Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 27, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 1-10670 | |
Entity Registrant Name | HANGER, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 84-0904275 | |
Entity Address, Address Line One | 10910 Domain Drive, Suite 300 | |
Entity Address, City or Town | Austin | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 78758 | |
City Area Code | 512 | |
Local Phone Number | 777-3800 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | HNGR | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 38,109,387 | |
Entity Central Index Key | 0000722723 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 147,510 | $ 74,419 |
Accounts receivable, net | 121,409 | 159,359 |
Inventories | 74,108 | 68,204 |
Income taxes receivable | 5,945 | |
Other current assets | 14,489 | 13,673 |
Total current assets | 363,461 | 315,655 |
Non-current assets: | ||
Property, plant and equipment, net | 86,637 | 84,057 |
Goodwill | 271,701 | 232,244 |
Other intangible assets, net | 19,106 | 17,952 |
Deferred income taxes | 70,489 | 70,481 |
Operating lease right-of-use assets | 125,577 | 110,559 |
Other assets | 15,710 | 11,305 |
Total assets | 952,681 | 842,253 |
Current liabilities: | ||
Current portion of long-term debt | 27,791 | 8,752 |
Accounts payable | 63,630 | 48,477 |
Accrued expenses and other current liabilities | 72,434 | 55,825 |
Accrued compensation related costs | 63,511 | 61,010 |
Current portion of operating lease liabilities | 32,932 | 34,342 |
Total current liabilities | 260,298 | 208,406 |
Long-term liabilities: | ||
Long-term debt, less current portion | 493,600 | 490,121 |
Operating lease liabilities | 106,405 | 88,418 |
Other liabilities | 60,077 | 45,804 |
Total liabilities | 920,380 | 832,749 |
Commitments and contingencies (Note Q) | ||
Shareholders' equity: | ||
Common stock, $0.01 par value; 60,000,000 shares authorized; 38,277,423 shares issued and 38,134,602 shares outstanding at 2020, and 37,602,873 shares issued and 37,460,052 shares outstanding at 2019, respectively | 383 | 376 |
Additional paid-in capital | 363,082 | 354,326 |
Accumulated other comprehensive loss | (20,400) | (12,551) |
Accumulated deficit | (310,068) | (331,951) |
Treasury stock, at cost; 142,821 shares at 2020 and 2019, respectively | (696) | (696) |
Total shareholders' equity | 32,301 | 9,504 |
Total liabilities and shareholders' equity | $ 952,681 | $ 842,253 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 38,277,423 | 37,602,873 |
Common stock, shares outstanding | 38,134,602 | 37,460,052 |
Treasury stock, shares | 142,821 | 142,821 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net revenues | $ 256,637 | $ 279,638 | $ 723,810 | $ 797,155 |
Material costs | 81,462 | 92,034 | 228,675 | 261,810 |
Personnel costs | 89,727 | 94,594 | 252,734 | 272,795 |
Other operating costs | 29,935 | 32,771 | 74,098 | 100,067 |
General and administrative expenses | 31,371 | 29,834 | 91,618 | 87,474 |
Professional accounting and legal fees | 2,264 | 3,629 | 7,409 | 9,576 |
Depreciation and amortization | 8,803 | 9,373 | 26,513 | 26,906 |
Income from operations | 13,075 | 17,403 | 42,763 | 38,527 |
Interest expense, net | 8,013 | 8,954 | 24,918 | 25,973 |
Non-service defined benefit plan expense | 158 | 173 | 474 | 519 |
Income before income taxes | 4,904 | 8,276 | 17,371 | 12,035 |
(Benefit) provision for income taxes | (1,911) | 2,585 | (4,750) | 3,260 |
Net income | $ 6,815 | $ 5,691 | $ 22,121 | $ 8,775 |
Basic and Diluted Per Common Share Data: | ||||
Basic income per share | $ 0.18 | $ 0.15 | $ 0.58 | $ 0.24 |
Weighted average shares used to compute basic earnings per common share | 38,133,598 | 37,349,144 | 37,878,753 | 37,218,234 |
Diluted income per share | $ 0.18 | $ 0.15 | $ 0.57 | $ 0.23 |
Weighted average shares used to compute diluted earnings per common share | 38,637,536 | 37,986,860 | 38,491,965 | 37,921,767 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income | $ 6,815 | $ 5,691 | $ 22,121 | $ 8,775 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on cash flow hedges, net of tax provision (benefit) of $488, ($516), ($2,509), and ($2,916), respectively | 1,542 | (1,641) | (7,933) | (9,265) |
Unrealized gain on defined benefit plan, net of tax provision of $9, $2, $27, and $6, respectively | 28 | 7 | 84 | 19 |
Total other comprehensive income (loss) | 1,570 | (1,634) | (7,849) | (9,246) |
Comprehensive income (loss) | $ 8,385 | $ 4,057 | $ 14,272 | $ (471) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Unrealized gain (loss) on cash flow hedges tax | $ 488 | $ (516) | $ (2,509) | $ (2,916) |
Unrealized gain on defined benefit plan tax | $ 9 | $ 2 | $ 27 | $ 6 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands | Common StockAdjusted Balance | Common Stock | Additional Paid-in CapitalAdjusted Balance | Additional Paid-in Capital | Accumulated Other Comprehensive LossAdjusted Balance | Accumulated Other Comprehensive Loss | Accumulated DeficitCumulative effect of a change in accounting | Accumulated DeficitAdjusted Balance | Accumulated Deficit | Treasury StockAdjusted Balance | Treasury Stock | Cumulative effect of a change in accounting | Adjusted Balance | Total |
Balance (ASU 2016-02) at Dec. 31, 2018 | $ 1,547 | $ 1,547 | ||||||||||||
Balance at Dec. 31, 2018 | $ 371 | $ 371 | $ 343,955 | $ 343,955 | $ (4,531) | $ (4,531) | $ (359,476) | $ (361,023) | $ (696) | $ (696) | $ (20,377) | $ (21,924) | ||
Balance (in shares) at Dec. 31, 2018 | 36,921 | 36,921 | ||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | (6,951) | (6,951) | ||||||||||||
Share based compensation expense | 3,265 | 3,265 | ||||||||||||
Issuance of common stock upon vesting of restricted stock units | $ 3 | (3) | ||||||||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 350 | |||||||||||||
Effect of shares withheld to cover taxes | (3,626) | (3,626) | ||||||||||||
Total other comprehensive loss | (2,930) | (2,930) | ||||||||||||
Balance at Mar. 31, 2019 | $ 374 | 343,591 | (7,461) | (366,427) | (696) | (30,619) | ||||||||
Balance (in shares) at Mar. 31, 2019 | 37,271 | |||||||||||||
Balance (ASU 2016-02) at Dec. 31, 2018 | 1,547 | 1,547 | ||||||||||||
Balance at Dec. 31, 2018 | $ 371 | $ 371 | 343,955 | 343,955 | (4,531) | (4,531) | (359,476) | (361,023) | (696) | (696) | (20,377) | (21,924) | ||
Balance (in shares) at Dec. 31, 2018 | 36,921 | 36,921 | ||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | 8,775 | |||||||||||||
Total other comprehensive loss | (9,246) | |||||||||||||
Balance at Sep. 30, 2019 | $ 375 | 350,579 | (13,777) | (350,701) | (696) | (14,220) | ||||||||
Balance (in shares) at Sep. 30, 2019 | 37,362 | |||||||||||||
Balance at Mar. 31, 2019 | $ 374 | 343,591 | (7,461) | (366,427) | (696) | (30,619) | ||||||||
Balance (in shares) at Mar. 31, 2019 | 37,271 | |||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | 10,035 | 10,035 | ||||||||||||
Share based compensation expense | 3,450 | 3,450 | ||||||||||||
Issuance of common stock upon vesting of restricted stock units | $ 1 | (1) | ||||||||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 64 | |||||||||||||
Effect of shares withheld to cover taxes | (28) | (28) | ||||||||||||
Total other comprehensive loss | (4,682) | (4,682) | ||||||||||||
Balance at Jun. 30, 2019 | $ 375 | 347,012 | (12,143) | (356,392) | (696) | (21,844) | ||||||||
Balance (in shares) at Jun. 30, 2019 | 37,335 | |||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | 5,691 | 5,691 | ||||||||||||
Share based compensation expense | 3,374 | 3,374 | ||||||||||||
Issuance in connection with the exercise of stock options | 249 | 249 | ||||||||||||
Issuance in connection with the exercise of stock options (in shares) | 20 | |||||||||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 7 | |||||||||||||
Effect of shares withheld to cover taxes | (56) | (56) | ||||||||||||
Total other comprehensive loss | (1,634) | (1,634) | ||||||||||||
Balance at Sep. 30, 2019 | $ 375 | 350,579 | (13,777) | (350,701) | (696) | (14,220) | ||||||||
Balance (in shares) at Sep. 30, 2019 | 37,362 | |||||||||||||
Balance (ASU 2016-13) at Dec. 31, 2019 | (238) | (238) | ||||||||||||
Balance at Dec. 31, 2019 | $ 376 | $ 376 | 354,326 | 354,326 | (12,551) | (12,551) | (332,189) | (331,951) | (696) | (696) | 9,266 | $ 9,504 | ||
Balance (in shares) at Dec. 31, 2019 | 37,460 | 37,460 | 37,460,052 | |||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | (15,748) | $ (15,748) | ||||||||||||
Share based compensation expense | 3,501 | 3,501 | ||||||||||||
Issuance of common stock upon vesting of restricted stock units | $ 4 | (4) | ||||||||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 354 | |||||||||||||
Effect of shares withheld to cover taxes | (4,146) | (4,146) | ||||||||||||
Total other comprehensive loss | (8,873) | (8,873) | ||||||||||||
Balance at Mar. 31, 2020 | $ 380 | 353,677 | (21,424) | (347,937) | (696) | (16,000) | ||||||||
Balance (in shares) at Mar. 31, 2020 | 37,814 | |||||||||||||
Balance (ASU 2016-13) at Dec. 31, 2019 | $ (238) | $ (238) | ||||||||||||
Balance at Dec. 31, 2019 | $ 376 | $ 376 | $ 354,326 | 354,326 | $ (12,551) | (12,551) | $ (332,189) | (331,951) | $ (696) | (696) | $ 9,266 | $ 9,504 | ||
Balance (in shares) at Dec. 31, 2019 | 37,460 | 37,460 | 37,460,052 | |||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | $ 22,121 | |||||||||||||
Total other comprehensive loss | (7,849) | |||||||||||||
Balance at Sep. 30, 2020 | $ 383 | 363,082 | (20,400) | (310,068) | (696) | $ 32,301 | ||||||||
Balance (in shares) at Sep. 30, 2020 | 38,135 | 38,134,602 | ||||||||||||
Balance at Mar. 31, 2020 | $ 380 | 353,677 | (21,424) | (347,937) | (696) | $ (16,000) | ||||||||
Balance (in shares) at Mar. 31, 2020 | 37,814 | |||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | 31,054 | 31,054 | ||||||||||||
Share based compensation expense | 8,984 | 8,984 | ||||||||||||
Issuance in connection with the exercise of stock options | 38 | 38 | ||||||||||||
Issuance in connection with the exercise of stock options (in shares) | 3 | |||||||||||||
Issuance of common stock upon vesting of restricted stock units | $ 3 | (3) | ||||||||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 316 | |||||||||||||
Effect of shares withheld to cover taxes | (2,682) | (2,682) | ||||||||||||
Total other comprehensive loss | (546) | (546) | ||||||||||||
Balance at Jun. 30, 2020 | $ 383 | 360,014 | (21,970) | (316,883) | (696) | 20,848 | ||||||||
Balance (in shares) at Jun. 30, 2020 | 38,133 | |||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||
Net income (loss) | 6,815 | 6,815 | ||||||||||||
Share based compensation expense | 3,081 | 3,081 | ||||||||||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 2 | |||||||||||||
Effect of shares withheld to cover taxes | (13) | (13) | ||||||||||||
Total other comprehensive loss | 1,570 | 1,570 | ||||||||||||
Balance at Sep. 30, 2020 | $ 383 | $ 363,082 | $ (20,400) | $ (310,068) | $ (696) | $ 32,301 | ||||||||
Balance (in shares) at Sep. 30, 2020 | 38,135 | 38,134,602 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows provided by operating activities: | ||
Net income | $ 22,121 | $ 8,775 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 26,513 | 26,906 |
Provision for doubtful accounts | 629 | 284 |
Share-based compensation expense | 15,565 | 10,089 |
Deferred income taxes | 2,067 | (723) |
Amortization of debt discounts and issuance costs | 1,564 | 1,202 |
Gain on sale and disposal of fixed assets | (729) | (1,200) |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 39,531 | 1,914 |
Inventories | (3,834) | (6,310) |
Other current assets and other assets | (3,115) | (1,769) |
Income taxes | (6,814) | 2,613 |
Accounts payable | 12,912 | (1,751) |
Accrued expenses and other current liabilities | 6,914 | (2,144) |
Accrued compensation related costs | 2,339 | (15,583) |
Other liabilities | 8,016 | (1,736) |
Operating lease liabilities, net of amortization of right-of-use assets | 1,559 | (622) |
Changes in operating assets and liabilities: | 57,508 | (25,388) |
Net cash provided by operating activities | 125,238 | 19,945 |
Cash flows used in investing activities | ||
Acquisitions, net of cash acquired | (16,854) | (31,585) |
Purchase of property, plant, and equipment | (19,352) | (20,262) |
Purchase of therapeutic program equipment leased to third parties under operating leases | (3,194) | (5,165) |
Proceeds from sale of property, plant, and equipment | 1,578 | 2,181 |
Purchase of company-owned life insurance investment | (250) | |
Net cash used in investing activities | (38,072) | (54,831) |
Cash flows used in financing activities: | ||
Borrowings under revolving credit agreement | 79,000 | |
Repayment of borrowings under revolving credit agreement | (79,000) | |
Repayment of term loan | (3,788) | (3,788) |
Payment of employee taxes on share-based compensation | (6,841) | (3,710) |
Payment on seller notes | (2,200) | (2,688) |
Payment of financing lease obligations | (521) | (344) |
Payments under vendor financing arrangements | (550) | |
Payment of debt issuance costs | (214) | |
Proceeds from the exercise of options | 39 | 249 |
Net cash used in financing activities | (14,075) | (10,281) |
Increase (decrease) in cash and cash equivalents | 73,091 | (45,167) |
Cash and cash equivalents at beginning of period | 74,419 | 95,114 |
Cash and cash equivalents at end of period | 147,510 | 49,947 |
Non-cash financing and investing activities: | ||
Seller notes, deferred payment obligations and additional consideration related to acquisitions | 29,420 | 5,053 |
Purchase of property, plant, and equipment in accounts payable at period end | 4,299 | 3,492 |
Purchase of property, plant, and equipment through vendor financing | 2,200 | |
Right-of-use assets obtained in exchange for finance lease obligations | $ 1,975 | $ 282 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Organization and Summary of Significant Accounting Policies | |
Organization and Summary of Significant Accounting Policies | Note A — Organization and Summary of Significant Accounting Policies Description of Business Hanger, Inc. (“we,” “our,” or “us”) is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries. We provide orthotic and prosthetic (“O&P”) services, distribute O&P devices and components, manage O&P networks, and provide therapeutic solutions to patients and businesses in acute, post-acute, and clinic settings. We operate through two segments, Patient Care and Products & Services. Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), as previously filed with the Securities and Exchange Commission (the “SEC”). In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of those to be expected for the full year. A detailed description of our significant accounting policies and management judgments is contained in our 2019 Form 10-K. Recent Developments Regarding COVID-19 We are subject to risks and uncertainties as a result of the outbreak of the novel coronavirus (“COVID-19”) pandemic (“COVID-19 pandemic”). The extent and duration of the impact of the COVID-19 pandemic on our operations and financial condition are highly uncertain and difficult to predict, as viral infections continue to increase and information is rapidly evolving. We believe that our patients are deferring visits to our O&P clinics as well as elective surgical procedures, both of which impact our business volumes through decreased patient encounters and physician referrals. Furthermore, capital markets and the economy have been disrupted by the COVID-19 pandemic, and it still remains possible that it could cause a recessionary environment impacting the healthcare industry generally, including the O&P industry. The continuing economic disruption has had and could have a continuing material adverse effect on our business, as the duration and extent of state and local government restrictions impacting our patients’ ability or willingness to visit our O&P clinics and those of our customers, is unknown. The United States government has responded with fiscal policy measures intended to support the healthcare industry and economy as a whole, including the passage of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) in March 2020. We continue to monitor the provisions of the CARES Act and their application to us, as well as future governmental policies and their impact on our business; however, the magnitude and overall effectiveness of such policies to us and the economy as a whole remains uncertain. CARES Act The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $175.0 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid- enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue and health-care related expenses that are attributable to the COVID-19 pandemic. In April 2020, the U.S. Department of Health and Human Services (“HHS”) began making payments to healthcare providers from the $175.0 billion appropriation. These are payments, rather than loans, to healthcare providers, and will not need to be repaid. During the second and third quarters of 2020, we recognized a total benefit of $20.6 million in our condensed consolidated statement of operations within Other operating costs for a portion of the grant proceeds we received under the CARES Act (“Grants”) from HHS. We recognize income related to grants on a systematic and rational basis when it becomes probable that we have complied with the terms and conditions of the grant and in the period in which the corresponding costs or income related to the grant are recognized. We recognized the benefit from the Grants within Other operating costs in our Patient Care segment. As of September 30, 2020, we have recorded a liability of $3.4 million within Accrued expenses and other liabilities in the condensed consolidated balance sheet related to proceeds from the Grants for amounts that have not met the recognition criteria in accordance with our accounting policy. The CARES Act also provides for a deferral of the employer portion of payroll taxes incurred during the COVID-19 pandemic through December 2020. The provisions allow us to defer half of such payroll taxes until December 2021 and the remaining half until December 2022. We deferred $7.1 million of payroll taxes within Other liabilities in the condensed consolidated balance sheet as of September 30, 2020. Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes Recent Accounting Pronouncements, Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2020 | |
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 diluted earnings per share were 34,379 and 20,202 for the three and nine months ended September 30, 2020, and 10 and zero for the three and nine months ended September 30, 2019. Our Credit Agreement (as defined below) restricts the payment of dividends or other distributions to our shareholders by us or any of our subsidiaries. See Note L - “Debt and Other Obligations” within these condensed consolidated financial statements. The reconciliation of the numerators and denominators used to calculate basic and diluted net income per share are as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands except share and per share amounts) 2020 2019 2020 2019 Net income $ 6,815 $ 5,691 $ 22,121 $ 8,775 Weighted average shares outstanding - basic 38,133,598 37,349,144 37,878,753 37,218,234 Effect of potentially dilutive restricted stock units and options 503,938 637,716 613,212 703,533 Weighted average shares outstanding - diluted 38,637,536 37,986,860 38,491,965 37,921,767 Basic income per share $ 0.18 $ 0.15 $ 0.58 $ 0.24 Diluted income per share $ 0.18 $ 0.15 $ 0.57 $ 0.23 |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2020 | |
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 U.S. Department of Veterans Affairs (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. The following table disaggregates revenue from contracts with customers in our Patient Care segment for the three and nine months ended September 30, 2020 and 2019: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Patient Care Segment Medicare $ 68,135 $ 72,879 $ 194,052 $ 206,295 Medicaid 34,541 36,140 96,612 103,631 Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care) 75,966 83,384 213,234 232,410 Veterans Administration 19,339 23,816 54,057 64,635 Private Pay 14,683 14,712 40,751 45,729 Total $ 212,664 $ 230,931 $ 598,706 $ 652,700 The impact to revenue related to prior period performance obligations was not material for the three and nine months ended September 30, 2020 and 2019. 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 three and nine months ended September 30, 2020 and 2019: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 32,711 $ 36,653 $ 90,928 $ 107,510 Therapeutic solutions 11,262 12,054 34,176 36,945 Total $ 43,973 $ 48,707 $ 125,104 $ 144,455 |
Accounts Receivable, Net
Accounts Receivable, Net | 9 Months Ended |
Sep. 30, 2020 | |
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 represents 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. We are exposed to credit losses primarily through our accounts receivable. These receivables are short in nature because their due date varies between due upon receipt of invoice and 90 days. We assess our receivables, divide them into similar risk pools, and monitor our ongoing credit exposure through active review of our aging buckets. Our activities include timely account reconciliations, dispute resolution, and payment confirmations. We also employ collection agencies and legal counsel to pursue recovery of defaulted receivables. As part of the new accounting standard discussed in Note A - “Organization and Summary of Significant Accounting Policies,” our expected loss methodology is developed using historical liquidation rates, current and future economic and market conditions, and a review of the current status of our patients and customers' trade accounts receivable balances. We also grouped our receivables into similar risk pools to better measure the risks for each pool. After evaluating the risk for each pool, we determined that additional credit loss risk was immaterial for the Patient Care segment. For the Products & Services segment, an allowance for doubtful accounts is recorded, which is deducted from gross accounts receivable to arrive at “Accounts receivable, net.” As of September 30, 2020, we have considered the current and future economic and market conditions resulting in an increase to the allowance for doubtful accounts by approximately $0.7 million since December 31, 2019. Accounts receivable, net as of September 30, 2020 and December 31, 2019 is comprised of the following: As of September 30, 2020 As of December 31, 2019 Products & Products & (in thousands) Patient Care Services Consolidated Patient Care Services Consolidated Gross charges before estimates for implicit price concessions $ 157,191 $ 21,765 $ 178,956 $ 202,132 $ 27,551 $ 229,683 Less estimates for implicit price concessions: Payor disallowances (47,314) — (47,314) (58,094) — (58,094) Patient non-payments (6,916) — (6,916) (9,589) — (9,589) Accounts receivable, gross 102,961 21,765 124,726 134,449 27,551 162,000 Allowance for doubtful accounts — (3,317) (3,317) — (2,641) (2,641) Accounts receivable, net $ 102,961 $ 18,448 $ 121,409 $ 134,449 $ 24,910 $ 159,359 |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2020 | |
Inventories | |
Inventories | Note E — Inventories Our inventories are comprised of the following: As of September 30, As of December 31, (in thousands) 2020 2019 Raw materials $ 20,047 $ 20,574 Work in process 15,575 10,165 Finished goods 38,486 37,465 Total inventories $ 74,108 $ 68,204 |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 9 Months Ended |
Sep. 30, 2020 | |
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 September 30, As of December 31, (in thousands) 2020 2019 Land $ 554 $ 634 Buildings 3,756 4,110 Furniture and fixtures 14,747 13,835 Machinery and equipment 25,826 25,438 Equipment leased to third parties under operating leases 27,510 29,217 Leasehold improvements 138,450 131,617 Computers and software 79,484 75,540 Total property, plant, and equipment, gross 290,327 280,391 Less: accumulated depreciation and amortization (203,690) (196,334) Total property, plant, and equipment, net $ 86,637 $ 84,057 Total depreciation expense was approximately $7.0 million and $21.4 million for the three and nine months ended September 30, 2020 and $7.7 million and $22.8 million for the three and nine months ended September 30, 2019, respectively. Total amortization of finance right-of-use assets was approximately $0.2 million and $0.5 million for the three and nine months ended September 30, 2020 and $0.1 million and $0.2 million for the three and nine months ended September 30, 2019, respectively. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2020 | |
Acquisitions | |
Acquisitions | Note G — Acquisitions 2020 Acquisition Activity In the second quarter of 2020, we acquired all of the outstanding equity interests of an O&P business for total consideration of $46.1 million at fair value, of which $16.8 million was cash consideration, net of cash acquired, $21.9 million was issued in the form of notes to the former shareholders, $3.5 million in the form of a deferred payment obligation to the former shareholders and $4.0 million in additional consideration. Of the $21.9 million in notes issued to the former shareholders, approximately $18.1 million of the notes were paid in October 2020 in a lump sum payment and the remaining $3.8 million of the notes are payable in annual installments over a period of three years on the anniversary date of the acquisition. Payments totaling $3.5 million under the deferred payment obligation are due in annual installments beginning in the fourth We accounted for this transaction under the acquisition method of accounting and have reported the results of operations of the acquisition as of the date of the acquisition. We based the estimated fair values of intangible assets 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 cost for acquired property, plant, and equipment. 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. We recorded the excess of the fair value of the consideration transferred in the acquisition over the fair value of net assets acquired 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 not 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 three and nine months ended September 30, 2020 were $0.1 million and $0.6 million, respectively, which includes those costs for transactions that are in progress or were not completed during the respective period. Acquisition-related costs incurred for the acquisitions completed during the three and nine month periods ended September 30, 2020 were $0.0 million and $0.4 million, respectively. We have not presented pro forma combined results for this acquisition because the impact on previously reported statements of operations would not have been material. Purchase Price Allocation We have performed a preliminary valuation analysis of the fair market value of the assets acquired and liabilities assumed in the acquisition. The final purchase price allocation 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. The aggregate purchase price of this acquisition was allocated on a preliminary basis as follows: (in thousands) Cash paid, net of cash acquired $ 16,762 Issuance of seller notes at fair value 21,941 Deferred payment obligation at fair value 3,468 Additional consideration, net 3,975 Aggregate purchase price 46,146 Accounts receivable 3,182 Inventories 2,021 Customer relationships (Weighted average useful life of 5.0 years) 5,600 Non-compete agreements (Weighted average useful life of 5.0 years) 200 Other assets and liabilities, net (4,301) Net assets acquired 6,702 Goodwill $ 39,444 Right 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. We completed each acquisition with the intention of expanding 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 was 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 aggregate purchase price for these acquisitions was allocated 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 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | Note H — Goodwill and Other Intangible Assets We assess goodwill and indefinite-lived intangible assets for impairment annually as of October 1st, and between annual tests if an event occurs, or circumstances change, that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value. The following table summarizes the activity in goodwill for the periods indicated: For the Nine Months Ended September 30, 2020 Patient Care Products & Services Consolidated Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, (in thousands) Gross Impairment Net Gross Impairment Net Gross Impairment Net As of December 31, 2019 $ 660,912 $ (428,668) $ 232,244 $ 139,299 $ (139,299) $ — $ 800,211 $ (567,967) $ 232,244 Additions from acquisitions 39,386 — 39,386 — — — 39,386 — 39,386 Measurement period adjustments (1) 71 — 71 — — — 71 — 71 As of September 30, 2020 $ 700,369 $ (428,668) $ 271,701 $ 139,299 $ (139,299) $ — $ 839,668 $ (567,967) $ 271,701 (1) Measurement period adjustments relate to 2020 and 2019 acquisitions and are primarily attributable to adjustments to the preliminary allocations of customer relationship intangibles. For the Year Ended December 31, 2019 Patient Care Products & Services Consolidated Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, (in thousands) Gross Impairment Net Gross Impairment Net Gross Impairment Net As of 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) As of 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. The balances related to intangible assets as of September 30, 2020 and December 31, 2019 are as follows: As of September 30, 2020 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 38,372 $ (26,844) $ — $ 11,528 Trade name 255 (170) — 85 Patents and other intangibles 9,011 (5,635) — 3,376 Definite-lived intangible assets 47,638 (32,649) — 14,989 Indefinite-lived trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 56,708 $ (32,649) $ (4,953) $ 19,106 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 Amortization expense related to other intangible assets was approximately $1.6 million and $4.6 million for the three and nine months ended September 30, 2020 and $1.6 million and $3.9 million for the three and nine months ended September 30, 2019. 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 (remainder of the year) $ 1,406 2021 3,735 2022 3,668 2023 3,424 2024 1,941 Thereafter 815 Total $ 14,989 |
Other Current Assets and Other
Other Current Assets and Other Assets | 9 Months Ended |
Sep. 30, 2020 | |
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 September 30, As of December 31, (in thousands) 2020 2019 Non-trade receivables $ 7,540 $ 6,711 Prepaid maintenance 3,277 2,767 Prepaid insurance 909 264 Other prepaid assets 2,763 3,931 Total other current assets $ 14,489 $ 13,673 Other assets consist of the following: As of September 30, As of December 31, (in thousands) 2020 2019 Implementation costs for cloud computing arrangements $ 4,694 $ 1,964 Cash surrender value of company-owned life insurance 3,811 3,253 Finance lease right-of-use assets 2,795 1,488 Deposits 2,145 1,893 Non-trade receivables 1,791 2,398 Other 474 309 Total other assets $ 15,710 $ 11,305 |
Accrued Expenses and Other Curr
Accrued Expenses and Other Current Liabilities and Other Liabilities | 9 Months Ended |
Sep. 30, 2020 | |
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 September 30, As of December 31, (in thousands) 2020 2019 Patient prepayments, deposits, and refunds payable $ 26,969 $ 24,183 Accrued sales taxes and other taxes 10,240 8,543 Insurance and self-insurance accruals 7,786 8,033 Derivative liability 7,704 3,516 Liabilities incurred to seller in acquisitions 3,656 — Accrued professional fees 1,547 2,533 Accrued interest payable 747 266 Other current liabilities 13,785 8,751 Total $ 72,434 $ 55,825 Other liabilities consist of: As of September 30, As of December 31, (in thousands) 2020 2019 Supplemental executive retirement plan obligations $ 19,461 $ 20,851 Derivative liability 16,075 9,821 Unrecognized tax benefits 7,910 5,296 Long-term insurance accruals 7,539 7,424 Deferred payroll taxes 7,118 — Other 1,974 2,412 Total $ 60,077 $ 45,804 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Taxes | |
Income Taxes | Note K — Income Taxes We recorded a benefit for income taxes of $1.9 million and $4.8 million for the three and nine months ended September 30, 2020. The effective tax rate was -39.0% and -27.3% for the three and nine months ended September 30, 2020. We recorded a provision for income taxes of $2.6 million and $3.3 million for the three and nine months ended September 30, 2019. The effective tax rate was 31.2% and 27.1% for the three and nine months ended September 30, 2019. The decrease in the effective tax rate for the three months ended September 30, 2020 compared with the three months ended September 30, 2019 is primarily attributable to a tax benefit resulting from the loss carryback provisions granted under the CARES Act. Our effective tax rate for the three months ended September 30, 2020 differed from the federal statutory tax rate of 21% primarily due to the net tax benefit of the loss carryback claim and non-deductible expenses. Our effective tax rate for the three months ended September 30, 2019 differed from the federal statutory tax rate of 21% primarily due to non-deductible expenses. The decrease in the effective tax rate for the nine months ended September 30, 2020 compared with the nine months ended September 30, 2019 is primarily attributable to the recognition of research and development tax credits for the current and prior years and a tax benefit resulting from the loss carryback provisions granted under the CARES Act, partially offset by a shortfall from share-based compensation. Our effective tax rate for the nine months ended September 30, 2020 differed from the federal statutory tax rate of 21% primarily due to research and development tax credits, the net tax benefit of the loss carryback claim, and non-deductible expenses. Our effective tax rate for the nine months ended September 30, 2019 differed from the federal statutory tax rate of 21% primarily due to non-deductible expenses. During the second quarter of 2020, we completed a study of qualifying research and development expenses resulting in the recognition of tax benefits of $2.2 million, net of tax reserves, related to the current year and $6.3 million, net of tax reserves, related to the prior years as of the third quarter of 2020. We recorded the tax benefit, before tax reserves, as a deferred tax asset. The CARES Act, which was enacted on March 27, 2020, includes changes to certain tax laws related to the deductibility of interest expense and depreciation, as well as the provision to carryback net operating losses to five preceding years. ASC 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. As a result of the CARES Act provisions, in the third quarter of 2020 we recognized a tax benefit of $4.0 million resulting from the loss carryback claim to a prior period with a higher statutory rate, which also decreased our current income taxes payable by $9.5 million as of September 30, 2020. |
Debt and Other Obligations
Debt and Other Obligations | 9 Months Ended |
Sep. 30, 2020 | |
Debt and Other Obligations | |
Debt and Other Obligations | Note L — Debt and Other Obligations Debt consists of the following: (in thousands) As of September 30, 2020 As of December 31, 2019 Debt: Term Loan B $ 492,375 $ 496,163 Seller notes 29,208 9,005 Deferred payment obligation 4,000 — Finance lease liabilities and other 3,606 2,033 Total debt before unamortized discount and debt issuance costs 529,189 507,201 Unamortized discount and debt issuance costs, net (7,798) (8,328) Total debt $ 521,391 $ 498,873 Current portion of long-term debt: Term Loan B $ 5,050 $ 5,050 Seller notes 21,893 3,175 Finance lease liabilities and other 848 527 Total current portion of long-term debt 27,791 8,752 Long-term debt $ 493,600 $ 490,121 Refinancing of Credit Agreement and Term B Borrowings On March 6, 2018, we entered into a $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 September 30, 2020. 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. In March 2020, we borrowed $79.0 million under our revolving credit facility, which was due in March 2023. In June 2020, we repaid $57.0 million in borrowings under this revolving credit facility, and in September 2020, we repaid the remaining $22.0 million in borrowings under the facility. We had approximately $94.8 million in available borrowing capacity under our $100.0 million revolving credit facility as of September 30, 2020. 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 three months ended September 30, 2020, the weighted average interest rate on outstanding borrowings under our Term Loan B facility was approximately 3.6%. We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note N – “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: i) requirements that we maintain certain financial ratios at prescribed levels, ii) a prohibition on payment of dividends and other distributions and iii) restrictions on our ability and certain of our subsidiaries to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, or consummate acquisitions outside the healthcare industry. 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 (some of which were amended in May 2020 by the Amendment (as defined and described below)): (i) a maximum consolidated first lien net leverage ratio (“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 4.50 to 1.00 for the fiscal quarters ended June 30, 2020 through March 31, 2021; 4.25 to 1.00 for the fiscal quarters ended June 30, 2021 through March 31, 2022; and 3.75 to 1.00 for the fiscal quarter ended June 30, 2022 and the last day of each fiscal quarter thereafter; and (ii) a minimum interest coverage ratio (defined as, with certain adjustments, the ratio of our EBITDA to consolidated interest expense to the extent paid or payable in cash) of 2.75 to 1.00 as of the last day of any fiscal quarter. The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable; provided, however, that the occurrence of an event of default as a result of a breach of a financial covenant under the Credit Agreement does not constitute a default or event of default with respect to any term facility under the Credit Agreement unless and until the required revolving lenders shall have terminated their revolving commitments and declared all amounts outstanding under the revolving credit facility to be due and payable. In addition, if we or any subsidiary guarantor becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency, or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable. Loans outstanding under the Credit Agreement will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) upon acceleration of such loans, (ii) while a payment event of default exists or (iii) upon the lenders’ request, during the continuance of any other event of default. In May 2020, we entered into an amendment to the Credit Agreement (the "Amendment") that provided for, amongst other things, an increase in the maximum Net Leverage Ratio to 5.25 to 1.00 for the fiscal quarters ended June 30, 2020 through March 31, 2021; 5.00 to 1.00 for the fiscal quarters ended June 30, 2021 through September 30, 2021; and 4.75 to 1.00 for the quarter ended December 31, 2021 and the last day of each fiscal quarter thereafter. In addition, the Amendment changed the definition of EBITDA used in the Net Leverage Ratio and minimum interest coverage ratio to adjust for declines in net revenue attributable to the COVID-19 pandemic. Borrowings under the revolving credit facility will bear interest at a variable rate equal to the greater of LIBOR or 1%, plus 3.75%. In addition, the Amendment contained certain restrictions and covenants that further limit our ability, and certain of our subsidiaries' ability, to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, or consummate acquisitions not financed with the proceeds of an equity offering, except that certain acquisitions are permitted after September 30, 2020, in the event we maintain certain leverage and liquidity thresholds. We capitalized debt issuance costs of $0.2 million in connection with the Amendment, which were recorded in Other assets. We were in compliance with all covenants at September 30, 2020. Seller notes and the deferred payment obligation We typically issue subordinated promissory notes (“Seller notes”) as a part of the consideration transferred when making acquisitions. We measure these instruments at their estimated fair values as of the respective acquisition dates. The stated interest rates on these instruments range from 2.50% to 3.00%. The Seller notes are unsecured and are presented net of unamortized discount of $0.9 million and $0.4 million as of September 30, 2020 and December 31, 2019, respectively. Principal and interest are payable in quarterly or annual installments and mature through October 2024. Amounts due under the deferred payment obligation to the former shareholders of an acquired O&P business are unsecured and presented net of unamortized discount of $0.5 million as of September 30, 2020. The deferred payment obligation was measured at its estimated fair value as of the acquisition date and accrues interest at a rate of 3.0%. Principal and interest payments under the deferred payment obligation are due in annual installments beginning in 2024 and for three years thereafter. Scheduled Maturities of Total Debt Scheduled maturities of debt at September 30, 2020 were as follows: (in thousands) 2020 (remainder of year) $ 21,023 2021 9,759 2022 8,494 2023 8,049 2024 7,337 Thereafter 474,527 Total debt before unamortized discount and debt issuance costs, net 529,189 Unamortized discount and debt issuance costs, net (7,798) Total debt $ 521,391 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Measurements | |
Fair Value Measurements | Note M — Fair Value Measurements Financial Instruments The carrying value of our outstanding term loan as of September 30, 2020 (excluding unamortized discounts and debt issuance costs of $6.9 million) was $492.4 million compared to its fair value of $487.5 million. The carrying value of our outstanding term loan as of December 31, 2019 (excluding unamortized discounts and debt issuance costs of $7.9 million) was $496.2 million compared to its fair value of $497.4 million. Our estimates of fair value are based on a discounted cash flow model and an indicative quote using unobservable inputs, primarily, our risk-adjusted credit spread, which represents a Level 3 measurement. We have interest rate swap agreements 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 L - “Debt and Other Obligations” and Note N - “Derivative Financial Instruments” for further information. We believe that the carrying value of the Seller notes and the deferred payment obligation 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. The carrying value of our outstanding Seller notes and the deferred payment obligation issued in connection with past acquisitions as of September 30, 2020 was $32.3 million, net of unamortized discounts of $0.9 million. |
Derivative Financial Instrument
Derivative Financial Instruments | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | Note N — Derivative Financial Instruments Cash Flow Hedges of Interest Rate Risk 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. As of September 30, 2020 and December 31, 2019, our swaps had a notional value outstanding of $300.0 million and $312.5 million, respectively. Change in Net Loss on Cash Flow Hedges Including Accumulated Other Comprehensive Income (Loss) The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the three months ended September 30, 2020 and 2019, respectively: (in thousands) Cash Flow Hedges Balance as of June 30, 2020 $ (19,612) Unrealized loss recognized in other comprehensive loss, net of tax (455) Reclassification to interest expense, net 1,997 Balance as of September 30, 2020 $ (18,070) Balance as of June 30, 2019 $ (10,560) Unrealized loss recognized in other comprehensive loss, net of tax (2,060) Reclassification to interest expense, net 419 Balance as of September 30, 2019 $ (12,201) The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the nine months ended September 30, 2020 and 2019, respectively: (in thousands) Cash Flow Hedges Balance as of December 31, 2019 $ (10,137) Unrealized loss recognized in other comprehensive loss, net of tax (12,518) Reclassification to interest expense, net 4,585 Balance as of September 30, 2020 $ (18,070) Balance as of December 31, 2018 $ (2,936) Unrealized loss recognized in other comprehensive loss, net of tax (10,135) Reclassification to interest expense, net 870 Balance as of September 30, 2019 $ (12,201) The following table presents the fair value of derivative assets and liabilities within the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019: As of September 30, 2020 As of December 31, 2019 (in thousands) Assets Liabilities Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities $ — $ 7,704 $ — $ 3,516 Other liabilities — 16,075 — 9,821 |
Share-Based Compensation
Share-Based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Share-Based Compensation | |
Share-Based Compensation | Note O — 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 September 30, 2020, there were 1,564,081 unvested restricted stock awards outstanding. This was comprised of 1,126,361 employee service-based awards with a weighted average grant date fair value of $19.23 per share, 367,097 employee performance-based awards with a weighted average grant date fair value of $18.94 per share, and 70,623 director service-based awards with a weighted average grant date value of $17.08 per share. As of September 30, 2020, there were 520,105 outstanding options exercisable with a weighted average exercise price of $12.77 and average remaining contractual term of 6.6 years. The 2017 Special Equity Plan was amended in May 2020 to modify the performance period ending date for purposes of the compounded annual growth rate calculation to February 20, 2020, shortening the performance period to approximately 33 months, representing a reduction of three months. This adjustment was considered a modification per Accounting Standards Codification 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. As a result of the modification, we recognized an additional $5.9 million in share-based compensation expense during the second quarter of 2020. We recognized a total of approximately $3.1 million and $15.6 million of share-based compensation expense for the three and nine months ended September 30, 2020 and a total of approximately $3.4 million and $10.1 million for the three and nine months ended September 30, 2019, respectively. Share-based compensation expense, net of forfeitures, relates to restricted stock units, performance-based restricted stock units, and stock options. |
Supplemental Executive Retireme
Supplemental Executive Retirement Plans | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Executive Retirement Plans | |
Supplemental Executive Retirement Plans | Note P — Supplemental Executive Retirement Plans Defined Benefit Supplemental Executive Retirement Plan Effective January 2004, we implemented an unfunded noncontributory defined benefit plan (“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. Actual results that differ from the assumptions are accumulated and amortized over future periods, affecting the recorded obligation and expense in future periods. We believe the assumptions used are appropriate; however, changes in assumptions or differences in actual experience may affect our benefit obligation and future expenses. The change in net benefit cost and obligation during the three and nine months ended September 30, 2020 and 2019 is as follows: Change in Benefit Obligation: (in thousands) 2020 2019 Benefit obligation as of June 30 $ 17,763 $ 17,535 Service cost 98 84 Interest cost 121 164 Payments (12) (12) Benefit obligation as of September 30 $ 17,970 $ 17,771 Benefit obligation as of December 31, 2019 and 2018, respectively $ 19,214 $ 18,927 Service cost 294 251 Interest cost 363 494 Payments (1,901) (1,901) Benefit obligation as of September 30 $ 17,970 $ 17,771 Amounts Recognized in the Condensed Consolidated Balance Sheets: As of September 30, As of December 31, (in thousands) 2020 2019 Current accrued expenses and other current liabilities $ 1,913 $ 1,913 Non-current other liabilities 16,057 17,301 Total accrued liabilities $ 17,970 $ 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 September 30, 2020 and December 31, 2019, the estimated accumulated obligation benefit is $4.2 million and $3.9 million, of which $3.8 million and $3.3 million is funded and $0.4 million and $0.6 million is unfunded at September 30, 2020 and December 31, 2019, respectively. In connection with the DC SERP benefit obligation, we maintain a company-owned life insurance policy (“COLI”). The carrying value of the COLI is measured at its cash surrender value and is presented within other assets in our condensed consolidated balance sheets. See Note I - “Other Current Assets and Other Assets” for additional information. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note Q — 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 Derivative Litigation 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., . 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 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 Judy 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 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 unredacted. 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, and are also subject to 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. |
Segment and Related Information
Segment and Related Information | 9 Months Ended |
Sep. 30, 2020 | |
Segment and Related Information | |
Segment and Related Information | Note R — Segment and Related Information We have identified two segments and both performance evaluation and resource allocation decisions are determined based on each segment’s income from operations. The operating segments are described further below: Patient Care — ● Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, health management organizations (“HMOs”), preferred provider organizations (“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 (generally with either 10 regional pricing areas or state level prices) for prosthetics and orthotics and by state for durable medical equipment (DMEPOS); ● Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons requiring financial assistance, regardless of age, which may supplement Medicare benefits for persons aged 65 or older requiring financial assistance; and ● the VA. 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 - Corporate & Other The accounting policies of the segments are the same as those described in Note A - “Organization and Summary of Significant Accounting Policies” in our 2019 Form 10-K. Intersegment revenue primarily relates to sales of O&P components from the Products & Services segment to the Patient Care segment. The sales are priced at the cost of the related materials plus overhead. Summarized financial information concerning our reporting segments is shown in the following tables. Total assets for each of the segments has not materially changed from December 31, 2019. Patient Care Products & Services For the Three Months Ended For the Three Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Net revenues Third party $ 212,664 $ 230,931 $ 43,973 $ 48,707 Intersegments — — 50,011 53,670 Total net revenues 212,664 230,931 93,984 102,377 Material costs Third party suppliers 56,599 65,055 24,863 26,979 Intersegments 7,339 6,284 42,672 47,386 Total material costs 63,938 71,339 67,535 74,365 Personnel expenses 76,989 81,274 12,738 13,320 Other expenses 34,713 37,245 5,957 6,858 Depreciation & amortization 4,786 4,943 2,633 2,723 Segment income from operations $ 32,238 $ 36,130 $ 5,121 $ 5,111 Patient Care Products & Services For the Nine Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Net revenues Third party $ 598,706 $ 652,700 $ 125,104 $ 144,455 Intersegments — — 138,899 150,245 Total net revenues 598,706 652,700 264,003 294,700 Material costs Third party suppliers 160,212 181,358 68,463 80,452 Intersegments 18,639 18,268 120,260 131,977 Total material costs 178,851 199,626 188,723 212,429 Personnel expenses 216,910 233,402 35,824 39,393 Other expenses 86,462 112,014 18,614 20,883 Depreciation & amortization 14,089 13,997 7,883 7,862 Segment income from operations $ 102,394 $ 93,661 $ 12,959 $ 14,133 A reconciliation of the total of the reportable segments’ income from operations to consolidated net income is as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Income from operations Patient Care $ 32,238 $ 36,130 $ 102,394 $ 93,661 Products & Services 5,121 5,111 12,959 14,133 Corporate & other (24,284) (23,838) (72,590) (69,267) Income from operations 13,075 17,403 42,763 38,527 Interest expense, net 8,013 8,954 24,918 25,973 Non-service defined benefit plan expense 158 173 474 519 Income before income taxes 4,904 8,276 17,371 12,035 (Benefit) provision for income taxes (1,911) 2,585 (4,750) 3,260 Net income $ 6,815 $ 5,691 $ 22,121 $ 8,775 A reconciliation of the reportable segment net revenues to consolidated net revenues is as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Net revenues Patient Care $ 212,664 $ 230,931 $ 598,706 $ 652,700 Products & Services 93,984 102,377 264,003 294,700 Corporate & other — — — — Consolidating adjustments (50,011) (53,670) (138,899) (150,245) Consolidated net revenues $ 256,637 $ 279,638 $ 723,810 $ 797,155 A reconciliation of the reportable segment material costs to consolidated material costs is as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Material costs Patient Care $ 63,938 $ 71,339 $ 178,851 $ 199,626 Products & Services 67,535 74,365 188,723 212,429 Corporate & other — — — — Consolidating adjustments (50,011) (53,670) (138,899) (150,245) Consolidated material costs $ 81,462 $ 92,034 $ 228,675 $ 261,810 |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Organization and Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), as previously filed with the Securities and Exchange Commission (the “SEC”). In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of those to be expected for the full year. A detailed description of our significant accounting policies and management judgments is contained in our 2019 Form 10-K. |
Recent Developments Regarding COVID-19 | Recent Developments Regarding COVID-19 We are subject to risks and uncertainties as a result of the outbreak of the novel coronavirus (“COVID-19”) pandemic (“COVID-19 pandemic”). The extent and duration of the impact of the COVID-19 pandemic on our operations and financial condition are highly uncertain and difficult to predict, as viral infections continue to increase and information is rapidly evolving. We believe that our patients are deferring visits to our O&P clinics as well as elective surgical procedures, both of which impact our business volumes through decreased patient encounters and physician referrals. Furthermore, capital markets and the economy have been disrupted by the COVID-19 pandemic, and it still remains possible that it could cause a recessionary environment impacting the healthcare industry generally, including the O&P industry. The continuing economic disruption has had and could have a continuing material adverse effect on our business, as the duration and extent of state and local government restrictions impacting our patients’ ability or willingness to visit our O&P clinics and those of our customers, is unknown. The United States government has responded with fiscal policy measures intended to support the healthcare industry and economy as a whole, including the passage of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) in March 2020. We continue to monitor the provisions of the CARES Act and their application to us, as well as future governmental policies and their impact on our business; however, the magnitude and overall effectiveness of such policies to us and the economy as a whole remains uncertain. CARES Act The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $175.0 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid- enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue and health-care related expenses that are attributable to the COVID-19 pandemic. In April 2020, the U.S. Department of Health and Human Services (“HHS”) began making payments to healthcare providers from the $175.0 billion appropriation. These are payments, rather than loans, to healthcare providers, and will not need to be repaid. During the second and third quarters of 2020, we recognized a total benefit of $20.6 million in our condensed consolidated statement of operations within Other operating costs for a portion of the grant proceeds we received under the CARES Act (“Grants”) from HHS. We recognize income related to grants on a systematic and rational basis when it becomes probable that we have complied with the terms and conditions of the grant and in the period in which the corresponding costs or income related to the grant are recognized. We recognized the benefit from the Grants within Other operating costs in our Patient Care segment. As of September 30, 2020, we have recorded a liability of $3.4 million within Accrued expenses and other liabilities in the condensed consolidated balance sheet related to proceeds from the Grants for amounts that have not met the recognition criteria in accordance with our accounting policy. The CARES Act also provides for a deferral of the employer portion of payroll taxes incurred during the COVID-19 pandemic through December 2020. The provisions allow us to defer half of such payroll taxes until December 2021 and the remaining half until December 2022. We deferred $7.1 million of payroll taxes within Other liabilities in the condensed consolidated balance sheet as of September 30, 2020. |
Recent Accounting Pronouncements, Adopted and Not Yet Adopted | Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes Recent Accounting Pronouncements, Not Yet Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share | |
Schedule of reconciliation of numerators and denominators used to calculate basic and diluted net income per share | For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands except share and per share amounts) 2020 2019 2020 2019 Net income $ 6,815 $ 5,691 $ 22,121 $ 8,775 Weighted average shares outstanding - basic 38,133,598 37,349,144 37,878,753 37,218,234 Effect of potentially dilutive restricted stock units and options 503,938 637,716 613,212 703,533 Weighted average shares outstanding - diluted 38,637,536 37,986,860 38,491,965 37,921,767 Basic income per share $ 0.18 $ 0.15 $ 0.58 $ 0.24 Diluted income per share $ 0.18 $ 0.15 $ 0.57 $ 0.23 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Patient Care | |
Revenue Recognition | |
Schedule of disaggregates of revenue from contracts with customers | For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Patient Care Segment Medicare $ 68,135 $ 72,879 $ 194,052 $ 206,295 Medicaid 34,541 36,140 96,612 103,631 Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care) 75,966 83,384 213,234 232,410 Veterans Administration 19,339 23,816 54,057 64,635 Private Pay 14,683 14,712 40,751 45,729 Total $ 212,664 $ 230,931 $ 598,706 $ 652,700 |
Products & Services | |
Revenue Recognition | |
Schedule of disaggregates of revenue from contracts with customers | For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Products & Services Segment Distribution services, net of intersegment revenue eliminations $ 32,711 $ 36,653 $ 90,928 $ 107,510 Therapeutic solutions 11,262 12,054 34,176 36,945 Total $ 43,973 $ 48,707 $ 125,104 $ 144,455 |
Accounts Receivable, Net (Table
Accounts Receivable, Net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounts Receivable, Net | |
Schedule of accounts receivable, net | As of September 30, 2020 As of December 31, 2019 Products & Products & (in thousands) Patient Care Services Consolidated Patient Care Services Consolidated Gross charges before estimates for implicit price concessions $ 157,191 $ 21,765 $ 178,956 $ 202,132 $ 27,551 $ 229,683 Less estimates for implicit price concessions: Payor disallowances (47,314) — (47,314) (58,094) — (58,094) Patient non-payments (6,916) — (6,916) (9,589) — (9,589) Accounts receivable, gross 102,961 21,765 124,726 134,449 27,551 162,000 Allowance for doubtful accounts — (3,317) (3,317) — (2,641) (2,641) Accounts receivable, net $ 102,961 $ 18,448 $ 121,409 $ 134,449 $ 24,910 $ 159,359 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Inventories | |
Schedule of inventories | As of September 30, As of December 31, (in thousands) 2020 2019 Raw materials $ 20,047 $ 20,574 Work in process 15,575 10,165 Finished goods 38,486 37,465 Total inventories $ 74,108 $ 68,204 |
Property, Plant and Equipment_2
Property, Plant and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Property, Plant and Equipment, Net | |
Schedule of property, plant and equipment, net | As of September 30, As of December 31, (in thousands) 2020 2019 Land $ 554 $ 634 Buildings 3,756 4,110 Furniture and fixtures 14,747 13,835 Machinery and equipment 25,826 25,438 Equipment leased to third parties under operating leases 27,510 29,217 Leasehold improvements 138,450 131,617 Computers and software 79,484 75,540 Total property, plant, and equipment, gross 290,327 280,391 Less: accumulated depreciation and amortization (203,690) (196,334) Total property, plant, and equipment, net $ 86,637 $ 84,057 |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
2020 Acquisition activity, O&P business | |
Schedule of aggregate purchase price of acquisitions allocated on a preliminary basis | (in thousands) Cash paid, net of cash acquired $ 16,762 Issuance of seller notes at fair value 21,941 Deferred payment obligation at fair value 3,468 Additional consideration, net 3,975 Aggregate purchase price 46,146 Accounts receivable 3,182 Inventories 2,021 Customer relationships (Weighted average useful life of 5.0 years) 5,600 Non-compete agreements (Weighted average useful life of 5.0 years) 200 Other assets and liabilities, net (4,301) Net assets acquired 6,702 Goodwill $ 39,444 |
2019 Acquisition Activity, prosthetic and orthotic business | |
Schedule of aggregate purchase price of acquisitions 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. |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Other Intangible Assets | |
Schedule of goodwill allocated to the Company's reportable segments | For the Nine Months Ended September 30, 2020 Patient Care Products & Services Consolidated Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, (in thousands) Gross Impairment Net Gross Impairment Net Gross Impairment Net As of December 31, 2019 $ 660,912 $ (428,668) $ 232,244 $ 139,299 $ (139,299) $ — $ 800,211 $ (567,967) $ 232,244 Additions from acquisitions 39,386 — 39,386 — — — 39,386 — 39,386 Measurement period adjustments (1) 71 — 71 — — — 71 — 71 As of September 30, 2020 $ 700,369 $ (428,668) $ 271,701 $ 139,299 $ (139,299) $ — $ 839,668 $ (567,967) $ 271,701 (1) Measurement period adjustments relate to 2020 and 2019 acquisitions and are primarily attributable to adjustments to the preliminary allocations of customer relationship intangibles. For the Year Ended December 31, 2019 Patient Care Products & Services Consolidated Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, Goodwill, Accumulated Goodwill, (in thousands) Gross Impairment Net Gross Impairment Net Gross Impairment Net As of 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) As of 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. |
Schedule of balances related to finite-lived intangible assets | As of September 30, 2020 Gross Carrying Accumulated Accumulated Net Carrying (in thousands) Amount Amortization Impairment Amount Customer lists $ 38,372 $ (26,844) $ — $ 11,528 Trade name 255 (170) — 85 Patents and other intangibles 9,011 (5,635) — 3,376 Definite-lived intangible assets 47,638 (32,649) — 14,989 Indefinite-lived trade name 9,070 — (4,953) 4,117 Total other intangible assets $ 56,708 $ (32,649) $ (4,953) $ 19,106 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 |
Schedule of estimated aggregate amortization expense for definite-lived intangible assets | (in thousands) 2020 (remainder of the year) $ 1,406 2021 3,735 2022 3,668 2023 3,424 2024 1,941 Thereafter 815 Total $ 14,989 |
Other Current Assets and Othe_2
Other Current Assets and Other Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Other Current Assets and Other Assets | |
Schedule of other current assets | As of September 30, As of December 31, (in thousands) 2020 2019 Non-trade receivables $ 7,540 $ 6,711 Prepaid maintenance 3,277 2,767 Prepaid insurance 909 264 Other prepaid assets 2,763 3,931 Total other current assets $ 14,489 $ 13,673 |
Schedule of other assets | As of September 30, As of December 31, (in thousands) 2020 2019 Implementation costs for cloud computing arrangements $ 4,694 $ 1,964 Cash surrender value of company-owned life insurance 3,811 3,253 Finance lease right-of-use assets 2,795 1,488 Deposits 2,145 1,893 Non-trade receivables 1,791 2,398 Other 474 309 Total other assets $ 15,710 $ 11,305 |
Accrued Expenses and Other Cu_2
Accrued Expenses and Other Current Liabilities and Other Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accrued Expenses and Other Current Liabilities and Other Liabilities | |
Schedule of accrued expenses and other current liabilities | As of September 30, As of December 31, (in thousands) 2020 2019 Patient prepayments, deposits, and refunds payable $ 26,969 $ 24,183 Accrued sales taxes and other taxes 10,240 8,543 Insurance and self-insurance accruals 7,786 8,033 Derivative liability 7,704 3,516 Liabilities incurred to seller in acquisitions 3,656 — Accrued professional fees 1,547 2,533 Accrued interest payable 747 266 Other current liabilities 13,785 8,751 Total $ 72,434 $ 55,825 |
Schedule of other liabilities | As of September 30, As of December 31, (in thousands) 2020 2019 Supplemental executive retirement plan obligations $ 19,461 $ 20,851 Derivative liability 16,075 9,821 Unrecognized tax benefits 7,910 5,296 Long-term insurance accruals 7,539 7,424 Deferred payroll taxes 7,118 — Other 1,974 2,412 Total $ 60,077 $ 45,804 |
Debt and Other Obligations (Tab
Debt and Other Obligations (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt and Other Obligations | |
Schedule of debt | (in thousands) As of September 30, 2020 As of December 31, 2019 Debt: Term Loan B $ 492,375 $ 496,163 Seller notes 29,208 9,005 Deferred payment obligation 4,000 — Finance lease liabilities and other 3,606 2,033 Total debt before unamortized discount and debt issuance costs 529,189 507,201 Unamortized discount and debt issuance costs, net (7,798) (8,328) Total debt $ 521,391 $ 498,873 Current portion of long-term debt: Term Loan B $ 5,050 $ 5,050 Seller notes 21,893 3,175 Finance lease liabilities and other 848 527 Total current portion of long-term debt 27,791 8,752 Long-term debt $ 493,600 $ 490,121 |
Schedule of maturities of debt | (in thousands) 2020 (remainder of year) $ 21,023 2021 9,759 2022 8,494 2023 8,049 2024 7,337 Thereafter 474,527 Total debt before unamortized discount and debt issuance costs, net 529,189 Unamortized discount and debt issuance costs, net (7,798) Total debt $ 521,391 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Financial Instruments | |
Schedule of activity of cash flow hedges included in accumulated other comprehensive income (loss) | (in thousands) Cash Flow Hedges Balance as of June 30, 2020 $ (19,612) Unrealized loss recognized in other comprehensive loss, net of tax (455) Reclassification to interest expense, net 1,997 Balance as of September 30, 2020 $ (18,070) Balance as of June 30, 2019 $ (10,560) Unrealized loss recognized in other comprehensive loss, net of tax (2,060) Reclassification to interest expense, net 419 Balance as of September 30, 2019 $ (12,201) The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the nine months ended September 30, 2020 and 2019, respectively: (in thousands) Cash Flow Hedges Balance as of December 31, 2019 $ (10,137) Unrealized loss recognized in other comprehensive loss, net of tax (12,518) Reclassification to interest expense, net 4,585 Balance as of September 30, 2020 $ (18,070) Balance as of December 31, 2018 $ (2,936) Unrealized loss recognized in other comprehensive loss, net of tax (10,135) Reclassification to interest expense, net 870 Balance as of September 30, 2019 $ (12,201) |
Schedule of fair value of derivative liabilities within the consolidated balance sheets | As of September 30, 2020 As of December 31, 2019 (in thousands) Assets Liabilities Assets Liabilities Derivatives designated as cash flow hedging instruments: Accrued expenses and other current liabilities $ — $ 7,704 $ — $ 3,516 Other liabilities — 16,075 — 9,821 |
Supplemental Executive Retire_2
Supplemental Executive Retirement Plans (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Executive Retirement Plans | |
Schedule of Change in Benefit Obligation | (in thousands) 2020 2019 Benefit obligation as of June 30 $ 17,763 $ 17,535 Service cost 98 84 Interest cost 121 164 Payments (12) (12) Benefit obligation as of September 30 $ 17,970 $ 17,771 Benefit obligation as of December 31, 2019 and 2018, respectively $ 19,214 $ 18,927 Service cost 294 251 Interest cost 363 494 Payments (1,901) (1,901) Benefit obligation as of September 30 $ 17,970 $ 17,771 |
Schedule of Amounts Recognized in the Consolidated Balance Sheets | As of September 30, As of December 31, (in thousands) 2020 2019 Current accrued expenses and other current liabilities $ 1,913 $ 1,913 Non-current other liabilities 16,057 17,301 Total accrued liabilities $ 17,970 $ 19,214 |
Segment and Related Informati_2
Segment and Related Information (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment and Related Information | |
Summary of financial information concerning the Company's reporting segments | Patient Care Products & Services For the Three Months Ended For the Three Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Net revenues Third party $ 212,664 $ 230,931 $ 43,973 $ 48,707 Intersegments — — 50,011 53,670 Total net revenues 212,664 230,931 93,984 102,377 Material costs Third party suppliers 56,599 65,055 24,863 26,979 Intersegments 7,339 6,284 42,672 47,386 Total material costs 63,938 71,339 67,535 74,365 Personnel expenses 76,989 81,274 12,738 13,320 Other expenses 34,713 37,245 5,957 6,858 Depreciation & amortization 4,786 4,943 2,633 2,723 Segment income from operations $ 32,238 $ 36,130 $ 5,121 $ 5,111 Patient Care Products & Services For the Nine Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Net revenues Third party $ 598,706 $ 652,700 $ 125,104 $ 144,455 Intersegments — — 138,899 150,245 Total net revenues 598,706 652,700 264,003 294,700 Material costs Third party suppliers 160,212 181,358 68,463 80,452 Intersegments 18,639 18,268 120,260 131,977 Total material costs 178,851 199,626 188,723 212,429 Personnel expenses 216,910 233,402 35,824 39,393 Other expenses 86,462 112,014 18,614 20,883 Depreciation & amortization 14,089 13,997 7,883 7,862 Segment income from operations $ 102,394 $ 93,661 $ 12,959 $ 14,133 |
Schedule of reconciliation of reportable segments | A reconciliation of the total of the reportable segments’ income from operations to consolidated net income is as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Income from operations Patient Care $ 32,238 $ 36,130 $ 102,394 $ 93,661 Products & Services 5,121 5,111 12,959 14,133 Corporate & other (24,284) (23,838) (72,590) (69,267) Income from operations 13,075 17,403 42,763 38,527 Interest expense, net 8,013 8,954 24,918 25,973 Non-service defined benefit plan expense 158 173 474 519 Income before income taxes 4,904 8,276 17,371 12,035 (Benefit) provision for income taxes (1,911) 2,585 (4,750) 3,260 Net income $ 6,815 $ 5,691 $ 22,121 $ 8,775 A reconciliation of the reportable segment net revenues to consolidated net revenues is as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Net revenues Patient Care $ 212,664 $ 230,931 $ 598,706 $ 652,700 Products & Services 93,984 102,377 264,003 294,700 Corporate & other — — — — Consolidating adjustments (50,011) (53,670) (138,899) (150,245) Consolidated net revenues $ 256,637 $ 279,638 $ 723,810 $ 797,155 A reconciliation of the reportable segment material costs to consolidated material costs is as follows: For the Three Months Ended For the Nine Months Ended September 30, September 30, (in thousands) 2020 2019 2020 2019 Material costs Patient Care $ 63,938 $ 71,339 $ 178,851 $ 199,626 Products & Services 67,535 74,365 188,723 212,429 Corporate & other — — — — Consolidating adjustments (50,011) (53,670) (138,899) (150,245) Consolidated material costs $ 81,462 $ 92,034 $ 228,675 $ 261,810 |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies - Description of Business (Details) | 9 Months Ended |
Sep. 30, 2020segment | |
Organization and Summary of Significant Accounting Policies | |
Number of operating segments | 2 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Sep. 30, 2020 | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | |
New Accounting Pronouncements or Change in Accounting Principle | ||||
Proceeds received from grant | $ 20,600 | $ 20,600 | ||
Liability related to proceeds received from grant | 3,400 | |||
Deferred payroll taxes under CARES Act | 7,100 | |||
Cumulative effect on accumulated deficit | $ (310,068) | $ (331,951) | ||
ASU 2016-13 | Restatement Adjustments | ||||
New Accounting Pronouncements or Change in Accounting Principle | ||||
Cumulative effect on accumulated deficit | $ 200 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share | ||||||||
Total anti-dilutive shares (in shares) | 34,379 | 10 | 20,202 | 0 | ||||
Net income | $ 6,815 | $ 31,054 | $ (15,748) | $ 5,691 | $ 10,035 | $ (6,951) | $ 22,121 | $ 8,775 |
Weighted average shares outstanding - basic | 38,133,598 | 37,349,144 | 37,878,753 | 37,218,234 | ||||
Effect of potentially dilutive restricted stock units and options | 503,938 | 637,716 | 613,212 | 703,533 | ||||
Weighted average shares outstanding - diluted | 38,637,536 | 37,986,860 | 38,491,965 | 37,921,767 | ||||
Basic and diluted: | ||||||||
Basic income per share | $ 0.18 | $ 0.15 | $ 0.58 | $ 0.24 | ||||
Diluted income per share | $ 0.18 | $ 0.15 | $ 0.57 | $ 0.23 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue Recognition | ||||
Net revenues | $ 256,637 | $ 279,638 | $ 723,810 | $ 797,155 |
Patient Care | ||||
Revenue Recognition | ||||
Net revenues | 212,664 | 230,931 | 598,706 | 652,700 |
Patient Care | Medicare | ||||
Revenue Recognition | ||||
Net revenues | 68,135 | 72,879 | 194,052 | 206,295 |
Patient Care | Medicaid | ||||
Revenue Recognition | ||||
Net revenues | 34,541 | 36,140 | 96,612 | 103,631 |
Patient Care | Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care) | ||||
Revenue Recognition | ||||
Net revenues | 75,966 | 83,384 | 213,234 | 232,410 |
Patient Care | Veterans Administration | ||||
Revenue Recognition | ||||
Net revenues | 19,339 | 23,816 | 54,057 | 64,635 |
Patient Care | Private Pay | ||||
Revenue Recognition | ||||
Net revenues | 14,683 | 14,712 | 40,751 | 45,729 |
Patient Care | Operating segments | ||||
Revenue Recognition | ||||
Net revenues | 212,664 | 230,931 | 598,706 | 652,700 |
Products & Services | ||||
Revenue Recognition | ||||
Net revenues | 93,984 | 102,377 | 264,003 | 294,700 |
Products & Services | Operating segments | ||||
Revenue Recognition | ||||
Net revenues | 43,973 | 48,707 | 125,104 | 144,455 |
Products & Services | Operating segments | Distribution services, net of intersegment revenue eliminations | ||||
Revenue Recognition | ||||
Net revenues | 32,711 | 36,653 | 90,928 | 107,510 |
Products & Services | Operating segments | Therapeutic solutions | ||||
Revenue Recognition | ||||
Net revenues | $ 11,262 | $ 12,054 | $ 34,176 | $ 36,945 |
Accounts Receivable, Net (Detai
Accounts Receivable, Net (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Accounts Receivable, net | ||
Gross charges before estimates for implicit price concessions | $ 178,956 | $ 229,683 |
Less estimates for implicit price concessions: | ||
Payor disallowances | (47,314) | (58,094) |
Patient non-payments | (6,916) | (9,589) |
Accounts receivable, gross | 124,726 | 162,000 |
Allowance for doubtful accounts | (3,317) | (2,641) |
Accounts receivable, net | 121,409 | 159,359 |
Additional allowance for doubtful account | 700 | |
Patient Care | ||
Accounts Receivable, net | ||
Gross charges before estimates for implicit price concessions | 157,191 | 202,132 |
Less estimates for implicit price concessions: | ||
Payor disallowances | (47,314) | (58,094) |
Patient non-payments | (6,916) | (9,589) |
Accounts receivable, gross | 102,961 | 134,449 |
Accounts receivable, net | 102,961 | 134,449 |
Products & Services | ||
Accounts Receivable, net | ||
Gross charges before estimates for implicit price concessions | 21,765 | 27,551 |
Less estimates for implicit price concessions: | ||
Accounts receivable, gross | 21,765 | 27,551 |
Allowance for doubtful accounts | (3,317) | (2,641) |
Accounts receivable, net | $ 18,448 | $ 24,910 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Inventories | ||
Raw materials | $ 20,047 | $ 20,574 |
Work in process | 15,575 | 10,165 |
Finished goods | 38,486 | 37,465 |
Total inventories | $ 74,108 | $ 68,204 |
Property, Plant and Equipment_3
Property, Plant and Equipment, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | $ 290,327 | $ 290,327 | $ 280,391 | ||
Less: accumulated depreciation and amortization | (203,690) | (203,690) | (196,334) | ||
Total property, plant, and equipment, net | 86,637 | 86,637 | 84,057 | ||
Depreciation expense | 7,000 | $ 7,700 | 21,400 | $ 22,800 | |
Amortization of finance right-of-use assets | 200 | $ 100 | 500 | $ 200 | |
Land | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | 554 | 554 | 634 | ||
Buildings | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | 3,756 | 3,756 | 4,110 | ||
Furniture and fixtures | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | 14,747 | 14,747 | 13,835 | ||
Machinery and equipment | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | 25,826 | 25,826 | 25,438 | ||
Equipment leased to third parties under operating leases | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | 27,510 | 27,510 | 29,217 | ||
Leasehold improvements | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | 138,450 | 138,450 | 131,617 | ||
Computers and software | |||||
Property, Plant and Equipment, Net | |||||
Total property, plant, and equipment, gross | $ 79,484 | $ 79,484 | $ 75,540 |
Acquisitions (Details)
Acquisitions (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Cash paid, net of cash acquired | $ 16,854 | $ 31,585 | |||||||
Acquisition-related costs | $ 0 | 400 | |||||||
General and administrative expenses | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Acquisition-related costs | 100 | 600 | |||||||
2020 Acquisition activity, O&P business | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Cash paid, net of cash acquired | $ 16,762 | ||||||||
Issuance of seller notes at fair value | 21,941 | ||||||||
Deferred payment obligations | 3,468 | ||||||||
Additional consideration | 3,975 | ||||||||
Aggregate purchase price | 46,146 | ||||||||
Accounts receivable | 3,182 | ||||||||
Inventories | 2,021 | ||||||||
Other assets and liabilities, net | (4,301) | ||||||||
Net assets acquired | 6,702 | ||||||||
Goodwill | 39,444 | ||||||||
Operating right-of-use assets | 4,700 | 4,700 | |||||||
Operating lease liabilities | $ 4,700 | $ 4,700 | |||||||
Consideration through settlement of amounts due from acquiree | 400 | ||||||||
2020 Acquisition activity, O&P business | Customer Relationships | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Other intangible assets, net | $ 5,600 | ||||||||
Weighted average useful life | 5 years | ||||||||
2020 Acquisition activity, O&P business | Non-compete agreements | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Other intangible assets, net | $ 200 | ||||||||
Weighted average useful life | 5 years | ||||||||
2020 Acquisition activity, O&P business | Payable in lump sum payment due in October 2020 | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Issuance of seller notes at fair value | $ 18,100 | ||||||||
Additional consideration | 3,600 | ||||||||
2020 Acquisition activity, O&P business | Payable in annual installments over a period of 3 years | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Issuance of seller notes at fair value | 3,800 | ||||||||
Deferred payment obligations | $ 3,500 | ||||||||
Beginning period for the deferred payment obligations payable | 4 years | ||||||||
Thereafter period for payable deferred payment obligations | 3 years | ||||||||
2019 Acquisition Activity, prosthetic and orthotic business | |||||||||
Aggregate purchase price of this acquisition was allocated on a preliminary basis | |||||||||
Cash paid, net of cash acquired | $ 5,000 | $ 3,000 | $ 200 | $ 27,700 | $ 35,909 | ||||
Issuance of seller notes at fair value | 2,800 | 300 | 300 | 4,400 | 7,835 | ||||
Additional consideration | 700 | 700 | 626 | ||||||
Aggregate purchase price | 7,800 | $ 3,300 | $ 500 | $ 32,800 | 44,370 | ||||
Accounts receivable | 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 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill | |||
Measurement period adjustments related to acquisitions | $ 2,100 | $ 300 | |
Goodwill allocated | |||
Goodwill, Net as of beginning of the year | $ 232,244 | ||
Goodwill, Net as of end of the year | 271,701 | 232,244 | |
Patient Care | |||
Goodwill allocated | |||
Goodwill, Gross as of beginning of the year | 660,912 | 627,410 | |
Goodwill, Accumulated Impairment | (428,668) | (428,668) | (428,668) |
Goodwill, Net as of beginning of the year | 232,244 | 198,742 | |
Additions from acquisitions | 39,386 | 35,926 | |
Measurement period adjustments | 71 | (2,424) | |
Goodwill, Gross as of end of the year | 700,369 | 660,912 | 627,410 |
Goodwill, Net as of end of the year | 271,701 | 232,244 | 198,742 |
Products & Services | |||
Goodwill allocated | |||
Goodwill, Gross as of beginning of the year | 139,299 | 139,299 | |
Goodwill, Accumulated Impairment | (139,299) | (139,299) | (139,299) |
Goodwill, Gross as of end of the year | 139,299 | 139,299 | 139,299 |
Consolidated | |||
Goodwill allocated | |||
Goodwill, Gross as of beginning of the year | 800,211 | 766,709 | |
Goodwill, Accumulated Impairment | (567,967) | (567,967) | (567,967) |
Goodwill, Net as of beginning of the year | 232,244 | 198,742 | |
Additions from acquisitions | 39,386 | 35,926 | |
Measurement period adjustments | 71 | (2,424) | |
Goodwill, Gross as of end of the year | 839,668 | 800,211 | 766,709 |
Goodwill, Net as of end of the year | $ 271,701 | $ 232,244 | $ 198,742 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |||||
Definite-lived, Gross Carrying Amount | $ 47,638 | $ 47,638 | $ 42,215 | ||
Definite-lived, Accumulated Amortization | (32,649) | (32,649) | (28,380) | ||
Definite-lived, Net Carrying Amount | 14,989 | 14,989 | 13,835 | ||
Total other intangible assets, Gross Carrying Amount | 56,708 | 56,708 | 51,285 | ||
Total other intangible assets, Accumulated Amortization | (32,649) | (32,649) | (28,380) | ||
Accumulated Impairment | (4,953) | (4,953) | (4,953) | ||
Total other intangible assets, Net Carrying Amount | 19,106 | 19,106 | 17,952 | ||
Amortization expense | 1,600 | $ 1,600 | 4,600 | $ 3,900 | |
Trade name | |||||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||||
Indefinite lived, Gross Carrying Amount | 9,070 | 9,070 | 9,070 | ||
Indefinite lived, Accumulated Impairment | (4,953) | (4,953) | (4,953) | ||
Indefinite lived, Net Carrying Amount | 4,117 | 4,117 | 4,117 | ||
Customer lists | |||||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||||
Definite-lived, Gross Carrying Amount | 38,372 | 38,372 | 32,772 | ||
Definite-lived, Accumulated Amortization | (26,844) | (26,844) | (22,726) | ||
Definite-lived, Net Carrying Amount | 11,528 | 11,528 | 10,046 | ||
Trade name | |||||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||||
Definite-lived, Gross Carrying Amount | 255 | 255 | 255 | ||
Definite-lived, Accumulated Amortization | (170) | (170) | (151) | ||
Definite-lived, Net Carrying Amount | 85 | 85 | 104 | ||
Patents and other intangibles | |||||
GOODWILL AND OTHER INTANGIBLE ASSETS | |||||
Definite-lived, Gross Carrying Amount | 9,011 | 9,011 | 9,188 | ||
Definite-lived, Accumulated Amortization | (5,635) | (5,635) | (5,503) | ||
Definite-lived, Net Carrying Amount | $ 3,376 | $ 3,376 | $ 3,685 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Estimated Amortization (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Estimated aggregate amortization expense for definite-lived intangible assets | |
2020 (remainder of the year) | $ 1,406 |
2021 | 3,735 |
2022 | 3,668 |
2023 | 3,424 |
2024 | 1,941 |
Thereafter | 815 |
Total | $ 14,989 |
Other Current Assets and Othe_3
Other Current Assets and Other Assets - Other Current Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Other Current Assets and Other Assets | ||
Non-trade receivables | $ 7,540 | $ 6,711 |
Prepaid maintenance | 3,277 | 2,767 |
Prepaid insurance | 909 | 264 |
Other prepaid assets | 2,763 | 3,931 |
Total other current assets | $ 14,489 | $ 13,673 |
Other Current Assets and Othe_4
Other Current Assets and Other Assets - Other Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Other Current Assets and Other Assets | ||
Implementation costs for cloud computing arrangements | $ 4,694 | $ 1,964 |
Cash surrender value of company-owned life insurance | 3,811 | 3,253 |
Finance lease right-of-use assets | 2,795 | 1,488 |
Deposits | 2,145 | 1,893 |
Non-trade receivables | 1,791 | 2,398 |
Other | 474 | 309 |
Total other assets | $ 15,710 | $ 11,305 |
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 | Sep. 30, 2020 | Dec. 31, 2019 |
Accrued Expenses and Other Current Liabilities and Other Liabilities | ||
Patient prepayments, deposits, and refunds payable | $ 26,969 | $ 24,183 |
Accrued sales taxes and other taxes | 10,240 | 8,543 |
Insurance and self-insurance accruals | 7,786 | 8,033 |
Derivative liability | 7,704 | 3,516 |
Liabilities incurred to seller in acquisitions | 3,656 | |
Accrued professional fees | 1,547 | 2,533 |
Accrued interest payable | 747 | 266 |
Other current liabilities | 13,785 | 8,751 |
Total | $ 72,434 | $ 55,825 |
Accrued Expenses and Other Cu_4
Accrued Expenses and Other Current Liabilities and Other Liabilities - Other liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accrued Expenses and Other Current Liabilities and Other Liabilities | ||
Supplemental executive retirement plan obligations | $ 19,461 | $ 20,851 |
Derivative liability | 16,075 | 9,821 |
Unrecognized tax benefits | 7,910 | 5,296 |
Long-term insurance accruals | 7,539 | 7,424 |
Deferred payroll taxes | 7,118 | |
Other | 1,974 | 2,412 |
Total | $ 60,077 | $ 45,804 |
Income Taxes - (Details)
Income Taxes - (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Income Taxes | ||||||
(Benefit) provision for income taxes | $ (1,911) | $ 2,585 | $ (4,750) | $ 3,260 | ||
Effective tax rate | (39.00%) | 31.20% | (27.30%) | 27.10% | ||
Federal statutory tax rate (as a percent) | 21.00% | 21.00% | 21.00% | 21.00% | ||
Recognition of tax benefits, Current year | $ 2,200 | |||||
Recognition of tax benefits, Prior years | $ 6,300 | |||||
Deferred taxes due to CARES Act | $ 9,500 | $ 9,500 | ||||
Recognition of tax benefits, Prior years due to CARES Act | $ 4,000 |
Debt and Other Obligations (Det
Debt and Other Obligations (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Debt and Other Obligations | ||
Total debt before unamortized discount and debt issuance costs | $ 529,189 | $ 507,201 |
Unamortized discount and debt issuance costs, net | (7,798) | (8,328) |
Total debt | 521,391 | 498,873 |
Total current portion of long-term debt | 27,791 | 8,752 |
Long-term debt | 493,600 | 490,121 |
Term Loan B | ||
Debt and Other Obligations | ||
Total debt before unamortized discount and debt issuance costs | 492,375 | 496,163 |
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 | 29,208 | 9,005 |
Total current portion of long-term debt | 21,893 | 3,175 |
Deferred payment obligation | ||
Debt and Other Obligations | ||
Total debt before unamortized discount and debt issuance costs | 4,000 | |
Finance lease liabilities and other | ||
Debt and Other Obligations | ||
Total debt before unamortized discount and debt issuance costs | 3,606 | 2,033 |
Total current portion of long-term debt | $ 848 | $ 527 |
Debt and Other Obligations - Re
Debt and Other Obligations - Refinancing of Credit Agreement and Term B Borrowings (Details) $ in Thousands | Mar. 06, 2018USD ($) | Sep. 30, 2020USD ($) | Jun. 30, 2020USD ($) | May 31, 2020 | Mar. 31, 2020USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Debt and Other Obligations | |||||||
Outstanding amount of debt | $ 529,189 | $ 529,189 | $ 507,201 | ||||
Letters of credit outstanding amount | $ 5,200 | 5,200 | |||||
Debt issuance costs | $ 214 | ||||||
LIBOR | Minimum | |||||||
Debt and Other Obligations | |||||||
Minimum interest base | 1.00% | ||||||
LIBOR | Maximum | |||||||
Debt and Other Obligations | |||||||
Increase in margin(as a percent) | 3.75% | ||||||
Fiscal quarters ended June 30, 2020 through March 31, 2021 | |||||||
Debt and Other Obligations | |||||||
Consolidated leverage ratio | 5.25% | ||||||
Fiscal quarters ended June 30, 2021 through September 30, 2021 | |||||||
Debt and Other Obligations | |||||||
Consolidated leverage ratio | 5.00% | ||||||
December 31, 2021 and the last day of each fiscal quarter thereafter | |||||||
Debt and Other Obligations | |||||||
Consolidated leverage ratio | 4.75% | ||||||
Credit Agreement, dated March 6, 2018, Term Loan B | |||||||
Debt and Other Obligations | |||||||
Outstanding amount of debt | $ 505,000 | ||||||
Weighted average interest rate | 3.60% | 3.60% | |||||
Revolving credit facility | |||||||
Debt and Other Obligations | |||||||
Borrowing | $ 22,000 | $ 57,000 | $ 79,000 | ||||
Available borrowing capacity | 94,800 | $ 94,800 | |||||
Maximum borrowing capacity | 605,000 | ||||||
Letters of credit outstanding amount | $ 100,000 | $ 100,000 | |||||
Increase in additional borrowing capacity | $ 125,000 | ||||||
Leverage ratio to increase credit commitment | 3.80 | ||||||
Increase in margin(as a percent) | 50.00% | ||||||
Interest rate in excess of applicable rate upon acceleration and default ( as a percent) | 2.00% | ||||||
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% | ||||||
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 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 - Se
Debt and Other Obligations - Seller Notes (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Seller Notes | ||
Debt and Other Obligations | ||
Unamortized discount | $ 0.9 | $ 0.4 |
Seller Notes | Minimum | ||
Debt and Other Obligations | ||
Interest rate stated percentage | 2.50% | |
Seller Notes | Maximum | ||
Debt and Other Obligations | ||
Interest rate stated percentage | 3.00% | |
Deferred payment obligation | ||
Debt and Other Obligations | ||
Unamortized discount | $ 0.5 | |
Interest rate stated percentage | 3.00% |
Debt and Other Obligations - Ma
Debt and Other Obligations - Maturities of Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Maturities of debt | ||
2020 (remainder of year) | $ 21,023 | |
2021 | 9,759 | |
2022 | 8,494 | |
2023 | 8,049 | |
2024 | 7,337 | |
Thereafter | 474,527 | |
Total debt before unamortized discount and debt issuance costs, net | 529,189 | $ 507,201 |
Unamortized discount and debt issuance costs, net | (7,798) | (8,328) |
Total debt | $ 521,391 | $ 498,873 |
Fair Value Measurements - Finan
Fair Value Measurements - Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
FAIR VALUE MEASUREMENTS | ||
Unamortized discount and debt issuance costs, net | $ 7,798 | $ 8,328 |
Credit Agreement, dated March 6, 2018, Term Loan B | ||
FAIR VALUE MEASUREMENTS | ||
Unamortized discount and debt issuance costs, net | 6,900 | 7,900 |
Credit Agreement, dated March 6, 2018, Term Loan B | Carrying Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 492,400 | 496,200 |
Credit Agreement, dated March 6, 2018, Term Loan B | Recurring basis | Level 3 | Fair Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 487,500 | |
Credit Agreement, dated March 6, 2018, Term Loan B | Revolving credit facility | Recurring basis | Level 3 | Fair Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | 497,400 | |
Seller Notes | Carrying Value | ||
FAIR VALUE MEASUREMENTS | ||
Debt | $ 32,300 | $ 900 |
Derivative Financial Instrume_3
Derivative Financial Instruments - Cash Flow Hedge (Details) - Interest rate swap agreements - Cash flow hedges - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 | Mar. 31, 2018 |
DERIVATIVE FINANCIAL INSTRUMENTS | |||
Notional amount of derivative instrument | $ 300 | $ 312.5 | $ 325 |
Annual reduction in notional amount of derivative | $ 12.5 |
Derivative Financial Instrume_4
Derivative Financial Instruments - Changes in Net Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (Details) - Interest rate swap agreements - Cash flow hedges - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Changes in Net Gain or Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) | ||||
Balance at the beginning of the period | $ (19,612) | $ (10,560) | $ (10,137) | $ (2,936) |
Unrealized loss recognized in other comprehensive loss, net of tax | (455) | (2,060) | (12,518) | (10,135) |
Reclassification to interest expense, net | 1,997 | 419 | 4,585 | 870 |
Balance at the end of the period | $ (18,070) | $ (12,201) | $ (18,070) | $ (12,201) |
Derivative Financial Instrume_5
Derivative Financial Instruments - Fair Value of Derivative Assets and Liabilities (Details) - Cash flow hedges - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accrued expenses and other current liabilities | ||
Derivatives designated as cash flow hedging instruments: | ||
Liabilities | $ 7,704 | $ 3,516 |
Other liabilities | ||
Derivatives designated as cash flow hedging instruments: | ||
Liabilities | $ 16,075 | $ 9,821 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | May 19, 2017 | May 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | May 17, 2019 |
Share Based Compensation | ||||||||
Options outstanding and exercisable (in share) | 520,105 | 520,105 | ||||||
Weighted average exercise price of options exercisable (in dollars per share) | $ 12.77 | $ 12.77 | ||||||
Average remaining contractual term of options exercisable | 6 years 7 months 6 days | |||||||
Stock-based compensation expense | $ 3.1 | $ 3.4 | $ 15.6 | $ 10.1 | ||||
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 | |||||||
2016 Omnibus Incentive Plan | ||||||||
Share Based Compensation | ||||||||
Available for issuance (in shares) | 243,611 | |||||||
Stock Options | Special Equity Plan | ||||||||
Share Based Compensation | ||||||||
Issued (in shares) | 800,000 | |||||||
Performance-based stock awards | ||||||||
Share Based Compensation | ||||||||
Shares outstanding | 367,097 | 367,097 | ||||||
Weighted average grant date fair value | $ 18.94 | $ 18.94 | ||||||
Performance-based stock awards | Special Equity Plan | ||||||||
Share Based Compensation | ||||||||
Issued (in shares) | 300,000 | |||||||
Performance period | 33 months | |||||||
Reduction in performance period | 3 months | |||||||
Incremental fair value | $ 5.9 | |||||||
Unvested restricted stock | ||||||||
Share Based Compensation | ||||||||
Shares outstanding | 1,564,081 | 1,564,081 | ||||||
Employee Service Based Awards | ||||||||
Share Based Compensation | ||||||||
Shares outstanding | 1,126,361 | 1,126,361 | ||||||
Weighted average grant date fair value | $ 19.23 | $ 19.23 | ||||||
Director Service Based Awards | ||||||||
Share Based Compensation | ||||||||
Shares outstanding | 70,623 | 70,623 | ||||||
Weighted average grant date fair value | $ 17.08 | $ 17.08 |
Supplemental Executive Retire_3
Supplemental Executive Retirement Plans - Plan Details and Change in Benefit Obligation (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)payment | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Supplemental Executive Retirement Plans | |||||
Number of annual payments | payment | 15 | ||||
Change in Benefit Obligation | |||||
Benefit obligation at the beginning of the period | $ 17,763 | $ 17,535 | $ 19,214 | $ 18,927 | |
Service cost | 98 | 84 | 294 | 251 | |
Interest cost | 121 | 164 | 363 | 494 | |
Payments | (12) | (12) | (1,901) | (1,901) | |
Benefit obligation at the end of the period | 17,970 | $ 17,771 | 17,970 | $ 17,771 | |
Amounts Recognized in the Condensed Consolidated Balance Sheets: | |||||
Current accrued expenses and other current liabilities | 1,913 | 1,913 | $ 1,913 | ||
Non-current other liabilities | 16,057 | 16,057 | 17,301 | ||
Total accrued liabilities | $ 17,970 | $ 17,970 | $ 19,214 |
Supplemental Executive Retire_4
Supplemental Executive Retirement Plans - DC SERP (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Supplemental Executive Retirement Plans | ||
Estimated accumulated benefit obligation | $ 4.2 | $ 3.9 |
Funded estimated accumulated benefit obligation | 3.8 | 3.3 |
Unfunded estimated accumulated benefit obligation | $ 0.4 | $ 0.6 |
Commitments and Contingencies -
Commitments and Contingencies - Derivative Litigation (Details) | 7 Months Ended |
Aug. 31, 2015lawsuit | |
Commitments and Contingencies | |
Number of law suits filed | 2 |
Segment and Related Informati_3
Segment and Related Information - Paragraphs (Details) | 9 Months Ended |
Sep. 30, 2020segment | |
Segment and Related Information | |
Number of operating segments | 2 |
Segment and Related Informati_4
Segment and Related Information - Financial Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment and Related Information | ||||
Net revenues | $ 256,637 | $ 279,638 | $ 723,810 | $ 797,155 |
Material costs | 81,462 | 92,034 | 228,675 | 261,810 |
Personnel expenses | 89,727 | 94,594 | 252,734 | 272,795 |
Depreciation & amortization | 8,803 | 9,373 | 26,513 | 26,906 |
Segment income from operations | 13,075 | 17,403 | 42,763 | 38,527 |
Purchase of property, plant and equipment | 19,352 | 20,262 | ||
Patient Care | ||||
Segment and Related Information | ||||
Net revenues | 212,664 | 230,931 | 598,706 | 652,700 |
Material costs | 63,938 | 71,339 | 178,851 | 199,626 |
Personnel expenses | 76,989 | 81,274 | 216,910 | 233,402 |
Other expenses | 34,713 | 37,245 | 86,462 | 112,014 |
Depreciation & amortization | 4,786 | 4,943 | 14,089 | 13,997 |
Segment income from operations | 32,238 | 36,130 | 102,394 | 93,661 |
Patient Care | Operating segments | ||||
Segment and Related Information | ||||
Net revenues | 212,664 | 230,931 | 598,706 | 652,700 |
Material costs | 56,599 | 65,055 | 160,212 | 181,358 |
Patient Care | Intersegments | ||||
Segment and Related Information | ||||
Material costs | 7,339 | 6,284 | 18,639 | 18,268 |
Products & Services | ||||
Segment and Related Information | ||||
Net revenues | 93,984 | 102,377 | 264,003 | 294,700 |
Material costs | 67,535 | 74,365 | 188,723 | 212,429 |
Personnel expenses | 12,738 | 13,320 | 35,824 | 39,393 |
Other expenses | 5,957 | 6,858 | 18,614 | 20,883 |
Depreciation & amortization | 2,633 | 2,723 | 7,883 | 7,862 |
Segment income from operations | 5,121 | 5,111 | 12,959 | 14,133 |
Products & Services | Operating segments | ||||
Segment and Related Information | ||||
Net revenues | 43,973 | 48,707 | 125,104 | 144,455 |
Material costs | 24,863 | 26,979 | 68,463 | 80,452 |
Products & Services | Intersegments | ||||
Segment and Related Information | ||||
Net revenues | 50,011 | 53,670 | 138,899 | 150,245 |
Material costs | $ 42,672 | $ 47,386 | $ 120,260 | $ 131,977 |
Segment and Related Informati_5
Segment and Related Information - Reconciliation of the Reportable Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Segment and Related Information | |||||||||
Income from operations | $ 13,075 | $ 17,403 | $ 42,763 | $ 38,527 | |||||
Interest expense, net | 8,013 | 8,954 | 24,918 | 25,973 | |||||
Non-service defined benefit plan expense | 158 | 173 | 474 | 519 | |||||
Income before income taxes | 4,904 | 8,276 | 17,371 | 12,035 | |||||
(Benefit) provision for income taxes | (1,911) | 2,585 | (4,750) | 3,260 | |||||
Net income | 6,815 | $ 31,054 | $ (15,748) | 5,691 | $ 10,035 | $ (6,951) | 22,121 | 8,775 | |
Consolidated net revenues | 256,637 | 279,638 | 723,810 | 797,155 | |||||
Consolidated material costs | 81,462 | 92,034 | 228,675 | 261,810 | |||||
Consolidated purchase of property, plant and equipment | 19,352 | 20,262 | |||||||
Consolidated assets | 952,681 | 952,681 | $ 842,253 | ||||||
Corporate & other | |||||||||
Segment and Related Information | |||||||||
Income from operations | (24,284) | (23,838) | (72,590) | (69,267) | |||||
Consolidating adjustments | |||||||||
Segment and Related Information | |||||||||
Consolidated net revenues | (50,011) | (53,670) | (138,899) | (150,245) | |||||
Consolidated material costs | (50,011) | (53,670) | (138,899) | (150,245) | |||||
Patient Care | |||||||||
Segment and Related Information | |||||||||
Income from operations | 32,238 | 36,130 | 102,394 | 93,661 | |||||
Consolidated net revenues | 212,664 | 230,931 | 598,706 | 652,700 | |||||
Consolidated material costs | 63,938 | 71,339 | 178,851 | 199,626 | |||||
Patient Care | Operating segments | |||||||||
Segment and Related Information | |||||||||
Consolidated net revenues | 212,664 | 230,931 | 598,706 | 652,700 | |||||
Consolidated material costs | 56,599 | 65,055 | 160,212 | 181,358 | |||||
Products & Services | |||||||||
Segment and Related Information | |||||||||
Income from operations | 5,121 | 5,111 | 12,959 | 14,133 | |||||
Consolidated net revenues | 93,984 | 102,377 | 264,003 | 294,700 | |||||
Consolidated material costs | 67,535 | 74,365 | 188,723 | 212,429 | |||||
Products & Services | Operating segments | |||||||||
Segment and Related Information | |||||||||
Consolidated net revenues | 43,973 | 48,707 | 125,104 | 144,455 | |||||
Consolidated material costs | $ 24,863 | $ 26,979 | $ 68,463 | $ 80,452 |