Business Wire | Nov 4, 2020 04:10PM EST

Hanger Reports Third Quarter 2020 Financial Results

Nov. 04, 2020

AUSTIN, Texas--(BUSINESS WIRE)--Nov. 04, 2020--Hanger, Inc. (NYSE: HNGR), a leading provider of orthotic and prosthetic (O&P) patient care services and solutions, today announced its financial results for the third quarter ended September 30, 2020.

Financial Highlights

* Net revenue was $256.6 million for the three months ended September 30, 2020, compared to $279.6 million for the same period in 2019, reflecting a decrease of 8.2 percent. Net same clinic revenue on a day-adjusted basis declined by 10.3 percent, due primarily to a decrease in patient volumes associated with the COVID-19 pandemic.

* Net income was $6.8 million for the three months ended September 30, 2020, compared to $5.7 million for the same period in 2019. Income from operations was $13.1 million for the quarter compared to $17.4 million for the same period in 2019.

* Adjusted EBITDA was $27.9 million in the third quarter of 2020, compared to $32.6 million for the same period in 2019, reflecting a decline of $4.8 million.

* GAAP diluted earnings per share was $0.18 for the third quarter of 2020, compared to $0.15 per diluted share for the same period in 2019. Adjusted diluted earnings per share was $0.20 for the three months ended September 30, 2020, compared to $0.25 per share for the same period in 2019.

* On September 30, 2020, the Company had $242.3 million in liquidity, reflecting an increase of $39.6 million as compared with June 30, 2020.

Vinit Asar, President and Chief Executive Officer of Hanger, Inc., stated, "Our patient volumes demonstrated continued recovery in the third quarter, and this, combined with the cost containment measures we took at the start of the pandemic, contributed to a favorable earnings and cash flow performance. Our employees have demonstrated strength and resilience in the face of these difficult times and their actions have positioned us well for 2021."

Complete reconciliations of GAAP to non-GAAP financial measures are provided in the tables located at the end of this press release.

Segment Results for Three Months Ended September 30, 2020

Patient Care Segment

For the three months ended September 30, 2020, Patient Care net revenue was $212.7 million, a decrease of $18.3 million, or 7.9 percent, compared to the same period in 2019. For the three month period, acquisitions of O&P clinics that were consummated in 2019 and 2020 contributed $4.4 million of revenue growth, net of consolidations.

Net same clinic revenue declined by 10.3 percent during the third quarter of 2020 compared to the same quarter in the prior year period. This reflected an improvement from the 18.7 percent decline reported during the second quarter of 2020. While patient care volumes remain lower than the prior year due to the impact of the COVID-19 pandemic, the Company experienced a gradual recovery in patient volumes during the quarter. Excluding acquisitions, net revenue from prosthetics declined 8.9 percent in the quarter and net revenue from orthotics declined 11.8 percent. While the percentage decline in prosthetics revenue as compared with the same periods in 2019 remained relatively consistent in the second and third quarters, revenue from orthotics services recovered significantly in the third quarter and was the primary contributing factor to the improvement in the Company's sequential quarterly revenue performance. Prosthetics comprised 55.5 percent of Patient Care segment net revenue during the third quarter of 2020 as compared to 54.8 percent during the same period in 2019.

During the months of July, August and September 2020, patient volumes decreased by approximately 18 percent, 17 percent and 13 percent, respectively, each as compared with their corresponding prior period in 2019. The average decline in patient appointments for the quarter was 16 percent, an improvement from 33 percent in the second quarter of 2020. As of September 30, 2020, the Company had temporarily closed 22 patient care clinics and another 84 clinics were open for reduced hours or by appointment only.

Income from operations in the Patient Care segment was $32.2 million during the third quarter of 2020, a decrease of $3.9 million compared to the $36.1 million reported in the prior year.

Adjusted EBITDA for the segment was $39.2 million, which reflected a $3.0 million or 7.0 percent decrease. Adjusted EBITDA margin in the segment totaled 18.4 percent compared to 18.3 percent during the third quarter of 2019.

Products & Services Segment

For the three months ended September 30, 2020, Products & Services net revenue totaled $44.0 million, a decline of 9.7 percent compared with the same period in 2019. Revenue from the distribution of O&P componentry declined by $3.9 million, or 10.8 percent, primarily from lower sales volumes due to the COVID-19 pandemic, and to a lesser extent, the Company's decision to exit the distribution of certain low margin off-the-shelf orthotics into third-party channels. Therapeutic solutions revenue declined $0.8 million, or 6.6 percent.

Income from operations for the Products & Services segment remained consistent with the third quarter of 2019 at $5.1 million. Adjusted EBITDA for the Products & Services segment totaled $8.2 million for the third quarter of 2020, a $0.1 million decrease compared with the same period of 2019. Adjusted EBITDA margin in the segment totaled 18.6 percent compared to 16.6 percent during the third quarter of 2019. Products & Services segment margins and earnings were positively affected by lower operating costs associated with temporary labor cost reductions.

Corporate & Other

Expenses associated with corporate and other activities increased by $0.4 million to $24.3 million for the quarter ended September 30, 2020 compared to the same period in 2019. Excluding the effect of depreciation and amortization, non-cash equity-based compensation expense and certain non-recurring expenses, the net cost of corporate and other activities increased by $1.9 million to $19.5 million in the third quarter of 2020.

Net Income; Interest Expense

Interest expense totaled $8.0 million for the three month period ended September 30, 2020, a decrease of $0.9 million from the prior year period.

For the three month period ended September 30, 2020, net income was $6.8 million compared with $5.7 million for the same period in 2019. GAAP diluted income per share was $0.18 compared to $0.15 per share in 2019. Adjusted diluted income per share was $0.20 for the three months ended September 30, 2020, compared to $0.25 per share for the same period in 2019.

Financial Highlights for the Nine Months Ended September 30, 2020

* Net revenue was $723.8 million for the nine months ended September 30, 2020, compared to $797.2 million for the same period of 2019, reflecting a net revenue decline of 9.2 percent. For the nine month period, acquisitions of O&P clinics that were consummated in 2019 and 2020 contributed $13.4 million of revenue growth, net of consolidations.

* Patient Care net revenue declined $54.0 million, or 8.3 percent, for the year-to-date period to $598.7 million, while same clinic day-adjusted net revenue per day declined 11.2 percent. Net revenue from prosthetics, excluding acquisitions, decreased 6.6 percent on a day-adjusted basis, while orthotics net revenue, excluding acquisitions, declined by 16.3 percent, also on a day-adjusted basis.

* Products & Services segment net revenue declined $19.4 million, or 13.4 percent, resulting from a decrease of $16.6 million, or 15.4 percent, in distribution services and a $2.8 million decrease, or 7.5 percent, in net revenue from therapeutic solutions.

* GAAP net income was $22.1 million for the nine months ended September 30, 2020, compared to $8.8 million for the same period in 2019. GAAP Patient Care segment results for the first nine months of 2020 included a benefit of $20.6 million to other operating costs related to the Company's receipt of CARES Act healthcare provider grants. These grants were received under the Public Health and Social Services Emergency fund, also referred to as The Provider Relief Fund, established by the CARES Act.

* Adjusted EBITDA of $69.7 million for the first nine months of 2020 was $12.2 million lower as compared to the $81.9 million reported in the prior year period. Adjusted EBITDA excludes the benefit of the CARES Act healthcare provider grants. The decline in Adjusted EBITDA is a result of lower patient volumes during March through September 2020 associated with the COVID-19 pandemic, partially offset by temporary cost reduction measures in personnel costs and other expense.

* For the nine months ended September 30, 2020, GAAP diluted earnings per share was $0.57 compared to $0.23 per share in 2019. Adjusted diluted earnings per share was $0.27 for the first nine months of 2020, compared to $0.45 per share for the same period in 2019.

Net Cash Provided by Operating Activities and Liquidity

Cash flows provided by operating activities for the three months ending September 30, 2020 were $45.2 million compared to $23.5 million for the same period in 2019. In addition to other factors, the Company benefited from improvements in cash collections during the third quarter of 2020 as its days sales outstanding decreased by four days to 43 days as of September 30, 2020 from 47 days on September 30, 2019.

On September 30, 2020, the Company had liquidity of $242.3 million, comprised of $147.5 million in cash and cash equivalents, and $94.8 million in available borrowing capacity under its revolving credit facility. This compares to total liquidity of $202.7 million on June 30, 2020.

Outlook Regarding the Effects of the COVID-19 Pandemic on Prospective Results

Beginning in April 2020, in response to the COVID-19 pandemic, the Company made certain changes to its operations, implemented a broad number of cost reduction measures, and temporarily delayed certain capital investment projects. Salaries for exempt employees were initially reduced by an average of 32 percent in April 2020. As volumes began to improve, one-third of this reduction was reinstated in June 2020, a further one-third was reinstated during July 2020, and the final outstanding 11 percent reduction in wages was reinstated at the end of the third quarter. The Company also commenced the gradual reduction of employee furloughs in June 2020 and completed the majority of these temporary furloughs at the end of the third quarter of 2020.

The restoration of these temporary salary reductions had the effect of increasing the Company's operating costs during the third quarter of 2020 as compared with the second quarter of 2020. The final one-third restoration will result in a further increase in personnel expenses for the fourth quarter of 2020 to levels that will approximate pre-pandemic amounts.

Management believes the remaining length and intensity of the pandemic is uncertain as is its future impact on patient volumes. Given the continuing uncertain and material effects the COVID-19 pandemic will likely have on prospective results, the Company is not providing guidance as to its anticipated financial results for the current year.

Conference and Webcast Details

The Company's management team will host a conference call tomorrow, Thursday, November 5, at 8:30 a.m. Eastern time to discuss the Company's third quarter 2020 financial results and business outlook.

To participate, dial 844-750-4896 or 412-317-5292 outside the U.S. and Canada, and ask to be joined into the Hanger, Inc. call. A live webcast, replay of the call and earnings release, will be available on the Company's Investor Relations website: www.investor.hanger.com/financial-reporting.

Additional Notes

A reconciliation of GAAP and non-GAAP financial results is included in the tables provided at the back of this press release. The Company has provided certain supplemental key statistics relating to its results for certain prior periods. These key statistics are non-GAAP measures used by the Company's management to analyze the Company's business results that are being provided for informational and analytical context.

Accompanying supplemental information will be posted to the Investor Relations section of Hanger's web site at www.hanger.com/investors.

About Hanger, Inc. - Hanger, Inc. (NYSE: HNGR) 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 approximately 800 locations nationwide. Through its Products & Services segment, Hanger distributes branded and private label O&P devices, products and components, and provides rehabilitative solutions. With nearly 160 years of clinical excellence and innovation, Hanger's vision is to lead the orthotic and prosthetic markets by providing superior patient care, outcomes, services and value. For more information on Hanger, visit https://investor.hanger.com.

This earnings release contains statements that are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as "believe," "expect," "project," "potential," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "would," "should," "could," "forecasts" or similar words. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate in these circumstances. We believe these assumptions are reasonable, but you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent releases or reports. These statements involve risks, estimates, assumptions, and uncertainties that could cause actual results to differ materially from those expressed in these statements and elsewhere in this release. These uncertainties include, but are not limited to, the financial and business impacts of COVID-19 on our operations and the operations of our customers, suppliers, governmental and private payers and others in the healthcare industry and beyond; federal laws governing the health care industry; governmental policies affecting O&P operations, including with respect to reimbursement; failure to successfully implement a new enterprise resource planning system or other disruptions to information technology systems; the inability to successfully execute our acquisition strategy, including integration of recently acquired O&P clinics into our existing business; changes in the demand for our O&P products and services, including additional competition in the O&P services market; disruptions to our supply chain; our ability to enter into and derive benefits from managed-care contracts; our ability to successfully attract and retain qualified O&P clinicians; and other risks and uncertainties generally affecting the health care industry. For additional information and risk factors that could affect the Company, see its Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the three months ended September 30, 2020, each as filed with the Securities and Exchange Commission. The information contained in this press release is made only as of the date hereof, even if subsequently made available by the Company on its website or otherwise.

Table 1

Hanger, Inc.

Condensed Consolidated Statements of Operations

(Unaudited - in thousands, except share and per share amounts)

For the Three Months Ended For the Nine Months Ended September 30, September 30,

2020 2019 2020 2019

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 29,935 32,771 74,098 100,067 costs (a)

General andadministrative 31,371 29,834 91,618 87,474 expenses

Professionalaccounting and 2,264 3,629 7,409 9,576 legal fees

Depreciation and 8,803 9,373 26,513 26,906 amortization

Income from 13,075 17,403 42,763 38,527 operations

Interest expense, 8,013 8,954 24,918 25,973 net

Non-service definedbenefit plan 158 173 474 519 expense

Income before 4,904 8,276 17,371 12,035 income taxes

(Benefit) provision (1,911 ) 2,585 (4,750 ) 3,260 for income taxes

Net income $ 6,815 $ 5,691 $ 22,121 $ 8,775



Basic and DilutedPer Common Share Data:

Basic earnings per $ 0.18 $ 0.15 $ 0.58 $ 0.24 share

Weighted averageshares used tocompute basic 38,133,598 37,349,144 37,878,753 37,218,234 earnings per commonshare

Diluted earnings $ 0.18 $ 0.15 $ 0.57 $ 0.23 per share

Weighted averageshares used tocompute diluted 38,637,536 37,986,860 38,491,965 37,921,767 earnings per commonshare

(a) For the nine months ended September 30, 2020, Hanger recognized approximately $20.6 million of income within other operating costs related to grant proceeds received under the CARES Act.

(a) For the nine months ended September 30, 2020, Hanger recognizedapproximately $20.6 million of income within other operating costs related togrant proceeds received under the CARES Act.

Table 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited - in thousands)

As of September 30,

As of December 31,

2020

2019

ASSETS

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

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

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

Shareholders' equity:

Common stock

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

(696

)

(696

)

Total shareholders' equity

32,301

9,504

Total liabilities and shareholders' equity

$

952,681

$

842,253

Table 2

Hanger, Inc.

Condensed Consolidated Balance Sheets

(Unaudited - in thousands)

As of September As of December 30, 31,

2020 2019

ASSETS

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



TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt $ 27,791 $ 8,752

Accounts payable 63,630 48,477

Accrued expenses and other current 72,434 55,825 liabilities

Accrued compensation related costs 63,511 61,010

Current portion of operating lease 32,932 34,342 liabilities

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



Shareholders' equity:

Common stock 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 (696 ) (696 )

Total shareholders' equity 32,301 9,504

Total liabilities and shareholders' $ 952,681 $ 842,253 equity

Table 3

Hanger, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

For the Nine Months Ended September 30,

2020

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

)

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

)

Payments 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

Table 3

Hanger, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited - in thousands)

For the Nine Months Ended September 30,

2020 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 1,564 1,202 costs

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 1,559 (622 ) of right-of-use assets

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 (3,194 ) (5,165 ) to third parties under operating leases

Proceeds from sale of property, plant, and 1,578 2,181 equipment

Purchase of company-owned life insurance (250 ) - investment

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 (79,000 ) - agreement

Repayment of term loan (3,788 ) (3,788 )

Payment of employee taxes on share-based (6,841 ) (3,710 ) compensation

Payment on seller notes (2,200 ) (2,688 )

Payments 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

Table 4

Hanger, Inc.

Segment Information: Revenue, EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the Coronavirus Aid, Relief and Economy Security Act ("CARES Act") and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user's understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

Table 4

Hanger, Inc.

Segment Information: Revenue, EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization.Adjusted EBITDA is defined as operating income before certain charges,third-party professional fees in excess of normal amounts incurred inconnection with our financial statement remediation, expenses associated withequity-based compensation, severance expenses, certain expenses incurred inconnection with our acquisitions, proceeds received from grants under theCoronavirus Aid, Relief and Economy Security Act ("CARES Act") and certainother charges.



We use EBITDA and Adjusted EBITDA as measures to assess the relative level ofour indebtedness and our compliance with certain debt covenants which are basedon these measures. Additionally, we utilize these measures to assess ouroperating and financial performance. We believe that these measures enhance auser's understanding of normal operating income excluding certain charges,depreciation and amortization.



Neither EBITDA or Adjusted EBITDA are measures of financial performancecomputed in accordance with Generally Accepted Accounting Principles ("GAAP")and should not be considered in isolation nor as a substitute for operatingincome, net income, cash flows from operations, or other statement ofoperations or cash flow data prepared in conformity with GAAP, or as a measureof profitability or liquidity. In addition, the calculation of EBITDA andAdjusted EBITDA is susceptible to varying interpretations and calculations, andthe amounts presented may not be comparable to similarly titled measures ofother companies. EBITDA and Adjusted EBITDA may not be indicative of historicaloperating results, and we do not intend these measures to be predictive offuture results of operations.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Net Revenue (a)

Patient Care

$

212,664

$

230,931

$

598,706

$

652,700

Products & Services

43,973

48,707

125,104

144,455

Net revenue

$

256,637

$

279,638

$

723,810

$

797,155

EBITDA (b)

Patient Care

$

37,024

$

41,073

$

116,483

$

107,658

Products & Services

7,754

7,834

20,842

21,995

Corporate & Other

(22,900

)

(22,131

)

(68,049

)

(64,220

)

EBITDA (Non-GAAP)

$

21,878

$

26,776

$

69,276

$

65,433

Adjusted EBITDA (b)

Patient Care

$

39,209

$

42,160

$

100,728

$

110,929

Products & Services

8,157

8,070

21,784

22,721

Corporate & Other

(19,505

)

(17,594

)

(52,860

)

(51,761

)

Adjusted EBITDA (Non-GAAP)

$

27,861

$

32,636

$

69,652

$

81,889

(a) Excludes intersegment revenue.

(b) EBITDA and Adjusted EBITDA are "Non-GAAP" measures. Please refer to both Table 6 and Table 7 for a reconciliation of these measures to GAAP net income.

For the Three Months Ended For the Nine Months Ended September 30, September 30,

2020 2019 2020 2019



Net Revenue (a)

Patient Care $ 212,664 $ 230,931 $ 598,706 $ 652,700

Products & Services 43,973 48,707 125,104 144,455

Net revenue $ 256,637 $ 279,638 $ 723,810 $ 797,155



EBITDA (b)

Patient Care $ 37,024 $ 41,073 $ 116,483 $ 107,658

Products & Services 7,754 7,834 20,842 21,995

Corporate & Other (22,900 ) (22,131 ) (68,049 ) (64,220 )

EBITDA (Non-GAAP) $ 21,878 $ 26,776 $ 69,276 $ 65,433



Adjusted EBITDA (b)

Patient Care $ 39,209 $ 42,160 $ 100,728 $ 110,929

Products & Services 8,157 8,070 21,784 22,721

Corporate & Other (19,505 ) (17,594 ) (52,860 ) (51,761 )

Adjusted EBITDA $ 27,861 $ 32,636 $ 69,652 $ 81,889 (Non-GAAP)



(a) Excludes intersegment revenue.

(b) EBITDA and Adjusted EBITDA are "Non-GAAP" measures. Please refer to bothTable 6 and Table 7 for a reconciliation of these measures to GAAP net income.

Table 5

Hanger, Inc.

Reconciliation of Net Income and Earnings Per Share to

Adjusted Net Income and Adjusted Earnings Per Share

(Unaudited - in thousands, except share and per share amounts)

Earnings Per Share (or "EPS") is defined as net income divided by our basic or diluted common shares during the applicable period. Adjusted EPS is defined as EPS adjusted for certain equity-based compensation charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the CARES Act, and certain other charges.

We utilize Adjusted EPS to assess our operating and financial performance. We believe that this measure enhances a user's understanding of normal operating results excluding certain charges.

Adjusted EPS is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of Adjusted EPS is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. Adjusted EPS may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

Table 5

Hanger, Inc.

Reconciliation of Net Income and Earnings Per Share to

Adjusted Net Income and Adjusted Earnings Per Share

(Unaudited - in thousands, except share and per share amounts)

Earnings Per Share (or "EPS") is defined as net income divided by our basic ordiluted common shares during the applicable period. Adjusted EPS is defined asEPS adjusted for certain equity-based compensation charges, third-partyprofessional fees in excess of normal amounts incurred in connection with ourfinancial statement remediation, severance expenses, certain expenses incurredin connection with our acquisitions, proceeds received from grants under theCARES Act, and certain other charges.



We utilize Adjusted EPS to assess our operating and financial performance. Webelieve that this measure enhances a user's understanding of normal operatingresults excluding certain charges.



Adjusted EPS is not a measure of financial performance computed in accordancewith GAAP and should not be considered in isolation nor as a substitute foroperating income, net income, cash flows from operations, or other statement ofoperations or cash flow data prepared in conformity with GAAP, or as a measureof profitability or liquidity. In addition, the calculation of Adjusted EPS issusceptible to varying interpretations and calculations, and the amountspresented may not be comparable to similarly titled measures of othercompanies. Adjusted EPS may not be indicative of historical operating results,and we do not intend these measures to be predictive of future results ofoperations.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Net income - as reported (GAAP)

$

6,815

$

5,691

$

22,121

$

8,775

Adjustments:

Modification of equity awards (a)

-

-

5,869

-

Amortization expense

1,797

1,561

5,071

3,917

Third-party professional fees

-

2,136

1,639

5,530

Acquisition-related expenses

33

350

405

848

Hanger supply chain implementation costs

376

-

806

-

Severance expenses

3,015

-

3,015

(11

)

Proceeds from grants under the CARES Act

(43

)

-

(20,576

)

-

Adjustments prior to tax effect

$

5,178

$

4,047

$

(3,771

)

$

10,284

Tax effect of specified adjustments (b)

(4,331

)

(373

)

(8,014

)

(2,097

)

Adjustments after taxes

847

3,674

(11,785

)

8,187

Adjusted net income (Non-GAAP)

$

7,662

$

9,365

$

10,336

$

16,962

Basic earnings per share - as reported (GAAP)

$

0.18

$

0.15

$

0.58

$

0.24

Effect of above listed specified adjustments

0.02

0.10

(0.31

)

0.22

Adjusted basic earnings per share - as reported (Non-GAAP)

$

0.20

$

0.25

$

0.27

$

0.46

Diluted earnings per share - as reported (GAAP)

$

0.18

$

0.15

$

0.57

$

0.23

Effect of above listed specified adjustments

0.02

0.10

(0.30

)

0.22

Adjusted diluted earnings per share - as reported (Non-GAAP)

$

0.20

$

0.25

$

0.27

$

0.45

Shares used to compute basic earnings per share

38,133,598

37,349,144

37,878,753

37,218,234

Shares used to compute diluted earnings per share

38,637,536

37,986,860

38,491,965

37,921,767

For the Three Months Ended For the Nine Months Ended September 30, September 30,

2020 2019 2020 2019



Net income - as $ 6,815 $ 5,691 $ 22,121 $ 8,775 reported (GAAP)



Adjustments:

Modification of - - 5,869 - equity awards (a)

Amortization 1,797 1,561 5,071 3,917 expense

Third-party - 2,136 1,639 5,530 professional fees

Acquisition-related 33 350 405 848 expenses

Hanger supply chainimplementation 376 - 806 - costs

Severance expenses 3,015 - 3,015 (11 )

Proceeds fromgrants under the (43 ) - (20,576 ) - CARES Act

Adjustments prior $ 5,178 $ 4,047 $ (3,771 ) $ 10,284 to tax effect



Tax effect ofspecified (4,331 ) (373 ) (8,014 ) (2,097 ) adjustments (b)

Adjustments after 847 3,674 (11,785 ) 8,187 taxes



Adjusted net income $ 7,662 $ 9,365 $ 10,336 $ 16,962 (Non-GAAP)



Basic earnings pershare - as reported $ 0.18 $ 0.15 $ 0.58 $ 0.24 (GAAP)

Effect of abovelisted specified 0.02 0.10 (0.31 ) 0.22 adjustments

Adjusted basicearnings per share $ 0.20 $ 0.25 $ 0.27 $ 0.46 - as reported(Non-GAAP)



Diluted earningsper share - as $ 0.18 $ 0.15 $ 0.57 $ 0.23 reported (GAAP)

Effect of abovelisted specified 0.02 0.10 (0.30 ) 0.22 adjustments

Adjusted dilutedearnings per share $ 0.20 $ 0.25 $ 0.27 $ 0.45 - as reported(Non-GAAP)



Shares used tocompute basic 38,133,598 37,349,144 37,878,753 37,218,234 earnings per share

Shares used tocompute diluted 38,637,536 37,986,860 38,491,965 37,921,767 earnings per share

(a) Modification of equity awards reflect a non-recurring charge in the second quarter of 2020 for incremental equity-based compensation expense under ASC 718, Stock Compensation, related to the modification of certain equity awards granted in 2017.

(b) "Tax effect of specified adjustments" reflects the difference between the Company's effective provision for taxes and the application of a combined federal and state statutory tax rate of 24% for the 2020 and 2019 periods to the Company's earnings from operations before taxes, after the incorporation of the identified adjustments above.

(a) Modification of equity awards reflect a non-recurring charge in the secondquarter of 2020 for incremental equity-based compensation expense under ASC718, Stock Compensation, related to the modification of certain equity awardsgranted in 2017.



(b) "Tax effect of specified adjustments" reflects the difference between theCompany's effective provision for taxes and the application of a combinedfederal and state statutory tax rate of 24% for the 2020 and 2019 periods tothe Company's earnings from operations before taxes, after the incorporation ofthe identified adjustments above.

Table 6

Hanger, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the CARES Act and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user's understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

Table 6

Hanger, Inc.

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization.Adjusted EBITDA is defined as operating income before certain charges,third-party professional fees in excess of normal amounts incurred inconnection with our financial statement remediation, expenses associated withequity-based compensation, severance expenses, certain expenses incurred inconnection with our acquisitions, proceeds received from grants under the CARESAct and certain other charges.



We use EBITDA and Adjusted EBITDA as measures to assess the relative level ofour indebtedness and our compliance with certain debt covenants which are basedon these measures. Additionally, we utilize these measures to assess ouroperating and financial performance. We believe that these measures enhance auser's understanding of normal operating income excluding certain charges,depreciation and amortization.



Neither EBITDA or Adjusted EBITDA are measures of financial performancecomputed in accordance with Generally Accepted Accounting Principles ("GAAP")and should not be considered in isolation nor as a substitute for operatingincome, net income, cash flows from operations, or other statement ofoperations or cash flow data prepared in conformity with GAAP, or as a measureof profitability or liquidity. In addition, the calculation of EBITDA andAdjusted EBITDA is susceptible to varying interpretations and calculations, andthe amounts presented may not be comparable to similarly titled measures ofother companies. EBITDA and Adjusted EBITDA may not be indicative of historicaloperating results, and we do not intend these measures to be predictive offuture results of operations.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Net income - as reported (GAAP)

$

6,815

$

5,691

$

22,121

$

8,775

Adjustments to calculate EBITDA:

Depreciation and amortization

8,803

9,373

26,513

26,906

Interest expense, net

8,013

8,954

24,918

25,973

Non-service defined benefit plan expense

158

173

474

519

(Benefit) provision for income taxes

(1,911

)

2,585

(4,750

)

3,260

Adjustments - net income to EBITDA

15,063

21,085

47,155

56,658

EBITDA (Non-GAAP)

21,878

26,776

69,276

65,433

Further adjustments to calculate Adjusted EBITDA:

Third-party professional fees

-

2,136

1,639

5,530

Equity-based compensation (a)

2,602

3,374

15,087

10,089

Acquisition-related expenses

33

350

405

848

Hanger supply chain implementation costs

376

-

806

-

Severance expenses

3,015

-

3,015

(11

)

Proceeds from grants under the CARES Act

(43

)

-

(20,576

)

-

Further adjustments - EBITDA to Adjusted EBITDA

5,983

5,860

376

16,456

Adjusted EBITDA (Non-GAAP)

$

27,861

$

32,636

$

69,652

$

81,889

For the Three Months For the Nine Months Ended Ended September 30, September 30,

2020 2019 2020 2019



Net income - as $ 6,815 $ 5,691 $ 22,121 $ 8,775 reported (GAAP)



Adjustments to calculate EBITDA:

Depreciation and 8,803 9,373 26,513 26,906 amortization

Interest expense, net 8,013 8,954 24,918 25,973

Non-service defined 158 173 474 519 benefit plan expense

(Benefit) provision (1,911 ) 2,585 (4,750 ) 3,260 for income taxes

Adjustments - net 15,063 21,085 47,155 56,658 income to EBITDA

EBITDA (Non-GAAP) 21,878 26,776 69,276 65,433



Further adjustmentsto calculate Adjusted EBITDA:

Third-party - 2,136 1,639 5,530 professional fees

Equity-based 2,602 3,374 15,087 10,089 compensation (a)

Acquisition-related 33 350 405 848 expenses

Hanger supply chain 376 - 806 - implementation costs

Severance expenses 3,015 - 3,015 (11 )

Proceeds from grants (43 ) - (20,576 ) - under the CARES Act

Further adjustments -EBITDA to Adjusted 5,983 5,860 376 16,456 EBITDA

Adjusted EBITDA $ 27,861 $ 32,636 $ 69,652 $ 81,889 (Non-GAAP)

(a) Equity- based compensation expense includes an incremental charge in the second quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9 million related to the modification of certain equity awards granted in 2017.

(a) Equity- based compensation expense includes an incremental charge in thesecond quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9million related to the modification of certain equity awards granted in 2017.

Table 7

Hanger, Inc.

Segment Reconciliation of Income From Operations to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization. Adjusted EBITDA is defined as operating income before certain charges, third-party professional fees in excess of normal amounts incurred in connection with our financial statement remediation, expenses associated with equity-based compensation, severance expenses, certain expenses incurred in connection with our acquisitions, proceeds received from grants under the CARES Act and certain other charges.

We use EBITDA and Adjusted EBITDA as measures to assess the relative level of our indebtedness and our compliance with certain debt covenants which are based on these measures. Additionally, we utilize these measures to assess our operating and financial performance. We believe that these measures enhance a user's understanding of normal operating income excluding certain charges, depreciation and amortization.

Neither EBITDA or Adjusted EBITDA are measures of financial performance computed in accordance with Generally Accepted Accounting Principles ("GAAP") and should not be considered in isolation nor as a substitute for operating income, net income, cash flows from operations, or other statement of operations or cash flow data prepared in conformity with GAAP, or as a measure of profitability or liquidity. In addition, the calculation of EBITDA and Adjusted EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA may not be indicative of historical operating results, and we do not intend these measures to be predictive of future results of operations.

Table 7

Hanger, Inc.

Segment Reconciliation of Income From Operations to EBITDA and Adjusted EBITDA

(Unaudited - in thousands)

EBITDA is defined as operating income before depreciation and amortization.Adjusted EBITDA is defined as operating income before certain charges,third-party professional fees in excess of normal amounts incurred inconnection with our financial statement remediation, expenses associated withequity-based compensation, severance expenses, certain expenses incurred inconnection with our acquisitions, proceeds received from grants under the CARESAct and certain other charges.



We use EBITDA and Adjusted EBITDA as measures to assess the relative level ofour indebtedness and our compliance with certain debt covenants which are basedon these measures. Additionally, we utilize these measures to assess ouroperating and financial performance. We believe that these measures enhance auser's understanding of normal operating income excluding certain charges,depreciation and amortization.



Neither EBITDA or Adjusted EBITDA are measures of financial performancecomputed in accordance with Generally Accepted Accounting Principles ("GAAP")and should not be considered in isolation nor as a substitute for operatingincome, net income, cash flows from operations, or other statement ofoperations or cash flow data prepared in conformity with GAAP, or as a measureof profitability or liquidity. In addition, the calculation of EBITDA andAdjusted EBITDA is susceptible to varying interpretations and calculations, andthe amounts presented may not be comparable to similarly titled measures ofother companies. EBITDA and Adjusted EBITDA may not be indicative of historicaloperating results, and we do not intend these measures to be predictive offuture results of operations.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Patient Care

Income from operations - as reported (GAAP)

$

32,238

$

36,130

$

102,394

$

93,661

Depreciation & amortization

4,786

4,943

14,089

13,997

EBITDA (Non-GAAP)

37,024

41,073

116,483

107,658

Further adjustments to calculate Adjusted EBITDA:

Equity-based compensation

925

1,087

3,181

3,282

Hanger supply chain implementation costs

263

-

600

-

Severance expenses

1,040

-

1,040

(11

)

Proceeds from grants under the CARES Act

(43

)

-

(20,576

)

-

Further adjustments - EBITDA to Adjusted EBITDA

2,185

1,087

(15,755

)

3,271

Adjusted EBITDA (Non-GAAP)

39,209

42,160

100,728

110,929

Products & Services

Income from operations - as reported (GAAP)

5,121

5,111

12,959

14,133

Depreciation & amortization

2,633

2,723

7,883

7,862

EBITDA (Non-GAAP)

7,754

7,834

20,842

21,995

Further adjustments to calculate Adjusted EBITDA:

Equity-based compensation

244

236

690

726

Hanger supply chain implementation costs

113

-

206

-

Severance expenses

46

-

46

-

Further adjustments - EBITDA to Adjusted EBITDA

403

236

942

726

Adjusted EBITDA (Non-GAAP)

8,157

8,070

21,784

22,721

Corporate & Other

Loss from operations - as reported (GAAP)

(24,284

)

(23,838

)

(72,590

)

(69,267

)

Depreciation & amortization

1,384

1,707

4,541

5,047

EBITDA (Non-GAAP)

(22,900

)

(22,131

)

(68,049

)

(64,220

)

Further adjustments to calculate Adjusted EBITDA:

Third-party professional fees

-

2,136

1,639

5,530

Equity-based compensation (a)

1,433

2,051

11,216

6,081

Acquisition related expenses

33

350

405

848

Severance expenses

1,929

-

1,929

-

Further adjustments - EBITDA to Adjusted EBITDA

3,395

4,537

15,189

12,459

Adjusted EBITDA (Non-GAAP)

(19,505

)

(17,594

)

(52,860

)

(51,761

)

Total Adjusted EBITDA (Non-GAAP)

$

27,861

$

32,636

$

69,652

$

81,889

For the Three Months Ended For the Nine Months Ended September 30, September 30,

2020 2019 2020 2019

Patient Care

Income fromoperations - as $ 32,238 $ 36,130 $ 102,394 $ 93,661 reported (GAAP)

Depreciation & 4,786 4,943 14,089 13,997 amortization

EBITDA (Non-GAAP) 37,024 41,073 116,483 107,658

Furtheradjustments to calculate AdjustedEBITDA:

Equity-based 925 1,087 3,181 3,282 compensation

Hanger supplychain 263 - 600 - implementationcosts

Severance expenses 1,040 - 1,040 (11 )

Proceeds fromgrants under the (43 ) - (20,576 ) - CARES Act

Furtheradjustments - 2,185 1,087 (15,755 ) 3,271 EBITDA to AdjustedEBITDA

Adjusted EBITDA 39,209 42,160 100,728 110,929 (Non-GAAP)



Products & Services

Income fromoperations - as 5,121 5,111 12,959 14,133 reported (GAAP)

Depreciation & 2,633 2,723 7,883 7,862 amortization

EBITDA (Non-GAAP) 7,754 7,834 20,842 21,995

Furtheradjustments to calculate AdjustedEBITDA:

Equity-based 244 236 690 726 compensation

Hanger supplychain 113 - 206 - implementationcosts

Severance expenses 46 - 46 -

Furtheradjustments - 403 236 942 726 EBITDA to AdjustedEBITDA

Adjusted EBITDA 8,157 8,070 21,784 22,721 (Non-GAAP)



Corporate & Other

Loss fromoperations - as (24,284 ) (23,838 ) (72,590 ) (69,267 ) reported (GAAP)

Depreciation & 1,384 1,707 4,541 5,047 amortization

EBITDA (Non-GAAP) (22,900 ) (22,131 ) (68,049 ) (64,220 )

Furtheradjustments to calculate AdjustedEBITDA:

Third-party - 2,136 1,639 5,530 professional fees

Equity-based 1,433 2,051 11,216 6,081 compensation (a)

Acquisition 33 350 405 848 related expenses

Severance expenses 1,929 - 1,929 -

Furtheradjustments - 3,395 4,537 15,189 12,459 EBITDA to AdjustedEBITDA

Adjusted EBITDA (19,505 ) (17,594 ) (52,860 ) (51,761 ) (Non-GAAP)

Total Adjusted $ 27,861 $ 32,636 $ 69,652 $ 81,889 EBITDA (Non-GAAP)

(a) Equity- based compensation expense includes an incremental charge in the second quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9 million related to the modification of certain equity awards granted in 2017.

(a) Equity- based compensation expense includes an incremental charge in thesecond quarter of 2020 under ASC 718, Stock Compensation of approximately $5.9million related to the modification of certain equity awards granted in 2017.

Table 8

Hanger, Inc.

Indebtedness

(Unaudited - in thousands)

As of September 30,

As of December 31,

2020

2019

Debt:

Term Loan B

$

492,375

$

496,163

Revolving credit facility

-

-

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

Net indebtedness:

Total debt before unamortized discount and debt issuance costs

$

529,189

$

507,201

Cash and cash equivalents

(147,510

)

(74,419

)

Net indebtedness

$

381,679

$

432,782

Table 8

Hanger, Inc.

Indebtedness

(Unaudited - in thousands)

As of As of December September 30, 31,

2020 2019

Debt:

Term Loan B $ 492,375 $ 496,163

Revolving credit facility - -

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 529,189 507,201 debt issuance costs

Unamortized discount and debt issuance costs, (7,798 ) (8,328 ) net

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



Net indebtedness:

Total debt before unamortized discount and $ 529,189 $ 507,201 debt issuance costs

Cash and cash equivalents (147,510 ) (74,419 )

Net indebtedness $ 381,679 $ 432,782

Table 9

Hanger, Inc.

Key Operating Metrics

As of and For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Same clinic revenue:

(Decline) growth rate on net revenue

(10.3)%

3.7%

(10.7)%

1.8%

(Decline) growth rate day adjusted (a)

(10.3)%

2.1%

(11.2)%

1.8%

Clinical locations:

Patient care clinics

704

695

Satellite clinics

110

106

Total clinical locations

814

801

Table 9

Hanger, Inc.

Key Operating Metrics

As of and For the Three For the Nine Months Months Ended Ended September 30, September 30,

2020 2019 2020 2019



Same clinic revenue:

(Decline) growth rate on net (10.3)% 3.7% (10.7)% 1.8%revenue

(Decline) growth rate day (10.3)% 2.1% (11.2)% 1.8%adjusted (a)



Clinical locations:

Patient care clinics 704 695

Satellite clinics 110 106

Total clinical locations 814 801

(a) Same Clinic Revenue per Day - Same Clinic Revenue per Day normalizes revenue for the number of days a clinic was open in each comparable period. These measures are both non-GAAP and unaudited.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005368/en/

CONTACT: Investor Relations Contacts: Thomas Kiraly, Executive Vice President and Chief Financial Officer, Hanger, Inc. 512-777-3600 tkiraly@hanger.com

CONTACT: Seth Frank, Vice President, Treasury and Investor Relations, Hanger, Inc. 512-777-3573 sfrank@hanger.com