By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- Reports 2013 Adjusted Diluted EPS of $1.95
-- Reports 2013 Diluted EPS of $1.80
-- Establishes 2014 Financial Guidance Hanger, Inc. (NYSE: HGR) announced net sales of $278.2 million for the quarter ended December 31, 2013, an increase of $8.6 million from net sales of $269.6 million for the fourth quarter of 2012. Adjusted diluted earnings per share, which excludes non-recurring tax costs, costs related to acquisitions and costs related to implementation of the Company's new clinic management system (which the Company refers to as "Janus"), were $0.54 for the fourth quarter of 2013 and equal to the prior year fourth quarter adjusted diluted earnings per share. Diluted earnings per share were $0.52 for the fourth quarter of 2013 compared to $0.58 for the same period of 2012 (see also Hanger, Inc.).
The fourth quarter net sales increase of $8.6 million, or 3.2%, was the result of an $11.1 million, or 4.9%, increase in the Patient Care segment, and a $2.5 million decline in the Products & Services segment. The $11.1 million increase in Patient Care segment sales was comprised of a $2.8 million, or 1.3%, increase in same center sales, with the remaining $8.3 million increase driven by acquisitions. The reclassification of certain accounts receivable write-offs and reserves previously classified as bad debts and subsequently classified as a reduction in net sales, first reported in the third quarter of 2013, had an impact on the calculation of same center sales growth, which would have been 2.7% under the previous classification. The $2.5 million decline in Products & Services segment sales was principally the result of the impact on the Company's distribution business of the acquisitions of independent O&P companies made by the Patient Care segment in 2012 and 2013, and a decline in demand for higher priced prosthetic devices (such as micro processor-controlled knees) from independent O&P practices due to pressure they are facing from Medicaid audits.
Income from operations for the quarter ended December 31, 2013 was $34.6 million, compared to $36.5 million in the prior year. Adjusted income from operations for the fourth quarter, which excludes non-recurring tax costs, costs related to acquisitions and costs related to the implementation of Janus, was $35.3 million, compared to $37.4 million in the prior year. Income from operations declined principally due to increased cost of materials and accounts receivable reserves related to operational issues experienced at a small non-clinic unit within the Company's Patient Care segment.
Net sales for the year ended December 31, 2013 increased $72.0 million, or 7.4%, to $1,046.4 million from $974.4 million in the same period of 2012. The sales increase was driven by an $18.8 million, or 2.4%, increase in same center sales in the Patient Care segment, a $51.1 million increase from acquired entities, as well as a $2.1 million, or 1.2%, increase in sales in the Products & Services segment. As with the fourth quarter results, the impact of the reclassification announced in the third quarter of 2013 had an adverse impact on the calculation of same center sales growth for the year, which would have been 3.4% under the previous classification. During 2013, the Company acquired O&P operations totaling approximately $20 million in annualized sales. Diluted earnings per share were $1.80 for the full-year 2013 compared to $1.83 for the same period of 2012. Adjusted diluted earnings per share, which excludes non-recurring tax benefits, costs related to acquisitions and the implementation of Janus, and debt issuance cost associated with the June 2013 refinancing of the Company's bank credit facilities, increased 8.3% to $1.95 for the full-year 2013 compared to adjusted diluted earnings per share of $1.80 for the full-year 2012.
The Company's cash flow from operations increased by $7.0 million to $88.3 million for the twelve months ended December 31, 2013 compared to an $81.3 million cash inflow for the same period in 2012. As of December 31, 2013, the Company had $181.3 million in total liquidity, including $9.9 million of cash and $171.4 million available under its revolving credit facility, net of approximately $25.0 million of borrowings and $3.6 million in letters of credit. The Company's leverage ratio, as defined in its credit facilities, was 2.5 times at year-end 2013.
"As we reflect on 2013, we view it as both successful and challenging," commented Vinit Asar, President and Chief Executive Officer. "We successfully grew adjusted diluted EPS by 8% while weathering sequestration, an increase in the number of Medicare audits that are affecting many health care providers and operational issues in one of our businesses. Entering 2014 our core business remains healthy, and we are making a number of investments in our back-office which we believe will improve our future operations."
The Company expects 2014 revenues of between $1.110 and $1.130 billion, resulting from 3% to 5% same center sales growth in its Patient Care Segment, and a slight decline in Products & Services Segment sales. The decline in Products & Services Segment sales reflects the carry-over impact of a large one-time sale during 2013, continued acquisition of its O&P distribution customers by the Patient Care Segment, and increasing pressure on independent O&P customers resulting from continuing Medicare audits. The Company anticipates adjusted diluted earnings per share to rise 8% to 13% to between $2.10 and $2.20, excluding approximately $0.05 for training and implementation costs of Janus. The earnings growth includes an $11 million, or $0.19 per diluted share, investment the company is making in its back-office operations, including centralization of its billing and processing activities and improvements in its finance, accounting and information technology functions. Operational improvements and costs savings related to these investments are expected to be realized beginning in late 2014. Despite these significant investments, the Company anticipates maintaining its adjusted operating margins at a level similar to the prior year and generating cash flow from operations of between $90 and $100 million. The Company also plans to invest between $40 and $50 million in capital additions during the year. In the month of January 2014, the Company acquired O&P practices with annualized sales of approximately $20 million. In view of this level of acquisitions in January, the Company's goal in 2014 is to acquire a total of $35 to $45 million of O&P annualized revenue.
A conference call to discuss the Company's 2013 results and 2014 guidance is scheduled to begin at 9:00 a.m., ET, on Thursday, February 13, 2014. Those wishing to participate should call 1-877-662-6095. A replay will be available until Friday, February 21, 2014, by dialing 1-855-859-2056 and referencing Conference ID # 36619714.
About Hanger, Inc. - Built on the legacy of James Edward Hanger, the first amputee of the American Civil War, Hanger, Inc. (NYSE: HGR) delivers orthotic and prosthetic (O&P) patient care, and distributes O&P products and rehabilitative solutions to the broader market. Hanger's Patient Care segment is the largest owner and operator of O&P patient care clinics with in excess of 740 locations nationwide. Through its Products & Services segment, Hanger distributes branded and private label O&P devices, products and components, and provides rehabilitative solutions. Steeped in over 150 years of clinical excellence and innovation, Hanger's vision is to be the partner of choice for products and services that enhance human physical capability. For more information on Hanger, visit www.hanger.com and follow us at www.Facebook.com/HangerNews, www.Twitter.com/HangerNews, and www.YouTube.com/HangerNews.
Keywords for this news article include: Finance, Hanger Inc., Legal Issues.
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