Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 29, 2020 | Jun. 30, 2019 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Entity Registrant Name | HANGER, INC. | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 629.1 | ||
Entity Common Stock, Shares Outstanding | 37,429,065 | ||
Entity Central Index Key | 0000722723 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 74,419 | $ 95,114 |
Accounts receivable, net | 159,359 | 143,986 |
Inventories | 68,204 | 67,690 |
Income taxes receivable | 379 | |
Other current assets | 13,673 | 18,731 |
Total current assets | 315,655 | 325,900 |
Non-current assets: | ||
Property, plant and equipment, net | 84,057 | 89,489 |
Goodwill | 232,244 | 198,742 |
Other intangible assets, net | 17,952 | 15,478 |
Deferred income taxes | 70,481 | 65,635 |
Operating lease right-of-use assets | 110,559 | |
Other assets | 11,305 | 7,766 |
Total assets | 842,253 | 703,010 |
Current liabilities: | ||
Current portion of long-term debt | 8,752 | 8,583 |
Accounts payable | 48,477 | 55,797 |
Accrued expenses and other current liabilities | 55,825 | 51,783 |
Accrued compensation related costs | 61,010 | 55,111 |
Current portion of operating lease liabilities | 34,342 | |
Total current liabilities | 208,406 | 171,274 |
Long-term liabilities: | ||
Long-term debt, less current portion | 490,121 | 502,090 |
Operating lease liabilities | 88,418 | |
Other liabilities | 45,804 | 51,570 |
Total liabilities | 832,749 | 724,934 |
Shareholders' equity (deficit): | ||
Common stock, $0.01 par value; 60,000,000 shares authorized; 37,602,873 shares issued and 37,460,052 shares outstanding at 2019, and 37,063,995 shares issued and 36,921,174 shares outstanding at 2018, respectively | 376 | 371 |
Additional paid-in capital | 354,326 | 343,955 |
Accumulated other comprehensive loss | (12,551) | (4,531) |
Accumulated deficit | (331,951) | (361,023) |
Treasury stock, at cost; 142,821 shares at 2019 and 2018, respectively | (696) | (696) |
Total shareholders' equity (deficit) | 9,504 | (21,924) |
Total liabilities and shareholders' equity (deficit) | $ 842,253 | $ 703,010 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
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 | 37,602,873 | 37,063,995 |
Common stock, shares outstanding | 37,460,052 | 36,921,174 |
Treasury stock, shares | 142,821 | 142,821 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
Net revenues | $ 300,891 | $ 279,638 | $ 281,098 | $ 236,419 | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 1,098,046 | $ 1,048,760 | $ 1,040,769 |
Material costs | 95,961 | 92,034 | 91,399 | 78,377 | 90,340 | 84,805 | 86,516 | 76,356 | 357,771 | 338,017 | 329,223 |
Personnel costs | 99,430 | 94,594 | 91,490 | 86,711 | 97,574 | 90,853 | 89,554 | 86,108 | 372,225 | 364,089 | 361,090 |
Other operating costs | 34,876 | 32,771 | 33,741 | 33,555 | 31,271 | 30,999 | 30,536 | 31,096 | 134,943 | 123,902 | 129,831 |
General and administrative expenses | 30,591 | 29,834 | 29,358 | 28,282 | 29,085 | 28,308 | 26,523 | 25,636 | 118,065 | 109,552 | 109,342 |
Professional accounting and legal fees | 4,113 | 3,629 | 3,247 | 2,700 | 4,726 | 3,107 | 4,236 | 4,846 | 13,689 | 16,915 | 36,239 |
Depreciation and amortization | 9,019 | 9,373 | 8,760 | 8,773 | 8,903 | 8,950 | 9,272 | 9,330 | 35,925 | 36,455 | 39,259 |
Impairment of intangible assets | 183 | 183 | 54,735 | ||||||||
Income (loss) from operations | 26,901 | 17,403 | 23,103 | (1,979) | 22,771 | 15,924 | 20,329 | 623 | 65,428 | 59,647 | (18,950) |
Interest expense, net | 8,285 | 8,954 | 8,481 | 8,538 | 9,046 | 8,939 | 7,317 | 12,263 | 34,258 | 37,566 | 57,688 |
Loss on extinguishment of debt | 16,998 | 16,998 | |||||||||
Non-service defined benefit plan expense | 172 | 173 | 173 | 173 | 176 | 176 | 176 | 176 | 691 | 703 | 736 |
Income (loss) before income taxes | 18,444 | 8,276 | 14,449 | (10,690) | 13,549 | 6,809 | 12,836 | (28,814) | 30,479 | 4,380 | (77,374) |
Provision for income taxes | (306) | 2,585 | 4,414 | (3,739) | 9,086 | 2,440 | (92) | (6,196) | 2,954 | 5,238 | 27,297 |
Net income (loss) | $ 18,750 | $ 5,691 | $ 10,035 | $ (6,951) | $ 4,463 | $ 4,369 | $ 12,928 | $ (22,618) | $ 27,525 | $ (858) | $ (104,671) |
Basic and Diluted Per Common Share Data: | |||||||||||
Basic income (loss) per share (in dollars per share) | $ 0.50 | $ 0.15 | $ 0.27 | $ (0.19) | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ 0.74 | $ (0.02) | $ (2.89) |
Weighted average shares used to compute basic earnings per common share | 37,411,847 | 37,349,144 | 37,299,766 | 37,001,977 | 36,906,938 | 36,856,881 | 36,790,401 | 36,498,482 | 37,267,188 | 36,764,551 | 36,270,920 |
Diluted income (loss) per share | $ 0.49 | $ 0.15 | $ 0.26 | $ (0.19) | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ 0.72 | $ (0.02) | $ (2.89) |
Weighted average shares used to compute diluted earnings per common share | 38,415,108 | 37,986,860 | 37,887,559 | 37,001,977 | 37,721,662 | 37,556,594 | 37,404,360 | 36,498,482 | 38,064,617 | 36,764,551 | 36,270,920 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||
Net income (loss) | $ 18,750 | $ 5,691 | $ 10,035 | $ (6,951) | $ 4,463 | $ 4,369 | $ 12,928 | $ (22,618) | $ 27,525 | $ (858) | $ (104,671) |
Other comprehensive loss: | |||||||||||
Unrealized loss on cash flow hedges, net of tax benefit of ($2,278), ($922), and $0, respectively | 2,064 | (1,641) | (4,688) | (2,936) | (4,698) | 1,738 | 2,314 | (2,290) | (7,201) | (2,936) | |
Unrealized (loss) gain on defined benefit plan, net of tax (benefit) provision of ($259), $142, and ($151), respectively | (838) | 7 | 6 | 6 | 694 | 26 | 26 | (292) | (819) | 454 | (246) |
Total other comprehensive loss | (8,020) | (2,482) | (246) | ||||||||
Comprehensive income (loss) | $ 19,976 | $ 4,057 | $ 5,353 | $ (9,881) | $ 459 | $ 6,133 | $ 15,268 | $ (25,200) | $ 19,505 | $ (3,340) | $ (104,917) |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||
Unrealized loss gain on cash flow hedges tax | $ (2,278) | $ (922) | $ 0 |
Unrealized (loss) gain on defined benefit plan tax | $ (259) | $ 142 | $ (151) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Treasury Stock | Total |
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 | ||||||
Cumulative effect of a change in accounting | ASU 2016-09 | 98 | (98) | ||||
Net income (loss) | (104,671) | (104,671) | ||||
Share based compensation expense | 12,929 | 12,929 | ||||
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 | |||||
Effect of shares withheld to cover taxes | (1,477) | (1,477) | ||||
Total other comprehensive (loss) income | (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 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
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 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | (858) | (858) | ||||
Share based compensation expense | 13,065 | 13,065 | ||||
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 | |||||
Effect of shares withheld to cover taxes | (2,906) | (2,906) | ||||
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 | |||||
Reclassification of certain tax effects from accumulated other comprehensive loss | ASU 2018-02 | (363) | 363 | ||||
Total other comprehensive (loss) income | (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 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Cumulative effect of a change in accounting | ASU 2016-02 | 1,547 | $ 1,547 | ||||
Issuance of common stock in connection with the exercise of stock options | $ 371 | 343,955 | (4,531) | (359,476) | (696) | (20,377) |
Issuance in connection with the exercise of stock options (in shares) | 36,921,000 | |||||
Balance at Jan. 01, 2019 | (20,377) | |||||
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 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income (loss) | $ 0 | 0 | 0 | 27,525 | 0 | $ 27,525 |
Share based compensation expense | 13,414 | 13,414 | ||||
Issuance of common stock upon vesting of restricted stock units | ASU 2018-02 | $ 4 | (4) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | ASU 2018-02 | 435,000 | |||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 0 | |||||
Effect of shares withheld to cover taxes | (4,137) | (4,137) | ||||
Issuance of common stock in connection with the exercise of stock options | $ 1 | 1,098 | 1,099 | |||
Issuance in connection with the exercise of stock options (in shares) | 104,000 | |||||
Total other comprehensive (loss) income | (8,020) | (8,020) | ||||
Balance at Dec. 31, 2019 | $ 376 | $ 354,326 | $ (12,551) | $ (331,951) | $ (696) | $ 9,504 |
Balance (in shares) at Dec. 31, 2019 | 37,460,000 | 37,460,052 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows provided by operating activities: | ||||
Net income (loss) | $ (22,618) | $ 27,525 | $ (858) | $ (104,671) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
Depreciation and amortization | 9,330 | 35,925 | 36,455 | 39,259 |
Provision (benefit) for doubtful accounts | 1,131 | (733) | 9,422 | |
Impairment of intangible assets | 183 | 54,735 | ||
Stock-based compensation expense | 13,414 | 13,065 | 12,930 | |
Deferred income taxes | (3,226) | 3,452 | 26,248 | |
Amortization of right-of-use assets | 312 | |||
Amortization of debt discounts and issuance costs | 1,623 | 2,837 | 8,876 | |
Loss on extinguishment of debt | 16,998 | 16,998 | ||
Gain on sale and disposal of fixed assets | (1,614) | (2,713) | (2,059) | |
Changes in operating assets and liabilities (Note U): | (15,932) | 9,841 | (14,635) | |
Net cash provided by operating activities | 58,846 | 78,527 | 30,105 | |
Cash flows used in investing activities | ||||
Purchase of property, plant, and equipment | (26,433) | (18,984) | (16,355) | |
Purchase of therapeutic program equipment leased to third parties under operating leases | (6,672) | (9,835) | (6,000) | |
Acquisitions, net of cash acquired | (36,585) | (1,978) | ||
Proceeds from company-owned life insurance investment | 17,135 | |||
Purchase of company-owned life insurance investment | (66) | (598) | (555) | |
Proceeds from sale of property, plant and equipment | 2,598 | 4,237 | 4,909 | |
Net cash used in investing activities | (67,158) | (27,158) | (866) | |
Cash flows (used in ) provided by financing activities | ||||
Borrowings under term loan, net of discount | 501,467 | 420 | ||
Repayment of term loan | (5,050) | (435,660) | (28,545) | |
Borrowings under revolving credit agreement | 3,000 | 156,965 | ||
Repayments under revolving credit agreement | (8,000) | (151,965) | ||
Payment of employee taxes on stock-based compensation | (4,137) | (2,906) | (1,477) | |
Payment on seller notes | (3,821) | (2,599) | (5,197) | |
Payment of financing lease obligations | (474) | (1,207) | (1,210) | |
Payment of debt issuance costs | (6,757) | (2,863) | ||
Payment of debt extinguishment costs | (8,436) | |||
Proceeds from exercise of options | 1,099 | 64 | ||
Net cash (used in) provided by financing activities | (12,383) | 38,966 | (33,872) | |
(Decrease) increase in cash, cash equivalents, and restricted cash | (20,695) | 90,335 | (4,633) | |
Cash, cash equivalents, and restricted cash, at beginning of period | 4,779 | 95,114 | 4,779 | 9,412 |
Cash, cash equivalents, and restricted cash, at end of period | 74,419 | 95,114 | 4,779 | |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash: | ||||
Cash and cash equivalents, at beginning of period | 1,508 | 95,114 | 1,508 | 7,157 |
Restricted cash, at beginning of period | 3,271 | 3,271 | 2,255 | |
Cash, cash equivalents, and restricted cash, at beginning of period | $ 4,779 | 95,114 | 4,779 | 9,412 |
Cash and cash equivalents, at end of period | 74,419 | 95,114 | 1,508 | |
Restricted cash, at end of period | 3,271 | |||
Cash, cash equivalents, and restricted cash, at end of period | $ 74,419 | $ 95,114 | $ 4,779 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
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 701 patient care clinics and 111 satellite locations in 46 states and the District of Columbia as of December 31, 2019. On a regular basis, we have been opening, closing, and merging patient care locations and satellite locations. During the year ended December 31, 2019, we have opened or acquired 100 and closed or consolidated 68 patient care locations. Our Products & Services segment is comprised of our distribution services and therapeutic solutions businesses. As a leading provider of O&P products in the United States, we engage in the 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 4,000 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, impairments of long-lived assets including goodwill, income taxes, business combinations, leases, and stock-based compensation. Revenue Recognition 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 VA, 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 $2.5 million at December 31, 2019 and $2.1 million at December 31, 2018. 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 under 90 days after the patient receives the device and the deferred revenue is recognized on a straight-line basis over the 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. Products & 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. 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 in advertising costs during the years ended December 31, 2019, 2018, and 2017, 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 $0.9 million, $1.5 million, and $0.7 million in advertising costs during the years ended December 31, 2019, 2018, and 2017, 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. 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 and estimated implicit price concessions, such as disallowed revenue and patient non-payments, as described in the revenue recognition accounting policy above. Estimates for both disallowed revenue and patient non-payments apply the expected value method by considering historical collection experience by each of the Medicare and non-Medicare (commercial insurance, Medicaid, the VA, 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 Our 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 $7.6 million and $7.2 million at December 31, 2019 and 2018, 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 $29.4 million and $27.5 million at December 31, 2019 and 2018, respectively, with WIP inventory representing $10.2 million and $9.3 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% of raw materials at December 31, 2019 and 2018, respectively, were purchased from our Products & Services segment. Raw material inventory was $19.2 million and $18.2 million at December 31, 2019 and 2018, 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 2019 and 2018 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 Our Product & Service segment inventories consist primarily of finished goods at its distribution centers as well as raw materials at fabrication facilities, and totaled $38.8 million and $40.2 million as of December 31, 2019 and 2018, 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, 2019, 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. 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, finance 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 which is included within “Other operating costs” in our consolidated statements of operations. 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. As of October 1, 2019, 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 year ended December 31, 2017, we recorded impairments of our goodwill totaling $53.3 million, respectively. We did not have any goodwill impairment during 2019 and 2018. For the years ended December 31, 2018, and 2017, we recorded impairments of our indefinite-lived trade name totaling $0.2 million, and $1.4 million, respectively. We did not have any indefinite-lived trade name impairment during 2019. See Note H - “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 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 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 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 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 $0.8 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 We lease a majority of our patient care clinics and warehouses 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 lease commencement date. We exclude leases with a term of one year or less from our balance sheet, and do not separate non-lease components from our real estate leases. Our leases may include variable payments for maintenance, which are expensed as incurred. In addition, we are the lessor of therapeutic program equipment to patients and businesses in acute, post-acute, and clinic settings. The 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. These operating lease agreements are typically for twelve months and have a 30-day cancellation policy. Equipment acquired under a finance lease is recorded at the present value of the future minimum lease payments. We do not separate non-lease components, consisting primarily of training, for these leases. 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 exp |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2019 | |
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 zero as of December 31, 2019, and 17,894 and 473,037 as of December 31, 2018 and 2017, 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 - “Debt and Other Obligations” within these consolidated financial statements. The reconciliation of the numerators and denominators used to calculate basic and diluted net income (loss) per share are as follows: For the Years Ended December 31, (in thousands, except per share data) 2019 2018 2017 Net income (loss) $ 27,525 $ (858) $ (104,671) Weighted average shares outstanding - basic 37,267,188 36,764,551 36,270,920 Effect of potentially dilutive restricted stock units and options (1) 797,429 — — Weighted average shares outstanding - diluted 38,064,617 36,764,551 36,270,920 Basic income (loss) per share $ 0.74 $ (0.02) $ (2.89) Diluted income (loss) per share $ 0.72 $ (0.02) $ (2.89) (1) In accordance with ASC 260 - Earnings Per Share, during periods of a net loss, shares used to compute diluted per share amounts exclude potentially dilutive shares related to unvested restricted stock units and unexercised options. For the years ended December 31, 2018 and 2017, potentially dilutive shares of 709,309 shares and 295,718 shares were excluded, as we were in a net loss position. |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2019 | |
Revenue Recognition | |
Revenue Recognition | Note C — Revenue Recognition 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 VA, and 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. The following table disaggregates revenue from contracts with customers in our Patient Care segment for the years ended December 31, 2019, 2018, and 2017: For the Years Ended December 31, (in thousands) 2019 2018 2017 Patient Care Segment Medicare $ 289,099 $ 273,833 $ 260,275 Medicaid 143,438 132,938 132,707 Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) 323,499 316,243 325,639 Veterans Administration 89,035 78,328 74,435 Private Pay 60,620 56,040 58,917 Total $ 905,691 $ 857,382 $ 851,973 The impact to revenue related to prior period performance obligations was not material for the years ended December 31, 2019, 2018, and 2017. Products & Services Segment Revenue in our Products & Services segment is derived from the distribution of O&P components and from therapeutic solutions which includes the leasing and sale of rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training. The following table disaggregates revenue from contracts with customers in our Product & Services segment for the years ended December 31, 2019, 2018, and 2017: For the Years Ended December 31, (in thousands) 2019 2018 2017 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 143,400 $ 135,995 $ 128,686 Therapeutic solutions 48,955 55,383 60,110 Total $ 192,355 $ 191,378 $ 188,796 |
Accounts Receivable, Net
Accounts Receivable, Net | 12 Months Ended |
Dec. 31, 2019 | |
Accounts Receivable, Net | |
Accounts Receivable, Net | Note D — 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. Our accounts receivable represent amounts outstanding from our gross charges, net of contractual discounts, sales returns, and other implicit price concessions including estimates for payor disallowances and patient non-payments. 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, 2019 and 2018 is comprised of the following: As of December 31, 2019 As of December 31, 2018 Products & Products & (in thousands) Patient Care Services Consolidated Patient Care Services Consolidated Gross charges before estimates for implicit price concessions $ 202,132 $ 27,551 $ 229,683 $ 182,338 $ 24,542 $ 206,880 Less estimates for implicit price concessions: Payor disallowances (58,094) — (58,094) (53,378) — (53,378) Patient non-payments (9,589) — (9,589) (7,244) — (7,244) Accounts receivable, gross 134,449 27,551 162,000 121,716 24,542 146,258 Allowance for doubtful accounts — (2,641) (2,641) — (2,272) (2,272) Accounts receivable, net $ 134,449 $ 24,910 $ 159,359 $ 121,716 $ 22,270 $ 143,986 Approximately 50.1% and 48.4% of gross charges before estimates for payor disallowances and patient non-payments, is due from the Federal Government (Medicare, Medicaid, and the VA) at December 31, 2019 and 2018, respectively. The following table summarizes activities by year for the allowance for doubtful accounts: Allowance for Doubtful (in thousands) Accounts Balance at December 31, 2016 $ 15,521 Additions 9,423 Reductions (10,879) Balance at December 31, 2017 14,065 Cumulative Effect of ASC 606 (9,894) Additions 630 Reductions (1,155) Recoveries (1,374) Balance at December 31, 2018 2,272 Additions 1,877 Reductions (762) Recoveries (746) Balance at December 31, 2019 $ 2,641 The following tables represent gross charges before estimates for payor disallowances and patient non-payments, 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, 2019 and 2018, respectively: December 31, 2019 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) $ 46,771 $ 12,599 $ 7,050 $ 18,120 $ 84,540 Private pay 1,081 535 435 569 2,620 Medicaid 13,779 3,903 2,314 8,068 28,064 VA 4,465 1,015 353 565 6,398 Non-Medicare 66,096 18,052 10,152 27,322 121,622 Medicare 36,654 8,181 5,191 30,484 80,510 Products & Services accounts receivable, before allowance 15,898 7,345 2,103 2,205 27,551 Gross charges before estimates for implicit price concessions and allowance for doubtful accounts 118,648 33,578 17,446 60,011 229,683 Less estimates for implicit price concessions (67,683) Accounts receivable, before allowance 162,000 Allowance for doubtful accounts (2,641) Accounts receivable, net $ 159,359 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 accounts receivable, before allowance 14,768 6,507 1,641 1,626 24,542 Gross charges before estimates for implicit price concessions and allowance for doubtful accounts 110,452 27,745 13,834 54,849 206,880 Less estimates for implicit price concessions (60,622) Accounts receivable, before allowance 146,258 Allowance for doubtful accounts (2,272) Accounts receivable, net $ 143,986 |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2019 | |
Inventories | |
Inventories | Note E — Inventories Our inventories are comprised of the following: As of December 31, (in thousands) 2019 2018 Raw materials $ 20,574 $ 19,632 Work in process 10,165 9,278 Finished goods 37,465 38,780 Total inventories $ 68,204 $ 67,690 |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment, Net | |
Property, Plant and Equipment, Net | Note F — Property, Plant, and Equipment, Net Property, plant, and equipment, net were comprised of the following: As of December 31, (in thousands) 2019 2018 Land $ 634 $ 644 Buildings (1) 4,110 24,558 Furniture and fixtures 13,835 13,121 Machinery and equipment 25,438 27,452 Equipment leased to third parties under operating leases 29,217 30,093 Leasehold improvements 131,617 111,247 Computers and software 75,540 69,173 Total property, plant, and equipment, gross 280,391 276,288 Less: accumulated depreciation and amortization (196,334) (186,799) Total property, plant, and equipment, net $ 84,057 $ 89,489 (1) As discussed in Note A - “ Organization and Summary of Significant Accounting Policies ” , the new lease standard resulted in the removal of assets associated with build-to-suit leases. Total depreciation expense was approximately $30.6 million, $29.7 million, and $29.7 million for the years ended December 31, 2019, 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) 2019 2018 Program equipment $ 29,217 $ 30,093 Less: Accumulated depreciation (12,972) (14,712) Net book value $ 16,245 $ 15,381 |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2019 | |
Acquisitions | |
Acquisitions | Note G — Acquisitions 2019 Acquisition Activity During 2019, we completed the following acquisitions of O&P clinics, none of which were individually material to our financial position, results of operations, or cash flows. Each acquisition is intended to expand the geographic footprint of our patient care offerings through the acquisitions of high quality O&P providers. · In the first quarter of 2019, we completed the acquisition of all the outstanding equity interests of an O&P business for total consideration of $32.8 million, of which $27.7 million was cash consideration, net of cash acquired, $4.4 million was issued in the form of notes to shareholders at fair value, and $0.7 million in additional consideration. · In the second quarter of 2019, we completed the acquisition of all the outstanding equity interests of an O&P business for total consideration of $0.5 million, of which $0.2 million was cash consideration, net of cash acquired, and $0.3 million was issued in the form of notes to shareholders at fair value. · In the third quarter of 2019, we completed the acquisition of all the outstanding equity interests of one O&P business and acquired the assets of another O&P business for total consideration of $3.3 million, of which $3.0 million was cash consideration, net of cash acquired, and $0.3 million was issued in the form of notes to shareholders at fair value. · In the fourth quarter of 2019, we completed the acquisition of all the outstanding equity interests of one O&P business and acquired the assets of another O&P business for total consideration of $7.8 million, of which $5.0 million was cash consideration, net of cash acquired, and $2.8 million was issued in the form of notes to shareholders at fair value. The notes issued to shareholders are unsecured and payable in installments over a period of 3 to 5 years. We accounted for these transactions under the acquisition method of accounting and have reported the results of operations of each acquisition as of the respective dates of the acquisitions. The estimated fair values of intangible assets were based on an income approach utilizing primarily discounted cash flow techniques for non-compete agreements and an income approach utilizing the excess earnings method for customer relationships. The income approach utilizes management’s estimates of future operating results and cash flows using a weighted average cost of capital that reflects market participant assumptions. Other significant judgments used in the valuation of tangible assets acquired in the acquisition include estimated selling price of inventory and estimated replacement costs for acquired property, plant and equipment. Generally, for all other assets acquired and liabilities assumed, the fair value reflects the carrying value of the asset or liability due to their short maturity. The excess of the fair value of the consideration transferred in the acquisition over the fair value of net assets acquired was recorded as goodwill. The goodwill reflects our expectations of favorable future growth opportunities, anticipated synergies through the scale of our O&P operations, and the assembled workforce. We expect that substantially all of the goodwill, which has been assigned to our Patient Care reporting unit, will be deductible for federal income tax purposes. Acquisition-related costs are included in general and administrative expenses in our consolidated statements of operations. Total acquisition-related costs incurred during the year ended December 31, 2019 were $1.5 million, which includes those costs for transactions that are in progress or not completed during the respective period. Acquisition-related costs incurred for acquisitions completed during the year ended December 31, 2019 were $1.0 million. We have not presented pro forma combined results for these acquisitions because the impact on previously reported statements of operations would not have been material individually or in the aggregate. Purchase Price Allocation For acquisitions that occurred after the second quarter of 2019, we have performed a preliminary valuation analysis of the fair market value of the assets acquired and liabilities assumed in the acquisitions. The final purchase price allocations will be determined when we have completed and fully reviewed the detailed valuations and could differ materially from the preliminary allocations. The final allocations may include changes in allocations of acquired intangible assets as well as goodwill and other changes to assets and liabilities including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary. We have finalized the purchase price allocation within the measurement period for acquisitions that have been completed prior to the third quarter of 2019. The aggregate purchase price of these acquisitions was allocated on a preliminary basis as follows: (in thousands) Cash paid, net of cash acquired $ 35,909 Issuance of seller notes at fair value 7,835 Additional consideration, net (1) 626 Aggregate purchase price 44,370 Accounts receivable 4,128 Inventories 2,081 Customer relationships (Weighted average useful life of 4.7 years) 7,038 Non-compete agreements (Weighted average useful life of 4.9 years) 350 Other assets and liabilities, net (2,983) Net assets acquired 10,614 Goodwill $ 33,756 (1) Approximately $0.7 million of additional consideration represents payments made during the third quarter related to certain tax elections with the seller, offset by an immaterial amount of favorable working capital adjustments. Right-of-use assets and lease liabilities related to operating leases recognized in connection with acquisitions completed for the year ended December 31, 2019 was $5.2 million. 2018 Acquisition Activity 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. The aggregate purchase price of these acquisitions was allocated on a preliminary basis as follows: (in thousands) Cash paid, net of cash acquired $ 1,978 Issuance of seller notes 1,120 Aggregate purchase price 3,098 Accounts receivable 256 Inventories 302 Customer relationships (Weighted average useful life of 4.0 years) 260 Non-compete agreements (Weighted average useful life of 4.6 years) 214 Other assets 90 Accounts payable (59) Accrued expenses and other liabilities (364) Net assets acquired 699 Goodwill $ 2,399 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | Note H — 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. 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, 2019 and 2018 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, 2017 $ 625,011 $ (428,668) $ 196,343 $ 139,299 $ (139,299) $ — $ 764,310 $ (567,967) $ 196,343 Additions from acquisitions 2,399 — 2,399 — — — 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 Additions from acquisitions 35,926 — 35,926 — — — 35,926 — 35,926 Measurement period adjustments (1) (2,424) — (2,424) — — — (2,424) — (2,424) Balance at December 31, 2019 $ 660,912 $ (428,668) $ 232,244 $ 139,299 $ (139,299) $ — $ 800,211 $ (567,967) $ 232,244 (1) Measurement period adjustments relate to 2019 and 2018 acquisitions of approximately $2.1 million and $0.3 million, respectively, and are primarily attributable to adjustments to the preliminary allocations of customer relationship intangibles. See Note G - “Acquisitions” within these consolidated financial statements for details surrounding goodwill acquired during the years ended December 31, 2019 and 2018. As of October 1, 2019 and 2018, we performed a qualitative assessment of goodwill impairment for the Patient Care reporting unit, which resulted in our determination that it was more likely than not that the carrying value of the reporting unit was less than its fair value. 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. 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 as of October 1. The balances related to other intangible assets as of December 31, 2019 and 2018 are as follows: As of December 31, 2019 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 32,772 $ (22,726) $ — $ 10,046 Trade name 255 (151) — 104 Patents and other intangibles 9,188 (5,503) — 3,685 Definite-lived intangible assets 42,215 (28,380) — 13,835 Indefinite-lived trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 51,285 $ (28,380) $ (4,953) $ 17,952 As of 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-lived trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 44,752 $ (24,321) $ (4,953) $ 15,478 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 rates, and discount rates. Existing 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 contractual term which ranges from two 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. There was no impairment on our indefinite-lived trade name for the year ended December 31, 2019. The impairment on our indefinite-lived trade name was $0.2 million and $1.4 million for the years ended December 31, 2018 and 2017, respectively. Trade name intangible assets with definite lives are amortized over their estimated useful lives of one to ten years. Amortization expense related to other intangible assets was approximately $5.0 million, $6.7 million, and $9.5 million for the years ended December 31, 2019, 2018, and 2017, 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) 2020 $ 5,160 2021 2,576 2022 2,509 2023 2,284 2024 781 Thereafter 525 Total $ 13,835 |
Other Current Assets and Other
Other Current Assets and Other Assets | 12 Months Ended |
Dec. 31, 2019 | |
Other Current Assets and Other Assets | |
Other Current Assets and Other Assets | Note I — Other Current Assets and Other Assets Other current assets consist of the following: As of December 31, (in thousands) 2019 2018 Non-trade receivables $ 6,711 $ 7,848 Prepaid maintenance 2,767 3,330 Prepaid rent 1,145 4,442 Prepaid other 994 1,101 Prepaid purchase orders 922 998 Prepaid education and training 726 597 Prepaid insurance 264 258 Other 144 157 Total other current assets $ 13,673 $ 18,731 Non-trade receivables primarily relate to vendor rebate receivables, tenant improvement allowance receivables under previous lease accounting guidance, and other non-trade receivables. Prepaid maintenance primarily relates to prepaid software and hardware maintenance, and software license fees. Prepaid rent relates to amounts of future rent expense paid in advance of the rental period. 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) 2019 2018 Cash surrender value of company-owned life insurance $ 3,253 $ 2,918 Non-trade receivables 2,398 1,904 Implementation costs for cloud computing arrangements 1,964 — Deposits 1,893 1,698 Finance lease right-of-use assets 1,488 — Surety bond collateral — 1,000 Other 309 246 Total other assets $ 11,305 $ 7,766 The cash surrender value of company-owned life insurance (“COLI”) funded our Defined Contribution Supplemental Executive Retirement Plan (“DC SERP”) at December 31, 2019 and December 31, 2018. See Note Q - “Employee Benefits” for additional information. Non-trade receivables primarily relate to estimated receivables due from our various business insurance policies. Implementation costs for cloud computing arrangements relate to capitalized costs of our new financial and supply chain system. Deposits primarily relate to security deposits made in connection with property leases. Finance lease right-of-use assets relate to the recognition of right-of-use assets in connection with the adoption of ASC 842, further discussed in Note A - "Organization and Summary of Significant Accounting Policies." Other relates to prepaid maintenance fees, prepaid license fees, and revolver facility fees. |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities and Other Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
Accrued Expenses and Other Current Liabilities and Other Liabilities | |
Accrued Expenses and Other Current Liabilities and Other Liabilities | Note J — Accrued Expenses and Other Current Liabilities and Other Liabilities Accrued expenses and other current liabilities consist of: As of December 31, (in thousands) 2019 2018 Patient prepayments, deposits, and refunds payable $ 24,183 $ 24,563 Accrued sales taxes and other taxes 8,543 6,810 Insurance and self-insurance accruals 8,033 8,886 Derivative liability 3,516 724 Accrued professional fees 2,533 3,751 Accrued interest payable 266 332 Other current liabilities 8,751 6,717 Total $ 55,825 $ 51,783 Patient prepayment deposits and refunds includes funds received for devices not yet delivered to a patient and refunds for overpayments. Taxes primarily includes accrued sales, property, and franchise tax liabilities. Accrued insurance primarily relates to accruals for estimated losses for certain self-insured risks including property, professional and general liability, and employee health care costs. Derivative liability relates to our cash flow hedge; refer to Note O - “Derivative Financial Instruments.” Accrued professional fees primarily relate to accruals for professional accounting and legal fees. Accrued interest payable relates to interest on our debt obligation. Other current liabilities are primarily related to accruals for deferred revenue and warranty liabilities. Other liabilities consist of: As of December 31, (in thousands) 2019 2018 Supplemental executive retirement plan obligations $ 20,851 $ 20,195 Derivative liability 9,821 3,134 Long-term insurance accruals 7,424 8,713 Unrecognized tax benefits 5,296 5,458 Deferred tenant improvement allowances — 8,570 Deferred rent — 4,455 Other 2,412 1,045 Total $ 45,804 $ 51,570 Supplemental executive retirement plan obligations includes obligations due on both the Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) and DC SERP. See Note Q - “Employee Benefits” within these consolidated financial statements. Derivative liability relates to our cash flow hedge; refer to Note O - “Derivative Financial Instruments.” 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 under previous lease accounting guidance. 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 also under previous lease accounting guidance. Both deferred credits were recognized as reductions of rent expense over the term of the associated lease. 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, 2019 | |
Income Taxes | |
Income Taxes | Note K — Income Taxes Components of provision for income taxes are as follows: Years Ended December 31, (in thousands) 2019 2018 2017 Current: Federal $ 5,461 $ 669 $ 541 State 719 1,117 574 Total current 6,180 1,786 1,115 Deferred: Federal 1,803 1,497 28,905 State (5,029) 1,955 (2,723) Total deferred (3,226) 3,452 26,182 Total provision for income taxes $ 2,954 $ 5,238 $ 27,297 A reconciliation of the federal statutory tax rate to our effective tax rate applicable to continuing operations is as follows: Years Ended December 31, 2019 2018 2017 Federal statutory tax rate 21.0 % 21.0 % 35.0 % State and local income taxes 6.0 % 26.6 % 0.9 % Change in valuation allowance (22.5) % 9.5 % (0.7) % Permanent Items 2.3 % 27.9 % (2.7) % Tax audit adjustments 0.9 % 8.7 % — % Change in uncertain tax positions 0.2 % 5.5 % (0.3) % Tax credits (0.1) % (5.6) % 0.1 % State tax rate change effect on deferred balance — % 27.7 % (0.2) % Federal statutory tax rate change effect on deferred balance — % — % (45.0) % Goodwill impairment — % — % (21.1) % Other 1.9 % (1.7) % (1.3) % Tax provision 9.7 % 119.6 % (35.3) % The significant components of our deferred tax assets and liabilities are presented in the following table: As of December 31, (in thousands) 2019 2018 Deferred tax assets: Lease liabilities $ 31,432 $ — Provision for doubtful accounts and implicit price concessions 18,547 16,529 Accrued expenses 12,789 15,352 Property, plant and equipment 9,797 10,829 Interest expense 8,946 7,798 Deferred benefit plan compensation 8,834 6,269 Net operating loss carryforwards 7,636 10,975 Share based compensation 4,016 3,902 Inventory reserves 2,554 2,710 Refund liabilities 2,346 2,517 Intangibles 1,236 1,063 Interest on seller notes 961 1,029 Deferred rent — 1,136 Other 893 1,307 Deferred tax assets 109,987 81,416 Less: Valuation allowance (2,065) (8,930) Total deferred tax assets 107,922 72,486 Deferred tax liabilities: Lease assets 28,360 — Goodwill 7,960 5,821 Prepaid expenses 1,121 1,030 Total deferred tax liabilities 37,441 6,851 Net deferred tax assets $ 70,481 $ 65,635 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 $2.8 million and $10.7 million of U.S. federal net operating loss carryforwards available as of December 31, 2019 and 2018, respectively. We have $136.9 million and $166.0 million of state net operating loss carryforwards available as of December 31, 2019 and 2018, 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 2020 and 2039. We establish valuation allowances when necessary to reduce deferred tax assets to amounts expected to be realized. As of December 31, 2019 and 2018, we have recorded a valuation allowance of approximately $2.1 million and $8.9 million, respectively, related to various state jurisdictions. In our assessment of the valuation allowance, we consider a number of types of evidence on a taxing jurisdiction and legal entity basis in each reporting period, including the nature, frequency, and severity of current and cumulative financial reporting income and losses, sources of future taxable income, future reversals of existing taxable temporary differences, and prudent and feasible tax planning strategies, weighted by objectivity. Based on our consideration of all available positive and negative evidence, we determined that it was more likely than not that we would be able to realize the benefit of certain state deferred tax assets after we achieved twelve quarters of cumulative pretax income adjusted for permanent differences, as well as forecasted future taxable income and other positive evidence, and released $7.1 million of the valuation allowance related to certain state deferred tax assets in the fourth quarter of 2019. 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 2019 $ 8,930 $ — $ 238 $ 7,103 $ 2,065 2018 $ 8,754 $ — $ 204 $ 28 $ 8,930 2017 $ 6,895 $ — $ 2,306 $ 447 $ 8,754 A reconciliation of our liability for unrecognized tax benefits is as follows: (in thousands) 2019 2018 2017 Unrecognized tax benefits, at beginning of the year $ 4,765 $ 4,860 $ 4,664 Additions for tax positions related to the current year 247 257 466 Decrease related to prior year positions (337) (352) (270) Decrease for lapse of applicable statute of limitations (344) — — Unrecognized tax benefits, at end of the year $ 4,331 $ 4,765 $ 4,860 As of December 31, 2019, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $2.8 million. We do not expect unrecognized tax benefits to decrease 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, 2019, 2018, and 2017, the amount of accrued interest and penalties was approximately $1.0 million, $0.8 million, and $0.6 million, respectively. We are subject to income tax in the U.S. federal, state, and local jurisdictions. We are no longer subject to U.S. federal income tax examinations for years prior to 2016. However, due to net operating loss carryforwards, tax authorities have the ability to adjust those net operating losses related to closed years. 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. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases | |
Leases | Note L — Leases The information pertaining to leases on the consolidated balance sheet is as follows: (in thousands) Classification As of December 31, 2019 Assets Operating lease right-of-use assets Operating lease right-of-use assets $ 110,559 Finance lease right-of-use assets Other assets 1,488 Total lease assets $ 112,047 Liabilities Current Operating Current portion of operating lease liabilities $ 34,342 Finance Current portion of long-term debt 370 Noncurrent Operating Operating lease liabilities 88,418 Finance Long-term debt, less current portion 1,135 Total lease liabilities $ 124,265 The components of lease cost recognized in the consolidated statement of operations are as follows: For the Year Ended (in thousands) 2019 Operating lease cost $ 44,081 Finance lease cost Amortization of right-of-use assets 312 Interest on lease liabilities 28 Sublease income (240) Short-term lease cost 613 Variable lease cost 5,476 Total lease cost $ 50,270 Maturities of our lease liabilities, by year and in the aggregate, under operating and financing obligations with terms of one year or more at December 31, 2019 are as follows: Finance Operating (in thousands) Leases Leases Total Leases 2020 422 38,972 39,394 2021 355 34,384 34,739 2022 267 26,416 26,683 2023 185 17,797 17,982 2024 148 10,530 10,678 Thereafter 289 8,975 9,264 Total lease payments 1,666 137,074 138,740 Imputed interest (161) (14,314) (14,475) Total $ 1,505 $ 122,760 $ 124,265 The lease term and discount rates are as follows: As of December 31, 2019 Weighted average remaining lease term (years) Operating leases 3.98 Finance leases 5.17 Weighted average discount rate Operating leases 5.29 % Finance leases 4.01 % Supplemental cash flow information related to leases is as follows: For the Year Ended (in thousands) December 31, 2019 Cash flows for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 44,111 Operating cash flows from finance leases 28 Financing cash flows from finance leases 325 Right-of-use assets obtained in exchange for lease obligations: Operating leases 46,254 Finance leases 1,245 As previously disclosed in our 2018 Annual Report on Form 10-K and under previous lease accounting, future minimum rental payments, by year and in the aggregate, under operating and financing obligations as of December 31, 2018 were 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 In August 2019, we entered into a lease agreement for a distribution facility in Georgia. The commencement date of the lease is expected to be in April 2020. The initial term of the lease is 127 months, with the option to extend the lease for up to two consecutive 60-month terms. The lease provides for annual base rent of approximately $1.0 million in the first year after a seven-month rent-free period following the lease commencement date, with subsequent annual increases of approximately 2%. In connection with the lease, the landlord has provided a tenant improvement allowance of $2.2 million to build-out certain improvements to the distribution facility. |
Debt and Other Obligations
Debt and Other Obligations | 12 Months Ended |
Dec. 31, 2019 | |
Debt and Other Obligations | |
Debt and Other Obligations | Note M — Debt and Other Obligations Debt consists of the following: As of December 31, As of December 31, (in thousands) 2019 2018 Debt: Term Loan B $ 496,163 $ 501,213 Seller notes 9,005 4,506 Finance lease liabilities and other 2,033 14,361 Total debt before unamortized discount and debt issuance costs 507,201 520,080 Unamortized discount and debt issuance costs, net (8,328) (9,407) Total debt 498,873 510,673 Current portion of long-term debt: Term Loan B 5,050 5,050 Seller notes 3,175 2,513 Finance lease liabilities and other 527 1,020 Total current portion of long-term debt 8,752 8,583 Long-term debt $ 490,121 $ 502,090 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 $5.2 million as of December 31, 2019. 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 years ended December 31, 2019 and 2018, the weighted average interest rate on outstanding borrowings under our Term Loan B facility was approximately 5.8% and 5.6%, respectively. 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 4.75 to 1.00 for the fiscal quarters ended December 31, 2019 and 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, 2019. 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 $0.4 million and $0.2 million as of December 31, 2019 and 2018, respectively. 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 quarterly or annual installments and mature through October 2024. Scheduled maturities of debt at December 31, 2019 were as follows : (in thousands) 2020 $ 8,932 2021 8,089 2022 6,767 2023 6,247 2024 5,975 Thereafter 471,191 Total debt before unamortized discount and debt issuance costs, net 507,201 Unamortized discount and debt issuance costs, net (8,328) Total debt $ 498,873 |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | Note N — Fair Value Measurements Financial Instruments In March 2018, we refinanced our credit facilities with the Credit Agreement. The carrying value (excluding unamortized discounts and debt issuance costs of $8.3 million) of our outstanding term loan as of December 31, 2019 was $496.2 million compared to its fair value of $497.4 million. The carrying value of our outstanding term loan as of December 31, 2018 was $501.2 million (excluding unamortized discounts and debt issuance costs of $9.4 million) compared to its fair value of $491.2 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, 2019 and December 31, 2018, we had no amounts outstanding on our revolving credit facility. 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 notional value outstanding as of December 31, 2019 was $312.5 million. 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 - "Debt and Other Obligations" and Note O - "Derivative Financial Instruments" for further information. The carrying value of our outstanding Seller Notes issued in connection with acquisitions as of December 31, 2019 and December 31, 2018 was $9.0 million and $4.5 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, 2019 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | Note O — Derivative Financial Instruments Cash Flow Hedges of Interest Rate Risk As of December 31, 2019, our swaps had a notional value outstanding of $312.5 million. As of December 31, 2018, our swaps had a notional value outstanding of $325.0 million. 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 for the years ended December 31, 2019 and 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) Unrealized loss recognized in other comprehensive loss, net of tax (8,806) Reclassification to interest expense, net of tax 1,605 Balance as of December 31, 2019 $ (10,137) The following table presents the fair value of derivative liabilities within the consolidated balance sheets as of December 31, 2019 and December 31, 2018: As of December 31, 2019 As of December 31, 2018 (in thousands) Assets Liabilities Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities — 3,516 — 724 Other liabilities — 9,821 — 3,134 |
Share Based Compensation
Share Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Share Based Compensation | |
Share Based Compensation | Note P — Share Based Compensation On May 17, 2019, the shareholders approved the Hanger, Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan authorizes the issuance of (a) up to 2,025,000 shares of Common Stock, plus (b) 243,611 shares available for issuance under the Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”). Upon approval of the 2019 Plan, the 2016 Plan was no longer available for future awards. 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. As of December 31, 2019, approximately 2.2 million shares were available for future issuance. The available shares consisted of (a) 2.0 million shares of common stock authorized for issuance under the amended 2019 Plan, plus (b) 0.2 million shares rolled forward from the 2016 Plan, plus (c) 0.1 million shares forfeited and added back to the pool, less (d) 0.1 million shares issued for awards. In 2019, shares issued under equity plans are issued from authorized and unissued shares. For the years ended December 31, 2019, 2018, and 2017, we recognized a total of approximately $13.4 million, $13.1 million, and $12.9 million, respectively, of share based compensation expense for the 2010, 2016, and 2019 plans. Share based 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, 2017 1,183,039 $ 14.30 702,391 $ 19.40 98,406 $ 12.66 Granted 569,571 15.70 165,853 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 14.47 593,099 17.63 61,376 18.25 Granted 467,896 19.14 147,983 19.16 55,752 20.09 Vested (452,306) 14.48 (120,953) 18.40 (61,376) 18.25 Forfeited (59,994) 14.94 (20,645) 18.32 — — Nonvested at December 31, 2019 1,164,224 $ 16.32 599,484 $ 17.82 55,752 $ 20.10 During the years ended December 31, 2019, 2018, and 2017, approximately 0.6 million, 0.7 million, and 0.4 million of restricted common stock units with an intrinsic value of $12.3 million, $12.0 million, and $5.9 million, respectively, became fully vested. As of December 31, 2019, 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 $32.7 million and the related weighted‑average period over which it is expected to be recognized is approximately 1.4 years. The aggregate granted units have vesting dates through June 2022. The 2019, 2018, and 2017 aggregate grants had total estimated grant date fair values of $12.9 million, $13.3 million, and $17.7 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. The 2017 special equity grant was amended on November 13, 2019 by adjusting the calculation of the CAGR of our common stock price from the third anniversary of the grant date to the average closing price for the 25 trading days ending on and including the last day of the three year performance period (i.e., May 18, 2020.) This adjustment was considered a modification per ASC 718, Compensation - Stock Compensation , and therefore, any incremental fair value arising from the modification of an award with market conditions would be recognized over the remaining service period. The valuation concluded an additional $34.0 thousand in incremental fair value that will be expensed ratably over the remainder of the service period. Options The fair value of each employee stock option award was estimated on the date of grant of May 19, 2017 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, 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 Granted — — Terminated (9,913) 12.77 Exercised (148,851) 12.77 Outstanding at December 31, 2019 523,105 $ 12.77 $ 7,762,878 7.4 At December 31, 2019, 0.5 million options were outstanding but not yet exercisable with a weighted average exercise price of $12.77, average remaining contractual terms of 7.4 years and aggregate intrinsic values of approximately $7.8 million. As of December 31, 2019, there was unrecognized compensation cost related to stock option awards of $0.7 million. 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. |
Employee Benefits
Employee Benefits | 12 Months Ended |
Dec. 31, 2019 | |
Employee Benefits | |
Employee Benefits | Note Q — 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 $6.1 million, $5.8 million, and $5.9 million under this plan during 2019, 2018, and 2017, 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, 2019 and 2018 as well as net periodic benefit plan expense for the years ended December 31, 2019, 2018, and 2017. As of December 31, 2019 and 2018, the average remaining service period of plan participants is 9.5 and 10.5 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, 2016 $ 21,304 Service cost 340 Interest cost 711 Payments (1,913) Actuarial loss 351 Benefit obligation as of December 31, 2017 20,793 Service cost 367 Interest cost 600 Payments (1,913) Actuarial gain (920) Benefit obligation at December 31, 2018 18,927 Service cost 335 Interest cost 658 Payments (1,913) Actuarial loss 1,207 Benefit obligation as of December 31, 2019 $ 19,214 The funded status of the DB SERP's net benefit obligation is as follows: December 31, (in thousands) 2019 2018 Unfunded status $ 15,950 $ 16,740 Unamortized net loss 3,264 2,187 Net amount recognized $ 19,214 $ 18,927 Amounts Recognized in the Consolidated Balance Sheets: December 31, (in thousands) 2019 2018 Current accrued expenses and other current liabilities $ 1,913 $ 1,913 Non-current other liabilities 17,301 17,014 Total accrued liabilities $ 19,214 $ 18,927 We recorded gross actuarial losses (gains) under the DB SERP of approximately $1.2 million, ($0.9) million, and $0.4 million in 2019, 2018, and 2017, 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 2019, 2018, or 2017. 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, 2019 and 2018. 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. 2019 2018 2017 Discount rate 2.9 % 4.0 % 3.3 % Average rate of increase in compensation 2.5 % 3.0 % 3.0 % At December 31, 2019, the estimated accumulated benefit obligation is $19.2 million. Future payments under the Plan are as follows: (in thousands) 2020 $ 1,913 2021 1,913 2022 1,913 2023 1,913 2024 1,913 Thereafter 9,649 $ 19,214 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, 2019 and 2018, the estimated accumulated benefit obligation is $3.9 million and $3.0 million, respectively, of which $3.3 million and $2.4 million is funded and $0.6 million and $0.6 million is unfunded at December 31, 2019 and 2018, 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 I - “Other Current Assets and Other Assets” for additional information. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note R — Commitments and Contingencies 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 Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The complaint sought unspecified damages, costs, attorneys’ fees, and equitable relief. On January 26, 2017, the court granted the defendants’ motions to dismiss for failure to state a claim upon which relief can be granted and dismissed with prejudice all claims against all defendants. On February 24, 2017, plaintiffs filed a notice of appeal to the United States Court of Appeals for the Fifth Circuit. On August 6, 2018, the Court of Appeals affirmed in part and reversed in part. On August 20, 2018, Hanger, Inc. and the remaining individual defendant filed a petition for panel rehearing and a petition for rehearing en banc with the Court of Appeals. On April 10, 2019, the Court of Appeals granted the petition for panel rehearing, withdrew its previous panel decision, and substituted a new panel decision in its place that affirmed the District Court’s dismissal with prejudice of all claims against all the defendants for failure to state a claim. Plaintiffs did not petition the Court of Appeals for a panel rehearing or a rehearing en banc, and did not file a writ of certiorari with the United States Supreme Court. Therefore, the April 10, 2019 Court of Appeals ruling affirming the dismissal of all claims with prejudice against all defendants is now final. 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 345th 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 sought 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. On March 22, 2019, the Special Master submitted a report to the Travis County Court recommending that the court order that the entire Special Committee report be produced. On April 2, 2019 we filed an objection to the Special Master’s report and recommendation, and requested a hearing on the matter. On June 25, 2019, the Travis County Court rejected the recommendation of the Special Master, and instead ordered that only a limited additional portion of the Special Committee report should be made available to plaintiffs. On July 10, 2019, the updated redacted Special Committee report was provided to plaintiffs through their counsel. In late October 2019, a non-binding agreement in principle was reached by the parties to settle the consolidated derivative action, the parties entered into a definitive settlement agreement in late December 2019, and in January 2020 the Travis County court issued an order providing preliminary approval of the settlement and ordering that notice of the settlement be made to the Company’s shareholders. On March 10, 2020, the Travis County court issued an order providing final approval of the settlement and dismissing with prejudice the consolidated derivative action. 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' Equity (Deficit)
Shareholders' Equity (Deficit) | 12 Months Ended |
Dec. 31, 2019 | |
Shareholders' Equity (Deficit) | |
Shareholders' Equity (Deficit) | Note S — Shareholders’ Equity (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, 2019 | |
Segment and Related Information | |
Segment and Related Information | Note T — Segment and Related Information We have identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each operating segment’s income from operations. The operating segments are described further below: Patient Care — This segment consists of (i) our owned and operated patient care clinics, and (ii) our contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care, and maintenance of the devices. The principal reimbursement sources for our services are: · Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, HMOs, PPOs, hospitals, vocational rehabilitation, workers’ compensation programs, and similar sources; · Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain persons with disabilities, 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 persons aged 65 or older in financial need; 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, 2019, 2018, and 2017. For the Patient Care segment, government reimbursement, comprised of Medicare, Medicaid, and the VA, in the aggregate, accounted for approximately, 57.5%, 56.5%, and 54.8% of their net revenue in 2019, 2018, and 2017, respectively. Additionally, for the Products & Services segment, no single customer accounted for more than 10% of net revenues in 2019, 2018, or 2017, 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) 2019 2018 2017 2019 2018 2017 Net revenue Third party $ 905,691 $ 857,382 $ 851,973 $ 192,355 $ 191,378 $ 188,796 Intersegments — — — 203,496 192,096 178,768 Total net revenue 905,691 857,382 851,973 395,851 383,474 367,564 Material costs Third party suppliers 250,407 234,409 228,091 107,364 103,608 101,132 Intersegments 24,394 23,792 23,808 179,102 168,304 154,960 Total material costs 274,801 258,201 251,899 286,466 271,912 256,092 Personnel expenses 319,633 312,736 312,695 52,592 51,353 48,395 Other expenses 151,140 140,527 143,598 28,178 24,306 25,855 Depreciation & amortization 18,541 19,113 21,363 10,650 10,197 10,163 Impairment of intangible assets — — — — 183 54,735 Segment income (loss) from operations $ 141,576 $ 126,805 $ 122,418 $ 17,965 $ 25,523 $ (27,676) Purchase of property, plant and equipment $ 16,102 $ 12,781 $ 8,163 $ 2,368 $ 1,890 $ 2,153 Purchase of therapeutic program equipment leased to third parties under operating leases $ — $ — $ — $ 6,672 $ 9,835 $ 6,000 A reconciliation of the total of the reportable segment's income (loss) from operations to consolidated income (loss) from operations is as follows: (in thousands) 2019 2018 2017 Income (loss) from operations Patient Care $ 141,576 $ 126,805 $ 122,418 Products & Services 17,965 25,523 (27,676) Corporate & other (94,113) (92,681) (113,692) Income (loss) from operations 65,428 59,647 (18,950) Interest expense, net 34,258 37,566 57,688 Loss on extinguishment of debt — 16,998 — Non-service defined benefit plan expense 691 703 736 Income (loss) before income taxes 30,479 4,380 (77,374) Provision for income taxes 2,954 5,238 27,297 Net income (loss) $ 27,525 $ (858) $ (104,671) A reconciliation of the reportable segment net revenue to consolidated net revenue is as follows: (in thousands) 2019 2018 2017 Net Revenue Patient Care $ 905,691 $ 857,382 $ 851,973 Products & Services 395,851 383,474 367,564 Corporate & other — — — Consolidating adjustments (203,496) (192,096) (178,768) Consolidated net revenue $ 1,098,046 $ 1,048,760 $ 1,040,769 A reconciliation of the reportable segment material costs to consolidated material costs is as follows: (in thousands) 2019 2018 2017 Material costs Patient Care $ 274,801 $ 258,201 $ 251,899 Products & Services 286,466 271,912 256,092 Corporate & other — — — Consolidating adjustments (203,496) (192,096) (178,768) Consolidated material costs $ 357,771 $ 338,017 $ 329,223 A reconciliation of the reportable segment purchase of property, plant and equipment to consolidated purchase of property, plant and equipment, including purchases of therapeutic program equipment leased to third parties under operating leases, is as follows: (in thousands) 2019 2018 2017 Purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases Patient Care $ 16,102 $ 12,781 $ 8,163 Products & Services Property, plant and equipment 2,368 1,890 2,153 Therapeutic program equipment leased to third parties under operating leases 6,672 9,835 6,000 Corporate & other 7,963 4,313 6,039 Total consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases $ 33,105 $ 28,819 $ 22,355 A reconciliation of the total of the reportable segment's assets to consolidated assets is as follows: (in thousands) 2019 2018 Assets Patient Care $ 552,644 $ 415,469 Products & Services 105,673 100,953 Corporate & other 183,936 186,588 Total consolidated assets $ 842,253 $ 703,010 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Cash Flow Information | |
Supplemental Cash Flow Information | Note U — 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) 2019 2018 2017 Accounts receivable, net $ (12,329) $ 3,238 $ (12,585) Inventories 1,568 1,750 (913) Other current assets and other assets (2,611) 4,459 661 Income taxes receivable 1,248 12,700 121 Accounts payable (6,725) 6,511 (3,562) Accrued expenses and other current liabilities (1,242) (16,550) (12,929) Accrued compensation related costs 5,780 1,713 16,843 Other liabilities (1,883) (3,980) (2,271) Operating lease liabilities, net of amortization of right-of-use assets 262 — — Changes in operating assets and liabilities on cash flows from operating activities $ (15,932) $ 9,841 $ (14,635) A reconciliation of the change in operating lease liabilities, net of amortization of right-of-use assets is as follows: For the Years Ended December 31, (in thousands) 2019 2018 2017 Operating lease liabilities $ (36,911) $ — $ — Amortization of right-of-use assets 37,173 — — Operating lease liabilities, net of amortization of right-of-use assets $ 262 $ — $ — The supplemental disclosure requirements for the statements of cash flows are as follows: For the Years Ended December 31, (in thousands) 2019 2018 2017 Cash paid during the period for: Interest paid $ 29,192 $ 31,312 $ 48,437 Income tax (refunds received) paid 5,100 (11,131) 725 Non-cash financing and investing activities: Issuance of seller notes and working capital adjustments in connection with acquisitions 7,885 1,120 — Purchase of property, plant and equipment in accounts payable at period end 2,998 5,018 2,119 Purchase of property, plant and equipment through vendor financing 2,200 — — Additions to property, plant and equipment acquired through financing obligations — 1,523 1,484 Retirements of financed property, plant and equipment and related financing obligations — 4,460 811 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events | |
Subsequent Events | Note V — Subsequent Events In March 2020, we entered into definitive share purchase agreements in connection with the acquisitions of two orthotic and prosthetic businesses for a total purchase price of $51.7 million, of which $43.2 million was cash consideration, $4.5 million was issued in the form of notes to the shareholders, and the assumption of approximately $4.0 million in deferred payment obligations owed to certain shareholders or employees of one of the acquired businesses. The notes are payable in annual installments over a period of 3 to 5 years. The deferred payment obligations are payable in annual installments beginning in the fourth year following the acquisition and for three years thereafter. Acquisition-related expenses incurred during the year ended December 31, 2019 related to the two acquisitions were not material. Due to the proximity of these transactions 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 acquired and liabilities assumed in the acquisitions. |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019. 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, December 31, (dollars in thousands, except per share amounts) 2019 2019 2019 2019 Net revenues $ 236,419 $ 281,098 $ 279,638 $ 300,891 Material costs 78,377 91,399 92,034 95,961 Personnel costs 86,711 91,490 94,594 99,430 Other operating costs 33,555 33,741 32,771 34,876 General and administrative expenses 28,282 29,358 29,834 30,591 Professional accounting and legal fees 2,700 3,247 3,629 4,113 Depreciation and amortization 8,773 8,760 9,373 9,019 (Loss) income from operations (1,979) 23,103 17,403 26,901 Interest expense, net 8,538 8,481 8,954 8,285 Non-service defined benefit plan expense 173 173 173 172 (Loss) income before income taxes (10,690) 14,449 8,276 18,444 (Benefit) provision for income taxes (3,739) 4,414 2,585 (306) Net (loss) income $ (6,951) $ 10,035 $ 5,691 $ 18,750 Other comprehensive (loss) income: Unrealized (loss) gain on cash flow hedges, net of tax (2,936) (4,688) (1,641) 2,064 Unrealized gain (loss) on defined benefit plan, net of tax 6 6 7 (838) Comprehensive (loss) income $ (9,881) $ 5,353 $ 4,057 $ 19,976 Basic Per Common Share Data: Basic (loss) earnings per share $ (0.19) $ 0.27 $ 0.15 $ 0.50 Weighted average shares outstanding - basic 37,001,977 37,299,766 37,349,144 37,411,847 Diluted Per Common Share Data: Diluted (loss) earnings per share $ (0.19) $ 0.26 $ 0.15 $ 0.49 Weighted average shares outstanding - diluted 37,001,977 37,887,559 37,986,860 38,415,108 Three Months Ended March 31, June 30, September 30, December 31, (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 |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
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, impairments of long-lived assets including goodwill, income taxes, business combinations, leases, and stock-based compensation. |
Revenue Recognition | Revenue Recognition 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 VA, 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 $2.5 million at December 31, 2019 and $2.1 million at December 31, 2018. 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 under 90 days after the patient receives the device and the deferred revenue is recognized on a straight-line basis over the 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. Products & 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. |
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 in advertising costs during the years ended December 31, 2019, 2018, and 2017, 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 $0.9 million, $1.5 million, and $0.7 million in advertising costs during the years ended December 31, 2019, 2018, and 2017, 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. |
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 and estimated implicit price concessions, such as disallowed revenue and patient non-payments, as described in the revenue recognition accounting policy above. Estimates for both disallowed revenue and patient non-payments apply the expected value method by considering historical collection experience by each of the Medicare and non-Medicare (commercial insurance, Medicaid, the VA, 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 Our 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 $7.6 million and $7.2 million at December 31, 2019 and 2018, 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 $29.4 million and $27.5 million at December 31, 2019 and 2018, respectively, with WIP inventory representing $10.2 million and $9.3 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% of raw materials at December 31, 2019 and 2018, respectively, were purchased from our Products & Services segment. Raw material inventory was $19.2 million and $18.2 million at December 31, 2019 and 2018, 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 2019 and 2018 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 Our Product & Service segment inventories consist primarily of finished goods at its distribution centers as well as raw materials at fabrication facilities, and totaled $38.8 million and $40.2 million as of December 31, 2019 and 2018, 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, 2019, 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. 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, finance 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 which is included within “Other operating costs” in our consolidated statements of operations. 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. As of October 1, 2019, 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 year ended December 31, 2017, we recorded impairments of our goodwill totaling $53.3 million, respectively. We did not have any goodwill impairment during 2019 and 2018. For the years ended December 31, 2018, and 2017, we recorded impairments of our indefinite-lived trade name totaling $0.2 million, and $1.4 million, respectively. We did not have any indefinite-lived trade name impairment during 2019. See Note H - “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 $0.8 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 and warehouses 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 lease commencement date. We exclude leases with a term of one year or less from our balance sheet, and do not separate non-lease components from our real estate leases. Our leases may include variable payments for maintenance, which are expensed as incurred. In addition, we are the lessor of therapeutic program equipment to patients and businesses in acute, post-acute, and clinic settings. The 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. These operating lease agreements are typically for twelve months and have a 30-day cancellation policy. Equipment acquired under a finance lease is recorded at the present value of the future minimum lease payments. We do not separate non-lease components, consisting primarily of training, for these leases. |
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 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 include 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. 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 2019 and are able to utilize net operating loss. We have $2.8 million and $10.7 million of U.S. federal and $136.9 million and $166.0 million of state net operating loss carryforwards available at December 31, 2019 and 2018, 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 2020 and 2039. 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. As of December 31, 2019 and 2018, we have recorded a valuation allowance of approximately $2.1 million and $8.9 million, respectively, related to various state jurisdictions. Based on our assessment of all available positive and negative evidence, which is completed quarterly, on a taxing jurisdiction and legal entity basis, we determined that it was more likely than not that we would be able to realize the benefit of certain state deferred tax assets and released valuation allowances of $7.1 million against our state deferred tax assets during the fourth quarter of 2019. We considered a number of types of evidence, including the nature, frequency, and severity of current and cumulative financial reporting income and losses, sources of future taxable income, future reversals of existing taxable temporary differences, and prudent and feasible tax planning strategies, weighted by objectivity. Management decided to release this valuation allowance primarily because the legal entity involved has achieved twelve quarters of cumulative financial reporting income in 2019 and is forecasting future taxable income along with other types of favorable evidence mentioned above. 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. |
Interest Expense, Net | Interest Expense, Net We record interest expense net of interest income. In our consolidated statements of operations, interest income was not material in the years ended December 31, 2019, 2018, and 2017. |
Share Based Compensation | Share Based Compensation We primarily issue restricted common stock units under one active share 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 shares 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 T - “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 Recently Adopted Accounting Pronouncements During 2019 we adopted the following: Accounting Standards Update (“ASU”) No. 2016-02, Leases (ASC 842) , and related clarifying standards, as of January 1, 2019, using the modified retrospective approach. This approach allows us to apply the standard as of the adoption date and record a cumulative-effect adjustment to the opening balance of accumulated deficit at January 1, 2019. The new lease standard requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on the balance sheet for all leases (with the exception of short-term leases, defined as leases with a term of 12 months or less) at the lease commencement date and recognize expenses on the consolidated statements of operations on a straight-line basis. In addition, we elected the package of practical expedients available under the transition provisions of the new lease standard, including (i) not reassessing whether expired or existing contracts contain leases, (ii) carrying forward lease classification under legacy guidance, and (iii) not revaluing initial direct costs for existing leases. By electing the modified retrospective approach on adoption date, prior period results will continue to be presented under legacy guidance based on the accounting standards originally in effect for such period. We have elected to keep leases with an initial term of 12 months or less off the balance sheet and recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, and have elected to utilize the practical expedient to account for lease and non-lease components together as a single combined lease component for real estate and therapeutic program equipment, from both a lessee and lessor perspective. From a lessor perspective, the timing and pattern of transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately, would be classified as an operating lease. The accounting for our finance leases and leases where we are the lessor remained substantially unchanged. The lease liability was measured as the present value of the unpaid lease payments and the right-of-use asset was derived from the calculation of the lease liability. As the rate implicit in the lease is generally not readily determinable for our operating leases, the discount rates used to determine the present value of our lease liability are based on our incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. Our incremental borrowing rate for a lease is the rate of interest we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Our lease term may include options to extend or terminate if the exercise of that option is reasonably certain to occur. We rent or sublease certain real estate to third parties. Our sublease portfolio consists mainly of operating leases on small medical office locations. The most significant impact of the new lease standard was to the balance sheet, where values were added for real estate operating leases, which increased both assets and liabilities. The capital leases associated with equipment were already reflected on our balance sheet and did not add any incremental assets or liabilities under the new lease standard. The adoption of the new lease standard did not have an impact on our compliance with existing debt covenants because the impact of changes in accounting standards is excluded from debt covenant calculations. The impact of applying the new lease standard to our results of operations and cash flows was not material. Additionally, we determined that the leases previously identified as build-to-suit leasing arrangements under legacy lease accounting should be derecognized pursuant to the transition guidance provided for build-to-suit leases in ASC 842. Accordingly, these leases were reassessed as operating leases as of January 1, 2019. The legacy guidance was based on a risks and rewards model which contained several prescriptive provisions designed to assess lessee ownership during construction. The ASC 842 model has eliminated these prescriptive rules and replaced them with a model based on control. Under ASC 842, we did not demonstrate control as the lessee and therefore the leases were derecognized at January 1, 2019. The resulting cumulative effect recognized at adoption to accumulated deficit was $1.5 million, net of tax. Upon adoption of ASC 842, the cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2019 was as follows: December 31, 2018 Effects of January 1, 2019 (in thousands) As reported adoption After adoption Assets Other current assets $ 18,731 $ (5,770) $ 12,961 Total current assets 325,900 (5,770) 320,130 Property, plant, and equipment, net 89,489 (8,068) 81,421 Other intangible assets, net 15,478 (220) 15,258 Deferred income taxes 65,635 (584) 65,051 Operating lease right-of-use assets — 102,226 102,226 Other assets 7,766 538 8,304 Total assets 703,010 88,122 791,132 Liabilities Current liabilities: Current portion of long-term debt 8,583 (619) 7,964 Accrued expenses and other current liabilities 51,783 (1,352) 50,431 Current portion of operating lease liabilities — 31,479 31,479 Total current liabilities 171,274 29,508 200,782 Long-term liabilities: Long-term debt, less current portion 502,090 (12,493) 489,597 Operating lease liabilities — 82,510 82,510 Other liabilities 51,570 (12,950) 38,620 Total liabilities 724,934 86,575 811,509 Shareholders’ deficit: Accumulated deficit (361,023) 1,547 (359,476) Total shareholders’ deficit (21,924) 1,547 (20,377) Total liabilities and shareholders’ deficit $ 703,010 $ 88,122 $ 791,132 · ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350) - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which requires 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). Effective July 1, 2019, we elected to early adopt the requirements of the standard on a prospective basis. As of December 31, 2019, we capitalized $2.1 million of implementation costs for cloud computing arrangements, net of accumulated amortization, which is recorded in other current assets and other assets in the consolidated balance sheet. 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. 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. 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. Recent Accounting Pronouncements, Not Yet Adopted 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, which 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 ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. Adoption of the standard is not expected to have a material impact on our consolidated financial statements. In August 2018, the 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. Adoption of the standard is not expected to have a material impact on our consolidated financial statements. 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 public entities 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 December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes exceptions related to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other comprehensive income, as well as, the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This ASU also modifies accounting related to income recognition of franchise tax, tax basis of goodwill, and effect of tax law or rate changes. The amendments in this ASU are effective for public entities 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. |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
ASU 2016-02 | |
Organization and Summary of Significant Accounting Policies | |
Schedule of cumulative effect of the changes made to our consolidated balance sheet | December 31, 2018 Effects of January 1, 2019 (in thousands) As reported adoption After adoption Assets Other current assets $ 18,731 $ (5,770) $ 12,961 Total current assets 325,900 (5,770) 320,130 Property, plant, and equipment, net 89,489 (8,068) 81,421 Other intangible assets, net 15,478 (220) 15,258 Deferred income taxes 65,635 (584) 65,051 Operating lease right-of-use assets — 102,226 102,226 Other assets 7,766 538 8,304 Total assets 703,010 88,122 791,132 Liabilities Current liabilities: Current portion of long-term debt 8,583 (619) 7,964 Accrued expenses and other current liabilities 51,783 (1,352) 50,431 Current portion of operating lease liabilities — 31,479 31,479 Total current liabilities 171,274 29,508 200,782 Long-term liabilities: Long-term debt, less current portion 502,090 (12,493) 489,597 Operating lease liabilities — 82,510 82,510 Other liabilities 51,570 (12,950) 38,620 Total liabilities 724,934 86,575 811,509 Shareholders’ deficit: Accumulated deficit (361,023) 1,547 (359,476) Total shareholders’ deficit (21,924) 1,547 (20,377) Total liabilities and shareholders’ deficit $ 703,010 $ 88,122 $ 791,132 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share | |
Schedule of reconciliation of numerators and denominators used to calculate basic and diluted net loss per share | For the Years Ended December 31, (in thousands, except per share data) 2019 2018 2017 Net income (loss) $ 27,525 $ (858) $ (104,671) Weighted average shares outstanding - basic 37,267,188 36,764,551 36,270,920 Effect of potentially dilutive restricted stock units and options (1) 797,429 — — Weighted average shares outstanding - diluted 38,064,617 36,764,551 36,270,920 Basic income (loss) per share $ 0.74 $ (0.02) $ (2.89) Diluted income (loss) per share $ 0.72 $ (0.02) $ (2.89) (1) In accordance with ASC 260 - Earnings Per Share, during periods of a net loss, shares used to compute diluted per share amounts exclude potentially dilutive shares related to unvested restricted stock units and unexercised options. For the years ended December 31, 2018 and 2017, potentially dilutive shares of 709,309 shares and 295,718 shares were excluded, as we were in a net loss position. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Patient Care | |
Revenue Recognition | |
Schedule of disaggregates of revenue from contracts with customers | For the Years Ended December 31, (in thousands) 2019 2018 2017 Patient Care Segment Medicare $ 289,099 $ 273,833 $ 260,275 Medicaid 143,438 132,938 132,707 Commercial Insurance/Managed Care (excluding Medicare and Medicaid Managed Care) 323,499 316,243 325,639 Veterans Administration 89,035 78,328 74,435 Private Pay 60,620 56,040 58,917 Total $ 905,691 $ 857,382 $ 851,973 |
Products & Services | |
Revenue Recognition | |
Schedule of disaggregates of revenue from contracts with customers | For the Years Ended December 31, (in thousands) 2019 2018 2017 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 143,400 $ 135,995 $ 128,686 Therapeutic solutions 48,955 55,383 60,110 Total $ 192,355 $ 191,378 $ 188,796 |
Accounts Receivable, Net (Table
Accounts Receivable, Net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounts Receivable, Net | |
Schedule of accounts receivable, net | As of December 31, 2019 As of December 31, 2018 Products & Products & (in thousands) Patient Care Services Consolidated Patient Care Services Consolidated Gross charges before estimates for implicit price concessions $ 202,132 $ 27,551 $ 229,683 $ 182,338 $ 24,542 $ 206,880 Less estimates for implicit price concessions: Payor disallowances (58,094) — (58,094) (53,378) — (53,378) Patient non-payments (9,589) — (9,589) (7,244) — (7,244) Accounts receivable, gross 134,449 27,551 162,000 121,716 24,542 146,258 Allowance for doubtful accounts — (2,641) (2,641) — (2,272) (2,272) Accounts receivable, net $ 134,449 $ 24,910 $ 159,359 $ 121,716 $ 22,270 $ 143,986 |
Schedule of activities by year for the allowance for doubtful accounts | Allowance for Doubtful (in thousands) Accounts Balance at December 31, 2016 $ 15,521 Additions 9,423 Reductions (10,879) Balance at December 31, 2017 14,065 Cumulative Effect of ASC 606 (9,894) Additions 630 Reductions (1,155) Recoveries (1,374) Balance at December 31, 2018 2,272 Additions 1,877 Reductions (762) Recoveries (746) Balance at December 31, 2019 $ 2,641 |
Schedule of gross charges before estimates for payor disallowances and patient non-payments, by major payor classification | December 31, 2019 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) $ 46,771 $ 12,599 $ 7,050 $ 18,120 $ 84,540 Private pay 1,081 535 435 569 2,620 Medicaid 13,779 3,903 2,314 8,068 28,064 VA 4,465 1,015 353 565 6,398 Non-Medicare 66,096 18,052 10,152 27,322 121,622 Medicare 36,654 8,181 5,191 30,484 80,510 Products & Services accounts receivable, before allowance 15,898 7,345 2,103 2,205 27,551 Gross charges before estimates for implicit price concessions and allowance for doubtful accounts 118,648 33,578 17,446 60,011 229,683 Less estimates for implicit price concessions (67,683) Accounts receivable, before allowance 162,000 Allowance for doubtful accounts (2,641) Accounts receivable, net $ 159,359 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 accounts receivable, before allowance 14,768 6,507 1,641 1,626 24,542 Gross charges before estimates for implicit price concessions and allowance for doubtful accounts 110,452 27,745 13,834 54,849 206,880 Less estimates for implicit price concessions (60,622) Accounts receivable, before allowance 146,258 Allowance for doubtful accounts (2,272) Accounts receivable, net $ 143,986 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventories | |
Schedule of inventories | As of December 31, (in thousands) 2019 2018 Raw materials $ 20,574 $ 19,632 Work in process 10,165 9,278 Finished goods 37,465 38,780 Total inventories $ 68,204 $ 67,690 |
Property, Plant and Equipment_2
Property, Plant and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment, Net | |
Schedule of property, plant and equipment, net | As of December 31, (in thousands) 2019 2018 Land $ 634 $ 644 Buildings (1) 4,110 24,558 Furniture and fixtures 13,835 13,121 Machinery and equipment 25,438 27,452 Equipment leased to third parties under operating leases 29,217 30,093 Leasehold improvements 131,617 111,247 Computers and software 75,540 69,173 Total property, plant, and equipment, gross 280,391 276,288 Less: accumulated depreciation and amortization (196,334) (186,799) Total property, plant, and equipment, net $ 84,057 $ 89,489 (1) As discussed in Note A - “ Organization and Summary of Significant Accounting Policies ” , the new lease standard resulted in the removal of assets associated with build-to-suit leases. |
Schedule of investment in equipment leased to third parties under operating leases | As of December 31, (in thousands) 2019 2018 Program equipment $ 29,217 $ 30,093 Less: Accumulated depreciation (12,972) (14,712) Net book value $ 16,245 $ 15,381 |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
2019 Acquisition Activity, prosthetic and orthotic business | |
Schedule of aggregate purchase price of acquisition allocated on a preliminary basis | (in thousands) Cash paid, net of cash acquired $ 35,909 Issuance of seller notes at fair value 7,835 Additional consideration, net (1) 626 Aggregate purchase price 44,370 Accounts receivable 4,128 Inventories 2,081 Customer relationships (Weighted average useful life of 4.7 years) 7,038 Non-compete agreements (Weighted average useful life of 4.9 years) 350 Other assets and liabilities, net (2,983) Net assets acquired 10,614 Goodwill $ 33,756 (1) Approximately $0.7 million of additional consideration represents payments made during the third quarter related to certain tax elections with the seller, offset by an immaterial amount of favorable working capital adjustments. |
2018 Acquisition Activity, two O&P businesses | |
Schedule of aggregate purchase price of acquisition allocated on a preliminary basis | (in thousands) Cash paid, net of cash acquired $ 1,978 Issuance of seller notes 1,120 Aggregate purchase price 3,098 Accounts receivable 256 Inventories 302 Customer relationships (Weighted average useful life of 4.0 years) 260 Non-compete agreements (Weighted average useful life of 4.6 years) 214 Other assets 90 Accounts payable (59) Accrued expenses and other liabilities (364) Net assets acquired 699 Goodwill $ 2,399 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2017 $ 625,011 $ (428,668) $ 196,343 $ 139,299 $ (139,299) $ — $ 764,310 $ (567,967) $ 196,343 Additions from acquisitions 2,399 — 2,399 — — — 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 Additions from acquisitions 35,926 — 35,926 — — — 35,926 — 35,926 Measurement period adjustments (1) (2,424) — (2,424) — — — (2,424) — (2,424) Balance at December 31, 2019 $ 660,912 $ (428,668) $ 232,244 $ 139,299 $ (139,299) $ — $ 800,211 $ (567,967) $ 232,244 |
Schedule of balances related to intangible assets | As of December 31, 2019 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 32,772 $ (22,726) $ — $ 10,046 Trade name 255 (151) — 104 Patents and other intangibles 9,188 (5,503) — 3,685 Definite-lived intangible assets 42,215 (28,380) — 13,835 Indefinite-lived trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 51,285 $ (28,380) $ (4,953) $ 17,952 As of 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-lived trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 44,752 $ (24,321) $ (4,953) $ 15,478 |
Schedule of estimated aggregate amortization expense for definite-lived intangible assets | (in thousands) 2020 $ 5,160 2021 2,576 2022 2,509 2023 2,284 2024 781 Thereafter 525 Total $ 13,835 |
Other Current Assets and Othe_2
Other Current Assets and Other Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Other Current Assets and Other Assets | |
Schedule of other current assets | As of December 31, (in thousands) 2019 2018 Non-trade receivables $ 6,711 $ 7,848 Prepaid maintenance 2,767 3,330 Prepaid rent 1,145 4,442 Prepaid other 994 1,101 Prepaid purchase orders 922 998 Prepaid education and training 726 597 Prepaid insurance 264 258 Other 144 157 Total other current assets $ 13,673 $ 18,731 |
Schedule of other assets | As of December 31, (in thousands) 2019 2018 Cash surrender value of company-owned life insurance $ 3,253 $ 2,918 Non-trade receivables 2,398 1,904 Implementation costs for cloud computing arrangements 1,964 — Deposits 1,893 1,698 Finance lease right-of-use assets 1,488 — Surety bond collateral — 1,000 Other 309 246 Total other assets $ 11,305 $ 7,766 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities and Other Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accrued Expenses and Other Current Liabilities and Other Liabilities | |
Schedule of accrued expenses and other current liabilities | As of December 31, (in thousands) 2019 2018 Patient prepayments, deposits, and refunds payable $ 24,183 $ 24,563 Accrued sales taxes and other taxes 8,543 6,810 Insurance and self-insurance accruals 8,033 8,886 Derivative liability 3,516 724 Accrued professional fees 2,533 3,751 Accrued interest payable 266 332 Other current liabilities 8,751 6,717 Total $ 55,825 $ 51,783 |
Schedule of other liabilities | As of December 31, (in thousands) 2019 2018 Supplemental executive retirement plan obligations $ 20,851 $ 20,195 Derivative liability 9,821 3,134 Long-term insurance accruals 7,424 8,713 Unrecognized tax benefits 5,296 5,458 Deferred tenant improvement allowances — 8,570 Deferred rent — 4,455 Other 2,412 1,045 Total $ 45,804 $ 51,570 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Schedule of components of provision for income taxes | Years Ended December 31, (in thousands) 2019 2018 2017 Current: Federal $ 5,461 $ 669 $ 541 State 719 1,117 574 Total current 6,180 1,786 1,115 Deferred: Federal 1,803 1,497 28,905 State (5,029) 1,955 (2,723) Total deferred (3,226) 3,452 26,182 Total provision for income taxes $ 2,954 $ 5,238 $ 27,297 |
Schedule of reconciliation of the federal statutory tax rate to our effective tax rate applicable to continuing operations | Years Ended December 31, 2019 2018 2017 Federal statutory tax rate 21.0 % 21.0 % 35.0 % State and local income taxes 6.0 % 26.6 % 0.9 % Change in valuation allowance (22.5) % 9.5 % (0.7) % Permanent Items 2.3 % 27.9 % (2.7) % Tax audit adjustments 0.9 % 8.7 % — % Change in uncertain tax positions 0.2 % 5.5 % (0.3) % Tax credits (0.1) % (5.6) % 0.1 % State tax rate change effect on deferred balance — % 27.7 % (0.2) % Federal statutory tax rate change effect on deferred balance — % — % (45.0) % Goodwill impairment — % — % (21.1) % Other 1.9 % (1.7) % (1.3) % Tax provision 9.7 % 119.6 % (35.3) % |
Schedule of significant components of the our deferred income tax assets and liabilities | As of December 31, (in thousands) 2019 2018 Deferred tax assets: Lease liabilities $ 31,432 $ — Provision for doubtful accounts and implicit price concessions 18,547 16,529 Accrued expenses 12,789 15,352 Property, plant and equipment 9,797 10,829 Interest expense 8,946 7,798 Deferred benefit plan compensation 8,834 6,269 Net operating loss carryforwards 7,636 10,975 Share based compensation 4,016 3,902 Inventory reserves 2,554 2,710 Refund liabilities 2,346 2,517 Intangibles 1,236 1,063 Interest on seller notes 961 1,029 Deferred rent — 1,136 Other 893 1,307 Deferred tax assets 109,987 81,416 Less: Valuation allowance (2,065) (8,930) Total deferred tax assets 107,922 72,486 Deferred tax liabilities: Lease assets 28,360 — Goodwill 7,960 5,821 Prepaid expenses 1,121 1,030 Total deferred tax liabilities 37,441 6,851 Net deferred tax assets $ 70,481 $ 65,635 |
Schedule of activity in the valuation allowance | (in thousands) Balance at Balance at End of Year Beginning of Year Acquisitions Provision Released Year 2019 $ 8,930 $ — $ 238 $ 7,103 $ 2,065 2018 $ 8,754 $ — $ 204 $ 28 $ 8,930 2017 $ 6,895 $ — $ 2,306 $ 447 $ 8,754 |
Summary of reconciliation of liability for unrecognized tax benefits | (in thousands) 2019 2018 2017 Unrecognized tax benefits, at beginning of the year $ 4,765 $ 4,860 $ 4,664 Additions for tax positions related to the current year 247 257 466 Decrease related to prior year positions (337) (352) (270) Decrease for lapse of applicable statute of limitations (344) — — Unrecognized tax benefits, at end of the year $ 4,331 $ 4,765 $ 4,860 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases | |
Schedule of Balance sheet information related to leases | (in thousands) Classification As of December 31, 2019 Assets Operating lease right-of-use assets Operating lease right-of-use assets $ 110,559 Finance lease right-of-use assets Other assets 1,488 Total lease assets $ 112,047 Liabilities Current Operating Current portion of operating lease liabilities $ 34,342 Finance Current portion of long-term debt 370 Noncurrent Operating Operating lease liabilities 88,418 Finance Long-term debt, less current portion 1,135 Total lease liabilities $ 124,265 |
Schedule of lease expense | For the Year Ended (in thousands) 2019 Operating lease cost $ 44,081 Finance lease cost Amortization of right-of-use assets 312 Interest on lease liabilities 28 Sublease income (240) Short-term lease cost 613 Variable lease cost 5,476 Total lease cost $ 50,270 |
Schedule of maturities of our lease liabilities | Finance Operating (in thousands) Leases Leases Total Leases 2020 422 38,972 39,394 2021 355 34,384 34,739 2022 267 26,416 26,683 2023 185 17,797 17,982 2024 148 10,530 10,678 Thereafter 289 8,975 9,264 Total lease payments 1,666 137,074 138,740 Imputed interest (161) (14,314) (14,475) Total $ 1,505 $ 122,760 $ 124,265 |
Schedule of weighted average lease term and discount rates | As of December 31, 2019 Weighted average remaining lease term (years) Operating leases 3.98 Finance leases 5.17 Weighted average discount rate Operating leases 5.29 % Finance leases 4.01 % |
Schedule of supplemental cash flow information | For the Year Ended (in thousands) December 31, 2019 Cash flows for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 44,111 Operating cash flows from finance leases 28 Financing cash flows from finance leases 325 Right-of-use assets obtained in exchange for lease obligations: Operating leases 46,254 Finance leases 1,245 |
Schedule of future minimum rental payments, by year and in the aggregate, under operating and financing obligations | 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 |
Debt and Other Obligations (Tab
Debt and Other Obligations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt and Other Obligations | |
Schedule of debt | As of December 31, As of December 31, (in thousands) 2019 2018 Debt: Term Loan B $ 496,163 $ 501,213 Seller notes 9,005 4,506 Finance lease liabilities and other 2,033 14,361 Total debt before unamortized discount and debt issuance costs 507,201 520,080 Unamortized discount and debt issuance costs, net (8,328) (9,407) Total debt 498,873 510,673 Current portion of long-term debt: Term Loan B 5,050 5,050 Seller notes 3,175 2,513 Finance lease liabilities and other 527 1,020 Total current portion of long-term debt 8,752 8,583 Long-term debt $ 490,121 $ 502,090 |
Schedule of maturities of debt | (in thousands) 2020 $ 8,932 2021 8,089 2022 6,767 2023 6,247 2024 5,975 Thereafter 471,191 Total debt before unamortized discount and debt issuance costs, net 507,201 Unamortized discount and debt issuance costs, net (8,328) Total debt $ 498,873 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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) Unrealized loss recognized in other comprehensive loss, net of tax (8,806) Reclassification to interest expense, net of tax 1,605 Balance as of December 31, 2019 $ (10,137) |
Schedule of fair value of derivative liabilities within the consolidated balance sheets | As of December 31, 2019 As of December 31, 2018 (in thousands) Assets Liabilities Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities — 3,516 — 724 Other liabilities — 9,821 — 3,134 |
Share Based Compensation (Table
Share Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share 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, 2017 1,183,039 $ 14.30 702,391 $ 19.40 98,406 $ 12.66 Granted 569,571 15.70 165,853 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 14.47 593,099 17.63 61,376 18.25 Granted 467,896 19.14 147,983 19.16 55,752 20.09 Vested (452,306) 14.48 (120,953) 18.40 (61,376) 18.25 Forfeited (59,994) 14.94 (20,645) 18.32 — — Nonvested at December 31, 2019 1,164,224 $ 16.32 599,484 $ 17.82 55,752 $ 20.10 |
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, 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 Granted — — Terminated (9,913) 12.77 Exercised (148,851) 12.77 Outstanding at December 31, 2019 523,105 $ 12.77 $ 7,762,878 7.4 |
Employee Benefits (Tables)
Employee Benefits (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Employee Benefits | |
Schedule of Change in Benefit Obligation | Change in Benefit Obligation (in thousands) Benefit obligation as of December 31, 2016 $ 21,304 Service cost 340 Interest cost 711 Payments (1,913) Actuarial loss 351 Benefit obligation as of December 31, 2017 20,793 Service cost 367 Interest cost 600 Payments (1,913) Actuarial gain (920) Benefit obligation at December 31, 2018 18,927 Service cost 335 Interest cost 658 Payments (1,913) Actuarial loss 1,207 Benefit obligation as of December 31, 2019 $ 19,214 |
Schedule of funded status of the DB SERP's net benefit obligation | December 31, (in thousands) 2019 2018 Unfunded status $ 15,950 $ 16,740 Unamortized net loss 3,264 2,187 Net amount recognized $ 19,214 $ 18,927 |
Schedule of Amounts Recognized in the Consolidated Balance Sheets | December 31, (in thousands) 2019 2018 Current accrued expenses and other current liabilities $ 1,913 $ 1,913 Non-current other liabilities 17,301 17,014 Total accrued liabilities $ 19,214 $ 18,927 |
Schedule of weighted average assumptions were used to determine the benefit obligation | 2019 2018 2017 Discount rate 2.9 % 4.0 % 3.3 % Average rate of increase in compensation 2.5 % 3.0 % 3.0 % |
Schedule of future payments under the Plan | (in thousands) 2020 $ 1,913 2021 1,913 2022 1,913 2023 1,913 2024 1,913 Thereafter 9,649 $ 19,214 |
Segment and Related Informati_2
Segment and Related Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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) 2019 2018 2017 2019 2018 2017 Net revenue Third party $ 905,691 $ 857,382 $ 851,973 $ 192,355 $ 191,378 $ 188,796 Intersegments — — — 203,496 192,096 178,768 Total net revenue 905,691 857,382 851,973 395,851 383,474 367,564 Material costs Third party suppliers 250,407 234,409 228,091 107,364 103,608 101,132 Intersegments 24,394 23,792 23,808 179,102 168,304 154,960 Total material costs 274,801 258,201 251,899 286,466 271,912 256,092 Personnel expenses 319,633 312,736 312,695 52,592 51,353 48,395 Other expenses 151,140 140,527 143,598 28,178 24,306 25,855 Depreciation & amortization 18,541 19,113 21,363 10,650 10,197 10,163 Impairment of intangible assets — — — — 183 54,735 Segment income (loss) from operations $ 141,576 $ 126,805 $ 122,418 $ 17,965 $ 25,523 $ (27,676) Purchase of property, plant and equipment $ 16,102 $ 12,781 $ 8,163 $ 2,368 $ 1,890 $ 2,153 Purchase of therapeutic program equipment leased to third parties under operating leases $ — $ — $ — $ 6,672 $ 9,835 $ 6,000 |
Schedule of reconciliation of reportable segments | A reconciliation of the total of the reportable segment's income (loss) from operations to consolidated income (loss) from operations is as follows: (in thousands) 2019 2018 2017 Income (loss) from operations Patient Care $ 141,576 $ 126,805 $ 122,418 Products & Services 17,965 25,523 (27,676) Corporate & other (94,113) (92,681) (113,692) Income (loss) from operations 65,428 59,647 (18,950) Interest expense, net 34,258 37,566 57,688 Loss on extinguishment of debt — 16,998 — Non-service defined benefit plan expense 691 703 736 Income (loss) before income taxes 30,479 4,380 (77,374) Provision for income taxes 2,954 5,238 27,297 Net income (loss) $ 27,525 $ (858) $ (104,671) A reconciliation of the reportable segment net revenue to consolidated net revenue is as follows: (in thousands) 2019 2018 2017 Net Revenue Patient Care $ 905,691 $ 857,382 $ 851,973 Products & Services 395,851 383,474 367,564 Corporate & other — — — Consolidating adjustments (203,496) (192,096) (178,768) Consolidated net revenue $ 1,098,046 $ 1,048,760 $ 1,040,769 A reconciliation of the reportable segment material costs to consolidated material costs is as follows: (in thousands) 2019 2018 2017 Material costs Patient Care $ 274,801 $ 258,201 $ 251,899 Products & Services 286,466 271,912 256,092 Corporate & other — — — Consolidating adjustments (203,496) (192,096) (178,768) Consolidated material costs $ 357,771 $ 338,017 $ 329,223 A reconciliation of the reportable segment purchase of property, plant and equipment to consolidated purchase of property, plant and equipment, including purchases of therapeutic program equipment leased to third parties under operating leases, is as follows: (in thousands) 2019 2018 2017 Purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases Patient Care $ 16,102 $ 12,781 $ 8,163 Products & Services Property, plant and equipment 2,368 1,890 2,153 Therapeutic program equipment leased to third parties under operating leases 6,672 9,835 6,000 Corporate & other 7,963 4,313 6,039 Total consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases $ 33,105 $ 28,819 $ 22,355 A reconciliation of the total of the reportable segment's assets to consolidated assets is as follows: (in thousands) 2019 2018 Assets Patient Care $ 552,644 $ 415,469 Products & Services 105,673 100,953 Corporate & other 183,936 186,588 Total consolidated assets $ 842,253 $ 703,010 |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Cash Flow Information | |
Schedule of changes in operating assets and liabilities on cash flows from operating activities, reconciliation of the change in operating lease liabilities, net of amortization of right-of-use assets 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) 2019 2018 2017 Accounts receivable, net $ (12,329) $ 3,238 $ (12,585) Inventories 1,568 1,750 (913) Other current assets and other assets (2,611) 4,459 661 Income taxes receivable 1,248 12,700 121 Accounts payable (6,725) 6,511 (3,562) Accrued expenses and other current liabilities (1,242) (16,550) (12,929) Accrued compensation related costs 5,780 1,713 16,843 Other liabilities (1,883) (3,980) (2,271) Operating lease liabilities, net of amortization of right-of-use assets 262 — — Changes in operating assets and liabilities on cash flows from operating activities $ (15,932) $ 9,841 $ (14,635) A reconciliation of the change in operating lease liabilities, net of amortization of right-of-use assets is as follows: For the Years Ended December 31, (in thousands) 2019 2018 2017 Operating lease liabilities $ (36,911) $ — $ — Amortization of right-of-use assets 37,173 — — Operating lease liabilities, net of amortization of right-of-use assets $ 262 $ — $ — The supplemental disclosure requirements for the statements of cash flows are as follows: For the Years Ended December 31, (in thousands) 2019 2018 2017 Cash paid during the period for: Interest paid $ 29,192 $ 31,312 $ 48,437 Income tax (refunds received) paid 5,100 (11,131) 725 Non-cash financing and investing activities: Issuance of seller notes and working capital adjustments in connection with acquisitions 7,885 1,120 — Purchase of property, plant and equipment in accounts payable at period end 2,998 5,018 2,119 Purchase of property, plant and equipment through vendor financing 2,200 — — Additions to property, plant and equipment acquired through financing obligations — 1,523 1,484 Retirements of financed property, plant and equipment and related financing obligations — 4,460 811 |
Quarterly Financial Informati_2
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Information (Unaudited) | |
Schedule of quarterly financial information | Three Months Ended March 31, June 30, September 30, December 31, (dollars in thousands, except per share amounts) 2019 2019 2019 2019 Net revenues $ 236,419 $ 281,098 $ 279,638 $ 300,891 Material costs 78,377 91,399 92,034 95,961 Personnel costs 86,711 91,490 94,594 99,430 Other operating costs 33,555 33,741 32,771 34,876 General and administrative expenses 28,282 29,358 29,834 30,591 Professional accounting and legal fees 2,700 3,247 3,629 4,113 Depreciation and amortization 8,773 8,760 9,373 9,019 (Loss) income from operations (1,979) 23,103 17,403 26,901 Interest expense, net 8,538 8,481 8,954 8,285 Non-service defined benefit plan expense 173 173 173 172 (Loss) income before income taxes (10,690) 14,449 8,276 18,444 (Benefit) provision for income taxes (3,739) 4,414 2,585 (306) Net (loss) income $ (6,951) $ 10,035 $ 5,691 $ 18,750 Other comprehensive (loss) income: Unrealized (loss) gain on cash flow hedges, net of tax (2,936) (4,688) (1,641) 2,064 Unrealized gain (loss) on defined benefit plan, net of tax 6 6 7 (838) Comprehensive (loss) income $ (9,881) $ 5,353 $ 4,057 $ 19,976 Basic Per Common Share Data: Basic (loss) earnings per share $ (0.19) $ 0.27 $ 0.15 $ 0.50 Weighted average shares outstanding - basic 37,001,977 37,299,766 37,349,144 37,411,847 Diluted Per Common Share Data: Diluted (loss) earnings per share $ (0.19) $ 0.26 $ 0.15 $ 0.49 Weighted average shares outstanding - diluted 37,001,977 37,887,559 37,986,860 38,415,108 Three Months Ended March 31, June 30, September 30, December 31, (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 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2019statesegmentcliniclocationitem | |
Number of segments | segment | 2 |
Patient Care | |
Patient care clinics | clinic | 701 |
Satellite locations | 111 |
Number of states where satellite's are located | state | 46 |
Locations opened or acquired | 100 |
Locations closed or consolidated | 68 |
Products & Services | |
Skilled nursing and post-acute providers receiving programs | item | 4,000 |
Organization and Summary of S_5
Organization and Summary of Significant Accounting Policies - Patient Care (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($) | |
Organization and Summary of Significant Accounting Policies | ||
Warranty liability | $ | $ 2.5 | $ 2.1 |
Patient Care | ||
Organization and Summary of Significant Accounting Policies | ||
Labor warranty (in days) | 90 days | |
Manufacturer warranty (in days) | 180 days | |
Number of performance obligations | item | 2 | |
Period of recognition deferred revenue (in days) | 90 days |
Organization and Summary of S_6
Organization and Summary of Significant Accounting Policies - Product & Services (Details) - Products & Services | 12 Months Ended |
Dec. 31, 2019 | |
Minimum | |
Organization and Summary of Significant Accounting Policies | |
Payment terms (in days) | 30 days |
Maximum | |
Organization and Summary of Significant Accounting Policies | |
Payment terms (in days) | 90 days |
Organization and Summary of S_7
Organization and Summary of Significant Accounting Policies - Other Operating Costs (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Other Operating Costs | |||
Marketing costs, including advertising | $ 3.8 | $ 3.8 | $ 3.8 |
Organization and Summary of S_8
Organization and Summary of Significant Accounting Policies - General and Administrative Expenses (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
General and Administrative Expenses | |||
Advertising costs | $ 0.9 | $ 1.5 | $ 0.7 |
Organization and Summary of S_9
Organization and Summary of Significant Accounting Policies - Accounts Receivable, Net (Details) | 12 Months Ended |
Dec. 31, 2019 | |
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 _10
Organization and Summary of Significant Accounting Policies - Inventories (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Inventories | ||
Reserve for excess and obsolete inventory | $ 7,600 | $ 7,200 |
Inventories | 68,204 | 67,690 |
WIP inventory | 10,165 | 9,278 |
Raw material inventory | 20,574 | 19,632 |
Patient Care | ||
Inventories | ||
Inventories | 29,400 | 27,500 |
WIP inventory | 10,200 | 9,300 |
Raw material inventory | $ 19,200 | $ 18,200 |
Intercompany purchase of raw materials (in percent) | 74.00% | 74.00% |
Products & Services | ||
Inventories | ||
Inventories | $ 38,800 | $ 40,200 |
Organization and Summary of _11
Organization and Summary of Significant Accounting Policies - Property, Plant and Equipment, Net (Details) | 12 Months Ended |
Dec. 31, 2019 | |
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 _12
Organization and Summary of Significant Accounting Policies - Goodwill and Other Intangible Assets, Net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Other Intangible Assets, Net | |||
Goodwill impairment | $ 0 | $ 0 | $ 53.3 |
Impairment of intangible assets | 0 | ||
Trade name | |||
Goodwill and Other Intangible Assets, Net | |||
Impairment of intangible assets | $ 0 | $ 0.2 | $ 1.4 |
Organization and Summary of _13
Organization and Summary of Significant Accounting Policies - Self-Insurance Reserves (Details) $ in Millions | Dec. 31, 2019USD ($) |
Organization and Summary of Significant Accounting Policies | |
Maximum amount of stop-loss coverage on claims | $ 0.8 |
Maximum amount of liability claims for workers' compensation, product, professional and general per individual incident | $ 0.5 |
Organization and Summary of _14
Organization and Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Organization and Summary of Significant Accounting Policies | ||
U.S. federal operating loss carryforwards | $ 2,800 | $ 10,700 |
State net operating loss carryforwards | 136,900 | 166,000 |
Net deferred tax assets | 70,481 | 65,635 |
Valuation allowance | 2,065 | $ 8,930 |
Valuation allowance released | $ 7,100 |
Organization and Summary of _15
Organization and Summary of Significant Accounting Policies - Shares Based Compensation (Details) | 12 Months Ended |
Dec. 31, 2019plan | |
Share Based Compensation | |
Number of share based compensation plans | 1 |
Minimum | |
Share Based Compensation | |
Vesting period (in years) | 1 year |
Maximum | |
Share Based Compensation | |
Vesting period (in years) | 4 years |
Performance-based stock awards | |
Share Based Compensation | |
Term of the absolute common stock price compounded annual growth rate | 3 years |
Organization and Summary of _16
Organization and Summary of Significant Accounting Policies - Segment Information (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
Organization and Summary of Significant Accounting Policies | |
Number of segments | 2 |
Organization and Summary of _17
Organization and Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Recent Accounting Pronouncement | ||||||
Package of practical expedients | true | |||||
Assets | ||||||
Other current assets | $ 12,961 | $ 13,673 | $ 18,731 | |||
Total current assets | 320,130 | 315,655 | 325,900 | |||
Property, plant and equipment, net | 81,421 | 84,057 | 89,489 | |||
Other intangible assets, net | 15,258 | 17,952 | 15,478 | |||
Deferred income taxes | 65,051 | 70,481 | 65,635 | |||
Operating lease right-of-use assets | 102,226 | 110,559 | ||||
Other assets | 8,304 | 11,305 | 7,766 | |||
Total assets | 791,132 | 842,253 | 703,010 | |||
Current liabilities: | ||||||
Current portion of long-term debt | 7,964 | 8,752 | 8,583 | |||
Accrued expenses and other current liabilities | 50,431 | 55,825 | 51,783 | |||
Current portion of operating lease liabilities | 31,479 | 34,342 | ||||
Total current liabilities | 200,782 | 208,406 | 171,274 | |||
Long-term liabilities: | ||||||
Long-term debt, less current portion | 489,597 | 490,121 | 502,090 | |||
Operating lease liabilities | 82,510 | 88,418 | ||||
Other liabilities | 38,620 | 45,804 | 51,570 | |||
Total liabilities | 811,509 | 832,749 | 724,934 | |||
Shareholders' deficit: | ||||||
Accumulated deficit | (359,476) | (331,951) | (361,023) | |||
Total shareholders' deficit | (20,377) | 9,504 | (21,924) | $ (28,807) | $ (28,051) | $ 65,414 |
Total liabilities and shareholders' deficit | 791,132 | 842,253 | 703,010 | |||
Deferred tax asset | 65,051 | 70,481 | $ 65,635 | |||
Capitalized implementation costs | 1,964 | |||||
ASU 2014-09 | ||||||
Assets | ||||||
Deferred income taxes | 300 | |||||
Shareholders' deficit: | ||||||
Accumulated deficit | (800) | |||||
Contract liability | 1,000 | |||||
Deferred tax asset | $ 300 | |||||
ASU 2016-02 | ||||||
Recent Accounting Pronouncement | ||||||
Accumulated deficit recognized | 1,500 | |||||
ASU 2018-15 | ||||||
Shareholders' deficit: | ||||||
Capitalized implementation costs | $ 2,100 | |||||
Restatement Adjustments | ASU 2016-02 | ||||||
Assets | ||||||
Other current assets | (5,770) | |||||
Total current assets | (5,770) | |||||
Property, plant and equipment, net | (8,068) | |||||
Other intangible assets, net | (220) | |||||
Deferred income taxes | (584) | |||||
Operating lease right-of-use assets | 102,226 | |||||
Other assets | 538 | |||||
Total assets | 88,122 | |||||
Current liabilities: | ||||||
Current portion of long-term debt | (619) | |||||
Accrued expenses and other current liabilities | (1,352) | |||||
Current portion of operating lease liabilities | 31,479 | |||||
Total current liabilities | 29,508 | |||||
Long-term liabilities: | ||||||
Long-term debt, less current portion | (12,493) | |||||
Operating lease liabilities | 82,510 | |||||
Other liabilities | (12,950) | |||||
Total liabilities | 86,575 | |||||
Shareholders' deficit: | ||||||
Accumulated deficit | 1,547 | |||||
Total shareholders' deficit | 1,547 | |||||
Total liabilities and shareholders' deficit | 88,122 | |||||
Deferred tax asset | $ (584) |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings Per Share | |||||||||||
Net income (loss) | $ 18,750 | $ 5,691 | $ 10,035 | $ (6,951) | $ 4,463 | $ 4,369 | $ 12,928 | $ (22,618) | $ 27,525 | $ (858) | $ (104,671) |
Weighted average shares outstanding - basic | 37,411,847 | 37,349,144 | 37,299,766 | 37,001,977 | 36,906,938 | 36,856,881 | 36,790,401 | 36,498,482 | 37,267,188 | 36,764,551 | 36,270,920 |
Effect of potentially dilutive restricted stock units and options | 797,429 | ||||||||||
Weighted average shares outstanding - diluted | 38,415,108 | 37,986,860 | 37,887,559 | 37,001,977 | 37,721,662 | 37,556,594 | 37,404,360 | 36,498,482 | 38,064,617 | 36,764,551 | 36,270,920 |
Total anti-dilutive shares (in shares) | 0 | 17,894 | 473,037 | ||||||||
Basic and diluted: | |||||||||||
Basic (loss) earnings per share | $ 0.50 | $ 0.15 | $ 0.27 | $ (0.19) | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ 0.74 | $ (0.02) | $ (2.89) |
Diluted income (loss) per share | $ 0.49 | $ 0.15 | $ 0.26 | $ (0.19) | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ 0.72 | $ (0.02) | $ (2.89) |
Unvested restricted stock units and unexercised options | |||||||||||
Earnings Per Share | |||||||||||
Total anti-dilutive shares (in shares) | 709,309 | 295,718 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue Recognition | |||||||||||
Net revenues | $ 300,891 | $ 279,638 | $ 281,098 | $ 236,419 | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 1,098,046 | $ 1,048,760 | $ 1,040,769 |
Patient Care | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 905,691 | 857,382 | 851,973 | ||||||||
Patient Care | Medicare | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 289,099 | 273,833 | 260,275 | ||||||||
Patient Care | Medicaid | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 143,438 | 132,938 | 132,707 | ||||||||
Patient Care | Commercial Insurance/ Managed Care (excluding Medicare and Medicaid Managed Care) | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 323,499 | 316,243 | 325,639 | ||||||||
Patient Care | Veterans Administration | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 89,035 | 78,328 | 74,435 | ||||||||
Patient Care | Private Pay | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 60,620 | 56,040 | 58,917 | ||||||||
Patient Care | Operating segments | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 905,691 | 857,382 | 851,973 | ||||||||
Products & Services | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 192,355 | 191,378 | 188,796 | ||||||||
Products & Services | Distribution services, net of intersegment revenue eliminations | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 143,400 | 135,995 | 128,686 | ||||||||
Products & Services | Therapeutic solutions | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | 48,955 | 55,383 | 60,110 | ||||||||
Products & Services | Operating segments | |||||||||||
Revenue Recognition | |||||||||||
Net revenues | $ 395,851 | $ 383,474 | $ 367,564 |
Accounts Receivable, Net - (Det
Accounts Receivable, Net - (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Accounts Receivable, net | ||||
Gross charges before estimates for implicit price concessions | $ 229,683 | $ 206,880 | ||
Less estimates for implicit price concessions: | ||||
Payor disallowances | (58,094) | (53,378) | ||
Patient non-payments | (9,589) | (7,244) | ||
Accounts receivable, gross | 162,000 | 146,258 | ||
Allowance for doubtful accounts | (2,641) | (2,272) | $ (14,065) | $ (15,521) |
Accounts receivable, net | 159,359 | 143,986 | ||
Patient Care | ||||
Accounts Receivable, net | ||||
Gross charges before estimates for implicit price concessions | 202,132 | 182,338 | ||
Less estimates for implicit price concessions: | ||||
Payor disallowances | (58,094) | (53,378) | ||
Patient non-payments | (9,589) | (7,244) | ||
Accounts receivable, gross | 134,449 | 121,716 | ||
Accounts receivable, net | 134,449 | 121,716 | ||
Products & Services | ||||
Accounts Receivable, net | ||||
Gross charges before estimates for implicit price concessions | 27,551 | 24,542 | ||
Less estimates for implicit price concessions: | ||||
Accounts receivable, gross | 27,551 | 24,542 | ||
Allowance for doubtful accounts | (2,641) | (2,272) | ||
Accounts receivable, net | $ 24,910 | $ 22,270 |
Accounts Receivable, Net - Conc
Accounts Receivable, Net - Concentration Risk (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Federal Government | Gross Charges | Credit Concentration Risk | ||
Concentration Risk | ||
Concentration risk (as a percent) | 50.10% | 48.40% |
Accounts Receivable, Net - Allo
Accounts Receivable, Net - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Allowance for Doubtful Accounts | |||
Balance at the beginning | $ 2,272 | $ 14,065 | $ 15,521 |
Cumulative Effect of ASC 606 | (9,894) | ||
Additions | 1,877 | 630 | 9,423 |
Reductions | (762) | (1,155) | (10,879) |
Recoveries | (746) | (1,374) | |
Balance at the end | $ 2,641 | $ 2,272 | $ 14,065 |
Accounts Receivable, Net - Agin
Accounts Receivable, Net - Aging Categories (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Accounts Receivable, net | ||||
0-60 days | $ 118,648 | $ 110,452 | ||
61-120 Days | 33,578 | 27,745 | ||
121-180 Days | 17,446 | 13,834 | ||
Over 180 Days | 60,011 | 54,849 | ||
Gross charges before estimates for implicit price concessions | 229,683 | 206,880 | ||
Less estimates for implicit price concessions | (67,683) | (60,622) | ||
Accounts receivable, before allowances | 162,000 | 146,258 | ||
Allowance for doubtful accounts | (2,641) | (2,272) | $ (14,065) | $ (15,521) |
Accounts receivable, net | 159,359 | 143,986 | ||
Patient Care | ||||
Accounts Receivable, net | ||||
Gross charges before estimates for implicit price concessions | 202,132 | 182,338 | ||
Accounts receivable, net | 134,449 | 121,716 | ||
Patient Care | Non-Medicare | ||||
Accounts Receivable, net | ||||
0-60 days | 66,096 | 63,345 | ||
61-120 Days | 18,052 | 15,755 | ||
121-180 Days | 10,152 | 9,191 | ||
Over 180 Days | 27,322 | 25,068 | ||
Gross charges before estimates for implicit price concessions | 121,622 | 113,359 | ||
Patient Care | Commercial Insurance/ Managed Care (excluding Medicare and Medicaid Managed Care) | ||||
Accounts Receivable, net | ||||
0-60 days | 46,771 | 44,918 | ||
61-120 Days | 12,599 | 11,495 | ||
121-180 Days | 7,050 | 6,467 | ||
Over 180 Days | 18,120 | 17,172 | ||
Gross charges before estimates for implicit price concessions | 84,540 | 80,052 | ||
Patient Care | Private Pay | ||||
Accounts Receivable, net | ||||
0-60 days | 1,081 | 951 | ||
61-120 Days | 535 | 437 | ||
121-180 Days | 435 | 343 | ||
Over 180 Days | 569 | 483 | ||
Gross charges before estimates for implicit price concessions | 2,620 | 2,214 | ||
Patient Care | Medicaid | ||||
Accounts Receivable, net | ||||
0-60 days | 13,779 | 12,690 | ||
61-120 Days | 3,903 | 2,964 | ||
121-180 Days | 2,314 | 1,855 | ||
Over 180 Days | 8,068 | 6,629 | ||
Gross charges before estimates for implicit price concessions | 28,064 | 24,138 | ||
Patient Care | Veterans Administration | ||||
Accounts Receivable, net | ||||
0-60 days | 4,465 | 4,786 | ||
61-120 Days | 1,015 | 859 | ||
121-180 Days | 353 | 526 | ||
Over 180 Days | 565 | 784 | ||
Gross charges before estimates for implicit price concessions | 6,398 | 6,955 | ||
Patient Care | Medicare | ||||
Accounts Receivable, net | ||||
0-60 days | 36,654 | 32,339 | ||
61-120 Days | 8,181 | 5,483 | ||
121-180 Days | 5,191 | 3,002 | ||
Over 180 Days | 30,484 | 28,155 | ||
Gross charges before estimates for implicit price concessions | 80,510 | 68,979 | ||
Products & Services | ||||
Accounts Receivable, net | ||||
Gross charges before estimates for implicit price concessions | 27,551 | 24,542 | ||
Allowance for doubtful accounts | (2,641) | (2,272) | ||
Accounts receivable, net | 24,910 | 22,270 | ||
Products & Services | Trade accounts receivable | ||||
Accounts Receivable, net | ||||
0-60 days | 15,898 | 14,768 | ||
61-120 Days | 7,345 | 6,507 | ||
121-180 Days | 2,103 | 1,641 | ||
Over 180 Days | 2,205 | 1,626 | ||
Gross charges before estimates for implicit price concessions | $ 27,551 | $ 24,542 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Inventories | ||
Raw materials | $ 20,574 | $ 19,632 |
Work in process | 10,165 | 9,278 |
Finished goods | 37,465 | 38,780 |
Total inventories | $ 68,204 | $ 67,690 |
Property, Plant and Equipment_3
Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2019 | |
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | $ 280,391 | $ 276,288 | ||
Less: accumulated depreciation and amortization | (196,334) | (186,799) | ||
Total property, plant, and equipment, net | 84,057 | 89,489 | $ 81,421 | |
Depreciation expense | 30,600 | 29,700 | $ 29,700 | |
Land | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | 634 | 644 | ||
Buildings | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | 4,110 | 24,558 | ||
Furniture and fixtures | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | 13,835 | 13,121 | ||
Machinery and equipment | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | 25,438 | 27,452 | ||
Equipment leased to third parties under operating leases | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | 29,217 | 30,093 | ||
Less: accumulated depreciation and amortization | (12,972) | (14,712) | ||
Net book value | 16,245 | 15,381 | ||
Leasehold improvements | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | 131,617 | 111,247 | ||
Computers and software | ||||
Property, Plant and Equipment, Net | ||||
Total property, plant, and equipment, gross | $ 75,540 | $ 69,173 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | |
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Cash paid, net of cash acquired | $ 36,585 | $ 1,978 | |||||
Issuance of seller notes and working capital adjustments in connection with acquisitions | 7,885 | 1,120 | |||||
Goodwill | 35,926 | 2,399 | |||||
2019 Acquisition Activity, prosthetic and orthotic business | |||||||
Acquisitions | |||||||
Acquisition-related costs that are in progress or not completed | 1,500 | ||||||
Acquisition-related costs | 1,000 | ||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Aggregate purchase price | $ 7,800 | $ 3,300 | $ 500 | $ 32,800 | 44,370 | ||
Cash paid, net of cash acquired | 5,000 | 3,000 | 200 | 27,700 | 35,909 | ||
Issuance of seller notes and working capital adjustments in connection with acquisitions | 2,800 | 300 | $ 300 | 4,400 | 7,835 | ||
Additional consideration | $ 700 | $ 700 | 626 | ||||
Accounts receivable, net | 4,128 | 4,128 | |||||
Inventories | 2,081 | 2,081 | |||||
Other assets and liabilities, net | (2,983) | (2,983) | |||||
Net assets acquired | (10,614) | (10,614) | |||||
Goodwill | 33,756 | ||||||
Operating right-of-use assets | 5,200 | 5,200 | |||||
Operating lease liabilities | 5,200 | 5,200 | |||||
2019 Acquisition Activity, prosthetic and orthotic business | Customer Relationships | |||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Other intangible assets, net | 7,038 | $ 7,038 | |||||
Weighted average useful life | 4 years 8 months 12 days | ||||||
2019 Acquisition Activity, prosthetic and orthotic business | Non-compete agreements | |||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Other intangible assets, net | $ 350 | $ 350 | |||||
Weighted average useful life | 4 years 10 months 24 days | ||||||
2019 Acquisition Activity, prosthetic and orthotic business | Minimum | |||||||
Acquisitions | |||||||
Notes payable to share holders in quarterly installments period | 3 years | ||||||
2019 Acquisition Activity, prosthetic and orthotic business | Maximum | |||||||
Acquisitions | |||||||
Notes payable to share holders in quarterly installments period | 5 years | ||||||
2018 Acquisition Activity, two O&P businesses | |||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Aggregate purchase price | $ 3,100 | 3,098 | |||||
Cash paid, net of cash acquired | 1,978 | ||||||
Issuance of seller notes and working capital adjustments in connection with acquisitions | 1,120 | ||||||
Accounts receivable, net | 256 | 256 | |||||
Inventories | 302 | 302 | |||||
Other Assets | 90 | 90 | |||||
Accounts payable | (59) | (59) | |||||
Accrued expenses and other liabilities | (364) | (364) | |||||
Net assets acquired | 699 | 699 | |||||
Goodwill | 2,399 | ||||||
2018 Acquisition Activity, two O&P businesses | Customer Relationships | |||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Other intangible assets, net | 260 | $ 260 | |||||
Weighted average useful life | 4 years | ||||||
2018 Acquisition Activity, two O&P businesses | Non-compete agreements | |||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||
Other intangible assets, net | $ 214 | $ 214 | |||||
Weighted average useful life | 4 years 7 months 6 days |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill (Details) $ in Thousands | Oct. 01, 2017USD ($)item | Oct. 01, 2016item | Dec. 31, 2018USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) |
Goodwill | ||||||
Number of Reporting Units | item | 3 | |||||
Impairment of intangible assets | $ 183 | $ 183 | $ 54,735 | |||
Measurement period adjustments related to acquisitions | $ 2,100 | 300 | ||||
Goodwill allocated | ||||||
Goodwill, Gross as of beginning of the year | 766,709 | 764,310 | ||||
Goodwill, Accumulated Impairment | (567,967) | (567,967) | (567,967) | (567,967) | ||
Goodwill, Net as of beginning of the year | 198,742 | 196,343 | ||||
Goodwill impairment | 0 | 0 | 53,300 | |||
Additions from acquisitions | 35,926 | 2,399 | ||||
Measurement period adjustments | (2,424) | |||||
Goodwill, Gross as of end of the year | 766,709 | 800,211 | 766,709 | 764,310 | ||
Goodwill, Net as of end of the year | 198,742 | 232,244 | 198,742 | 196,343 | ||
Patient Care | ||||||
Goodwill allocated | ||||||
Goodwill, Gross as of beginning of the year | 627,410 | 625,011 | ||||
Goodwill, Accumulated Impairment | (428,668) | (428,668) | (428,668) | (428,668) | ||
Goodwill, Net as of beginning of the year | 198,742 | 196,343 | ||||
Additions from acquisitions | 35,926 | 2,399 | ||||
Measurement period adjustments | (2,424) | |||||
Goodwill, Gross as of end of the year | 627,410 | 660,912 | 627,410 | 625,011 | ||
Goodwill, Net as of end of the year | 198,742 | 232,244 | 198,742 | 196,343 | ||
Products & Services | ||||||
Goodwill | ||||||
Number of Reporting Units | item | 2 | 2 | ||||
Impairment of intangible assets | 183 | 54,735 | ||||
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) | ||
Goodwill, Gross as of end of the year | $ 139,299 | 139,299 | $ 139,299 | $ 139,299 | ||
Goodwill, Net as of end of the year | $ 0 | |||||
Therapeutic | ||||||
Goodwill | ||||||
Impairment of intangible assets | $ 32,800 | |||||
Distribution | ||||||
Goodwill | ||||||
Impairment of intangible assets | $ 20,500 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | $ 42,215 | $ 35,682 | |
Definite-lived, Accumulated Amortization | (28,380) | (24,321) | |
Definite-lived, Net Carrying Amount | 13,835 | 11,361 | |
Total other intangible assets, Gross Carrying Amount | 51,285 | 44,752 | |
Total other intangible assets, Accumulated Impairment | (4,953) | (4,953) | |
Total other intangible assets, Net Carrying Amount | 17,952 | 15,478 | |
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill) | 0 | ||
Amortization expense | $ 5,000 | 6,700 | $ 9,500 |
Minimum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 2 years | ||
Maximum | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Amortized period of intangible assets | 5 years | ||
Trade name | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Indefinite lived, Gross Carrying Amount | $ 9,070 | 9,070 | |
Indefinite lived, Accumulated Impairment | (4,953) | (4,953) | |
Indefinite lived, Net Carrying Amount | 4,117 | 4,117 | |
Impairment of Intangible Assets, Indefinite-lived (Excluding Goodwill) | 0 | 200 | $ 1,400 |
Customer lists | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | 32,772 | 26,036 | |
Definite-lived, Accumulated Amortization | (22,726) | (19,051) | |
Definite-lived, Net Carrying Amount | $ 10,046 | 6,985 | |
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 | 255 | |
Definite-lived, Accumulated Amortization | (151) | (125) | |
Definite-lived, Net Carrying Amount | $ 104 | 130 | |
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 intangibles | |||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||
Definite-lived, Gross Carrying Amount | $ 9,188 | 9,391 | |
Definite-lived, Accumulated Amortization | (5,503) | (5,145) | |
Definite-lived, Net Carrying Amount | $ 3,685 | $ 4,246 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Estimated Amortization (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Estimated aggregate amortization expense for definite-lived intangible assets | |
2020 | $ 5,160 |
2021 | 2,576 |
2022 | 2,509 |
2023 | 2,284 |
2024 | 781 |
Thereafter | 525 |
Total | $ 13,835 |
Other Current Assets and Othe_3
Other Current Assets and Other Assets - Other Current Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Other Current Assets and Other Assets | |||
Non-trade receivables | $ 6,711 | $ 7,848 | |
Prepaid maintenance | 2,767 | 3,330 | |
Prepaid rent | 1,145 | 4,442 | |
Prepaid other | 994 | 1,101 | |
Prepaid purchase orders | 922 | 998 | |
Prepaid education and training | 726 | 597 | |
Prepaid insurance | 264 | 258 | |
Other | 144 | 157 | |
Total other current assets | $ 13,673 | $ 12,961 | $ 18,731 |
Other Current Assets and Othe_4
Other Current Assets and Other Assets - Other Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Other Current Assets and Other Assets | |||
Cash surrender value of company-owned life insurance | $ 3,253 | $ 2,918 | |
Non-trade receivables | 2,398 | 1,904 | |
Implementation costs for cloud computing arrangements | 1,964 | ||
Deposits | 1,893 | 1,698 | |
Finance lease right-of-use assets | 1,488 | ||
Surety bond collateral | 1,000 | ||
Other | 309 | 246 | |
Total other assets | $ 11,305 | $ 8,304 | $ 7,766 |
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, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Accrued Expenses and Other Current Liabilities and Other Liabilities | |||
Patient prepayments, deposits and refunds payable | $ 24,183 | $ 24,563 | |
Accrued sales taxes and other taxes | 8,543 | 6,810 | |
Insurance and self-insurance accruals | 8,033 | 8,886 | |
Derivative liability | 3,516 | 724 | |
Accrued professional fees | 2,533 | 3,751 | |
Accrued interest payable | 266 | 332 | |
Other current liabilities | 8,751 | 6,717 | |
Total | $ 55,825 | $ 50,431 | $ 51,783 |
Accrued Expenses and Other Cu_4
Accrued Expenses and Other Current Liabilities and Other Liabilities - Other liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Accrued Expenses and Other Current Liabilities and Other Liabilities | |||
Supplemental executive retirement plan obligations | $ 20,851 | $ 20,195 | |
Derivative liability | 9,821 | 3,134 | |
Long-term insurance accruals | 7,424 | 8,713 | |
Unrecognized tax benefits | 5,296 | 5,458 | |
Deferred tenant improvement allowances | 8,570 | ||
Deferred rent | 4,455 | ||
Other | 2,412 | 1,045 | |
Total | $ 45,804 | $ 38,620 | $ 51,570 |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | |||||||||||
Federal | $ 5,461 | $ 669 | $ 541 | ||||||||
State | 719 | 1,117 | 574 | ||||||||
Total current | 6,180 | 1,786 | 1,115 | ||||||||
Deferred: | |||||||||||
Federal | 1,803 | 1,497 | 28,905 | ||||||||
State | (5,029) | 1,955 | (2,723) | ||||||||
Total deferred | (3,226) | 3,452 | 26,182 | ||||||||
Total provision for income taxes | $ (306) | $ 2,585 | $ 4,414 | $ (3,739) | $ 9,086 | $ 2,440 | $ (92) | $ (6,196) | $ 2,954 | $ 5,238 | $ 27,297 |
Income Taxes - Rate Reconciliat
Income Taxes - Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reconciliation of the federal statutory tax rate to the Company's effective tax rate | |||
Federal statutory tax rate (as a percent) | 21.00% | 21.00% | 35.00% |
State and local income taxes (as a percent) | 6.00% | 26.60% | 0.90% |
Change in valuation allowance (as a percent) | (22.50%) | 9.50% | (0.70%) |
Permanent items (as a percent) | 2.30% | 27.90% | (2.70%) |
Tax audit adjustments (as a percent) | 0.90% | 8.70% | |
Change in uncertain tax positions (as a percent) | 0.20% | 5.50% | (0.30%) |
Tax credits (as a percent) | (0.10%) | (5.60%) | 0.10% |
State tax rate change effect on deferred balance | 27.70% | (0.20%) | |
Federal statutory tax rate change effect on deferred balance (as a percent) | (45.00%) | ||
Goodwill impairment (as a percent) | (21.10%) | ||
Other (as a percent) | 1.90% | (1.70%) | (1.30%) |
Tax provision (as a percent) | 9.70% | 119.60% | (35.30%) |
Income Taxes - Deferred tax ass
Income Taxes - Deferred tax assets and liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Lease liabilities | $ 31,432 | |
Provision for doubtful accounts and implicit price | 18,547 | $ 16,529 |
Accrued expenses | 12,789 | 15,352 |
Property, plant and equipment | 9,797 | 10,829 |
Interest expense | 8,946 | 7,798 |
Deferred benefit plan compensation | 8,834 | 6,269 |
Net operating loss carryforwards | 7,636 | 10,975 |
Share based compensation | 4,016 | 3,902 |
Inventory reserves | 2,554 | 2,710 |
Refund liabilities | 2,346 | 2,517 |
Intangibles | 1,236 | 1,063 |
Interest on seller notes | 961 | 1,029 |
Deferred rent | 1,136 | |
Other | 893 | 1,307 |
Deferred tax assets | 109,987 | 81,416 |
Less: Valuation allowance | (2,065) | (8,930) |
Total deferred tax assets | 107,922 | 72,486 |
Deferred tax liabilities: | ||
Lease assets | 28,360 | |
Goodwill | 7,960 | 5,821 |
Prepaid expenses | 1,121 | 1,030 |
Total deferred tax liabilities | 37,441 | 6,851 |
Net deferred tax asset | $ 70,481 | $ 65,635 |
Income Taxes - Net Operating Lo
Income Taxes - Net Operating Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Taxes | ||
Valuation allowance | $ 2,065 | $ 8,930 |
Valuation allowance released | 7,100 | |
Federal | ||
Income Taxes | ||
Net operating loss carryforwards available | 2,800 | 10,700 |
State | ||
Income Taxes | ||
Net operating loss carryforwards available | $ 136,900 | $ 166,000 |
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Valuation allowance activities | |||
Balance at Beginning of Year | $ 8,930 | $ 8,754 | $ 6,895 |
Provision | 238 | 204 | 2,306 |
Released | 7,103 | 28 | 447 |
Balance at End of Year | $ 2,065 | $ 8,930 | $ 8,754 |
Income Taxes - Unrecognized Tax
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reconciliation of beginning and ending balances of unrecognized tax benefits | |||
Unrecognized tax benefits, at beginning of the year | $ 4,765 | $ 4,860 | $ 4,664 |
Additions for tax positions related to the current year | 247 | 257 | 466 |
Decrease related to prior year positions | (337) | (352) | (270) |
Decrease for lapse of applicable statute of limitations | (344) | ||
Unrecognized tax benefits, at end of the year | 4,331 | 4,765 | 4,860 |
Total amount of unrecognized tax benefits, if recognized, would affect the effective tax rate | 2,800 | ||
Accrued interest and penalties | $ 1,000 | $ 800 | $ 600 |
Leases - Condensed Consolidated
Leases - Condensed Consolidated balance sheet information (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jan. 01, 2019 |
Balance sheet information related to leases | ||
Operating lease right-of-use assets | $ 110,559 | $ 102,226 |
Operating lease right-of-use assets (Classification) | us-gaap:OperatingLeaseRightOfUseAsset | |
Finance lease right-of-use assets | $ 1,488 | |
Finance lease right-of-use assets (Classification) | us-gaap:OtherAssetsNoncurrent | |
Total lease assets | $ 112,047 | |
Operating | $ 34,342 | 31,479 |
Operating (Classification) | us-gaap:OperatingLeaseLiabilityCurrent | |
Finance | $ 370 | |
Finance (Classification) | us-gaap:LongTermDebtAndCapitalLeaseObligationsCurrent | |
Operating | $ 88,418 | $ 82,510 |
Operating (Classification) | us-gaap:OperatingLeaseLiabilityNoncurrent | |
Finance | $ 1,135 | |
Finance (Classification) | us-gaap:LongTermDebtAndCapitalLeaseObligations | |
Total lease liabilities | $ 124,265 |
Leases - Lease cost components
Leases - Lease cost components (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases | |
Operating lease cost | $ 44,081 |
Finance lease cost | |
Amortization of right-of-use assets | 312 |
Interest of lease liabilities | 28 |
Sublease income | (240) |
Short-term lease cost | 613 |
Variable lease cost | 5,476 |
Total lease cost | $ 50,270 |
Leases - Maturities of lease li
Leases - Maturities of lease liabilities (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Leases | |
2020 | $ 422 |
2021 | 355 |
2022 | 267 |
2023 | 185 |
2024 | 148 |
Thereafter | 289 |
Total lease payments | 1,666 |
Imputed interest | (161) |
Total | 1,505 |
2020 | 38,972 |
2021 | 34,384 |
2022 | 26,416 |
2023 | 17,797 |
2024 | 10,530 |
Thereafter | 8,975 |
Total lease payments | 137,074 |
Imputed interest | (14,314) |
Operating Lease, Liability, Total | 122,760 |
2020 | 39,394 |
2021 | 34,739 |
2022 | 26,683 |
2023 | 17,982 |
2024 | 10,678 |
Thereafter | 9,264 |
Total lease payments | 138,740 |
Imputed interest | (14,475) |
Total | $ 124,265 |
Leases - Lease term and discoun
Leases - Lease term and discount rates information (Details) | Dec. 31, 2019 |
Leases | |
Operating leases (in years) | 3 years 11 months 23 days |
Finance leases (in years) | 5 years 2 months 1 day |
Operating leases (as a percent) | 5.29% |
Finance leases (as a percent) | 4.01% |
Leases - Supplemental cash flow
Leases - Supplemental cash flow information (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases | |
Operating cash flows from operating leases | $ 44,111 |
Operating cash flows from finance leases | 28 |
Financing cash flows from finance leases | 325 |
Operating leases | 46,254 |
Finance leases | $ 1,245 |
Leases - Before adoption of ASC
Leases - Before adoption of ASC 842 (Details) $ in Thousands | 1 Months Ended | |
Aug. 31, 2019USD ($)item | Dec. 31, 2019USD ($) | |
Operating Leases | ||
2019 | $ 39,378 | |
2020 | 29,641 | |
2021 | 21,303 | |
2022 | 14,479 | |
2023 | 9,193 | |
Thereafter | 10,008 | |
Total | 124,002 | |
Capital Leases | ||
2019 | 249 | |
2020 | 175 | |
2021 | 109 | |
2022 | 28 | |
Total | $ 561 | |
Lease agreement for a distribution facility in Georgia | ||
Term of the lease | 127 months | |
Number of consecutive months in the extension period of the lease | item | 2 | |
Extension period of the lease | 60 months | |
Annual base rent | $ 1,000 | |
Rent-free period | 7 months | |
Annual increase (as a percent) | 2.00% | |
Tenant improvement allowance | $ 2,200 |
Debt and Other Obligations (Det
Debt and Other Obligations (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
Debt and Other Obligations | |||
Total debt before unamortized discount and debt issuance costs | $ 507,201 | $ 520,080 | |
Unamortized discount and debt issuance costs, net | (8,328) | (9,407) | |
Total debt | 498,873 | 510,673 | |
Total current portion of long-term debt | 8,752 | $ 7,964 | 8,583 |
Long-term debt | 490,121 | $ 489,597 | 502,090 |
Term Loan B | |||
Debt and Other Obligations | |||
Total debt before unamortized discount and debt issuance costs | 496,163 | 501,213 | |
Total current portion of long-term debt | 5,050 | 5,050 | |
Seller Notes | |||
Debt and Other Obligations | |||
Total debt before unamortized discount and debt issuance costs | 9,005 | 4,506 | |
Total current portion of long-term debt | 3,175 | 2,513 | |
Finance lease liabilities and other | |||
Debt and Other Obligations | |||
Total debt before unamortized discount and debt issuance costs | 2,033 | 14,361 | |
Total current portion of long-term debt | $ 527 | $ 1,020 |
Debt and Other Obligations - Re
Debt and Other Obligations - Refinancing of Credit Agreement and Term B Borrowings (Details) - USD ($) $ in Thousands | Mar. 06, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 |
Debt and Other Obligations | ||||
Outstanding amount of debt | $ 520,080 | $ 507,201 | ||
Letters of credit outstanding amount | $ 5,200 | |||
Debt issuance costs | 6,757 | $ 2,863 | ||
Debt call premium | $ 8,436 | |||
Revolving Credit Facility | ||||
Debt and Other Obligations | ||||
Annual fee, as a percent of the applicable margin over LIBOR | 50.00% | |||
Revolving Credit Facility | Minimum | ||||
Debt and Other Obligations | ||||
Unused commitment fee (as a percent) | 0.375% | |||
Revolving Credit Facility | Maximum | ||||
Debt and Other Obligations | ||||
Unused commitment fee (as a percent) | 0.50% | |||
Credit Agreement, dated March 6, 2018, Term Loan B | ||||
Debt and Other Obligations | ||||
Outstanding amount of debt | $ 505,000 | |||
Weighted average interest rate | 5.60% | 5.80% | ||
Prior Credit Agreements | ||||
Debt and Other Obligations | ||||
Debt call premium | 8,400 | |||
Unamortized discount and debt issuance costs expensed | 8,600 | |||
Revolving Credit Facility | ||||
Debt and Other Obligations | ||||
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 | ||||
Debt and Other Obligations | ||||
Interest rate margin (as a percent) | 1.00% | |||
Revolving Credit Facility | Federal funds rate | ||||
Debt and Other Obligations | ||||
Interest rate margin (as a percent) | 0.50% | |||
Revolving Credit Facility | Fiscal quarters ended December 31, 2019 and March31, 2020 | ||||
Debt and Other Obligations | ||||
Consolidated leverage ratio | 4.75% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2020 through March 31, 2021 | ||||
Debt and Other Obligations | ||||
Consolidated leverage ratio | 4.50% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2021 through March 31, 2022 | ||||
Debt and Other Obligations | ||||
Consolidated leverage ratio | 4.25% | |||
Revolving Credit Facility | Fiscal quarters ended June 30, 2022 and the last day of each fiscal quarter thereafter | ||||
Debt and Other Obligations | ||||
Consolidated leverage ratio | 3.75% | |||
Revolving Credit Facility | Last day of any fiscal quarter | ||||
Debt and Other Obligations | ||||
Consolidated leverage ratio | 2.75% | |||
Revolving Credit Facility | Revolving Credit Facility | ||||
Debt and Other Obligations | ||||
Maximum borrowing capacity | $ 100,000 |
Debt and Other Obligations - Su
Debt and Other Obligations - Subsidiary Guarantees (Details) - Minimum | Dec. 31, 2019 |
Debt and Other Obligations | |
Subsidiary guarantors' percentage of revenue | 90.00% |
Subsidiary guarantors' percentage of assets | 90.00% |
Debt and Other Obligations - Se
Debt and Other Obligations - Seller Notes (Details) - Seller Notes - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Debt and Other Obligations | ||
Unamortized discount | $ 0.4 | $ 0.2 |
Minimum | ||
Debt and Other Obligations | ||
Interest rate stated percentage | 2.00% | |
Maximum | ||
Debt and Other Obligations | ||
Interest rate stated percentage | 3.00% |
Debt and Other Obligations - Ma
Debt and Other Obligations - Maturities of Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Maturities of debt | ||
2020 | $ 8,932 | |
2021 | 8,089 | |
2022 | 6,767 | |
2023 | 6,247 | |
2024 | 5,975 | |
Thereafter | 471,191 | |
Total debt before unamortized discount and debt issuance costs, net | 507,201 | $ 520,080 |
Unamortized discount and debt issuance costs, net | (8,328) | (9,407) |
Total debt | $ 498,873 | $ 510,673 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
FAIR VALUE MEASUREMENTS | |||
Unamortized discount and debt issuance costs, net | $ 8,328,000 | $ 9,407,000 | |
Interest rate swap agreements | Cash flow hedges | |||
FAIR VALUE MEASUREMENTS | |||
Notional amount of derivative instrument | 312,500,000 | 325,000,000 | $ 325,000,000 |
Annual reduction in notional amount of derivative | $ 12,500,000 | ||
Credit Agreement, dated March 6, 2018, Term Loan B | |||
FAIR VALUE MEASUREMENTS | |||
Unamortized discount and debt issuance costs, net | 8,300,000 | 9,400,000 | |
Credit Agreement, dated March 6, 2018, Term Loan B | Carrying Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 496,200,000 | 501,200,000 | |
Credit Agreement, dated March 6, 2018, Term Loan B | Recurring basis | Level 3 | Fair Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | 497,400,000 | 491,200,000 | |
Revolving Credit Facility | |||
FAIR VALUE MEASUREMENTS | |||
Outstanding amount | 0 | 0 | |
Seller Notes | Carrying Value | |||
FAIR VALUE MEASUREMENTS | |||
Debt | $ 9,000,000 | $ 4,500,000 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Cash Flow Hedge (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
Interest rate swap agreements | Cash flow hedges | |||
DERIVATIVE FINANCIAL INSTRUMENTS | |||
Notional amount of derivative instrument | $ 312.5 | $ 325 | $ 325 |
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 - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Changes in Net Gain or Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Loss | ||
Balance at the beginning of the period | $ (2,936) | $ 0 |
Unrealized loss recognized in other comprehensive loss, net of tax | (8,806) | (4,838) |
Reclassification to interest expense, net of tax | 1,605 | 1,902 |
Balance at the end of the period | $ (10,137) | $ (2,936) |
Derivative Financial Instrume_5
Derivative Financial Instruments - Fair Value of Derivative Assets and Liabilities (Details) - Cash flow hedges - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Accrued expenses and other current liabilities | ||
Derivatives designated as cash flow hedging instruments: | ||
Liabilities | $ 3,516 | $ 724 |
Other liabilities | ||
Derivatives designated as cash flow hedging instruments: | ||
Liabilities | $ 9,821 | $ 3,134 |
Share Based Compensation - Plan
Share Based Compensation - Plans (Details) - USD ($) $ in Millions | May 17, 2019 | May 19, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Share Based Compensation | |||||
Issued (in shares) | 100,000 | ||||
Forfeited (in shares) | 100,000 | ||||
Available for issuance (in shares) | 2,200,000 | ||||
Stock-based compensation expense | $ 13.4 | $ 13.1 | $ 12.9 | ||
Special Equity Plan | |||||
Share Based Compensation | |||||
Shares of common stock authorized for issuance under the share-based compensation plan | 1,500,000 | ||||
2019 Omnibus Incentive Plan | |||||
Share Based Compensation | |||||
Shares of common stock authorized for issuance under the share-based compensation plan | 2,025,000 | 2,000,000 | |||
2016 Omnibus Incentive Plan | |||||
Share Based Compensation | |||||
Shares of common stock authorized for issuance under the share-based compensation plan | 200,000 | ||||
Additional shares authorized (in shares) | 243,611 | ||||
Stock Options | Special Equity Plan | |||||
Share Based Compensation | |||||
Issued (in shares) | 800,000 | ||||
Performance-based stock awards | Special Equity Plan | |||||
Share Based Compensation | |||||
Issued (in shares) | 300,000 |
Share Based Compensation - Rest
Share Based Compensation - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Restricted stock and performance-based restricted stock units | |||
Other disclosures | |||
Unrecognized stock-based compensation expense related to non-vested stock | $ 32.7 | ||
Weighted- average period over which unrecognized stock-based compensation cost will be expensed | 1 year 4 months 24 days | ||
Restricted stock units | |||
Units | |||
Vested (in units) | (600,000) | (700,000) | (400,000) |
Other disclosures | |||
Intrinsic value of shares fully vested during the period | $ 12.3 | $ 12 | $ 5.9 |
Total estimated grant date fair values | $ 12.9 | $ 13.3 | $ 17.7 |
Restricted stock units | Employee Awards | |||
Units | |||
Nonvested at the beginning of the year (in units) | 1,208,628 | 1,183,039 | |
Granted (in units) | 467,896 | 569,571 | |
Vested (in units) | (452,306) | (422,884) | |
Forfeited (in units) | (59,994) | (121,098) | |
Nonvested at the end of the year (in units) | 1,164,224 | 1,208,628 | 1,183,039 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the year (in dollars per unit) | $ 14.47 | $ 14.30 | |
Granted (in dollars per unit) | 19.14 | 15.70 | |
Vested (in dollars per unit) | 14.48 | 16.07 | |
Forfeited (in dollars per unit) | 14.94 | 13.02 | |
Nonvested at the end of the year (in dollars per unit) | $ 16.32 | $ 14.47 | $ 14.30 |
Restricted stock units | Director Awards | |||
Units | |||
Nonvested at the beginning of the year (in units) | 61,376 | 98,406 | |
Granted (in units) | 55,752 | 61,376 | |
Vested (in units) | (61,376) | (98,406) | |
Nonvested at the end of the year (in units) | 55,752 | 61,376 | 98,406 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the year (in dollars per unit) | $ 18.25 | $ 12.66 | |
Granted (in dollars per unit) | 20.09 | 18.25 | |
Vested (in dollars per unit) | 18.25 | 12.66 | |
Nonvested at the end of the year (in dollars per unit) | $ 20.10 | $ 18.25 | $ 12.66 |
Performance-based stock awards | Employee Awards | |||
Units | |||
Nonvested at the beginning of the year (in units) | 593,099 | 702,391 | |
Granted (in units) | 147,983 | 165,853 | |
Vested (in units) | (120,953) | (199,395) | |
Forfeited (in units) | (20,645) | (75,750) | |
Nonvested at the end of the year (in units) | 599,484 | 593,099 | 702,391 |
Weighted Average Grant Date Fair Value | |||
Nonvested at the beginning of the year (in dollars per unit) | $ 17.63 | $ 19.40 | |
Granted (in dollars per unit) | 19.16 | 15.76 | |
Vested (in dollars per unit) | 18.40 | 22.16 | |
Forfeited (in dollars per unit) | 18.32 | 18.06 | |
Nonvested at the end of the year (in dollars per unit) | $ 17.82 | $ 17.63 | $ 19.40 |
Share Based Compensation - Spec
Share Based Compensation - Special Equity Grant (Details) | Nov. 13, 2019USD ($)D | May 19, 2017$ / shares | Dec. 31, 2019 |
Minimum | |||
Share Based Compensation | |||
Vesting period (in years) | 1 year | ||
Maximum | |||
Share Based Compensation | |||
Vesting period (in years) | 4 years | ||
Special Equity Plan | Performance-based stock awards | |||
Share 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 | ||
Number of trading days | D | 25 | ||
Performance Period | 3 years | ||
Incremental fair value | $ | $ 34,000 | ||
Special Equity Plan | Performance-based stock awards | CAGR of 10% | Minimum | |||
Share 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 | |||
Share 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 |
Share Based Compensation - Opti
Share Based Compensation - Options Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Other Disclosures | |||
Aggregate Intrinsic Value | $ 2,378,100 | ||
Weighted Average Remaining Contractual Term (Years) | 8 years 4 months 24 days | ||
Stock Options | |||
Share 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) | 681,869 | 798,020 | |
Terminated (in shares) | (9,913) | (111,203) | |
Exercised (in shares) | (148,851) | (4,948) | |
Outstanding at the end of the year (in shares) | 523,105 | 681,869 | |
Weighted Average Exercise Price | |||
Outstanding at the beginning of the year (in dollars per share) | $ 12.77 | $ 12.77 | |
Terminated (in dollars per share) | 12.77 | 12.77 | |
Exercised (in dollars per share) | 12.77 | 12.77 | |
Outstanding at the end of the year (in dollars per share) | $ 12.77 | $ 12.77 | |
Other Disclosures | |||
Aggregate Intrinsic Value | $ 7,762,878 | $ 4,213,950 | |
Weighted Average Remaining Contractual Term (Years) | 7 years 4 months 24 days | ||
Options exercisable (in shares) | 500,000 | 700,000 | |
Weighted average exercise price of options exercisable (in dollars per share) | $ 12.77 | $ 12.77 | |
Average remaining contractual term of options exercisable | 7 years 4 months 24 days | 8 years 4 months 24 days | |
Aggregate intrinsic value of exercisable options | $ 7,800 | $ 4,200 | |
Unrecognized stock-based compensation expense related to non-vested stock | $ 700 |
Employee Benefits - Savings Pla
Employee Benefits - Savings Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Employee Benefits | |||
Matching employer contributions under 401(k) Savings and Retirement plan | $ 6.1 | $ 5.8 | $ 5.9 |
Employee Benefits - DB SERP (De
Employee Benefits - DB SERP (Details) - payment | 1 Months Ended | 12 Months Ended | |
Jan. 31, 2004 | Dec. 31, 2019 | Dec. 31, 2018 | |
Supplemental Executive Retirement Plan (SERP) | |||
Number of annual payments upon retirement | 15 | ||
Average remaining service period | 9 years 6 months | 10 years 6 months |
Employee Benefits - Benefit Obl
Employee Benefits - Benefit Obligation Rollforward (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Change in Benefit Obligation | |||
Benefit obligation at the beginning of the period | $ 18,927 | $ 20,793 | $ 21,304 |
Service cost | 335 | 367 | 340 |
Interest cost | 658 | 600 | 711 |
Payments | (1,913) | (1,913) | (1,913) |
Actuarial (gain) loss | 1,207 | (920) | 351 |
Benefit obligation at the end of the period | $ 19,214 | $ 18,927 | $ 20,793 |
Employee Benefits -Funded Statu
Employee Benefits -Funded Status (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Funded status of the DB SERP's net benefit obligation | ||
Unfunded status | $ 15,950 | $ 16,740 |
Unamortized net loss | 3,264 | 2,187 |
Net amount recognized | $ 19,214 | $ 18,927 |
Employee Benefits - Amounts in
Employee Benefits - Amounts in Balance Sheets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Amounts Recognized in the Consolidated Balance Sheets: | |||
Current accrued expenses and other current liabilities | $ 1,913 | $ 1,913 | |
Non-current other liabilities | 17,301 | 17,014 | |
Total accrued liabilities | 19,214 | 18,927 | |
Other comprehensive loss - gross actuarial (gains) losses | $ 1,200 | $ (900) | $ 400 |
Cash surrender value of the DB SERP | $ 17,100 |
Employee Benefits - Assumptions
Employee Benefits - Assumptions (Details) | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Weighted average assumptions used to determine the benefit obligation and net benefit cost | |||
Discount rate, to determine the benefit obligation (as a percent) | 2.90% | 4.00% | 3.30% |
Average rate of increase in compensation, to determine the benefit obligation (as a percent) | 2.50% | 3.00% | 3.00% |
Employee Benefits - Future Paym
Employee Benefits - Future Payments (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Future payments under the Plan | ||||
2020 | $ 1,913 | |||
2021 | 1,913 | |||
2022 | 1,913 | |||
2023 | 1,913 | |||
2024 | 1,913 | |||
Thereafter | 9,649 | |||
Total | $ 19,214 | $ 18,927 | $ 20,793 | $ 21,304 |
Employee Benefits - DC SERP (De
Employee Benefits - DC SERP (Details) - USD ($) $ in Millions | Dec. 31, 2019 | Dec. 31, 2018 |
Employee Benefits | ||
Estimated accumulated benefit obligation | $ 3.9 | $ 3 |
Funded estimated accumulated benefit obligation | 3.3 | 2.4 |
Unfunded estimated accumulated benefit obligation | $ 0.6 | $ 0.6 |
Commitments and Contingencies -
Commitments and Contingencies - Securities and Derivative Litigation (Details) | 7 Months Ended |
Aug. 31, 2015lawsuit | |
Commitments and Contingencies | |
Number of law suits filed | 2 |
Commitments and Contingencies_2
Commitments and Contingencies - Favorable Settlements (Details) $ in Millions | Jun. 28, 2018USD ($) | May 15, 2018USD ($) | Dec. 31, 2019USD ($)item |
Commitments and Contingencies | |||
Number of matters that received favorable resolution | item | 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 |
Shareholders' Equity (Deficit)
Shareholders' Equity (Deficit) (Details) - $ / shares | Feb. 28, 2016 | Dec. 31, 2019 | Dec. 31, 2018 |
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, 2019USD ($)segment | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
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) | 57.50% | 56.50% | 54.80% |
Segment and Related Informati_4
Segment and Related Information - Financial Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Segment and Related Information | |||||||||||
Net revenues | $ 300,891 | $ 279,638 | $ 281,098 | $ 236,419 | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 1,098,046 | $ 1,048,760 | $ 1,040,769 |
Material costs | 95,961 | 92,034 | 91,399 | 78,377 | 90,340 | 84,805 | 86,516 | 76,356 | 357,771 | 338,017 | 329,223 |
Personnel expenses | 99,430 | 94,594 | 91,490 | 86,711 | 97,574 | 90,853 | 89,554 | 86,108 | 372,225 | 364,089 | 361,090 |
Depreciation & amortization | 9,019 | 9,373 | 8,760 | 8,773 | 8,903 | 8,950 | 9,272 | 9,330 | 35,925 | 36,455 | 39,259 |
Impairment of intangible assets | 183 | 183 | 54,735 | ||||||||
Segment income (loss) from operations | $ 26,901 | $ 17,403 | $ 23,103 | $ (1,979) | $ 22,771 | $ 15,924 | $ 20,329 | $ 623 | 65,428 | 59,647 | (18,950) |
Purchase of property, plant and equipment | 26,433 | 18,984 | 16,355 | ||||||||
Patient Care | |||||||||||
Segment and Related Information | |||||||||||
Net revenues | 905,691 | 857,382 | 851,973 | ||||||||
Material costs | 250,407 | 234,409 | 228,091 | ||||||||
Personnel expenses | 319,633 | 312,736 | 312,695 | ||||||||
Other expenses | 151,140 | 140,527 | 143,598 | ||||||||
Depreciation & amortization | 18,541 | 19,113 | 21,363 | ||||||||
Segment income (loss) from operations | 141,576 | 126,805 | 122,418 | ||||||||
Purchase of property, plant and equipment | 16,102 | 12,781 | 8,163 | ||||||||
Patient Care | Operating segments | |||||||||||
Segment and Related Information | |||||||||||
Net revenues | 905,691 | 857,382 | 851,973 | ||||||||
Material costs | 274,801 | 258,201 | 251,899 | ||||||||
Patient Care | Intersegments | |||||||||||
Segment and Related Information | |||||||||||
Material costs | 24,394 | 23,792 | 23,808 | ||||||||
Products & Services | |||||||||||
Segment and Related Information | |||||||||||
Net revenues | 192,355 | 191,378 | 188,796 | ||||||||
Material costs | 107,364 | 103,608 | 101,132 | ||||||||
Personnel expenses | 52,592 | 51,353 | 48,395 | ||||||||
Other expenses | 28,178 | 24,306 | 25,855 | ||||||||
Depreciation & amortization | 10,650 | 10,197 | 10,163 | ||||||||
Impairment of intangible assets | 183 | 54,735 | |||||||||
Segment income (loss) from operations | 17,965 | 25,523 | (27,676) | ||||||||
Purchase of property, plant and equipment | 2,368 | 1,890 | 2,153 | ||||||||
Purchase of therapeutic program equipment leased to third parties under operating leases | 6,672 | 9,835 | 6,000 | ||||||||
Products & Services | Operating segments | |||||||||||
Segment and Related Information | |||||||||||
Net revenues | 395,851 | 383,474 | 367,564 | ||||||||
Material costs | 286,466 | 271,912 | 256,092 | ||||||||
Products & Services | Intersegments | |||||||||||
Segment and Related Information | |||||||||||
Net revenues | 203,496 | 192,096 | 178,768 | ||||||||
Material costs | $ 179,102 | $ 168,304 | $ 154,960 |
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, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2019 | |
Segment and Related Information | ||||||||||||
Income (loss) from operations | $ 26,901 | $ 17,403 | $ 23,103 | $ (1,979) | $ 22,771 | $ 15,924 | $ 20,329 | $ 623 | $ 65,428 | $ 59,647 | $ (18,950) | |
Interest expense, net | 8,285 | 8,954 | 8,481 | 8,538 | 9,046 | 8,939 | 7,317 | 12,263 | 34,258 | 37,566 | 57,688 | |
Loss on extinguishment of debt | 16,998 | 16,998 | ||||||||||
Non-service defined benefit plan expense | 172 | 173 | 173 | 173 | 176 | 176 | 176 | 176 | 691 | 703 | 736 | |
Income (loss) before income taxes | 18,444 | 8,276 | 14,449 | (10,690) | 13,549 | 6,809 | 12,836 | (28,814) | 30,479 | 4,380 | (77,374) | |
Provision for income taxes | (306) | 2,585 | 4,414 | (3,739) | 9,086 | 2,440 | (92) | (6,196) | 2,954 | 5,238 | 27,297 | |
Net income (loss) | 18,750 | 5,691 | 10,035 | (6,951) | 4,463 | 4,369 | 12,928 | (22,618) | 27,525 | (858) | (104,671) | |
Consolidated net revenues | 300,891 | 279,638 | 281,098 | 236,419 | 284,853 | 262,946 | 266,966 | 233,995 | 1,098,046 | 1,048,760 | 1,040,769 | |
Consolidated material costs | 95,961 | $ 92,034 | $ 91,399 | $ 78,377 | 90,340 | $ 84,805 | $ 86,516 | $ 76,356 | 357,771 | 338,017 | 329,223 | |
Consolidated purchase of property, plant and equipment | 26,433 | 18,984 | 16,355 | |||||||||
Consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases | 33,105 | 28,819 | 22,355 | |||||||||
Consolidated assets | 842,253 | 703,010 | 842,253 | 703,010 | $ 791,132 | |||||||
Corporate & other | ||||||||||||
Segment and Related Information | ||||||||||||
Income (loss) from operations | (94,113) | (92,681) | (113,692) | |||||||||
Consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases | 7,963 | 4,313 | 6,039 | |||||||||
Consolidated assets | 183,936 | 186,588 | 183,936 | 186,588 | ||||||||
Consolidating adjustments | ||||||||||||
Segment and Related Information | ||||||||||||
Consolidated net revenues | (203,496) | (192,096) | (178,768) | |||||||||
Consolidated material costs | (203,496) | (192,096) | (178,768) | |||||||||
Patient Care | ||||||||||||
Segment and Related Information | ||||||||||||
Income (loss) from operations | 141,576 | 126,805 | 122,418 | |||||||||
Consolidated net revenues | 905,691 | 857,382 | 851,973 | |||||||||
Consolidated material costs | 250,407 | 234,409 | 228,091 | |||||||||
Consolidated purchase of property, plant and equipment | 16,102 | 12,781 | 8,163 | |||||||||
Consolidated purchase of property, plant and equipment and therapeutic program equipment leased to third parties under operating leases | 16,102 | 12,781 | 8,163 | |||||||||
Consolidated assets | 552,644 | 415,469 | 552,644 | 415,469 | ||||||||
Patient Care | Operating segments | ||||||||||||
Segment and Related Information | ||||||||||||
Consolidated net revenues | 905,691 | 857,382 | 851,973 | |||||||||
Consolidated material costs | 274,801 | 258,201 | 251,899 | |||||||||
Products & Services | ||||||||||||
Segment and Related Information | ||||||||||||
Income (loss) from operations | 17,965 | 25,523 | (27,676) | |||||||||
Consolidated net revenues | 192,355 | 191,378 | 188,796 | |||||||||
Consolidated material costs | 107,364 | 103,608 | 101,132 | |||||||||
Consolidated purchase of property, plant and equipment | 2,368 | 1,890 | 2,153 | |||||||||
Consolidated purchase of therapeutic program equipment leased to third parties under operating leases | 6,672 | 9,835 | 6,000 | |||||||||
Consolidated assets | $ 105,673 | $ 100,953 | 105,673 | 100,953 | ||||||||
Products & Services | Operating segments | ||||||||||||
Segment and Related Information | ||||||||||||
Consolidated net revenues | 395,851 | 383,474 | 367,564 | |||||||||
Consolidated material costs | $ 286,466 | $ 271,912 | $ 256,092 |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in operating assets and liabilities | |||
Accounts receivable, net | $ (12,329) | $ 3,238 | $ (12,585) |
Inventories | 1,568 | 1,750 | (913) |
Other current assets and other assets | (2,611) | 4,459 | 661 |
Income taxes receivable | 1,248 | 12,700 | 121 |
Accounts payable | (6,725) | 6,511 | (3,562) |
Accrued expenses and other current liabilities | (1,242) | (16,550) | (12,929) |
Accrued compensation related costs | 5,780 | 1,713 | 16,843 |
Other liabilities | (1,883) | (3,980) | (2,271) |
Operating lease liabilities, net of amortization of right-of-use assets | 262 | ||
Changes in operating assets and liabilities on cash flows from operating activities | (15,932) | 9,841 | (14,635) |
Operating lease liabilities | (36,911) | ||
Amortization of right-of-use assets | 37,173 | ||
Operating lease liabilities, net of amortization of right-of-use assets | 262 | ||
Cash paid during the period for: | |||
Interest paid | 29,192 | 31,312 | 48,437 |
Income tax (refunds received) paid | 5,100 | (11,131) | 725 |
Non-cash financing and investing activities: | |||
Issuance of seller notes and working capital adjustments in connection with acquisitions | 7,885 | 1,120 | |
Purchase of property, plant and equipment in accounts payable at period end | 2,998 | 5,018 | 2,119 |
Purchase of property, plant and equipment through vendor financing | $ 2,200 | ||
Additions to property, plant and equipment acquired through financing obligations | 1,523 | 1,484 | |
Retirements of financed property, plant and equipment and related financing obligations | $ 4,460 | $ 811 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Mar. 31, 2020USD ($)item | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
SUBSEQUENT EVENTS | |||
Issuance of seller notes in connection with acquisitions | $ 7,885 | $ 1,120 | |
Subsequent Events | |||
SUBSEQUENT EVENTS | |||
Number of business acquisitions | item | 2 | ||
Aggregate purchase price | $ 51,700 | ||
Consideration paid in cash | 43,200 | ||
Issuance of seller notes in connection with acquisitions | 4,500 | ||
Deferred payment obligations | $ 4,000 | ||
Beginning period for the deferred payment obligations payable | 4 years | ||
Thereafter period for payable deferred payment obligations | 3 years | ||
Subsequent Events | Minimum | |||
SUBSEQUENT EVENTS | |||
Period of notes payable in annual installments | 3 years | ||
Subsequent Events | Maximum | |||
SUBSEQUENT EVENTS | |||
Period of notes payable in annual installments | 5 years |
Quarterly Financial Informati_3
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Quarterly Financial Information (Unaudited) | |||||||||||
Net revenues | $ 300,891 | $ 279,638 | $ 281,098 | $ 236,419 | $ 284,853 | $ 262,946 | $ 266,966 | $ 233,995 | $ 1,098,046 | $ 1,048,760 | $ 1,040,769 |
Material costs | 95,961 | 92,034 | 91,399 | 78,377 | 90,340 | 84,805 | 86,516 | 76,356 | 357,771 | 338,017 | 329,223 |
Personnel costs | 99,430 | 94,594 | 91,490 | 86,711 | 97,574 | 90,853 | 89,554 | 86,108 | 372,225 | 364,089 | 361,090 |
Other operating costs | 34,876 | 32,771 | 33,741 | 33,555 | 31,271 | 30,999 | 30,536 | 31,096 | 134,943 | 123,902 | 129,831 |
General and administrative expenses | 30,591 | 29,834 | 29,358 | 28,282 | 29,085 | 28,308 | 26,523 | 25,636 | 118,065 | 109,552 | 109,342 |
Professional accounting and legal fees | 4,113 | 3,629 | 3,247 | 2,700 | 4,726 | 3,107 | 4,236 | 4,846 | 13,689 | 16,915 | 36,239 |
Depreciation and amortization | 9,019 | 9,373 | 8,760 | 8,773 | 8,903 | 8,950 | 9,272 | 9,330 | 35,925 | 36,455 | 39,259 |
Impairment of intangible assets | 183 | 183 | 54,735 | ||||||||
Income (loss) from operations | 26,901 | 17,403 | 23,103 | (1,979) | 22,771 | 15,924 | 20,329 | 623 | 65,428 | 59,647 | (18,950) |
Interest expense, net | 8,285 | 8,954 | 8,481 | 8,538 | 9,046 | 8,939 | 7,317 | 12,263 | 34,258 | 37,566 | 57,688 |
Loss on extinguishment of debt | 16,998 | 16,998 | |||||||||
Non-service defined benefit plan expense | 172 | 173 | 173 | 173 | 176 | 176 | 176 | 176 | 691 | 703 | 736 |
Income (loss) before income taxes | 18,444 | 8,276 | 14,449 | (10,690) | 13,549 | 6,809 | 12,836 | (28,814) | 30,479 | 4,380 | (77,374) |
(Benefit) provision for income taxes | (306) | 2,585 | 4,414 | (3,739) | 9,086 | 2,440 | (92) | (6,196) | 2,954 | 5,238 | 27,297 |
Net income (loss) | 18,750 | 5,691 | 10,035 | (6,951) | 4,463 | 4,369 | 12,928 | (22,618) | 27,525 | (858) | (104,671) |
Other comprehensive loss: | |||||||||||
Unrealized (loss) gain on cash flow hedges, net of tax | 2,064 | (1,641) | (4,688) | (2,936) | (4,698) | 1,738 | 2,314 | (2,290) | (7,201) | (2,936) | |
Unrealized (loss) gain on defined benefit plan, net of tax | (838) | 7 | 6 | 6 | 694 | 26 | 26 | (292) | (819) | 454 | (246) |
Comprehensive income (loss) | $ 19,976 | $ 4,057 | $ 5,353 | $ (9,881) | $ 459 | $ 6,133 | $ 15,268 | $ (25,200) | $ 19,505 | $ (3,340) | $ (104,917) |
Basic Per Common Share Data: | |||||||||||
Basic (loss) earnings per share | $ 0.50 | $ 0.15 | $ 0.27 | $ (0.19) | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ 0.74 | $ (0.02) | $ (2.89) |
Weighted average shares used to compute basic earnings per common share | 37,411,847 | 37,349,144 | 37,299,766 | 37,001,977 | 36,906,938 | 36,856,881 | 36,790,401 | 36,498,482 | 37,267,188 | 36,764,551 | 36,270,920 |
Diluted Per Common Share Data: | |||||||||||
Diluted (loss) earnings per share | $ 0.49 | $ 0.15 | $ 0.26 | $ (0.19) | $ 0.12 | $ 0.12 | $ 0.35 | $ (0.62) | $ 0.72 | $ (0.02) | $ (2.89) |
Weighted average shares used to compute diluted earnings per common share | 38,415,108 | 37,986,860 | 37,887,559 | 37,001,977 | 37,721,662 | 37,556,594 | 37,404,360 | 36,498,482 | 38,064,617 | 36,764,551 | 36,270,920 |