilities | 724,136 | ||||
Shareholders' deficit: | |||||
Accumulated deficit | (360,436) | ||||
Total shareholders' deficit | (21,337) | ||||
Adjustments | ASU 2014-09 | |||||
Assets | |||||
Deferred income taxes | (211) | 271 | |||
Total assets | (211) | ||||
Liabilities | |||||
Accrued expenses and other current liabilities | (798) | 1,027 | |||
Total current liabilities | (798) | ||||
Total liabilities | (798) | ||||
Shareholders' deficit: | |||||
Accumulated deficit | 587 | $ (756) | |||
Total shareholders' deficit | $ 587 |
ORGANIZATION AND SUMMARY OF S_6
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Effect of Topic 606 on Statement of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Operations | |||||||||||
Net revenues | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 285,736 | $ 257,966 | $ 263,386 | $ 233,681 | $ 1,048,760 | $ 1,040,769 | $ 1,042,054 |
Other operating costs | 31,271 | 30,999 | 30,536 | 31,096 | 32,097 | 33,184 | 31,861 | 32,689 | 123,902 | 129,831 | 139,024 |
Income from operations | 22,771 | 15,924 | 20,329 | 623 | (35,413) | 9,540 | 16,464 | (9,541) | 59,647 | (18,950) | (71,300) |
Income from continuing operations before income taxes | 13,549 | 6,809 | 12,836 | (28,814) | (50,088) | (5,741) | 2,189 | (23,734) | 4,380 | (77,374) | (123,316) |
Net loss | 4,463 | 4,369 | 12,928 | (22,618) | (84,413) | (4,161) | 1,637 | (17,734) | (858) | (104,671) | (106,471) |
Comprehensive loss | $ 459 | $ 6,133 | $ 15,268 | $ (25,200) | $ (84,608) | $ (4,178) | $ 1,620 | $ (17,751) | (3,340) | $ (104,917) | $ (106,497) |
Proforma balance without the adoption of ASC 606 | ASU 2014-09 | |||||||||||
Consolidated Statements of Operations | |||||||||||
Net revenues | 1,052,774 | ||||||||||
Other operating costs | 128,145 | ||||||||||
Income from operations | 59,418 | ||||||||||
Income from continuing operations before income taxes | 4,151 | ||||||||||
Net loss | (1,087) | ||||||||||
Comprehensive loss | (3,569) | ||||||||||
Adjustments | ASU 2014-09 | |||||||||||
Consolidated Statements of Operations | |||||||||||
Net revenues | 4,014 | ||||||||||
Other operating costs | 4,243 | ||||||||||
Income from operations | (229) | ||||||||||
Income from continuing operations before income taxes | (229) | ||||||||||
Net loss | (229) | ||||||||||
Comprehensive loss | $ (229) |
ORGANIZATION AND SUMMARY OF S_7
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Patient Care (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018USD ($)item | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Summary of Significant Accounting Policies | |||||||||||
Warranty liability | $ 2,100 | $ 2,400 | $ 2,100 | $ 2,400 | |||||||
Net revenues | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 285,736 | $ 257,966 | $ 263,386 | $ 233,681 | $ 1,048,760 | 1,040,769 | $ 1,042,054 |
Patient Care | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Labor warranty (in days) | 90 days | ||||||||||
Manufacturer warranty (in days) | 180 days | ||||||||||
Number of performance obligations | item | 2 | 2 | |||||||||
Period of recognition deferred revenue (in days) | 90 days | ||||||||||
Net revenues | $ 857,382 | 851,973 | 840,130 | ||||||||
Patient Care | ASU 2014-09 | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenue deferred | $ 800 | 800 | |||||||||
Revenue recognized from satisfying performance obligations coming from previous period | 1,000 | ||||||||||
Patient Care | Private Pay | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Estimated uncollectible amounts | 4,200 | ||||||||||
Net revenues | 56,040 | 58,917 | 56,289 | ||||||||
Patient Care | Medicare | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | 273,833 | 260,275 | 256,240 | ||||||||
Patient Care | Medicaid | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | 132,938 | 132,707 | 124,339 | ||||||||
Patient Care | Commercial Insurance/ Managed Care (excluding Medicare and Medicaid Managed Care) | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | 316,243 | 325,639 | 329,331 | ||||||||
Patient Care | Veterans Administration | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | $ 78,328 | $ 74,435 | $ 73,931 |
ORGANIZATION AND SUMMARY OF S_8
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Product & Services (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Summary of Significant Accounting Policies | |||||||||||
Net revenues | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 285,736 | $ 257,966 | $ 263,386 | $ 233,681 | $ 1,048,760 | $ 1,040,769 | $ 1,042,054 |
Products & Services | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | $ 191,378 | 188,796 | 201,924 | ||||||||
Products & Services | Minimum | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Payment terms (in days) | 30 days | ||||||||||
Products & Services | Maximum | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Payment terms (in days) | 90 days | ||||||||||
Products & Services | Distribution, net of intersegment revenue eliminations | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | $ 135,995 | 128,686 | 127,510 | ||||||||
Products & Services | Therapeutic solutions | |||||||||||
Summary of Significant Accounting Policies | |||||||||||
Net revenues | $ 55,383 | $ 60,110 | $ 74,414 |
ORGANIZATION AND SUMMARY OF S_9
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Operating Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Other Operating Costs | |||
Marketing costs, including advertising | $ 3.8 | $ 3.8 | $ 4 |
ORGANIZATION AND SUMMARY OF _10
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - General and Administrative Expenses (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
General and Administrative Expenses | |||
Advertising costs | $ 1.5 | $ 0.7 | $ 0.6 |
ORGANIZATION AND SUMMARY OF _11
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts Receivable, Net (Details) | 12 Months Ended |
Dec. 31, 2018 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Minimum period of receivable balances for which an evaluation of its collectability is performed | 1 year |
Adjudication period of receivable balances for which an evaluation of its collectability is performed | 12 months |
ORGANIZATION AND SUMMARY OF _12
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventories (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Inventories | ||
Reserve for excess and obsolete inventory | $ 7,200 | $ 6,200 |
Inventories | 67,690 | 69,138 |
WIP inventory | 9,278 | 8,996 |
Raw material inventory | 19,632 | 19,929 |
Patient Care | ||
Inventories | ||
Inventories | 27,500 | 27,700 |
WIP inventory | 9,300 | 9,000 |
Raw material inventory | $ 18,200 | $ 18,700 |
Intercompany purchase of raw materials (in percent) | 74.00% | 71.00% |
Products & Services | ||
Inventories | ||
Inventories | $ 40,200 | $ 41,400 |
ORGANIZATION AND SUMMARY OF _13
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment, Net (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Furniture and fixtures | |
Property, Plant and Equipment, Net | |
Estimated life | 5 years |
Equipment and information systems | |
Property, Plant and Equipment, Net | |
Estimated life | 5 years |
Buildings | Minimum | |
Property, Plant and Equipment, Net | |
Estimated life | 10 years |
Buildings | Maximum | |
Property, Plant and Equipment, Net | |
Estimated life | 40 years |
Leasehold improvements | Maximum | |
Property, Plant and Equipment, Net | |
Estimated life | 10 years |
ORGANIZATION AND SUMMARY OF _14
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill and Other Intangible Assets, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill and Other Intangible Assets, Net | |||||
Asset Impairment Charges | $ 183 | $ 54,735 | $ 183 | $ 54,735 | $ 86,164 |
Goodwill impairment | 0 | 53,335 | 86,000 | ||
Trade name | |||||
Goodwill and Other Intangible Assets, Net | |||||
Impairment of intangible assets | $ 200 | $ 1,400 | $ 200 |
ORGANIZATION AND SUMMARY OF _15
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Self-Insurance Reserves (Details) $ in Millions | Dec. 31, 2018USD ($) |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Maximum amount of stop-loss coverage on claims | $ 0.5 |
Maximum amount of liability claims for workers' compensation, product, professional and general per individual incident | $ 0.5 |
ORGANIZATION AND SUMMARY OF _16
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
U.S. federal operating loss carryforwards | $ 10,700 | $ 24,200 | |
State net operating loss carryforwards | 166,000 | 195,000 | |
Net deferred tax assets | 65,635 | 68,126 | |
Valuation allowance | $ 8,930 | $ 8,754 | |
Corporate federal income tax rate (as a percent) | 21.00% | 35.00% | 35.00% |
Tax expense related to re-measurement of deferred tax assets and liabilities | $ 35,000 |
ORGANIZATION AND SUMMARY OF _17
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Interest Expense, Net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
Interest expense net of interest income | $ 0.1 | $ 0.1 | $ 0.1 |
ORGANIZATION AND SUMMARY OF _18
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details) | 12 Months Ended |
Dec. 31, 2018plan | |
STOCK BASED COMPENSATION | |
Number of stock-based compensation plans | 1 |
Minimum | |
STOCK BASED COMPENSATION | |
Vesting period (in years) | 1 year |
Maximum | |
STOCK BASED COMPENSATION | |
Vesting period (in years) | 4 years |
Performance-based stock awards | |
STOCK BASED COMPENSATION | |
Term of the absolute common stock price compounded annual growth rate | 3 years |
ORGANIZATION AND SUMMARY OF _19
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segment Information (Details) | 12 Months Ended |
Dec. 31, 2018segment | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Number of segments | 2 |
ORGANIZATION AND SUMMARY OF _20
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Adoption of New Accounting Standards (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 01, 2018 | |
Recent Accounting Pronouncement | ||||||||||||
Accumulated deficit | $ (361,023) | $ (359,772) | $ (361,023) | $ (359,772) | ||||||||
Deferred income taxes | 65,635 | 68,126 | 65,635 | 68,126 | ||||||||
General and administrative expenses | 29,085 | $ 28,308 | $ 26,523 | $ 25,636 | 33,373 | $ 25,356 | $ 25,227 | $ 25,386 | 109,552 | 109,342 | $ 106,438 | |
Non-service defined benefit plan expense | 176 | $ 176 | $ 176 | $ 176 | $ 184 | $ 184 | $ 184 | $ 184 | 703 | 736 | 786 | |
ASU 2014-09 | ||||||||||||
Recent Accounting Pronouncement | ||||||||||||
Accumulated deficit | $ (360,528) | |||||||||||
Deferred income taxes | 68,397 | |||||||||||
ASU 2014-09 | Adjustments | ||||||||||||
Recent Accounting Pronouncement | ||||||||||||
Accumulated deficit | 587 | 587 | (756) | |||||||||
Contract liability | 1,000 | 1,000 | ||||||||||
Deferred income taxes | (211) | (211) | $ 271 | |||||||||
ASU 2017-07 | ||||||||||||
Recent Accounting Pronouncement | ||||||||||||
General and administrative expenses | 700 | 700 | 800 | |||||||||
Non-service defined benefit plan expense | $ 700 | $ 700 | $ 800 | |||||||||
ASU 2018-02 | ||||||||||||
Recent Accounting Pronouncement | ||||||||||||
Decrease in AOCI in the amount an increase in retained earnings | $ 400 |
ORGANIZATION AND SUMMARY OF _21
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Standards Not Yet Adopted (Details) - ASU 2016-02 - Restatement Adjustments $ in Millions | Jan. 01, 2019USD ($) |
Minimum | |
Recent Accounting Pronouncement | |
Lease liability | $ 115 |
Right-of-use assets | 115 |
Maximum | |
Recent Accounting Pronouncement | |
Lease liability | 125 |
Right-of-use assets | $ 125 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Share | |||||||||||
Loss from continuing operations applicable to common shareholders | $ (858) | $ (104,671) | $ (107,406) | ||||||||
Income from discontinued operations, net of income taxes | 935 | ||||||||||
Net loss | $ 4,463 | $ 4,369 | $ 12,928 | $ (22,618) | $ (84,413) | $ (4,161) | $ 1,637 | $ (17,734) | $ (858) | $ (104,671) | $ (106,471) |
Weighted average shares outstanding - basic | 36,906,938 | 36,856,881 | 36,790,401 | 36,498,482 | 36,410,488 | 36,340,089 | 36,286,528 | 36,084,630 | 36,764,551 | 36,270,920 | 35,933,222 |
Weighted average shares outstanding - diluted | 37,721,662 | 37,556,594 | 37,404,360 | 36,498,482 | 36,410,488 | 36,340,089 | 36,543,740 | 36,084,630 | 36,764,551 | 36,270,920 | 35,933,222 |
Total anti-dilutive shares (in shares) | 17,894 | 473,037 | 342,369 | ||||||||
Basic and diluted: | |||||||||||
Loss from continuing operations per share applicable to common stock | $ (0.02) | $ (2.89) | $ (2.99) | ||||||||
Income from discontinued operations per share applicable to common stock | 0.03 | ||||||||||
Net loss per share applicable to common stockholders (in dollars per share) | $ (0.02) | $ (2.89) | $ (2.96) | ||||||||
Unvested restricted stock units and unexercised options | |||||||||||
Earnings Per Share | |||||||||||
Total anti-dilutive shares (in shares) | 709,309 | 295,718 | 145,497 |
ACCOUNTS RECEIVABLE, NET - (Det
ACCOUNTS RECEIVABLE, NET - (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Accounts Receivable, net | ||||
Accounts receivable, before allowances | $ 206,880 | $ 216,644 | ||
Allowances for estimated implicit price concessions arising from: | ||||
Payor disallowances | (53,378) | (56,233) | ||
Patient non-payments | (7,244) | |||
Accounts receivable, gross | 146,258 | 160,411 | ||
Allowance for doubtful accounts | (2,272) | (14,065) | $ (15,521) | $ (15,027) |
Accounts receivable, net | 143,986 | 146,346 | ||
Patient Care | ||||
Accounts Receivable, net | ||||
Accounts receivable, before allowances | 182,338 | 193,150 | ||
Allowances for estimated implicit price concessions arising from: | ||||
Payor disallowances | (53,378) | (56,233) | ||
Patient non-payments | (7,244) | |||
Accounts receivable, gross | 121,716 | 136,917 | ||
Allowance for doubtful accounts | (9,894) | |||
Accounts receivable, net | 121,716 | 127,023 | ||
Products & Services | ||||
Accounts Receivable, net | ||||
Accounts receivable, before allowances | 24,542 | 23,494 | ||
Allowances for estimated implicit price concessions arising from: | ||||
Accounts receivable, gross | 24,542 | 23,494 | ||
Allowance for doubtful accounts | (2,272) | (4,171) | ||
Accounts receivable, net | $ 22,270 | $ 19,323 |
ACCOUNTS RECEIVABLE, NET - Conc
ACCOUNTS RECEIVABLE, NET - Concentration Risk (Details) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Federal Government | Gross Accounts Receivable | Credit Concentration Risk | ||
Concentration Risk | ||
Concentration risk (as a percent) | 48.40% | 49.20% |
ACCOUNTS RECEIVABLE, NET - Allo
ACCOUNTS RECEIVABLE, NET - Allowance for Disallowed Revenue and Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
ACCOUNTS RECEIVABLE, NET | |||
Balance at the beginning | $ 56,233 | $ 61,137 | $ 81,306 |
Cumulative Effect of ASC 606 | 9,894 | ||
Additions | 42,653 | 36,962 | 48,961 |
Reductions | (48,158) | (41,866) | (69,130) |
Balance at the end | 60,622 | 56,233 | 61,137 |
Allowance for Doubtful Accounts | |||
Balance at the beginning | 14,065 | 15,521 | 15,027 |
Cumulative Effect of ASC 606 | (9,894) | ||
Provision for Doubtful Accounts | 630 | 9,423 | 13,727 |
Allowance for Doubtful Accounts Receivable, Write-offs | 1,155 | 10,879 | 13,233 |
Allowance for Doubtful Accounts Receivable, Recoveries | 1,374 | ||
Balance at the end | $ 2,272 | $ 14,065 | $ 15,521 |
ACCOUNTS RECEIVABLE, NET - Agin
ACCOUNTS RECEIVABLE, NET - Aging Categories (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Accounts Receivable, net | ||||
0-60 Days | $ 110,452 | $ 118,066 | ||
61-120 Days | 27,745 | 27,650 | ||
121-180 Days | 13,834 | 13,682 | ||
Over 180 Days | 54,849 | 57,246 | ||
Accounts receivable, before allowances | 206,880 | 216,644 | ||
Allowance for disallowed revenue and patient non-payment | (60,622) | (56,233) | $ (61,137) | $ (81,306) |
Allowance for doubtful accounts | (2,272) | (14,065) | $ (15,521) | $ (15,027) |
Accounts receivable, net | 143,986 | 146,346 | ||
Patient Care | ||||
Accounts Receivable, net | ||||
Accounts receivable, before allowances | 182,338 | 193,150 | ||
Allowance for doubtful accounts | (9,894) | |||
Accounts receivable, net | 121,716 | 127,023 | ||
Patient Care | Non-Medicare | ||||
Accounts Receivable, net | ||||
0-60 Days | 63,345 | 69,553 | ||
61-120 Days | 15,755 | 16,850 | ||
121-180 Days | 9,191 | 9,067 | ||
Over 180 Days | 25,068 | 22,968 | ||
Accounts receivable, before allowances | 113,359 | 118,438 | ||
Patient Care | Commercial Insurance/ Managed Care (excluding Medicare and Medicaid Managed Care) | ||||
Accounts Receivable, net | ||||
0-60 Days | 44,918 | 50,310 | ||
61-120 Days | 11,495 | 11,649 | ||
121-180 Days | 6,467 | 6,302 | ||
Over 180 Days | 17,172 | 15,279 | ||
Accounts receivable, before allowances | 80,052 | 83,540 | ||
Patient Care | Private Pay | ||||
Accounts Receivable, net | ||||
0-60 Days | 951 | 880 | ||
61-120 Days | 437 | 447 | ||
121-180 Days | 343 | 381 | ||
Over 180 Days | 483 | 1,311 | ||
Accounts receivable, before allowances | 2,214 | 3,019 | ||
Patient Care | Medicaid | ||||
Accounts Receivable, net | ||||
0-60 Days | 12,690 | 13,785 | ||
61-120 Days | 2,964 | 3,561 | ||
121-180 Days | 1,855 | 1,832 | ||
Over 180 Days | 6,629 | 5,684 | ||
Accounts receivable, before allowances | 24,138 | 24,862 | ||
Patient Care | Veterans Administration | ||||
Accounts Receivable, net | ||||
0-60 Days | 4,786 | 4,578 | ||
61-120 Days | 859 | 1,193 | ||
121-180 Days | 526 | 552 | ||
Over 180 Days | 784 | 694 | ||
Accounts receivable, before allowances | 6,955 | 7,017 | ||
Patient Care | Medicare | ||||
Accounts Receivable, net | ||||
0-60 Days | 32,339 | 34,197 | ||
61-120 Days | 5,483 | 5,725 | ||
121-180 Days | 3,002 | 3,396 | ||
Over 180 Days | 28,155 | 31,394 | ||
Accounts receivable, before allowances | 68,979 | 74,712 | ||
Products & Services | ||||
Accounts Receivable, net | ||||
Accounts receivable, before allowances | 24,542 | 23,494 | ||
Allowance for doubtful accounts | (2,272) | (4,171) | ||
Accounts receivable, net | 22,270 | 19,323 | ||
Products & Services | Trade accounts receivable | ||||
Accounts Receivable, net | ||||
0-60 Days | 14,768 | 14,316 | ||
61-120 Days | 6,507 | 5,075 | ||
121-180 Days | 1,641 | 1,219 | ||
Over 180 Days | 1,626 | 2,884 | ||
Accounts receivable, before allowances | $ 24,542 | $ 23,494 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Raw materials | $ 19,632 | $ 19,929 |
Work in process | 9,278 | 8,996 |
Finished goods | 38,780 | 40,213 |
Total inventories | $ 67,690 | $ 69,138 |
PROPERTY PLANT AND EQUIPMENT,_3
PROPERTY PLANT AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | $ 276,288 | $ 266,184 | |
Less: accumulated depreciation and amortization | (186,799) | (172,569) | |
Total property, plant, and equipment, net | 89,489 | 93,615 | |
Depreciation expense | 29,700 | 29,700 | $ 31,000 |
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 | 24,558 | 28,180 | |
Assets under capital leases | |||
Assets under capital leases | 20,400 | 24,100 | |
Accumulated depreciation | 9,300 | 8,900 | |
Furniture and fixtures | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 13,121 | 12,968 | |
Machinery and equipment | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 27,452 | 26,838 | |
Program Equipment | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 30,093 | 31,100 | |
Less: accumulated depreciation and amortization | (14,712) | (19,954) | |
Net book value | 15,381 | 11,146 | |
Leasehold improvements | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | 111,247 | 100,999 | |
Computers and software | |||
Property, Plant and Equipment, Net | |||
Total property, plant, and equipment, gross | $ 69,173 | $ 65,455 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2018USD ($)item | Dec. 31, 2018USD ($) | Dec. 31, 2017item | Dec. 31, 2016item | |
Acquisitions | ||||
Number of businesses acquired | item | 2 | 0 | 0 | |
Components of the aggregated purchase price the assets acquired and liabilities assumed | ||||
Issuance of seller notes | $ 1,120 | |||
Goodwill | 2,399 | |||
Two O&P businesses | ||||
Components of the aggregated purchase price the assets acquired and liabilities assumed | ||||
Cash paid, net of cash acquired | $ 1,978 | 1,978 | ||
Issuance of seller notes | 1,120 | |||
Aggregate purchase price | 3,098 | |||
Net accounts receivable | 256 | 256 | ||
Inventories | 302 | 302 | ||
Intangible assets, excluding goodwill | 474 | 474 | ||
Other assets | 90 | 90 | ||
Accounts payable and accrued expenses | (59) | (59) | ||
Other liabilities assumed | (364) | (364) | ||
Net assets acquired | $ 699 | 699 | ||
Goodwill | $ 2,399 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) $ in Thousands | Oct. 01, 2017USD ($)item | Oct. 01, 2016USD ($)item | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) |
Goodwill | |||||||
Number of reporting units | item | 3 | 3 | |||||
Impairment of intangible assets | $ 183 | $ 54,735 | $ 183 | $ 54,735 | $ 86,164 | ||
Goodwill allocated | |||||||
Goodwill, Gross as of beginning of the year | 764,310 | 764,310 | |||||
Goodwill, Accumulated Impairment | (567,967) | (567,967) | (567,967) | (567,967) | (514,632) | ||
Goodwill, Net as of beginning of the year | 196,343 | 249,678 | |||||
Goodwill impairment | 0 | 53,335 | 86,000 | ||||
Additions from acquisitions | 2,399 | ||||||
Goodwill, Gross as of end of the year | 766,709 | 764,310 | 766,709 | 764,310 | 764,310 | ||
Goodwill, Net as of end of the year | 198,742 | 196,343 | 198,742 | 196,343 | 249,678 | ||
Patient Care | |||||||
Goodwill allocated | |||||||
Goodwill, Gross as of beginning of the year | 625,011 | 625,011 | |||||
Goodwill, Accumulated Impairment | (428,668) | (428,668) | (428,668) | (428,668) | (428,668) | ||
Goodwill, Net as of beginning of the year | 196,343 | 196,343 | |||||
Additions from acquisitions | 2,399 | ||||||
Goodwill, Gross as of end of the year | 627,410 | 625,011 | 627,410 | 625,011 | 625,011 | ||
Goodwill, Net as of end of the year | 198,742 | 196,343 | 198,742 | 196,343 | 196,343 | ||
Products & Services | |||||||
Goodwill | |||||||
Number of reporting units | 2 | 2 | |||||
Impairment of intangible assets | 183 | 54,735 | 86,164 | ||||
Goodwill allocated | |||||||
Goodwill, Gross as of beginning of the year | 139,299 | 139,299 | |||||
Goodwill, Accumulated Impairment | (139,299) | (139,299) | (139,299) | (139,299) | (85,964) | ||
Goodwill, Net as of beginning of the year | 53,335 | ||||||
Goodwill impairment | 53,335 | ||||||
Goodwill, Gross as of end of the year | $ 139,299 | $ 139,299 | $ 139,299 | $ 139,299 | 139,299 | ||
Goodwill, Net as of end of the year | $ 53,335 | ||||||
Therapeutic | |||||||
Goodwill | |||||||
Impairment of intangible assets | $ 32,800 | $ 64,900 | |||||
Distribution | |||||||
Goodwill | |||||||
Impairment of intangible assets | $ 20,500 | $ 21,100 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | $ 35,682 | $ 52,259 | |
Definite-lived, Accumulated Amortization | (24,321) | (34,619) | |
Definite-lived, Net Carrying Amount | 11,361 | 17,640 | |
Total other intangible assets, Gross Carrying Amount | 44,752 | 61,329 | |
Total other intangible assets, Accumulated Impairment | (4,953) | (4,770) | |
Total other intangible assets, Net Carrying Amount | 15,478 | 21,940 | |
Amortization expense | $ 6,700 | 9,500 | $ 13,900 |
Minimum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 1 year | ||
Maximum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 5 years | ||
Trade name | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Indefinite life, Gross Carrying Amount | $ 9,070 | 9,070 | |
Indefinite life, Accumulated Impairment | (4,953) | (4,770) | |
Indefinite life, Net Carrying Amount | 4,117 | 4,300 | |
Impairment of intangible assets | 200 | 1,400 | $ 200 |
Customer lists | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | 26,036 | 36,439 | |
Definite-lived, Accumulated Amortization | (19,051) | (24,267) | |
Definite-lived, Net Carrying Amount | $ 6,985 | 12,172 | |
Customer lists | Minimum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 4 years | ||
Customer lists | Maximum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 10 years | ||
Trade name | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | $ 255 | 462 | |
Definite-lived, Accumulated Amortization | (125) | (302) | |
Definite-lived, Net Carrying Amount | $ 130 | 160 | |
Trade name | Minimum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 1 year | ||
Trade name | Trade name | Maximum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 10 years | ||
Other intangible assets | Maximum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 17 years | ||
Patents and other | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | $ 9,391 | 15,358 | |
Definite-lived, Accumulated Amortization | (5,145) | (10,050) | |
Definite-lived, Net Carrying Amount | $ 4,246 | $ 5,308 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Estimated Amortization (Details) $ in Thousands | Dec. 31, 2018USD ($) |
Estimated aggregate amortization expense for definite-lived intangible assets | |
2019 | $ 3,895 |
2020 | 3,598 |
2021 | 1,016 |
2022 | 944 |
2023 | 804 |
Thereafter | 1,104 |
Total | $ 11,361 |
OTHER CURRENT ASSETS AND OTHE_3
OTHER CURRENT ASSETS AND OTHER ASSETS - Other Current Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
OTHER CURRENT ASSETS AND OTHER ASSETS | ||||
Non-trade receivables | $ 7,848 | $ 7,668 | ||
Prepaid rent | 4,442 | 4,248 | ||
Prepaid maintenance | 3,330 | 3,134 | ||
Restricted cash | 3,271 | $ 2,255 | $ 3,870 | |
Prepaid other | 1,101 | 1,436 | ||
Prepaid purchase orders | 998 | 99 | ||
Prepaid education and training | 597 | 582 | ||
Prepaid insurance | 258 | 271 | ||
Other | 157 | 179 | ||
Total other current assets | $ 18,731 | $ 20,888 |
OTHER CURRENT ASSETS AND OTHE_4
OTHER CURRENT ASSETS AND OTHER ASSETS - Other Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
OTHER CURRENT ASSETS AND OTHER ASSETS | ||
Cash surrender value of company owned life insurance | $ 2,918 | $ 2,340 |
Non-trade receivables | 1,904 | 2,407 |
Deposits | 1,698 | 2,193 |
Other | 1,246 | 2,500 |
Total other assets | $ 7,766 | $ 9,440 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES - Accrued expenses and other current liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | ||
Patient prepayments, deposits and refunds payable | $ 24,563 | $ 30,194 |
Insurance and self-insurance accruals | 8,886 | 8,901 |
Accrued sales taxes and other taxes | 6,810 | 6,335 |
Accrued professional fees | 3,751 | 11,612 |
Derivative liability | 724 | |
Accrued interest payable | 332 | 845 |
Other current liabilities | 6,717 | 8,421 |
Total accrued expenses and other current liabilities | $ 51,783 | $ 66,308 |
ACCRUED EXPENSES AND OTHER CU_4
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES - Other liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES AND OTHER LIABILITIES | ||
Supplemental executive retirement plan obligations | $ 20,195 | $ 21,842 |
Long-term insurance accruals | 8,713 | 9,531 |
Deferred tenant improvement allowances | 8,570 | 7,361 |
Unrecognized tax benefits, and related interest and penalties | 5,458 | 5,219 |
Deferred rent | 4,455 | 4,909 |
Derivative liability | 3,134 | |
Other | 1,045 | 1,391 |
Total other liabilities | $ 51,570 | $ 50,253 |
INCOME TAXES - Expense (Details
INCOME TAXES - Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current: | |||||||||||
Federal | $ 669 | $ 541 | $ (18,812) | ||||||||
State | 1,117 | 574 | 694 | ||||||||
Total current | 1,786 | 1,115 | (18,118) | ||||||||
Deferred: | |||||||||||
Federal | 1,497 | 28,905 | 3,008 | ||||||||
State | 1,955 | (2,723) | (800) | ||||||||
Total deferred | 3,452 | 26,182 | 2,208 | ||||||||
Provision (benefit) for income taxes from continuing operations | $ 9,086 | $ 2,440 | $ (92) | $ (6,196) | $ 34,325 | $ (1,580) | $ 552 | $ (6,000) | $ 5,238 | $ 27,297 | (15,910) |
Income tax provision (benefit) attributable to discontinued operations | $ 490 |
INCOME TAXES - Rate Reconciliat
INCOME TAXES - Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Reconciliation of the federal statutory tax rate to the Company's effective tax rate | |||
Federal statutory tax rate (as a percent) | 21.00% | 35.00% | 35.00% |
State and local income taxes (as a percent) | 26.60% | 0.90% | 0.50% |
Change in valuation allowance (as a percent) | 9.50% | (0.70%) | |
Federal statutory tax rate change effect on deferred balance (as a percent) | (45.00%) | ||
State tax rate change effect on deferred balance | 27.70% | (0.20%) | (0.10%) |
Change in uncertain tax positions (as a percent) | 5.50% | (0.30%) | 0.90% |
Goodwill impairment (as a percent) | (21.10%) | (22.30%) | |
Permanent items (as a percent) | 27.90% | (2.70%) | (0.30%) |
Tax audit adjustments (as a percent) | 8.70% | ||
Tax credits (as a percent) | (5.60%) | 0.10% | |
Other (as a percent) | (1.70%) | (1.30%) | (0.80%) |
Tax provision (as a percent) | 119.60% | (35.30%) | 12.90% |
INCOME TAXES - Deferred Tax Lia
INCOME TAXES - Deferred Tax Liability (Asset) (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax liabilities: | ||
Goodwill | $ 5,821 | $ 3,883 |
Intangible | 4 | |
Prepaid expenses | 1,030 | 1,029 |
Sec. 481(a) adjustments | 56 | |
Total deferred tax liabilities | 6,851 | 4,972 |
Deferred tax assets: | ||
Deferred benefit plan compensation | 6,269 | 5,786 |
Provision for doubtful accounts and implicit price | 16,529 | 18,243 |
Property, plant and equipment | 10,829 | 12,216 |
Net operating loss carryforwards | 10,975 | 15,191 |
Accrued expenses | 15,352 | 17,974 |
Intangibles | 1,063 | |
Inventory reserves | 2,710 | 2,123 |
Stock-based compensation | 3,902 | 3,972 |
Capital leases | 150 | 210 |
Deferred rent | 1,136 | 1,265 |
Refund liabilities | 2,517 | 2,895 |
Interest on seller notes | 1,029 | 1,010 |
Interest expense | 7,798 | |
Other | 1,157 | 967 |
Total deferred tax assets | 81,416 | 81,852 |
Valuation allowance | (8,930) | (8,754) |
Net deferred tax assets | 72,486 | 73,098 |
Net deferred tax asset | $ 65,635 | $ 68,126 |
INCOME TAXES - Net Operating Lo
INCOME TAXES - Net Operating Loss (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Income Taxes | ||
Valuation allowance | $ 8.9 | $ 8.8 |
Federal | ||
Income Taxes | ||
Net operating loss carryforwards under the (tax effected) of U.S. federal and state tax laws | 10.7 | 24.2 |
State | ||
Income Taxes | ||
Net operating loss carryforwards under the (tax effected) of U.S. federal and state tax laws | $ 166 | $ 195 |
INCOME TAXES - Activity in Valu
INCOME TAXES - Activity in Valuation Allowance (Details) - Deferred tax asset valuation allowance - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Valuation allowance activities | |||
Balance at Beginning of Year | $ 8,754 | $ 6,895 | $ 6,853 |
Provision | 204 | 2,306 | 377 |
Released | 28 | 447 | 335 |
Balance at End of Year | $ 8,930 | $ 8,754 | $ 6,895 |
INCOME TAXES - Unrecognized Tax
INCOME TAXES - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Reconciliation of beginning and ending balances of unrecognized tax benefits | |||
Unrecognized tax benefits, at beginning of the year | $ 4,860 | $ 4,664 | $ 7,567 |
Additions for tax positions related to the current year | 257 | 466 | 456 |
Decrease related to prior year positions | (352) | (270) | (409) |
Decrease for lapse of applicable statute of limitations | (200) | (2,950) | |
Unrecognized tax benefits, at end of the year | 4,765 | 4,860 | 4,664 |
Total amount of unrecognized tax benefits, if recognized, would affect the effective tax rate | 2,800 | ||
Accrued interest and penalties | $ 800 | $ 600 | $ 400 |
Corporate federal income tax rate (as a percent) | 21.00% | 35.00% | 35.00% |
Tax expense related to re-measurement of deferred tax assets and liabilities | $ 35,000 |
EMPLOYEE BENEFITS - Savings Pla
EMPLOYEE BENEFITS - Savings Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
EMPLOYEE BENEFITS | |||
Matching employer contributions under 401(k) Savings and Retirement plan | $ 5.8 | $ 5.9 | $ 6.7 |
EMPLOYEE BENEFITS - DB SERP (De
EMPLOYEE BENEFITS - DB SERP (Details) - payment | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2004 | Dec. 31, 2018 | Dec. 31, 2017 | |
Supplemental Executive Retirement Plan (SERP) | |||
Number of annual payments upon retirement | 15 | ||
Average remaining service period | 10 years 6 months | 11 years 6 months |
EMPLOYEE BENEFITS - Benefit Obl
EMPLOYEE BENEFITS - Benefit Obligation Rollforward (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Change in Benefit Obligation | |||
Benefit obligation at the beginning of the period | $ 20,793 | $ 21,304 | $ 21,885 |
Service cost | 367 | 340 | 390 |
Interest cost | 600 | 711 | 740 |
Payments | (1,913) | (1,913) | (1,847) |
Actuarial (gain) loss | (920) | 351 | 136 |
Benefit obligation at the end of the period | $ 18,927 | $ 20,793 | $ 21,304 |
EMPLOYEE BENEFITS -Funded Statu
EMPLOYEE BENEFITS -Funded Status (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Funded status of the DB SERP's net benefit obligation | ||
Unfunded status | $ 16,740 | $ 20,793 |
Unamortized net (gain) loss | 2,187 | |
Net amount recognized | $ 18,927 | $ 20,793 |
EMPLOYEE BENEFITS - Amonts in B
EMPLOYEE BENEFITS - Amonts in Balance Sheets (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Amounts Recognized in the Consolidated Balance Sheets: | |||
Current accrued expenses and other current liabilities | $ 1,913 | $ 1,913 | |
Non-current other liabilities | 17,014 | 18,880 | |
Total accrued liabilities | 18,927 | 20,793 | |
Other comprehensive loss - gross actuarial (gains) losses | $ (900) | 400 | $ 100 |
Cash surrender value of the DB SERP | $ 17,100 |
EMPLOYEE BENEFITS - Assumptions
EMPLOYEE BENEFITS - Assumptions (Details) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Weighted average assumptions used to determine the benefit obligation and net benefit cost | |||
Discount rate, to determine the benefit obligation (as a percent) | 4.00% | 3.30% | 3.50% |
Average rate of increase in compensation, to determine the benefit obligation (as a percent) | 3.00% | 3.00% | 3.00% |
EMPLOYEE BENEFITS - Future Paym
EMPLOYEE BENEFITS - Future Payments (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Future payments under the Plan | ||||
2019 | $ 1,913 | |||
2020 | 1,913 | |||
2021 | 1,913 | |||
2022 | 1,913 | |||
2023 | 1,913 | |||
Thereafter | 9,362 | |||
Total | $ 18,927 | $ 20,793 | $ 21,304 | $ 21,885 |
EMPLOYEE BENEFITS - DC SERP (De
EMPLOYEE BENEFITS - DC SERP (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
EMPLOYEE BENEFITS | ||
Estimated accumulated benefit obligation | $ 3 | $ 3 |
Funded estimated accumulated benefit obligation | 2.4 | 2.3 |
Unfunded estimated accumulated benefit obligation | $ 0.6 | $ 0.7 |
LEASES (Details)
LEASES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Leases | |||
Rent expense | $ 47,500 | $ 47,300 | $ 48,100 |
Net book value | 89,489 | 93,615 | |
Future minimum rental payments, by year and in the aggregate, under operating leases | |||
2019 | 39,378 | ||
2020 | 29,641 | ||
2021 | 21,303 | ||
2022 | 14,479 | ||
2023 | 9,193 | ||
Thereafter | 10,008 | ||
Total | 124,002 | ||
Future minimum rental payments, by year and in the aggregate, under Capital Lease Obligations | |||
2019 | 249 | ||
2020 | 175 | ||
2021 | 109 | ||
2022 | 28 | ||
Total | 561 | ||
Office equipment under capital leases | |||
Leases | |||
Net book value | $ 500 | $ 700 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 06, 2018 | Dec. 31, 2017 |
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | $ 520,080 | $ 460,956 | |
Unamortized discount and debt issuance costs, net | (9,407) | (10,692) | |
Total debt | 510,673 | 450,264 | |
Current portion of long-term debt | 8,583 | 4,336 | |
Long-term debt | 502,090 | 445,928 | |
Credit Agreement, dated March 6, 3028, Term Loan B | |||
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | 501,213 | $ 505,000 | |
Credit Agreement, dated August 1, 2016, Term Loan B | |||
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | 280,000 | ||
Term Loan | |||
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | 151,875 | ||
Revolving Credit Facility | |||
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | 5,000 | ||
Seller Notes | |||
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | 4,506 | 5,912 | |
Financing leases and other | |||
Long-Term Debt | |||
Total debt before unamortized discount and debt issuance costs | $ 14,361 | $ 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 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Long-Term Debt | ||||
Outstanding amount of debt | $ 520,080 | $ 460,956 | ||
Letters of credit outstanding amount | $ 5,900 | |||
Debt issuance costs | 6,757 | 2,863 | $ 15,832 | |
Debt call premium | 8,436 | |||
Revolving Credit Facility | ||||
Long-Term Debt | ||||
Maximum borrowing capacity | $ 100,000 | |||
Outstanding amount of debt | 5,000 | |||
Annual fee, as a percent of the applicable margin over LIBOR | 50.00% | |||
Revolving Credit Facility | Minimum | ||||
Long-Term Debt | ||||
Unused commitment fee (as a percent) | 0.375% | |||
Revolving Credit Facility | Maximum | ||||
Long-Term Debt | ||||
Unused commitment fee (as a percent) | 0.50% | |||
Term Loan | ||||
Long-Term Debt | ||||
Outstanding amount of debt | $ 151,875 | |||
Credit Agreement, dated March 6, 3028, Term Loan B | ||||
Long-Term Debt | ||||
Outstanding amount of debt | $ 505,000 | $ 501,213 | ||
Weighted average interest rate | 5.60% | |||
Prior Credit Agreements | ||||
Long-Term Debt | ||||
Debt call premium | 8,400 | |||
Unamortized discount and debt issuance costs expensed | 8,600 | |||
Revolving Credit Facility | ||||
Long-Term Debt | ||||
Maximum borrowing capacity | 605,000 | |||
Increase in additional borrowing capacity | $ 125,000 | |||
Maximum leverage ratio to use maximum credit facility | 3.80 | |||
Proceeds from borrowing | $ 501,500 | |||
Debt issuance costs | $ 6,800 | |||
Interest rate in excess of applicable rate upon acceleration and default ( as a percent) | 2.00% | |||
Revolving Credit Facility | LIBOR | ||||
Long-Term Debt | ||||
Interest rate margin (as a percent) | 1.00% | |||
Revolving Credit Facility | Federal funds rate | ||||
Long-Term Debt | ||||
Interest rate margin (as a percent) | 0.50% | |||
Revolving Credit Facility | Fiscal quarters ended December 31, 2018 and March31, 2019 | ||||
Long-Term Debt | ||||
Consolidated leverage ratio | 5.00% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2019 through March 31, 2020 | ||||
Long-Term Debt | ||||
Consolidated leverage ratio | 4.75% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2020 through March 31, 2021 | ||||
Long-Term Debt | ||||
Consolidated leverage ratio | 4.50% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2021 through March 31, 2022 | ||||
Long-Term Debt | ||||
Consolidated leverage ratio | 4.25% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2022 and the last day of each fiscal quarter thereafter | ||||
Long-Term Debt | ||||
Consolidated leverage ratio | 3.75% | |||
Revolving Credit Facility | Last day of any fiscal quarter | ||||
Long-Term Debt | ||||
Consolidated leverage ratio | 2.75% |
LONG-TERM DEBT - Subsidiary Gua
LONG-TERM DEBT - Subsidiary Guarantees (Details) - Minimum | Dec. 31, 2018 |
Long-Term Debt | |
Subsidiary guarantors' percentage of revenue | 90.00% |
Subsidiary guarantors' percentage of assets | 90.00% |
LONG-TERM DEBT - Seller Notes (
LONG-TERM DEBT - Seller Notes (Details) - Seller Notes - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Long-Term Debt | ||
Unamortized discount | $ 0.2 | $ 0.3 |
Minimum | ||
Long-Term Debt | ||
Interest rate stated percentage | 2.00% | |
Maximum | ||
Long-Term Debt | ||
Interest rate stated percentage | 3.00% |
LONG-TERM DEBT - Maturities of
LONG-TERM DEBT - Maturities of Debt (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Maturities of long-term debt | ||
2019 | $ 8,678 | |
2020 | 8,517 | |
2021 | 6,719 | |
2022 | 6,324 | |
2023 | 6,456 | |
Thereafter | 483,386 | |
Total debt before unamortized discount and debt issuance costs, net | 520,080 | $ 460,956 |
Unamortized discount and debt issuance costs, net | (9,407) | (10,692) |
Total debt | $ 510,673 | 450,264 |
Financing leases and other | ||
Effective interest rate | 16.00% | |
Maturities of long-term debt | ||
Total debt before unamortized discount and debt issuance costs, net | $ 14,361 | $ 18,169 |
Financing leases and other | Minimum | ||
Lease commitment terms | 1 year | |
Financing leases and other | Maximum | ||
Lease commitment terms | 16 years |
LONG-TERM DEBT - Financing Leas
LONG-TERM DEBT - Financing Leases and Other (Details) - Financing leases and other $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Aggregate contractual payments associated with the financing obligations | |
2019 | $ 3,134 |
2020 | 2,764 |
2021 | 2,775 |
2022 | 2,492 |
2023 | 2,425 |
Thereafter | 12,005 |
Less: amount representing interest | (11,234) |
Total | $ 14,361 |
Effective interest rate | 16.00% |
Minimum | |
Aggregate contractual payments associated with the financing obligations | |
Lease commitment terms | 1 year |
Maximum | |
Aggregate contractual payments associated with the financing obligations | |
Lease commitment terms | 16 years |
FAIR VALUE MEASUREMENTS - Finan
FAIR VALUE MEASUREMENTS - Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
FAIR VALUE MEASUREMENTS | |||
Unamortized discount and debt issuance costs, net | $ 9,407 | $ 10,692 | |
Interest rate swap agreements | Cash flow hedges | |||
FAIR VALUE MEASUREMENTS | |||
Notional amount of derivative instrument | 325,000 | $ 325,000 | 0 |
Annual reduction in notional amount of derivative | $ 12,500 | ||
Recurring basis | Level 1 | Other current assets | Fair Value | |||
FAIR VALUE MEASUREMENTS | |||
Money market funds | 0 | 3,300 | |
Term Loan | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 151,900 | ||
Term Loan | Recurring basis | Level 3 | Fair Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 149,400 | ||
Credit Agreement, dated March 6, 3028, Term Loan B | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 501,200 | ||
Credit Agreement, dated March 6, 3028, Term Loan B | Recurring basis | Level 3 | Fair Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 491,200 | ||
Credit Agreement, dated August 1, 2016, Term Loan B | Carrying Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 280,000 | ||
Credit Agreement, dated August 1, 2016, Term Loan B | Recurring basis | Level 3 | Fair Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 283,500 | ||
Revolving Credit Facility | |||
FAIR VALUE MEASUREMENTS | |||
Outstanding amount | 0 | ||
Revolving Credit Facility | Carrying Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 5,000 | ||
Revolving Credit Facility | Recurring basis | Level 3 | Fair Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 4,900 | ||
Seller Notes | Carrying Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | $ 4,500 | $ 5,900 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS - Cash Flow Hedge (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Interest rate swap agreements | Cash flow hedges | |||
DERIVATIVE FINANCIAL INSTRUMENTS | |||
Notional amount of derivative instrument | $ 325 | $ 325 | $ 0 |
DERIVATIVE FINANCIAL INSTRUME_4
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 | 12 Months Ended |
Dec. 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 | $ 4,838 |
Reclassification to interest expense, net of tax | (1,902) |
Balance at the end of the period | $ 2,936 |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS - Fair Value of Derivative Assets and Liabilities (Details) - Cash flow hedges $ in Thousands | Dec. 31, 2018USD ($) |
Accrued expenses and other current liabilities | |
Derivatives designated as cash flow hedging instruments: | |
Liabilities | $ 724 |
Other liabilities | |
Derivatives designated as cash flow hedging instruments: | |
Liabilities | $ 3,134 |
STOCK-BASED COMPENSATION - Plan
STOCK-BASED COMPENSATION - Plans (Details) - USD ($) $ in Millions | May 19, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | May 31, 2018 |
STOCK BASED COMPENSATION | |||||
Issued (in shares) | 2,700,000 | ||||
Forfeited (in shares) | 500,000 | ||||
Available for future issuance (in shares) | 800,000 | ||||
Stock-based compensation expense | $ 13.1 | $ 12.9 | $ 9.8 | ||
Special Equity Plan | |||||
STOCK BASED COMPENSATION | |||||
Shares authorized for issuance (in shares) | 1,500,000 | ||||
Additional shares authorized (in shares) | 0 | ||||
2016 Plan | |||||
STOCK BASED COMPENSATION | |||||
Shares authorized for issuance (in shares) | 2,600,000 | 2,600,000 | |||
2010 Plan | |||||
STOCK BASED COMPENSATION | |||||
Shares authorized for issuance (in shares) | 400,000 | 400,000 | |||
Stock Options | Special Equity Plan | |||||
STOCK BASED COMPENSATION | |||||
Issued (in shares) | 800,000 | ||||
Performance-based stock awards | Special Equity Plan | |||||
STOCK BASED COMPENSATION | |||||
Issued (in shares) | 300,000 |
STOCK-BASED COMPENSATION - Rest
STOCK-BASED COMPENSATION - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Restricted stock and performance-based restricted stock units | |||
Other disclosures | |||
Unrecognized stock-based compensation expense related to non-vested stock | $ 30.8 | ||
Weighted- average period over which unrecognized stock-based compensation cost will be expensed | 1 year 6 months | ||
Restricted stock units | |||
Units | |||
Vested (in units) | (700,000) | (400,000) | (400,000) |
Other disclosures | |||
Intrinsic value of shares fully vested during the period | $ 12 | $ 5.9 | $ 2.1 |
Total estimated grant date fair values | $ 13.3 | $ 17.7 | $ 6.2 |
Restricted stock units | Employee Awards | |||
Units | |||
Nonvested at the beginning of the year (in units) | 1,183,039 | 1,066,598 | |
Granted (in units) | 569,571 | 555,280 | |
Vested (in units) | (422,884) | (363,834) | |
Forfeited (in units) | (121,098) | (75,005) | |
Nonvested at the end of the year (in units) | 1,208,628 | 1,183,039 | 1,066,598 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the year (in dollars per unit) | $ 14.30 | $ 16.30 | |
Granted (in dollars per unit) | 15.70 | 13.74 | |
Vested (in dollars per unit) | 16.07 | 19.27 | |
Forfeited (in dollars per unit) | 13.02 | 14.58 | |
Nonvested at the end of the year (in dollars per unit) | $ 14.47 | $ 14.30 | $ 16.30 |
Restricted stock units | Director Awards | |||
Units | |||
Nonvested at the beginning of the year (in units) | 98,406 | 71,465 | |
Granted (in units) | 61,376 | 98,406 | |
Vested (in units) | (98,406) | (71,465) | |
Nonvested at the end of the year (in units) | 61,376 | 98,406 | 71,465 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the year (in dollars per unit) | $ 12.66 | $ 6.72 | |
Granted (in dollars per unit) | 18.25 | 12.66 | |
Vested (in dollars per unit) | 12.66 | 6.72 | |
Nonvested at the end of the year (in dollars per unit) | $ 18.25 | $ 12.66 | $ 6.72 |
Performance-based stock awards | Employee Awards | |||
Units | |||
Nonvested at the beginning of the year (in units) | 632,636 | 125,729 | |
Granted (in units) | 204,181 | 512,458 | |
Vested (in units) | (199,395) | (5,551) | |
Forfeited (in units) | (75,750) | ||
Nonvested at the end of the year (in units) | 561,672 | 632,636 | 125,729 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the year (in dollars per unit) | $ 18.87 | $ 26.11 | |
Granted (in dollars per unit) | 15.76 | 17.21 | |
Vested (in dollars per unit) | 22.16 | 29.66 | |
Forfeited (in dollars per unit) | 18.06 | ||
Nonvested at the end of the year (in dollars per unit) | $ 16.68 | $ 18.87 | $ 26.11 |
STOCK-BASED COMPENSATION - Spec
STOCK-BASED COMPENSATION - Special Equity Grant (Details) - $ / shares | May 19, 2017 | Dec. 31, 2018 |
Minimum | ||
STOCK BASED COMPENSATION | ||
Vesting period (in years) | 1 year | |
Maximum | ||
STOCK BASED COMPENSATION | ||
Vesting period (in years) | 4 years | |
Special Equity Plan | Performance-based stock awards | ||
STOCK BASED COMPENSATION | ||
Vesting (in percent) | 100.00% | |
Vesting period (in years) | 3 years | |
Compounded annual growth rate goal (in percent) | 20.00% | |
Equivalent share price at target date (in dollar per unit) | $ 22.07 | |
Share closing price on the eve of grant (in dollar per unit) | 12.77 | |
Fair value (in dollars per unit) | $ 19.29 | |
Volatility rate | 109.50% | |
Risk-free interest rate | 1.44% | |
Performance period | 3 years | |
Special Equity Plan | Performance-based stock awards | CAGR of 10% | Minimum | ||
STOCK BASED COMPENSATION | ||
Vesting (in percent) | 50.00% | |
Compounded annual growth rate goal (in percent) | 10.00% | |
Equivalent share price at target date (in dollar per unit) | $ 17 | |
Special Equity Plan | Performance-based stock awards | CAGR of 30% | Maximum | ||
STOCK BASED COMPENSATION | ||
Vesting (in percent) | 200.00% | |
Compounded annual growth rate goal (in percent) | 30.00% | |
Equivalent share price at target date (in dollar per unit) | $ 28.06 |
STOCK-BASED COMPENSATION - Opti
STOCK-BASED COMPENSATION - Options Activity (Details) - Stock Options - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
STOCK BASED COMPENSATION | ||
Grant date fair value | $ 8.67 | |
Expected dividend yield | 0.00% | |
Volatility rate | 92.48% | |
Risk-free interest rate | 1.68% | |
Expected term | 4 years 4 months 17 days | |
Shares | ||
Outstanding at the beginning of the year (in shares) | 798,020 | 0 |
Granted (in shares) | 798,020 | |
Terminated (in shares) | (111,203) | |
Exercised (in shares) | (4,948) | |
Outstanding at the end of the year (in shares) | 681,869 | 798,020 |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the year (in dollars per share) | $ 12.77 | |
Granted (in dollars per share) | $ 12.77 | |
Terminated (in dollars per share) | 12.77 | |
Exercised (in dollars per share) | 12.77 | |
Outstanding at the end of the year (in dollars per share) | $ 12.77 | $ 12.77 |
Other Disclosures | ||
Aggregate Intrinsic Value | $ 4,213,950 | $ 2,378,100 |
Weighted Average Remaining Contractual Term (Years) | 8 years 4 months 24 days | 9 years 4 months 24 days |
Options exercisable (in shares) | 700,000 | 800,000 |
Weighted average exercise price of options exercisable (in dollars per share) | $ 12.77 | $ 12.77 |
Average remaining contractual term of options exercisable | 8 years 4 months 24 days | 9 years 4 months 24 days |
Aggregate intrinsic value of exercisable options | $ 4,200 | $ 2,400 |
Unrecognized stock-based compensation expense related to non-vested stock | $ 2,700 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Commitments (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Apr. 30, 2014 | Dec. 31, 2018 | Dec. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES | |||
Outstanding purchase commitments | $ 4.5 | ||
Covered period of purchase commitment | 5 years | ||
Estimated loss on purchase commitment | $ 3.4 | ||
Remaining purchase commitment | $ 0 | ||
Reserve Associated with Inventory | $ 2.2 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Contingencies (Details) | 7 Months Ended |
Aug. 31, 2015lawsuit | |
COMMITMENTS AND CONTINGENCIES | |
Number of law suits filed | 2 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES - Favorable Settlements (Details) $ in Millions | Jun. 28, 2018USD ($) | May 15, 2018USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Dec. 31, 2018 |
COMMITMENTS AND CONTINGENCIES | |||||
Number of matters that received favorable resolution | 2 | ||||
Net favorable settlement | $ 1.7 | ||||
Payment for claims | $ 2.2 | ||||
Favorable amount over previously estimated liabilities | $ 0.5 | ||||
Period covered by unclaimed property claims | 12 years | ||||
Interest of unclaimed properties settlement not required to be paid | $ 1.5 | $ 1.5 |
SHAREHOLDERS' DEFICIT (Details)
SHAREHOLDERS' DEFICIT (Details) - $ / shares | Feb. 28, 2016 | Dec. 31, 2018 | Dec. 31, 2017 |
Shareholder's Rights Plan | |||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Series A Junior Participating Preferred Stock | |||
Shareholder's Rights Plan | |||
Number of shares of Preferred Stock each Right entitles a holder to purchase | 0.001 | ||
Purchase price per right | $ 65 | ||
Common Stock | |||
Shareholder's Rights Plan | |||
Common stock, par value (in dollars per share) | $ 0.01 | ||
Minimum threshold percentage of common stock for rights exercisable | 10.00% | ||
Preferred Stock | Series A Junior Participating Preferred Stock | |||
Shareholder's Rights Plan | |||
Preferred stock, par value (in dollars per share) | $ 0.01 | ||
Right | |||
Shareholder's Rights Plan | |||
Preferred share purchase right | 1 |
SEGMENT AND RELATED INFORMATI_3
SEGMENT AND RELATED INFORMATION - Paragraphs (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018USD ($)segment | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
SEGMENT AND RELATED INFORMATION | |||
Number of operating segments | segment | 2 | ||
Revenue from foreign exports | $ 0 | $ 0 | $ 0 |
Foreign Assets | $ 0 | $ 0 | $ 0 |
Patient Care | Federal Government | Net Revenues | Customer Concentration | |||
SEGMENT AND RELATED INFORMATION | |||
Concentration risk (as a percent) | 56.50% | 54.80% | 54.10% |
SEGMENT AND RELATED INFORMATI_4
SEGMENT AND RELATED INFORMATION - Financial Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
SEGMENT AND RELATED INFORMATION | |||||||||||
Net revenues | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 285,736 | $ 257,966 | $ 263,386 | $ 233,681 | $ 1,048,760 | $ 1,040,769 | $ 1,042,054 |
Material costs | 90,340 | 84,805 | 86,516 | 76,356 | 88,816 | 82,345 | 83,657 | 74,405 | 338,017 | 329,223 | 332,071 |
Personnel expenses | 97,574 | 90,853 | 89,554 | 86,108 | 95,239 | 90,065 | 87,831 | 87,955 | 364,089 | 361,090 | 363,537 |
Depreciation & amortization | 8,903 | 8,950 | 9,272 | 9,330 | 9,665 | 9,632 | 9,825 | 10,137 | 36,455 | 39,259 | 44,887 |
Impairment of intangible assets | 183 | 54,735 | 183 | 54,735 | 86,164 | ||||||
Segment income (loss) from operations | $ 22,771 | $ 15,924 | $ 20,329 | $ 623 | $ (35,413) | $ 9,540 | $ 16,464 | $ (9,541) | 59,647 | (18,950) | (71,300) |
Purchase of property, plant and equipment | 18,984 | 16,355 | 21,148 | ||||||||
Patient Care | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Net revenues | 857,382 | 851,973 | 840,130 | ||||||||
Material costs | 234,409 | 228,091 | 230,957 | ||||||||
Personnel expenses | 312,736 | 312,695 | 315,892 | ||||||||
Other expenses | 140,527 | 143,598 | 150,604 | ||||||||
Depreciation & amortization | 19,113 | 21,363 | 24,873 | ||||||||
Segment income (loss) from operations | 126,805 | 122,418 | 92,749 | ||||||||
Purchase of property, plant and equipment | 12,781 | 8,163 | 14,581 | ||||||||
Patient Care | Operating segments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Net revenues | 857,382 | 851,973 | 840,130 | ||||||||
Material costs | 258,201 | 251,899 | 256,012 | ||||||||
Patient Care | Intersegments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Material costs | 23,792 | 23,808 | 25,055 | ||||||||
Products & Services | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Net revenues | 191,378 | 188,796 | 201,924 | ||||||||
Material costs | 103,608 | 101,132 | 101,114 | ||||||||
Personnel expenses | 51,353 | 48,395 | 47,645 | ||||||||
Other expenses | 24,306 | 25,855 | 32,228 | ||||||||
Depreciation & amortization | 10,197 | 10,163 | 11,600 | ||||||||
Impairment of intangible assets | 183 | 54,735 | 86,164 | ||||||||
Segment income (loss) from operations | 25,523 | (27,676) | (51,772) | ||||||||
Purchase of property, plant and equipment | 1,890 | 2,153 | 820 | ||||||||
Products & Services | Operating segments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Net revenues | 383,474 | 367,564 | 377,463 | ||||||||
Material costs | 271,912 | 256,092 | 251,598 | ||||||||
Products & Services | Intersegments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Net revenues | 192,096 | 178,768 | 175,539 | ||||||||
Material costs | $ 168,304 | $ 154,960 | $ 150,484 |
SEGMENT AND RELATED INFORMATI_5
SEGMENT AND RELATED INFORMATION - Reconciliation of the Reportable Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
SEGMENT AND RELATED INFORMATION | |||||||||||
Income (loss) from operations | $ 22,771 | $ 15,924 | $ 20,329 | $ 623 | $ (35,413) | $ 9,540 | $ 16,464 | $ (9,541) | $ 59,647 | $ (18,950) | $ (71,300) |
Interest expense, net | 9,046 | 8,939 | 7,317 | 12,263 | 14,491 | 15,097 | 14,091 | 14,009 | 37,566 | 57,688 | 45,199 |
Loss on extinguishment of debt | 16,998 | 16,998 | 6,031 | ||||||||
Non-service defined benefit plan expense | 176 | 176 | 176 | 176 | 184 | 184 | 184 | 184 | 703 | 736 | 786 |
Income (loss) from continuing operations before income taxes | 13,549 | 6,809 | 12,836 | (28,814) | (50,088) | (5,741) | 2,189 | (23,734) | 4,380 | (77,374) | (123,316) |
Provision (benefit) for income taxes | 9,086 | 2,440 | (92) | (6,196) | 34,325 | (1,580) | 552 | (6,000) | 5,238 | 27,297 | (15,910) |
Loss from continuing operations | (858) | (104,671) | (107,406) | ||||||||
Consolidated net revenue | 284,853 | 262,946 | 266,966 | 233,995 | 285,736 | 257,966 | 263,386 | 233,681 | 1,048,760 | 1,040,769 | 1,042,054 |
Consolidated material costs | 90,340 | $ 84,805 | $ 86,516 | $ 76,356 | 88,816 | $ 82,345 | $ 83,657 | $ 74,405 | 338,017 | 329,223 | 332,071 |
Consolidated purchase of property, plant and equipment | 18,984 | 16,355 | 21,148 | ||||||||
Consolidated assets | 703,010 | 640,423 | 703,010 | 640,423 | |||||||
Corporate & other | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Income (loss) from operations | (92,681) | (113,692) | (112,277) | ||||||||
Consolidated purchase of property, plant and equipment | 4,313 | 6,039 | 5,747 | ||||||||
Consolidated assets | 186,588 | 129,128 | 186,588 | 129,128 | |||||||
Consolidating adjustments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Consolidated net revenue | (192,096) | (178,768) | (175,539) | ||||||||
Consolidated material costs | (192,096) | (178,768) | (175,539) | ||||||||
Patient Care | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Income (loss) from operations | 126,805 | 122,418 | 92,749 | ||||||||
Consolidated net revenue | 857,382 | 851,973 | 840,130 | ||||||||
Consolidated material costs | 234,409 | 228,091 | 230,957 | ||||||||
Consolidated purchase of property, plant and equipment | 12,781 | 8,163 | 14,581 | ||||||||
Consolidated assets | 415,469 | 413,759 | 415,469 | 413,759 | |||||||
Patient Care | Operating segments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Consolidated net revenue | 857,382 | 851,973 | 840,130 | ||||||||
Consolidated material costs | 258,201 | 251,899 | 256,012 | ||||||||
Products & Services | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Income (loss) from operations | 25,523 | (27,676) | (51,772) | ||||||||
Consolidated net revenue | 191,378 | 188,796 | 201,924 | ||||||||
Consolidated material costs | 103,608 | 101,132 | 101,114 | ||||||||
Consolidated purchase of property, plant and equipment | 1,890 | 2,153 | 820 | ||||||||
Consolidated assets | $ 100,953 | $ 97,536 | 100,953 | 97,536 | |||||||
Products & Services | Operating segments | |||||||||||
SEGMENT AND RELATED INFORMATION | |||||||||||
Consolidated net revenue | 383,474 | 367,564 | 377,463 | ||||||||
Consolidated material costs | $ 271,912 | $ 256,092 | $ 251,598 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Changes in operating assets and liabilities | |||
Accounts receivable, net | $ 3,238 | $ (12,585) | $ 17,612 |
Inventories | 1,750 | (913) | 253 |
Other current assets and other assets | 4,459 | 661 | 849 |
Income taxes receivable | 12,700 | 121 | 18,725 |
Accounts payable | 6,511 | (3,562) | (3,133) |
Accrued expenses and other current liabilities | (16,550) | (12,929) | (3,045) |
Accrued compensation related costs | 1,713 | 16,843 | (12,006) |
Other liabilities | (3,980) | (2,271) | (5,797) |
Changes in operating assets and liabilities on cash flows from operating activities | 9,841 | (14,635) | 13,458 |
Cash paid during the period for: | |||
Interest paid | 31,312 | 48,437 | 42,345 |
Income tax (refunds received) paid | (11,131) | 725 | (35,092) |
Non-cash financing and investing activities: | |||
Issuance of seller notes in connection with acquisitions | 1,120 | ||
Additions to property, plant and equipment acquired through financing obligations | 1,523 | 1,484 | 374 |
Retirements of financed property, plant and equipment and related financing obligations | 4,460 | 811 | 2,381 |
Purchase of property, plant and equipment in accounts payable | $ 5,018 | $ 2,119 | $ 728 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
DISCONTINUED OPERATIONS | |
Income from discontinued operations, net of income taxes | $ 935 |
Dosteon | Discontinued Operations | |
DISCONTINUED OPERATIONS | |
Contingent consideration gains resulting from the disposal | 1,400 |
Income before income taxes from discontinued operations | 1,425 |
Income tax provision | 490 |
Income from discontinued operations, net of income taxes | $ 935 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ in Millions | Jan. 28, 2019 | Dec. 31, 2018 |
General and administrative expenses | ||
SUBSEQUENT EVENTS | ||
Acquisition-related expenses | $ 0.5 | |
Subsequent Events | ||
SUBSEQUENT EVENTS | ||
Aggregate purchase price | $ 33.2 | |
Consideration paid in cash | 28.5 | |
Consideration paid in notes | $ 4.8 | |
Notes payable to share holders in quarterly installments period | 3 years |
QUARTERLY FINANCIAL INFORMATI_3
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) | |||||||||||
Net revenues | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 285,736 | $ 257,966 | $ 263,386 | $ 233,681 | $ 1,048,760 | $ 1,040,769 | $ 1,042,054 |
Material costs | 90,340 | 84,805 | 86,516 | 76,356 | 88,816 | 82,345 | 83,657 | 74,405 | 338,017 | 329,223 | 332,071 |
Personnel costs | 97,574 | 90,853 | 89,554 | 86,108 | 95,239 | 90,065 | 87,831 | 87,955 | 364,089 | 361,090 | 363,537 |
Other operating costs | 31,271 | 30,999 | 30,536 | 31,096 | 32,097 | 33,184 | 31,861 | 32,689 | 123,902 | 129,831 | 139,024 |
General and administrative expenses | 29,085 | 28,308 | 26,523 | 25,636 | 33,373 | 25,356 | 25,227 | 25,386 | 109,552 | 109,342 | 106,438 |
Professional accounting and legal fees | 4,726 | 3,107 | 4,236 | 4,846 | 7,224 | 7,844 | 8,521 | 12,650 | 16,915 | 36,239 | 41,233 |
Depreciation and amortization | 8,903 | 8,950 | 9,272 | 9,330 | 9,665 | 9,632 | 9,825 | 10,137 | 36,455 | 39,259 | 44,887 |
Impairment of intangible assets | 183 | 54,735 | 183 | 54,735 | 86,164 | ||||||
Income (loss) from operations | 22,771 | 15,924 | 20,329 | 623 | (35,413) | 9,540 | 16,464 | (9,541) | 59,647 | (18,950) | (71,300) |
Interest expense, net | 9,046 | 8,939 | 7,317 | 12,263 | 14,491 | 15,097 | 14,091 | 14,009 | 37,566 | 57,688 | 45,199 |
Loss on extinguishment of debt | 16,998 | 16,998 | 6,031 | ||||||||
Non-service defined benefit plan expense | 176 | 176 | 176 | 176 | 184 | 184 | 184 | 184 | 703 | 736 | 786 |
Income (loss) from continuing operations before income taxes | 13,549 | 6,809 | 12,836 | (28,814) | (50,088) | (5,741) | 2,189 | (23,734) | 4,380 | (77,374) | (123,316) |
(Benefit) provision for income taxes | 9,086 | 2,440 | (92) | (6,196) | 34,325 | (1,580) | 552 | (6,000) | 5,238 | 27,297 | (15,910) |
Net loss | 4,463 | 4,369 | 12,928 | (22,618) | (84,413) | (4,161) | 1,637 | (17,734) | (858) | (104,671) | (106,471) |
Other comprehensive loss: | |||||||||||
Unrealized (loss) gain on cash flow hedges, net of tax | (4,698) | 1,738 | 2,314 | (2,290) | (2,936) | ||||||
Unrealized (loss) gain on defined benefit plan, net of tax | 694 | 26 | 26 | (292) | (195) | (17) | (17) | (17) | 454 | (246) | (26) |
Comprehensive loss | $ 459 | $ 6,133 | $ 15,268 | $ (25,200) | $ (84,608) | $ (4,178) | $ 1,620 | $ (17,751) | $ (3,340) | $ (104,917) | $ (106,497) |
Basic Per Common Share Data: | |||||||||||
Basic (loss) earnings per share | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ (2.32) | $ (0.11) | $ 0.05 | $ (0.49) | |||
Weighted average shares outstanding - basic | 36,906,938 | 36,856,881 | 36,790,401 | 36,498,482 | 36,410,488 | 36,340,089 | 36,286,528 | 36,084,630 | 36,764,551 | 36,270,920 | 35,933,222 |
Diluted Per Common Share Data: | |||||||||||
Diluted (loss) earnings per share | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ (2.32) | $ (0.11) | $ 0.04 | $ (0.49) | |||
Weighted average shares outstanding - diluted | 37,721,662 | 37,556,594 | 37,404,360 | 36,498,482 | 36,410,488 | 36,340,089 | 36,543,740 | 36,084,630 | 36,764,551 | 36,270,920 | 35,933,222 |