Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 01, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'HANGER, INC. | ' |
Entity Central Index Key | '0000722723 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 34,767,882 |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $7,216 | $19,211 |
Restricted cash | ' | 3,120 |
Accounts receivable, less allowance for doubtful accounts of $8,358 and $7,562 in 2013 and 2012, respectively | 176,663 | 165,668 |
Inventories | 144,374 | 127,295 |
Prepaid expenses, other assets, and income taxes receivable | 14,560 | 15,673 |
Deferred income taxes | 31,115 | 27,685 |
Total current assets | 373,928 | 358,652 |
PROPERTY, PLANT AND EQUIPMENT | ' | ' |
Land | 794 | 794 |
Buildings | 8,896 | 8,896 |
Furniture and fixtures | 20,382 | 19,582 |
Machinery and equipment | 61,178 | 60,364 |
Equipment leased to third parties under operating leases | 33,224 | 34,827 |
Leasehold improvements | 81,708 | 74,615 |
Computer and software | 99,974 | 98,186 |
Total property, plant and equipment, gross | 306,156 | 297,264 |
Less accumulated depreciation | 190,193 | 182,803 |
Total property, plant and equipment, net | 115,963 | 114,461 |
INTANGIBLE ASSETS | ' | ' |
Goodwill | 678,215 | 674,774 |
Customer list and other intangible assets, less accumulated amortization of $25,607 and $20,643 in 2013 and 2012, respectively | 58,638 | 64,281 |
Total intangible assets, net | 736,853 | 739,055 |
OTHER ASSETS | ' | ' |
Debt issuance costs, net | 8,994 | 14,033 |
Other assets | 12,261 | 11,126 |
Total other assets | 21,255 | 25,159 |
TOTAL ASSETS | 1,247,999 | 1,237,327 |
CURRENT LIABILITIES | ' | ' |
Current portion of long-term debt | 13,673 | 11,082 |
Accounts payable | 32,339 | 28,923 |
Accrued expenses | 30,391 | 22,357 |
Accrued interest payable | 5,772 | 3,041 |
Accrued compensation related costs | 33,991 | 41,784 |
Total current liabilities | 116,166 | 107,187 |
LONG-TERM LIABILITIES | ' | ' |
Long-term debt, less current portion | 457,384 | 509,564 |
Deferred income taxes | 76,480 | 77,730 |
Other liabilities | 40,869 | 39,752 |
Total liabilities | 690,899 | 734,233 |
COMMITMENTS AND CONTINGENCIES (Note H) | ' | ' |
SHAREHOLDERS' EQUITY | ' | ' |
Common stock, $.01 par value; 60,000,000 shares authorized, 36,032,368 and 35,617,884 shares issued and outstanding at 2013 and 2012, respectively | 360 | 356 |
Additional paid-in capital | 288,860 | 280,084 |
Accumulated other comprehensive loss | -1,919 | -1,919 |
Retained earnings | 270,455 | 225,229 |
Shareholders' equity, excluding treasury stock | 557,756 | 503,750 |
Treasury stock at cost (141,154 shares at 2013 and 2012) | -656 | -656 |
Total shareholders' equity | 557,100 | 503,094 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $1,247,999 | $1,237,327 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
CONSOLIDATED BALANCE SHEETS | ' | ' |
Accounts receivable, allowance for doubtful accounts (in dollars) | $8,358 | $7,562 |
Customer list and other intangible assets, accumulated amortization (in dollars) | $25,607 | $20,643 |
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 | 36,032,368 | 35,617,884 |
Common stock, shares outstanding | 36,032,368 | 35,617,884 |
Treasury stock, shares | 141,154 | 141,154 |
CONSOLIDATED_STATEMENTS_OF_INC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ' | ' | ' | ' |
Net sales | $271,053 | $242,536 | $768,201 | $704,794 |
Material costs | 79,401 | 73,109 | 226,585 | 212,706 |
Personnel costs | 94,768 | 84,135 | 277,897 | 248,723 |
Other operating expenses | 47,754 | 41,210 | 136,434 | 125,099 |
Depreciation and amortization | 9,224 | 8,709 | 28,019 | 25,432 |
Income from operations | 39,906 | 35,373 | 99,266 | 92,834 |
Interest expense | 6,017 | 7,751 | 21,502 | 23,212 |
Extinguishment of debt | ' | ' | 6,645 | ' |
Income before taxes | 33,889 | 27,622 | 71,119 | 69,622 |
Provision for income taxes | 12,230 | 10,278 | 25,891 | 26,257 |
Net income | 21,659 | 17,344 | 45,228 | 43,365 |
Comprehensive income | $21,659 | $17,344 | $45,228 | $43,365 |
Basic Per Common Share Data | ' | ' | ' | ' |
Net income (in dollars per share) | $0.62 | $0.50 | $1.30 | $1.27 |
Shares used to compute basic per common share amounts (in shares) | 34,902,103 | 34,362,757 | 34,783,419 | 34,224,756 |
Diluted Per Common Share Data | ' | ' | ' | ' |
Net income (in dollars per share) | $0.61 | $0.50 | $1.28 | $1.25 |
Shares used to compute diluted per common share amounts (in shares) | 35,401,273 | 35,002,351 | 35,315,897 | 34,817,680 |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operating activities: | ' | ' |
Net income | $45,228 | $43,365 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
(Gain)/Loss on disposal of assets | -5,570 | 5 |
Reduction of seller notes and earnouts | -363 | -971 |
Provision for doubtful accounts | 8,545 | 6,580 |
Provision for deferred income taxes | -2,564 | -1,031 |
Depreciation and amortization | 28,019 | 25,432 |
Amortization of debt issuance costs | 8,703 | 2,589 |
Compensation expense on stock options and restricted stock units | 6,398 | 6,100 |
Changes in operating assets and liabilities, net of effects of acquired companies: | ' | ' |
Accounts receivable | -14,586 | -10,266 |
Inventories | -14,676 | -13,995 |
Prepaid expenses, other current assets, and income taxes | 5,028 | -337 |
Accounts payable | 4,581 | 670 |
Accrued expenses and accrued interest payable | 5,421 | 4,192 |
Accrued compensation related costs | -9,584 | -5,970 |
Other | 3,946 | 2,642 |
Net cash provided by operating activities | 68,526 | 59,005 |
Cash flows from investing activities: | ' | ' |
Purchase of property, plant and equipment (net of acquisitions) | -24,429 | -23,439 |
Purchase of equipment leased to third parties under operating leases | -3,041 | -1,438 |
Acquisitions (net of cash acquired) | -5,695 | -14,266 |
Restricted cash | 3,120 | -3,120 |
Proceeds from sale of property, plant and equipment | 4,595 | ' |
Net cash used in investing activities | -25,450 | -42,263 |
Cash flows from financing activities: | ' | ' |
Borrowings under term loan | 225,000 | ' |
Repayment of term loan | -294,706 | ' |
Borrowings under revolving credit agreement | 163,000 | -2,950 |
Repayments under revolving credit agreement | -137,000 | ' |
Repayment of seller's notes and other contingent considerations | -9,168 | -3,416 |
Repayment of capital lease obligations | -808 | -545 |
Deferred financing costs | -3,665 | ' |
Excess tax benefit from stock-based compensation | 2,214 | 685 |
Proceeds from issuance of common stock | 1,628 | 2,206 |
Purchase and retirement of treasury stock | -1,566 | ' |
Net cash used in financing activities | -55,071 | -4,020 |
Decrease in cash and cash equivalents | -11,995 | 12,722 |
Cash and cash equivalents, at beginning of period | 19,211 | 42,896 |
Cash and cash equivalents, at end of period | 7,216 | 55,618 |
Cash paid during the period for: | ' | ' |
Interest | 16,299 | 16,902 |
Income taxes (net of refunds) | 21,033 | 22,106 |
Non-cash financing and investing activities: | ' | ' |
Issuance of restricted stock units | 10,990 | 5,452 |
Issuance of notes in connections with acquisitions | $675 | $7,625 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2013 | |
BASIS OF PRESENTATION | ' |
BASIS OF PRESENTATION | ' |
NOTE A — BASIS OF PRESENTATION | |
The unaudited interim consolidated financial statements as of September 30, 2013, and for the three and nine month periods ended September 30, 2013 and 2012 have been prepared by Hanger, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for such periods. The year-end consolidated data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The results of operations for the three and nine month periods ended September 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year. | |
These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012, filed by the Company with the SEC. |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||||||||||||||
NOTE B — SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||||||||||||||
Principles of Consolidation | ||||||||||||||||||||||||||
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying financial statements. | ||||||||||||||||||||||||||
Revision of Previously Reported Consolidated Financial Information | ||||||||||||||||||||||||||
During the third quarter 2013, the Company corrected an error in the classification of certain components of bad debt expense (the “2013 Revision”). Hanger previously classified the reserves related to the write-off of older accounts receivable balances due from commercial and government payors as bad debt expense, which was reported as Other Operating Expense in its financial statements, instead of as a reduction of sales. Management has assessed the materiality of the errors on previously reported periods and concluded the impact was not material to any of the prior annual or quarterly consolidated financial statements. The errors had no impact on previously reported net income, balance sheet totals or the operating cash flows for any of the periods. The impact of the adjustment lowers sales and reduces Other Operating Expenses by equal and offsetting amounts in the Consolidated Statements of Income and Comprehensive Income and the Provision for doubtful accounts and Change in accounts receivable by equal and offsetting amounts in the Consolidated Statements of Cash Flows. Further, the Company has historically included the reserve for contra revenue in its presentation of the Allowance for doubtful accounts on the Consolidated Balance Sheets and the net change in the reserve for contra revenue in the Provision for doubtful accounts on the Consolidated Statements of Cash Flows and the Schedule II Valuation and Qualifying Accounts included in the Company’s Annual Report on Form 10-K. The Company has revised that presentation to only include the reserve for doubtful accounts and the related activity in the reserve for doubtful accounts in those respective balances. The impacts of the revisions on net sales are included in the results of the Patient Care Services segment in Note K. | ||||||||||||||||||||||||||
During the fourth quarter of 2012, the Company identified adjustments necessary to correct prior periods for the overstatement of the value of work-in-process inventory at December 31, 2011 and 2010. The Company assessed the materiality of the errors on previously reported periods and concluded the impact was not material to any prior annual consolidated financial statements. Management, however, deemed the impact of this error on the consolidated financial statements for the three months ended March 31, 2012 and 2011 to be material and restated the first quarter 2012 and 2011 financial results (“2012 Restatement”) in the restated Quarterly Report on Form 10-Q/A, filed with the SEC on March 22, 2013 (the “Amended Filing”) and revised the consolidated financial statements for the three and six month periods ended June 30, 2012 in the Second Quarter 2013 Report on Form 10Q. These errors had no impact on operating cash flows for any of the periods. The impact of the errors is included in the results of the Patient Care Services segment in Note K. The 2012 Restatement did not have an impact on the Consolidated Balance Sheets as of September 30, 2012 or the Consolidated Statement of Income and Comprehensive Income or the Consolidated Statement of Cash Flows for the three month period ended September 30, 2012. | ||||||||||||||||||||||||||
The impact of the 2013 Revision on the Consolidated Statements of Income and Comprehensive Income and the Consolidated Statements of Cash Flows for the three months ended March 31, 2013, the three and six months ended June 30, 2013, the three months ended March 31, 2012, the three and six months ended June 30, 2012, the three and nine months ended September 30, 2012, the annual periods ended 2010, 2011 and 2012, and Schedule II Valuation and Qualifying Accounts for the annual periods 2010, 2011 and 2012 are shown below. The impact of the 2012 Restatement resulted in a revision to the Consolidated Statements of Income and Comprehensive Income and the Consolidated Statement of Cash Flows for the nine month period ended September 30, 2012 which is included within the respective table below. | ||||||||||||||||||||||||||
Impact of 2013 Revision to previously reported 2013 consolidated interim results | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
March 31, 2013 | June 30, 2013 | June 30, 2013 | ||||||||||||||||||||||||
As Previously | As Previously | As Previously | ||||||||||||||||||||||||
(in thousands) | Reported | As Revised | Reported | As Revised | Reported | As Revised | ||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 233,535 | $ | 229,350 | $ | 273,735 | $ | 267,798 | $ | 507,270 | $ | 497,148 | ||||||||||||||
Other operating expenses* | $ | 43,843 | $ | 39,658 | $ | 54,959 | $ | 49,022 | $ | 98,802 | $ | 88,680 | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 5,229 | $ | 1,657 | $ | 14,905 | $ | 4,591 | ||||||||||||||||||
Change in accounts receivable | $ | 3,644 | $ | 7,216 | $ | (18,026 | ) | $ | (7,712 | ) | ||||||||||||||||
* The other operating expense balance for the three months ended March 31, 2013 includes $0.1 million of acquisition expenses previously reported as a separate caption in the presentation of the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Impact of 2013 Revision to previously reported 2012 consolidated interim results | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | |||||||||||||||||||||||
March 31, 2012 | June 30, 2012 | June 30, 2012 | September 30, 2012 | |||||||||||||||||||||||
As Previously | As Previously | As Previously | As Previously | |||||||||||||||||||||||
(in thousands) | Reported | As Revised | Reported | As Revised | Reported | As Revised | Reported | As Revised | ||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 218,091 | $ | 214,355 | $ | 251,754 | $ | 247,902 | $ | 469,845 | $ | 462,257 | $ | 243,503 | $ | 242,536 | ||||||||||
Other operating expenses* | $ | 40,219 | $ | 36,483 | $ | 51,256 | $ | 47,404 | $ | 91,475 | $ | 83,887 | $ | 42,177 | $ | 41,210 | ||||||||||
Consolidated Statement of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 4,723 | $ | 907 | $ | 12,925 | $ | 4,462 | ||||||||||||||||||
Change in accounts receivable | $ | 851 | $ | 4,667 | $ | (16,190 | ) | $ | (7,727 | ) | ||||||||||||||||
* The other operating expense balance for the three months ended March 31, 2012 includes $0.1 million of acquisition expenses previously reported as a separate caption in the presentation of the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Impact of 2013 Revision and 2012 Restatement to previously reported 2012 consolidated interim results | ||||||||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2012 | ||||||||||||||||||||||||||
(in thousands, except per share amounts) | As Previously | As Revised | ||||||||||||||||||||||||
Reported | ||||||||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 713,349 | $ | 704,794 | ||||||||||||||||||||||
Material costs | $ | 210,107 | $ | 212,706 | ||||||||||||||||||||||
Personnel costs | $ | 251,189 | $ | 248,723 | ||||||||||||||||||||||
Other operating expenses | $ | 135,566 | $ | 125,099 | ||||||||||||||||||||||
Income from operations | $ | 91,055 | $ | 92,834 | ||||||||||||||||||||||
Income before taxes | $ | 67,843 | $ | 69,622 | ||||||||||||||||||||||
Provision for income taxes | $ | 25,558 | $ | 26,257 | ||||||||||||||||||||||
Net income | $ | 42,285 | $ | 43,365 | ||||||||||||||||||||||
Basic earnings per share | $ | 1.24 | $ | 1.27 | ||||||||||||||||||||||
Diluted earnings per share | $ | 1.21 | $ | 1.25 | ||||||||||||||||||||||
Consolidated Statement of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 15,926 | $ | 6,580 | ||||||||||||||||||||||
Change in accounts receivable | $ | (19,612 | ) | $ | (10,266 | ) | ||||||||||||||||||||
Impact of 2013 Revision to previously reported consolidated annual results | ||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||||
December 31, 2010 | December 31, 2011 | December 31, 2012 | ||||||||||||||||||||||||
(in thousands) | As Previously | As Revised | As Previously | As Revised | As Previously | As Revised | ||||||||||||||||||||
Reported | Reported | Reported | ||||||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net Sales | $ | 817,379 | $ | 808,766 | $ | 918,539 | $ | 907,794 | $ | 985,550 | $ | 974,429 | ||||||||||||||
Other operating expenses | $ | 165,158 | $ | 156,545 | $ | 177,910 | $ | 167,165 | $ | 188,868 | $ | 177,747 | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 20,276 | $ | 7,252 | $ | 24,837 | $ | 9,396 | $ | 19,773 | $ | 9,589 | ||||||||||||||
Change in accounts receivable | $ | (31,041 | ) | $ | (18,017 | ) | $ | (42,024 | ) | $ | (26,583 | ) | $ | (40,443 | ) | $ | (30,259 | ) | ||||||||
Impact of 2013 Revision to previously reported Schedule II Allowance for doubtful accounts table | ||||||||||||||||||||||||||
Year | Classification | Balance at | Additions | Write-offs | Balance at | |||||||||||||||||||||
(In thousands) | beginning of year | Charged to Costs | end of year | |||||||||||||||||||||||
and Expenses | ||||||||||||||||||||||||||
2012 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 22,028 | $ | 19,773 | $ | 20,422 | $ | 21,379 | ||||||||||||||||||
Revised | $ | 7,236 | $ | 9,589 | $ | 9,299 | $ | 7,526 | ||||||||||||||||||
2011 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 16,686 | $ | 22,101 | $ | 16,759 | $ | 22,028 | ||||||||||||||||||
Revised | $ | 5,153 | $ | 9,396 | $ | 7,313 | $ | 7,236 | ||||||||||||||||||
2010 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 10,526 | $ | 20,276 | $ | 14,116 | $ | 16,686 | ||||||||||||||||||
Revised | $ | 4,286 | $ | 7,252 | $ | 6,385 | $ | 5,153 | ||||||||||||||||||
Use of Estimates | ||||||||||||||||||||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||||||||||||||||||||||||||
Cash and Cash Equivalents | ||||||||||||||||||||||||||
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits at certain financial institutions. | ||||||||||||||||||||||||||
Restricted Cash | ||||||||||||||||||||||||||
Restricted cash has statutory or contractual restrictions that prevent it from being used in the Company’s operations. As of December 31, 2012, the Company agreed to restrict $3.1 million of cash to serve as collateral for its Workers’ Compensation program. In August of 2013, the Company substituted a letter of credit for the restricted cash to serve as collateral for its Worker’s Compensation program, and the cash balances used as collateral were transferred to the Company’s operating accounts. | ||||||||||||||||||||||||||
Credit Risk | ||||||||||||||||||||||||||
The Company primarily provides O&P (orthotics and prosthetics) devices and services and products throughout the United States of America and is reimbursed by the patients, third-party insurers, governmentally funded health insurance programs, and, for those products distributed through the Products & Services business, by independent O&P providers. The Company also provides advanced rehabilitation technology and clinical programs to skilled nursing facilities in the United States primarily through operating leases. The Company performs ongoing credit evaluations of its Products & Services segment customers. Accounts receivable are not collateralized. The ability of the Company’s debtors to meet their obligations is dependent upon their financial stability which could be affected by future legislation and regulatory actions. Additionally, the Company maintains reserves for potential losses from these receivables that historically have been within management’s expectations. | ||||||||||||||||||||||||||
Inventories | ||||||||||||||||||||||||||
Inventories in the Patient Care segment consisting principally of raw materials and work-in-process, which amounted to $113.7 million and $96.6 million as of September 30, 2013 and December 31, 2012, respectively, are valued based on the gross profit method, which approximates lower of cost or market using the first-in first-out method. The Company applies the gross profit method on a patient care clinic basis in this segment’s inventory to determine ending inventory at the end of each interim period. On October 31, which is the date of the Company’s annual physical inventory, the Company values the inventory at lower of cost or market using the first-in first-out method and includes work-in-process consisting of materials, labor and overhead which is valued based on established standards for the stage of completion of each custom order. Adjustments to reconcile the physical inventory to the Company’s books are treated as changes in accounting estimates and are recorded in the fourth quarter. The October 31 inventory is subsequently adjusted during interim periods to apply the gross profit method described above. | ||||||||||||||||||||||||||
Inventories in the Products & Services segments consist principally of finished goods which are stated at the lower of cost or market using the first-in, first-out method for all reporting periods and are valued based on perpetual records. | ||||||||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||||||||
The Company follows the authoritative guidance for financial assets and liabilities, which establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. The authoritative guidance requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy by which these assets and liabilities must be categorized, based on significant levels of inputs as follows: | ||||||||||||||||||||||||||
Level 1 unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company | ||||||||||||||||||||||||||
Level 2 inputs that are observable in the marketplace other than those inputs classified as Level 1 | ||||||||||||||||||||||||||
Level 3 inputs that are unobservable in the marketplace and significant to the valuation | ||||||||||||||||||||||||||
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. | ||||||||||||||||||||||||||
Financial Instruments | ||||||||||||||||||||||||||
Assets measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, are $2.5 million and $11.0 million, respectively, and are comprised of cash equivalent money market investments. The money market investments are based on Level 1 observable market prices and are equivalent to one dollar. The carrying value of the Company’s short-term financial instruments, such as receivables and payables, approximate their fair values based on the short-term maturities of these instruments. During the second quarter of 2013, the Company refinanced its credit facilities by replacing its $300.0 million Term Loan and $100.0 million Revolving Credit Facility with a $225.0 million Term Loan Facility and a $200.0 million Revolving Credit Facility. See Note F for further information. | ||||||||||||||||||||||||||
· The carrying values of the Company’s outstanding Term Loans as of September 30, 2013 and December 31, 2012, were $223.6 million and $293.3 million, respectively. The Company has determined the carrying value on these loans approximates fair value for debt with similar terms and remaining maturities based on interest rates currently available and has therefore concluded these are Level 2 measurements. | ||||||||||||||||||||||||||
· The carrying values of the Company’s outstanding Revolving Credit Facilities as of September 30, 2013 and December 31, 2012, were $26.0 million and $0 million, respectively. The Company has determined the carrying value on these loans approximates fair value for debt with similar terms and remaining maturities based on interest rates currently available and has therefore concluded these are Level 2 measurements. | ||||||||||||||||||||||||||
· The carrying value of the Senior Notes was $200.0 million as of September 30, 2013 and December 31, 2012. The fair value of the Senior Notes, based on a Level 1 quoted market price, was $213.0 million and $211.5 million as of September 30, 2013 and December 31, 2012. | ||||||||||||||||||||||||||
· Seller Notes are recorded at contractual carrying values of $21.5 million and $27.3 million as of September 30, 2013 and December 31, 2012, respectively, and carrying value approximates fair value for similar debt in all material respects. The Company estimates fair value of the seller notes with a discounted cash flow model using unobservable rates and has determined these represent Level 3 measurements. | ||||||||||||||||||||||||||
Revenue Recognition | ||||||||||||||||||||||||||
Revenues in the Company’s Patient Care segment are derived from the sale of O&P devices and the maintenance and repair of existing devices. Revenues are recorded based upon contracts with commercial insurance companies and government agencies, net of contractual adjustments and discounts. Individual patients are generally responsible for deductible and/or co-payments. Revenues are recorded when the patient has accepted and received the device. Revenues from maintenance and repairs are recognized when the service is provided. | ||||||||||||||||||||||||||
The Company estimates an allowance for disallowed sales primarily for commercial & governmental contractual adjustments and discounts not identified at the time of sale. The allowance is estimated based upon historical experience. Additions to the allowance are reported as a reduction of Net sales. | ||||||||||||||||||||||||||
The Company estimates an allowance for doubtful accounts to estimate uncollectible accounts due primarily from individual patients. The allowance is estimated based upon historical experience. Bad debt expense is reported within Other operating expenses. | ||||||||||||||||||||||||||
Revenues in the Company’s Products & Services segment are derived from the distribution of O&P devices to customers and leasing rehabilitation technology combined with clinical therapy programs, education and training. Distribution revenues are recorded upon the shipment of products, in accordance with the terms of the invoice, net of merchandise returns received. Discounted sales are recorded at net realizable value. Leasing revenues are recognized based upon the contractual terms of the agreements, which contain negotiated pricing and service levels with terms ranging from one to five years, and are generally billed to the Company’s customers monthly. | ||||||||||||||||||||||||||
Property, Plant and Equipment | ||||||||||||||||||||||||||
Property, plant and equipment are recorded at cost less accumulated depreciation, with the exception of assets acquired through acquisitions, which are initially recorded at fair value. Equipment acquired under capital leases is recorded at the lower of fair market value or the present value of the future minimum lease payments. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | ||||||||||||||||||||||||||
Goodwill represents the excess of purchase price over the fair value of net identifiable assets of purchased businesses. The Company assesses goodwill for impairment annually during the fourth quarter, or when events or circumstances indicate that the carrying value of the reporting units may not be recoverable. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If the Company determines that a two-step goodwill impairment test is necessary or more efficient than a qualitative approach, it will measure the fair value of the Company’s reporting units using a combination of income, market and cost approaches. Any impairment would be recognized by a charge to operating results and a reduction in the carrying value of the intangible asset. There were no impairment indicators since the last annual impairment test on October 1, 2012. | ||||||||||||||||||||||||||
Income Taxes | ||||||||||||||||||||||||||
The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income tax liabilities and assets are determined based on the difference between the financial statements and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recognizes a valuation allowance on the deferred tax assets if it is more likely than not that the assets will not be realized in future years. Significant accounting judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. The Company believes that its tax positions are consistent with applicable tax law, but certain positions may be challenged by taxing authorities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, the Company is subject to periodic audits and examinations by the Internal Revenue Service and other state and local taxing authorities. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates. | ||||||||||||||||||||||||||
Segment Information | ||||||||||||||||||||||||||
The Company applies a “management” approach to disclosure of segment information. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of the Company’s operating segments. During the first quarter of 2013, the Company assessed and updated their operating segments to align with how the business is managed and determined their reportable segments are the same as their operating segments. The description of the Company’s segments and the disclosure of segment information are presented in Note K. | ||||||||||||||||||||||||||
Recent Accounting Pronouncements | ||||||||||||||||||||||||||
In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangibles for Impairment”. This ASU amended guidance that simplifies how entities test indefinite-lived intangible assets other than goodwill for impairment. After assessment of certain qualitative factors, if it is determined to be more likely than not that an indefinite-lived asset is impaired, entities must perform the quantitative impairment test. Otherwise, the quantitative test becomes optional. The amended guidance was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this new guidance in the first quarter of 2013, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements. | ||||||||||||||||||||||||||
In February 2013, the FASB issued ASU 2013-2, “Other Comprehensive Income.” This ASU amends ASC 220, “Comprehensive Income,” and supersedes ASU 2011-05 “Presentation of Comprehensive Income” and ASU 2011-12 “Comprehensive Income,” to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. The standard does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the guidance requires an entity to provide enhanced disclosures to present separately by component reclassifications out of accumulated other comprehensive income. The amendments in this ASU were effective prospectively for reporting periods beginning after December 15, 2012. The Company has adopted this guidance and its implementation did not have a material impact on its consolidated financial statements. | ||||||||||||||||||||||||||
In July 2013, the FASB issued new accounting guidance that requires that unrecognized tax benefits be classified as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards available at the reporting date in the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require the Company to use, and it does not intend to use, the deferred tax asset for such purpose. This guidance is effective for reporting periods beginning after December 15, 2013. The Company does not expect the adoption of these provisions to have a material effect on the consolidated financial statements. |
GOODWILL_AND_OTHER_INTANGIBLE_
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ' | |||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ' | |||||||||||||||||||
NOTE C — GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||||||
The Company completes its annual goodwill and indefinite lived intangible impairment analysis in the fourth quarter of each year. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. If the Company determines that a two-step goodwill impairment test is necessary or more efficient than a qualitative approach, it will measure the fair value of the Company’s reporting units using a combination of income, market and cost approaches. No triggering events have transpired since December 31, 2012. Goodwill allocated to the Company’s operating segments for the nine months ended September 30, 2013 and for the year ended December 31, 2012 are as follows: | ||||||||||||||||||||
(In thousands) | Patient Care | Products & | Total | |||||||||||||||||
Services | ||||||||||||||||||||
Balance at December 31, 2012 | $ | 538,492 | $ | 136,282 | $ | 674,774 | ||||||||||||||
Additions due to acquisitions | 3,562 | — | 3,562 | |||||||||||||||||
Adjustments | (121 | ) | — | (121 | ) | |||||||||||||||
Balance at September 30, 2013 | $ | 541,933 | $ | 136,282 | $ | 678,215 | ||||||||||||||
Patient Care | Products & | Total | ||||||||||||||||||
Services | ||||||||||||||||||||
Balance at December 31, 2011 | $ | 474,166 | $ | 135,318 | $ | 609,484 | ||||||||||||||
Additions due to acquisitions | 63,849 | 964 | 64,813 | |||||||||||||||||
Contingent considerations (1) | 477 | — | 477 | |||||||||||||||||
Balance at December 31, 2012 | $ | 538,492 | $ | 136,282 | $ | 674,774 | ||||||||||||||
(1) Contingent considerations relates to acquisitions completed prior to the adoption of ASC 805. | ||||||||||||||||||||
The balances related to intangible assets as of September 30, 2013 and December 31, 2012 are as follows: | ||||||||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||||||||
(In thousands) | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | |||||||||||||||
Amount | Amount | Amount | Amount | |||||||||||||||||
Customer Lists | $ | 46,072 | $ | (10,628 | ) | $ | 35,444 | $ | 48,044 | $ | (7,846 | ) | $ | 40,198 | ||||||
Trade Name | 9,932 | (197 | ) | 9,735 | 9,070 | — | 9,070 | |||||||||||||
Patents and Other Intangibles | 28,241 | (14,782 | ) | 13,459 | 27,810 | (12,797 | ) | 15,013 | ||||||||||||
$ | 84,245 | $ | (25,607 | ) | $ | 58,638 | $ | 84,924 | $ | (20,643 | ) | $ | 64,281 | |||||||
Customer lists are amortized over their estimated period of benefit, generally 10 to 14 years. The majority of value associated to trade names is identified as an indefinite lived intangible asset, which is assessed for impairment on an annual basis as discussed in Note B. Trade names not identified as an indefinite lived intangible asset are amortized over their estimated period of benefit of approximately 1 to 3 year. Patents are amortized using the straight-line method over 5 years. Total intangible amortization expenses were $5.0 million and $3.8 million for the nine months ended September 30, 2013 and September 30, 2012, respectively. The weighted average life of the additions to customer lists, patents and other intangibles is 7.7 years. |
INVENTORIES
INVENTORIES | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
INVENTORIES | ' | |||||||
INVENTORIES | ' | |||||||
NOTE D — INVENTORIES | ||||||||
Inventories recorded using the gross profit method primarily consists of raw materials and work-in-process held by the Patient Care segment. Inventories using the perpetual method primarily consists of finished goods held by the Products and Services segment. A description of the Company’s inventory valuation methodologies are presented in Note B. | ||||||||
(In thousands) | September 30, 2013 | December 31, 2012 | ||||||
Raw materials | $ | 45,150 | $ | 41,372 | ||||
Work in process | 70,053 | 56,931 | ||||||
Finished goods | 29,171 | 28,992 | ||||||
$ | 144,374 | $ | 127,295 |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2013 | |
ACQUISITIONS | ' |
ACQUISITIONS | ' |
NOTE E — ACQUISITIONS | |
During the nine months ended September 30, 2013, the Company acquired five O&P companies, operating a total of 12 patient care clinics. The aggregate purchase price for these O&P businesses was $8.0 million. Of this aggregate purchase price, $0.7 million consisted of promissory notes, $1.2 million is made up of contingent consideration payable within the next two years and $5.6 million was paid in cash. Contingent consideration is reported as other liabilities on the Company’s consolidated balance sheet. The Company recorded approximately $3.6 million of goodwill related to these acquisitions, and the expenses incurred related to these acquisitions were insignificant and were included in other operating expenses. | |
During the nine months ended September 30, 2012, the Company acquired 14 O&P companies, operating a total of 21 patient care clinics. The aggregate purchase price for these O&P businesses was $21.8 million. Of this aggregate purchase price, $7.6 million consisted of promissory notes, $1.6 million was made up of contingent consideration payable within the next five years, and $12.6 million was paid in cash. Contingent consideration is reported as other liabilities on the Company’s consolidated balance sheet. The Company recorded approximately $13.6 million of goodwill related to these acquisitions, and the expenses incurred related to this acquisition were insignificant and were included in other operating expenses. | |
The results of operations for these acquisitions are included in the Company’s results of operations from the date of acquisition. Pro forma results would not be materially different. | |
In connection with contingent consideration agreements with acquisitions completed prior to adoption of the revised authoritative guidance effective for business combinations for which the acquisition date was on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, the Company made payments of $0 and $0.5 million during the nine months ended September 30, 2013 and 2012, respectively. The Company has accounted for these amounts as additional purchase price, resulting in an increase in goodwill. For acquisitions completed subsequent to adoption of revised authoritative guidance, the Company made payments in connection with contingent consideration agreements of $1.9 million in the first nine months of 2013 and $1.3 million in the same period of 2012. As of September 30, 2013 the Company has accrued a total of $4.1 million related to contingent consideration. |
LONG_TERM_DEBT
LONG TERM DEBT | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
LONG TERM DEBT | ' | |||||||
LONG TERM DEBT | ' | |||||||
NOTE F — LONG TERM DEBT | ||||||||
Long-term debt consists of the following: | ||||||||
September 30, | December 31, | |||||||
(In thousands) | 2013 | 2012 | ||||||
Revolving Credit Facility | $ | 26,000 | $ | — | ||||
Term Loan | 223,594 | 293,300 | ||||||
7 1/8 % Senior Notes due 2018 | 200,000 | 200,000 | ||||||
Subordinated seller notes, non-collateralized, net of unamortized discount with principal and interest payable in either monthly, quarterly or annual installments at effective interest rates ranging from 2.00% to 4.00%, maturing through November 2018 | 21,463 | 27,346 | ||||||
Total Debt | 471,057 | 520,646 | ||||||
Less current portion | (13,673 | ) | (11,082 | ) | ||||
Long Term Debt | $ | 457,384 | $ | 509,564 | ||||
Refinancing | ||||||||
During the second quarter of 2013 the Company refinanced its bank credit facilities through a new 5 year credit agreement that increased its senior secured facilities to an aggregate principal amount of up to $425.0 million from $400.0 million previously. The new credit agreement includes a $200.0 million revolving credit facility and a $225.0 million term loan facility. Each new facility matures on June 17, 2018 and is subject to a leveraged-based pricing grid, with initial pricing of LIBOR plus 1.75%. In conjunction with the refinancing, the Company incurred a pre-tax non-cash charge of approximately $6.6 million during the second quarter of 2013 related to the write-off of existing debt issuance costs associated with its previous credit agreement. No prepayment penalties were incurred. | ||||||||
Revolving Credit Facility | ||||||||
The $200.0 million Revolving Credit Facility matures on June 17, 2018 and bears interest at LIBOR plus 1.75%, or the applicable rate (as defined in the Credit Agreement). As of September 30, 2013, the Company had $170.4 million available under this facility. The amounts outstanding under the Revolving Credit Facility as of September 30, 2013 were $26.0 million, net of standby letters of credit of approximately $3.6 million. The obligations under the Revolving Credit Facility are senior obligations, are guaranteed by the Company’s subsidiaries, and are secured by a first priority perfected security interest in all of the Company’s assets, all the assets of the Company’s subsidiaries and the equity interests of the Company’s subsidiaries. | ||||||||
Term Loan | ||||||||
The Term Loan Facility, of which $223.6 million is outstanding, matures on June 17, 2018 and bears interest at LIBOR plus 1.75%, or the applicable rate (as defined in the Credit Agreement). Quarterly principal payments ranging from 0.625% to 3.750% are required throughout the life of the Term Loan, commencing September 30, 2013. From time to time, mandatory prepayments may be required as a result of certain additional debt incurrences, certain asset sales, or other events as defined in the Credit Agreement. No such mandatory prepayments were required during the third quarter of 2013. The obligations under the Term Loan Facility are senior obligations, are guaranteed by the Company’s subsidiaries, and are secured by a first priority perfected security interest in all of the Company’s assets, all the assets of the Company’s subsidiaries and the equity interests of the Company’s subsidiaries. | ||||||||
71/8% Senior Notes | ||||||||
The 7 1/8 % Senior Notes mature November 15, 2018 and are senior indebtedness, which is guaranteed on a senior unsecured basis by all of the Company’s subsidiaries. Interest is payable semi-annually on May 15 and November 15 of each year. | ||||||||
On or prior to November 15, 2013, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 107.125% of the principal amount thereof additional interest to the redemption date with the proceeds of a public offering of its equity securities. Also, prior to November 15, 2014, the Company may redeem all or some of the notes at a redemption price of 103.6% all to interest that would have become due from the redemption date through November 15, 2014. On or after November 15, 2014, the Company may redeem all or a part of the notes with a premium, as described in further detail in the Company’s Annual Report on form 10-K for the year ended December 31, 2012. | ||||||||
Subsidiary Guarantees | ||||||||
The Revolving Credit Facility, Term Loan Facilities and the 7 1/8 % Senior Notes are guaranteed by all of the Company’s subsidiaries. Separate condensed consolidating information is not included as the parent company does not have independent assets or operations. The guarantees are full and unconditional and joint and several. There are no restrictions on the ability of the Company’s subsidiaries to transfer cash to the Company or to co-guarantors. | ||||||||
Debt Covenants | ||||||||
The terms of the Senior Notes, the Revolving Credit Facility, and the Term Loan Facility limit the Company’s ability to, among other things, purchase capital assets, incur additional indebtedness, create liens, pay dividends on or redeem capital stock, make certain investments, make restricted payments, make certain dispositions of assets, engage in transactions with affiliates, engage in certain business activities, and engage in mergers, consolidations and certain sales of assets. The credit agreement requires compliance with various covenants including but not limited to (i) minimum consolidated interest coverage ratio of 3.50:1.00 and (ii) maximum total leverage ratio of 4.00:1.00. As of September 30, 2013, the Company was in compliance with all covenants under these debt agreements. |
COMMITMENTS_AND_CONTINGENT_LIA
COMMITMENTS AND CONTINGENT LIABILITIES | 9 Months Ended |
Sep. 30, 2013 | |
COMMITMENTS AND CONTINGENT LIABILITIES | ' |
COMMITMENTS AND CONTINGENT LIABILITIES | ' |
NOTE G — COMMITMENTS AND CONTINGENT LIABILITIES | |
Contingencies | |
The Company is subject to legal proceedings and claims which arise from time to time in the ordinary course of its business, including additional payments under business purchase agreements. In the opinion of management, the amount of ultimate liability, if any with respect to these actions, will not have a materially adverse effect on the financial position, liquidity or results of operations of the Company. | |
The Company is in a highly regulated industry and receives regulatory agency inquiries from time to time in the ordinary course of its business, including inquiries relating to the Company’s billing activities. To date these inquiries have not resulted in material liabilities, but no assurance can be given that future regulatory agencies’ inquiries will be consistent with the results to date or that any discrepancies identified during a regulatory review will not have a material adverse effect on the Company’s consolidated financial statements. | |
On May 20, 2013, the Staff of the SEC’s Division of Enforcement informed the Company that it was conducting an investigation of the Company and made a request for a voluntary production of documents and information concerning the Company’s calculations of bad debt expense and allowance for doubtful accounts. The Company is cooperating fully with the SEC Staff. | |
Guarantees and Indemnifications | |
In the ordinary course of its business, the Company may enter into service agreements with service providers in which it agrees to indemnify or limit the service provider against certain losses and liabilities arising from the service provider’s performance of the agreement. The Company has reviewed its existing contracts containing indemnification or clauses of guarantees and does not believe that its liability under such agreements is material to the Company’s operations. |
NET_INCOME_PER_COMMON_SHARE
NET INCOME PER COMMON SHARE | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
NET INCOME PER COMMON SHARE | ' | |||||||||||||
NET INCOME PER COMMON SHARE | ' | |||||||||||||
NOTE H — NET INCOME PER COMMON SHARE | ||||||||||||||
Basic per common share amounts are computed using the weighted average number of common shares outstanding during the year. Diluted per common share amounts are computed using the weighted average number of common shares outstanding during the year and dilutive potential common shares. Dilutive potential common shares consist of stock options and restricted stock units and are calculated using the treasury stock method. | ||||||||||||||
Net income per share is computed as follows: | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
(In thousands, except share and per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Net income | $ | 21,659 | $ | 17,344 | $ | 45,228 | $ | 43,365 | ||||||
Shares of common stock outstanding used to compute basic per common share amounts | 34,902,103 | 34,362,757 | 34,783,419 | 34,224,756 | ||||||||||
Effect of dilutive restricted stock units and options (1) | 499,170 | 639,594 | 532,478 | 592,924 | ||||||||||
Shares used to compute dilutive per common share amounts | 35,401,273 | 35,002,351 | 35,315,897 | 34,817,680 | ||||||||||
Basic income per share | $ | 0.62 | $ | 0.5 | $ | 1.3 | $ | 1.27 | ||||||
Diluted income per share | $ | 0.61 | $ | 0.5 | $ | 1.28 | $ | 1.25 | ||||||
(1) There were no anti-dilutive options for the three or nine month periods ended September 30, 2013 and 2012. |
SUPPLEMENTAL_EXECUTIVE_RETIREM
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN | ' | |||||
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN | ' | |||||
NOTE I — SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN | ||||||
The Company’s unfunded noncontributory defined benefit plan (the “Plan”) covers certain senior executives, is administered by the Company and calls for annual payments upon retirement based on years of service and final average salary. Benefit cost 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. | ||||||
The following assumptions were used in the calculation of the net benefit cost and obligation: | ||||||
2013 | 2012 | |||||
Discount rate | 3.25 | % | 3.9 | % | ||
Average rate of increase in compensation | 3 | % | 3 | % | ||
The Company believes the assumptions used are appropriate; however, changes in assumptions or differences in actual experience may affect the Company’s benefit obligation and future expenses. The change in the Plan’s net benefit obligation for the nine months ended September 30, 2013 and 2012: | ||||||
(In thousands) | ||||||
Net benefit cost accrued at December 31, 2012 | $ | 22,377 | ||||
Service cost | 735 | |||||
Interest cost | 519 | |||||
Payments | (1,246 | ) | ||||
Net benefit cost accrued at September 30, 2013 | $ | 22,385 | ||||
(In thousands) | ||||||
Net benefit cost accrued at December 31, 2011 | $ | 20,230 | ||||
Service cost | 690 | |||||
Interest cost | 570 | |||||
Payments | (705 | ) | ||||
Net benefit cost accrued at September 30, 2012 | $ | 20,785 |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2013 | |
STOCK-BASED COMPENSATION | ' |
STOCK-BASED COMPENSATION | ' |
NOTE J - STOCK-BASED COMPENSATION | |
The Company utilizes the authoritative guidance using the modified prospective method. Compensation expense for all awards granted is calculated according to the provisions of such guidance. | |
On May 13, 2010, the shareholders of the Company approved the 2010 Omnibus Incentive Plan (the “2010 Plan”), which replaced the Amended and Restated 2002 Stock Incentive and Bonus Plan (the “2002 Plan”) and the 2003 Non-Employee Directors’ Stock Incentive Plan (the “2003 Plan. Awards granted under either the 2002 Plan or the 2003 Plan that were outstanding on May 13, 2010 remain outstanding and continue to be subject to all of the terms and conditions of the 2002 Plan or the 2003 Plan, as applicable. | |
The 2010 Plan provides that 2.5 million shares of common stock are reserved for issuance, subject to adjustment as set forth in the 2010 Plan; provided, however, that only 1.5 million shares may be issued pursuant to the exercise of incentive stock options. Of these 2.5 million shares, 2.0 million are shares that are newly authorized for issuance under the 2010 Plan and 0.5 million are unissued shares not subject to awards that have been carried over from the shares previously authorized for issuance under the terms of the 2002 Plan and the 2003 Plan. Unless earlier terminated by the Board of Directors, the 2010 Plan will remain in effect until the earlier of (i) the date that is ten years from the date the plan is approved by the Company’s shareholders, which is the effective date for the 2010 plan, namely May 13, 2020, or (ii) the date all shares reserved for issuance have been issued. | |
As of September 30, 2013, of the 2.5 million shares of common stock authorized for issuance under the Company’s 2010 Plan, approximately 1.5 million shares have been issued. During the first nine months of 2013, the Company issued approximately 0.4 million shares of restricted stock units under the 2010 Plan. The total fair value of these grants is $12.1 million. Total unrecognized share-based compensation cost related to unvested restricted stock units was approximately $16.1 million as of September 30, 2013 and is expected to be expensed as compensation expense over approximately four years. | |
For the nine months ended September 30, 2013 and 2012, the Company has included approximately $6.4 million and $6.1 million, respectively, for share-based compensation cost in the accompanying condensed consolidated statements of income for the 2002, 2003 and 2010 Plans. Compensation expense relates to restricted stock unit grants. |
SEGMENT_AND_RELATED_INFORMATIO
SEGMENT AND RELATED INFORMATION | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
SEGMENT AND RELATED INFORMATION | ' | ||||||||||||||||
SEGMENT AND RELATED INFORMATION | ' | ||||||||||||||||
NOTE K — SEGMENT AND RELATED INFORMATION | |||||||||||||||||
The Company has identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each operating segment’s income from operations. The operating segments are described further below: | |||||||||||||||||
Patient Care —This segment consists of (i) the Company’s owned and operated patient care clinics and other O&P operations and (ii) its contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care and maintenance of the devices. The principal reimbursement sources for the Company’s services are: | |||||||||||||||||
· Commercial and other, which consist of individuals, rehabilitation providers, private insurance companies, HMOs, PPOs, hospitals, vocational rehabilitation, workers’ compensation programs and similar sources; | |||||||||||||||||
· Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain disabled persons, which provides reimbursement for O&P products and services based on prices set forth in fee schedules for 10 regional service areas; | |||||||||||||||||
· Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons in financial need, regardless of age, which may supplement Medicare benefits for financially needy persons aged 65 or older; and | |||||||||||||||||
· U.S. Department of Veterans Affairs. | |||||||||||||||||
The Company estimates that government reimbursement, comprised of Medicare, Medicaid and the U.S. Department of Veterans Affairs, in the aggregate, accounted for approximately 40.5% and 40.8%, of the Company’s net sales for the nine months ended September 30, 2013 and 2012, respectively. | |||||||||||||||||
The Company’s contract and network management business 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. The Company partners 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. The Company’s network now includes approximately 1,150 O&P provider locations, including over 400 independent providers. As of September 30, 2013, the Company had 57 contracts with national and regional providers. | |||||||||||||||||
Products & Services—This segment consists of the Company’s distribution business, which distributes and fabricates O&P products and components for both the O&P industry and the Company’s own patient care clinics, and the Company’s rehabilitation solutions business. Rehabilitation solutions leases rehabilitation equipment and provides evidence-based clinical programs to post-acute rehabilitation service providers. This segment also develops emerging neuromuscular technologies for the O&P and rehabilitation markets. | |||||||||||||||||
Other — This consists of corporate overhead and includes unallocated expense such as personnel costs, professional fees and corporate offices expenses. | |||||||||||||||||
The accounting policies of the segments are the same as those described in the summary of “Significant Accounting Policies” in Note B to the consolidated financial statements. | |||||||||||||||||
Summarized financial information concerning the Company’s operating segments is shown in the following table. Intersegment sales mainly include sales of O&P components from the Products & Services segment to the Patient Care segment and were made at prices which approximate market values. | |||||||||||||||||
(In thousands) | Patient Care | Products & | Other | Consolidating | Total | ||||||||||||
Services | Adjustments | ||||||||||||||||
Three Months Ended September 30, 2013 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 221,057 | $ | 49,996 | $ | — | $ | — | $ | 271,053 | |||||||
Intersegments | — | 58,030 | — | (58,030 | ) | — | |||||||||||
Depreciation and amortization | 4,090 | 3,029 | 2,105 | — | 9,224 | ||||||||||||
Income (loss) from operations | 38,189 | 16,723 | (14,742 | ) | (264 | ) | 39,906 | ||||||||||
Interest (income) expense | 7,729 | 3,338 | (5,050 | ) | — | 6,017 | |||||||||||
Extinguishment of debt | — | — | — | — | — | ||||||||||||
Income (loss) before taxes | 30,460 | 13,385 | (9,692 | ) | (264 | ) | 33,889 | ||||||||||
Three Months Ended September 30, 2012 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 199,499 | $ | 43,037 | $ | — | $ | — | $ | 242,536 | |||||||
Intersegments | — | 53,941 | — | (53,941 | ) | — | |||||||||||
Depreciation and amortization | 3,492 | 3,173 | 2,044 | — | 8,709 | ||||||||||||
Income (loss) from operations | 36,221 | 10,051 | (10,086 | ) | (813 | ) | 35,373 | ||||||||||
Interest (income) expense | 7,520 | 2,236 | (2,005 | ) | — | 7,751 | |||||||||||
Income (loss) before taxes | 28,701 | 7,815 | (8,081 | ) | (813 | ) | 27,622 | ||||||||||
Nine Months Ended September 30, 2013 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 635,237 | $ | 132,964 | $ | — | $ | — | $ | 768,201 | |||||||
Intersegments | — | 167,963 | — | (167,963 | ) | — | |||||||||||
Depreciation and amortization | 12,223 | 9,575 | 6,221 | — | 28,019 | ||||||||||||
Income (loss) from operations | 105,198 | 37,263 | (42,389 | ) | (806 | ) | 99,266 | ||||||||||
Interest (income) expense | 23,154 | 10,011 | (11,663 | ) | — | 21,502 | |||||||||||
Extinguishment of debt | — | — | 6,645 | — | 6,645 | ||||||||||||
Income (loss) before taxes | 82,044 | 27,252 | (37,371 | ) | (806 | ) | 71,119 | ||||||||||
Capital expenditures | 11,071 | 2,271 | 14,128 | — | 27,470 | ||||||||||||
Nine Months Ended September 30, 2012 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 576,414 | $ | 128,380 | $ | — | $ | — | $ | 704,794 | |||||||
Intersegments | — | 156,500 | — | (156,500 | ) | — | |||||||||||
Depreciation and amortization | 10,306 | 9,207 | 5,919 | — | 25,432 | ||||||||||||
Income (loss) from operations | 100,551 | 29,275 | (35,734 | ) | (1,258 | ) | 92,834 | ||||||||||
Interest (income) expense | 22,657 | 6,771 | (6,216 | ) | — | 23,212 | |||||||||||
Income (loss) before taxes | 77,894 | 22,504 | (29,518 | ) | (1,258 | ) | 69,622 | ||||||||||
Capital expenditures | 9,181 | 2,233 | 13,463 | — | 24,877 | ||||||||||||
Total Assets | |||||||||||||||||
September 30, 2013 | 1,485,779 | 376,184 | — | (613,964 | ) | 1,247,999 | |||||||||||
December 31, 2012 | 1,389,223 | 336,318 | — | (488,214 | ) | 1,237,327 |
SIGNIFICANT_ACCOUNTING_POLICIE1
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||||||||||||||
Principles of Consolidation | ' | |||||||||||||||||||||||||
Principles of Consolidation | ||||||||||||||||||||||||||
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying financial statements. | ||||||||||||||||||||||||||
Revision of Previously Reported Consolidated Financial Information | ' | |||||||||||||||||||||||||
Revision of Previously Reported Consolidated Financial Information | ||||||||||||||||||||||||||
During the third quarter 2013, the Company corrected an error in the classification of certain components of bad debt expense (the “2013 Revision”). Hanger previously classified the reserves related to the write-off of older accounts receivable balances due from commercial and government payors as bad debt expense, which was reported as Other Operating Expense in its financial statements, instead of as a reduction of sales. Management has assessed the materiality of the errors on previously reported periods and concluded the impact was not material to any of the prior annual or quarterly consolidated financial statements. The errors had no impact on previously reported net income, balance sheet totals or the operating cash flows for any of the periods. The impact of the adjustment lowers sales and reduces Other Operating Expenses by equal and offsetting amounts in the Consolidated Statements of Income and Comprehensive Income and the Provision for doubtful accounts and Change in accounts receivable by equal and offsetting amounts in the Consolidated Statements of Cash Flows. Further, the Company has historically included the reserve for contra revenue in its presentation of the Allowance for doubtful accounts on the Consolidated Balance Sheets and the net change in the reserve for contra revenue in the Provision for doubtful accounts on the Consolidated Statements of Cash Flows and the Schedule II Valuation and Qualifying Accounts included in the Company’s Annual Report on Form 10-K. The Company has revised that presentation to only include the reserve for doubtful accounts and the related activity in the reserve for doubtful accounts in those respective balances. The impacts of the revisions on net sales are included in the results of the Patient Care Services segment in Note K. | ||||||||||||||||||||||||||
During the fourth quarter of 2012, the Company identified adjustments necessary to correct prior periods for the overstatement of the value of work-in-process inventory at December 31, 2011 and 2010. The Company assessed the materiality of the errors on previously reported periods and concluded the impact was not material to any prior annual consolidated financial statements. Management, however, deemed the impact of this error on the consolidated financial statements for the three months ended March 31, 2012 and 2011 to be material and restated the first quarter 2012 and 2011 financial results (“2012 Restatement”) in the restated Quarterly Report on Form 10-Q/A, filed with the SEC on March 22, 2013 (the “Amended Filing”) and revised the consolidated financial statements for the three and six month periods ended June 30, 2012 in the Second Quarter 2013 Report on Form 10Q. These errors had no impact on operating cash flows for any of the periods. The impact of the errors is included in the results of the Patient Care Services segment in Note K. The 2012 Restatement did not have an impact on the Consolidated Balance Sheets as of September 30, 2012 or the Consolidated Statement of Income and Comprehensive Income or the Consolidated Statement of Cash Flows for the three month period ended September 30, 2012. | ||||||||||||||||||||||||||
The impact of the 2013 Revision on the Consolidated Statements of Income and Comprehensive Income and the Consolidated Statements of Cash Flows for the three months ended March 31, 2013, the three and six months ended June 30, 2013, the three months ended March 31, 2012, the three and six months ended June 30, 2012, the three and nine months ended September 30, 2012, the annual periods ended 2010, 2011 and 2012, and Schedule II Valuation and Qualifying Accounts for the annual periods 2010, 2011 and 2012 are shown below. The impact of the 2012 Restatement resulted in a revision to the Consolidated Statements of Income and Comprehensive Income and the Consolidated Statement of Cash Flows for the nine month period ended September 30, 2012 which is included within the respective table below. | ||||||||||||||||||||||||||
Impact of 2013 Revision to previously reported 2013 consolidated interim results | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
March 31, 2013 | June 30, 2013 | June 30, 2013 | ||||||||||||||||||||||||
As Previously | As Previously | As Previously | ||||||||||||||||||||||||
(in thousands) | Reported | As Revised | Reported | As Revised | Reported | As Revised | ||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 233,535 | $ | 229,350 | $ | 273,735 | $ | 267,798 | $ | 507,270 | $ | 497,148 | ||||||||||||||
Other operating expenses* | $ | 43,843 | $ | 39,658 | $ | 54,959 | $ | 49,022 | $ | 98,802 | $ | 88,680 | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 5,229 | $ | 1,657 | $ | 14,905 | $ | 4,591 | ||||||||||||||||||
Change in accounts receivable | $ | 3,644 | $ | 7,216 | $ | (18,026 | ) | $ | (7,712 | ) | ||||||||||||||||
* The other operating expense balance for the three months ended March 31, 2013 includes $0.1 million of acquisition expenses previously reported as a separate caption in the presentation of the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Impact of 2013 Revision to previously reported 2012 consolidated interim results | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | |||||||||||||||||||||||
March 31, 2012 | June 30, 2012 | June 30, 2012 | September 30, 2012 | |||||||||||||||||||||||
As Previously | As Previously | As Previously | As Previously | |||||||||||||||||||||||
(in thousands) | Reported | As Revised | Reported | As Revised | Reported | As Revised | Reported | As Revised | ||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 218,091 | $ | 214,355 | $ | 251,754 | $ | 247,902 | $ | 469,845 | $ | 462,257 | $ | 243,503 | $ | 242,536 | ||||||||||
Other operating expenses* | $ | 40,219 | $ | 36,483 | $ | 51,256 | $ | 47,404 | $ | 91,475 | $ | 83,887 | $ | 42,177 | $ | 41,210 | ||||||||||
Consolidated Statement of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 4,723 | $ | 907 | $ | 12,925 | $ | 4,462 | ||||||||||||||||||
Change in accounts receivable | $ | 851 | $ | 4,667 | $ | (16,190 | ) | $ | (7,727 | ) | ||||||||||||||||
* The other operating expense balance for the three months ended March 31, 2012 includes $0.1 million of acquisition expenses previously reported as a separate caption in the presentation of the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Impact of 2013 Revision and 2012 Restatement to previously reported 2012 consolidated interim results | ||||||||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2012 | ||||||||||||||||||||||||||
(in thousands, except per share amounts) | As Previously | As Revised | ||||||||||||||||||||||||
Reported | ||||||||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 713,349 | $ | 704,794 | ||||||||||||||||||||||
Material costs | $ | 210,107 | $ | 212,706 | ||||||||||||||||||||||
Personnel costs | $ | 251,189 | $ | 248,723 | ||||||||||||||||||||||
Other operating expenses | $ | 135,566 | $ | 125,099 | ||||||||||||||||||||||
Income from operations | $ | 91,055 | $ | 92,834 | ||||||||||||||||||||||
Income before taxes | $ | 67,843 | $ | 69,622 | ||||||||||||||||||||||
Provision for income taxes | $ | 25,558 | $ | 26,257 | ||||||||||||||||||||||
Net income | $ | 42,285 | $ | 43,365 | ||||||||||||||||||||||
Basic earnings per share | $ | 1.24 | $ | 1.27 | ||||||||||||||||||||||
Diluted earnings per share | $ | 1.21 | $ | 1.25 | ||||||||||||||||||||||
Consolidated Statement of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 15,926 | $ | 6,580 | ||||||||||||||||||||||
Change in accounts receivable | $ | (19,612 | ) | $ | (10,266 | ) | ||||||||||||||||||||
Impact of 2013 Revision to previously reported consolidated annual results | ||||||||||||||||||||||||||
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||||
December 31, 2010 | December 31, 2011 | December 31, 2012 | ||||||||||||||||||||||||
(in thousands) | As Previously | As Revised | As Previously | As Revised | As Previously | As Revised | ||||||||||||||||||||
Reported | Reported | Reported | ||||||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net Sales | $ | 817,379 | $ | 808,766 | $ | 918,539 | $ | 907,794 | $ | 985,550 | $ | 974,429 | ||||||||||||||
Other operating expenses | $ | 165,158 | $ | 156,545 | $ | 177,910 | $ | 167,165 | $ | 188,868 | $ | 177,747 | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 20,276 | $ | 7,252 | $ | 24,837 | $ | 9,396 | $ | 19,773 | $ | 9,589 | ||||||||||||||
Change in accounts receivable | $ | (31,041 | ) | $ | (18,017 | ) | $ | (42,024 | ) | $ | (26,583 | ) | $ | (40,443 | ) | $ | (30,259 | ) | ||||||||
Impact of 2013 Revision to previously reported Schedule II Allowance for doubtful accounts table | ||||||||||||||||||||||||||
Year | Classification | Balance at | Additions | Write-offs | Balance at | |||||||||||||||||||||
(In thousands) | beginning of year | Charged to Costs | end of year | |||||||||||||||||||||||
and Expenses | ||||||||||||||||||||||||||
2012 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 22,028 | $ | 19,773 | $ | 20,422 | $ | 21,379 | ||||||||||||||||||
Revised | $ | 7,236 | $ | 9,589 | $ | 9,299 | $ | 7,526 | ||||||||||||||||||
2011 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 16,686 | $ | 22,101 | $ | 16,759 | $ | 22,028 | ||||||||||||||||||
Revised | $ | 5,153 | $ | 9,396 | $ | 7,313 | $ | 7,236 | ||||||||||||||||||
2010 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 10,526 | $ | 20,276 | $ | 14,116 | $ | 16,686 | ||||||||||||||||||
Revised | $ | 4,286 | $ | 7,252 | $ | 6,385 | $ | 5,153 | ||||||||||||||||||
Use of Estimates | ' | |||||||||||||||||||||||||
Use of Estimates | ||||||||||||||||||||||||||
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||||||||||||||||||||||||||
Cash and Cash Equivalents | ' | |||||||||||||||||||||||||
Cash and Cash Equivalents | ||||||||||||||||||||||||||
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits at certain financial institutions. | ||||||||||||||||||||||||||
Restricted Cash | ' | |||||||||||||||||||||||||
Restricted Cash | ||||||||||||||||||||||||||
Restricted cash has statutory or contractual restrictions that prevent it from being used in the Company’s operations. As of December 31, 2012, the Company agreed to restrict $3.1 million of cash to serve as collateral for its Workers’ Compensation program. In August of 2013, the Company substituted a letter of credit for the restricted cash to serve as collateral for its Worker’s Compensation program, and the cash balances used as collateral were transferred to the Company’s operating accounts. | ||||||||||||||||||||||||||
Credit Risk | ' | |||||||||||||||||||||||||
Credit Risk | ||||||||||||||||||||||||||
The Company primarily provides O&P (orthotics and prosthetics) devices and services and products throughout the United States of America and is reimbursed by the patients, third-party insurers, governmentally funded health insurance programs, and, for those products distributed through the Products & Services business, by independent O&P providers. The Company also provides advanced rehabilitation technology and clinical programs to skilled nursing facilities in the United States primarily through operating leases. The Company performs ongoing credit evaluations of its Products & Services segment customers. Accounts receivable are not collateralized. The ability of the Company’s debtors to meet their obligations is dependent upon their financial stability which could be affected by future legislation and regulatory actions. Additionally, the Company maintains reserves for potential losses from these receivables that historically have been within management’s expectations. | ||||||||||||||||||||||||||
Inventories | ' | |||||||||||||||||||||||||
Inventories | ||||||||||||||||||||||||||
Inventories in the Patient Care segment consisting principally of raw materials and work-in-process, which amounted to $113.7 million and $96.6 million as of September 30, 2013 and December 31, 2012, respectively, are valued based on the gross profit method, which approximates lower of cost or market using the first-in first-out method. The Company applies the gross profit method on a patient care clinic basis in this segment’s inventory to determine ending inventory at the end of each interim period. On October 31, which is the date of the Company’s annual physical inventory, the Company values the inventory at lower of cost or market using the first-in first-out method and includes work-in-process consisting of materials, labor and overhead which is valued based on established standards for the stage of completion of each custom order. Adjustments to reconcile the physical inventory to the Company’s books are treated as changes in accounting estimates and are recorded in the fourth quarter. The October 31 inventory is subsequently adjusted during interim periods to apply the gross profit method described above. | ||||||||||||||||||||||||||
Inventories in the Products & Services segments consist principally of finished goods which are stated at the lower of cost or market using the first-in, first-out method for all reporting periods and are valued based on perpetual records. | ||||||||||||||||||||||||||
Fair Value Measurements | ' | |||||||||||||||||||||||||
Fair Value Measurements | ||||||||||||||||||||||||||
The Company follows the authoritative guidance for financial assets and liabilities, which establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. The authoritative guidance requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy by which these assets and liabilities must be categorized, based on significant levels of inputs as follows: | ||||||||||||||||||||||||||
Level 1 unadjusted quoted prices for identical assets or liabilities in active markets accessible by the Company | ||||||||||||||||||||||||||
Level 2 inputs that are observable in the marketplace other than those inputs classified as Level 1 | ||||||||||||||||||||||||||
Level 3 inputs that are unobservable in the marketplace and significant to the valuation | ||||||||||||||||||||||||||
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. | ||||||||||||||||||||||||||
Financial Instruments | ' | |||||||||||||||||||||||||
Financial Instruments | ||||||||||||||||||||||||||
Assets measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, are $2.5 million and $11.0 million, respectively, and are comprised of cash equivalent money market investments. The money market investments are based on Level 1 observable market prices and are equivalent to one dollar. The carrying value of the Company’s short-term financial instruments, such as receivables and payables, approximate their fair values based on the short-term maturities of these instruments. During the second quarter of 2013, the Company refinanced its credit facilities by replacing its $300.0 million Term Loan and $100.0 million Revolving Credit Facility with a $225.0 million Term Loan Facility and a $200.0 million Revolving Credit Facility. See Note F for further information. | ||||||||||||||||||||||||||
· The carrying values of the Company’s outstanding Term Loans as of September 30, 2013 and December 31, 2012, were $223.6 million and $293.3 million, respectively. The Company has determined the carrying value on these loans approximates fair value for debt with similar terms and remaining maturities based on interest rates currently available and has therefore concluded these are Level 2 measurements. | ||||||||||||||||||||||||||
· The carrying values of the Company’s outstanding Revolving Credit Facilities as of September 30, 2013 and December 31, 2012, were $26.0 million and $0 million, respectively. The Company has determined the carrying value on these loans approximates fair value for debt with similar terms and remaining maturities based on interest rates currently available and has therefore concluded these are Level 2 measurements. | ||||||||||||||||||||||||||
· The carrying value of the Senior Notes was $200.0 million as of September 30, 2013 and December 31, 2012. The fair value of the Senior Notes, based on a Level 1 quoted market price, was $213.0 million and $211.5 million as of September 30, 2013 and December 31, 2012. | ||||||||||||||||||||||||||
· Seller Notes are recorded at contractual carrying values of $21.5 million and $27.3 million as of September 30, 2013 and December 31, 2012, respectively, and carrying value approximates fair value for similar debt in all material respects. The Company estimates fair value of the seller notes with a discounted cash flow model using unobservable rates and has determined these represent Level 3 measurements. | ||||||||||||||||||||||||||
Revenue Recognition | ' | |||||||||||||||||||||||||
Revenue Recognition | ||||||||||||||||||||||||||
Revenues in the Company’s Patient Care segment are derived from the sale of O&P devices and the maintenance and repair of existing devices. Revenues are recorded based upon contracts with commercial insurance companies and government agencies, net of contractual adjustments and discounts. Individual patients are generally responsible for deductible and/or co-payments. Revenues are recorded when the patient has accepted and received the device. Revenues from maintenance and repairs are recognized when the service is provided. | ||||||||||||||||||||||||||
The Company estimates an allowance for disallowed sales primarily for commercial & governmental contractual adjustments and discounts not identified at the time of sale. The allowance is estimated based upon historical experience. Additions to the allowance are reported as a reduction of Net sales. | ||||||||||||||||||||||||||
The Company estimates an allowance for doubtful accounts to estimate uncollectible accounts due primarily from individual patients. The allowance is estimated based upon historical experience. Bad debt expense is reported within Other operating expenses. | ||||||||||||||||||||||||||
Revenues in the Company’s Products & Services segment are derived from the distribution of O&P devices to customers and leasing rehabilitation technology combined with clinical therapy programs, education and training. Distribution revenues are recorded upon the shipment of products, in accordance with the terms of the invoice, net of merchandise returns received. Discounted sales are recorded at net realizable value. Leasing revenues are recognized based upon the contractual terms of the agreements, which contain negotiated pricing and service levels with terms ranging from one to five years, and are generally billed to the Company’s customers monthly. | ||||||||||||||||||||||||||
Property, Plant and Equipment | ' | |||||||||||||||||||||||||
Property, Plant and Equipment | ||||||||||||||||||||||||||
Property, plant and equipment are recorded at cost less accumulated depreciation, with the exception of assets acquired through acquisitions, which are initially recorded at fair value. Equipment acquired under capital leases is recorded at the lower of fair market value or the present value of the future minimum lease payments. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | ' | |||||||||||||||||||||||||
Goodwill and Other Intangible Assets | ||||||||||||||||||||||||||
Goodwill represents the excess of purchase price over the fair value of net identifiable assets of purchased businesses. The Company assesses goodwill for impairment annually during the fourth quarter, or when events or circumstances indicate that the carrying value of the reporting units may not be recoverable. The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If the Company determines that a two-step goodwill impairment test is necessary or more efficient than a qualitative approach, it will measure the fair value of the Company’s reporting units using a combination of income, market and cost approaches. Any impairment would be recognized by a charge to operating results and a reduction in the carrying value of the intangible asset. There were no impairment indicators since the last annual impairment test on October 1, 2012. | ||||||||||||||||||||||||||
Income Taxes | ' | |||||||||||||||||||||||||
Income Taxes | ||||||||||||||||||||||||||
The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income tax liabilities and assets are determined based on the difference between the financial statements and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recognizes a valuation allowance on the deferred tax assets if it is more likely than not that the assets will not be realized in future years. Significant accounting judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. The Company believes that its tax positions are consistent with applicable tax law, but certain positions may be challenged by taxing authorities. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. In addition, the Company is subject to periodic audits and examinations by the Internal Revenue Service and other state and local taxing authorities. Although the Company believes that its estimates are reasonable, actual results could differ from these estimates. | ||||||||||||||||||||||||||
Segment Information | ' | |||||||||||||||||||||||||
Segment Information | ||||||||||||||||||||||||||
The Company applies a “management” approach to disclosure of segment information. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the basis of the Company’s operating segments. During the first quarter of 2013, the Company assessed and updated their operating segments to align with how the business is managed and determined their reportable segments are the same as their operating segments. The description of the Company’s segments and the disclosure of segment information are presented in Note K. | ||||||||||||||||||||||||||
Recently Accounting Pronouncements | ' | |||||||||||||||||||||||||
Recent Accounting Pronouncements | ||||||||||||||||||||||||||
In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangibles for Impairment”. This ASU amended guidance that simplifies how entities test indefinite-lived intangible assets other than goodwill for impairment. After assessment of certain qualitative factors, if it is determined to be more likely than not that an indefinite-lived asset is impaired, entities must perform the quantitative impairment test. Otherwise, the quantitative test becomes optional. The amended guidance was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this new guidance in the first quarter of 2013, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements. | ||||||||||||||||||||||||||
In February 2013, the FASB issued ASU 2013-2, “Other Comprehensive Income.” This ASU amends ASC 220, “Comprehensive Income,” and supersedes ASU 2011-05 “Presentation of Comprehensive Income” and ASU 2011-12 “Comprehensive Income,” to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. The standard does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the guidance requires an entity to provide enhanced disclosures to present separately by component reclassifications out of accumulated other comprehensive income. The amendments in this ASU were effective prospectively for reporting periods beginning after December 15, 2012. The Company has adopted this guidance and its implementation did not have a material impact on its consolidated financial statements. | ||||||||||||||||||||||||||
In July 2013, the FASB issued new accounting guidance that requires that unrecognized tax benefits be classified as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards available at the reporting date in the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require the Company to use, and it does not intend to use, the deferred tax asset for such purpose. This guidance is effective for reporting periods beginning after December 15, 2013. The Company does not expect the adoption of these provisions to have a material effect on the consolidated financial statements. |
SIGNIFICANT_ACCOUNTING_POLICIE2
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | |||||||||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES | ' | |||||||||||||||||||||||||
Schedule of impact of error on the Consolidated Statements of Income and Comprehensive Income and the Consolidated statements of Cash Flows | ' | |||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
March 31, 2013 | June 30, 2013 | June 30, 2013 | ||||||||||||||||||||||||
As Previously | As Previously | As Previously | ||||||||||||||||||||||||
(in thousands) | Reported | As Revised | Reported | As Revised | Reported | As Revised | ||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 233,535 | $ | 229,350 | $ | 273,735 | $ | 267,798 | $ | 507,270 | $ | 497,148 | ||||||||||||||
Other operating expenses* | $ | 43,843 | $ | 39,658 | $ | 54,959 | $ | 49,022 | $ | 98,802 | $ | 88,680 | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 5,229 | $ | 1,657 | $ | 14,905 | $ | 4,591 | ||||||||||||||||||
Change in accounts receivable | $ | 3,644 | $ | 7,216 | $ | (18,026 | ) | $ | (7,712 | ) | ||||||||||||||||
* The other operating expense balance for the three months ended March 31, 2013 includes $0.1 million of acquisition expenses previously reported as a separate caption in the presentation of the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Three Months Ended | Three Months Ended | Six Months Ended | Three Months Ended | |||||||||||||||||||||||
March 31, 2012 | June 30, 2012 | June 30, 2012 | September 30, 2012 | |||||||||||||||||||||||
As Previously | As Previously | As Previously | As Previously | |||||||||||||||||||||||
(in thousands) | Reported | As Revised | Reported | As Revised | Reported | As Revised | Reported | As Revised | ||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 218,091 | $ | 214,355 | $ | 251,754 | $ | 247,902 | $ | 469,845 | $ | 462,257 | $ | 243,503 | $ | 242,536 | ||||||||||
Other operating expenses* | $ | 40,219 | $ | 36,483 | $ | 51,256 | $ | 47,404 | $ | 91,475 | $ | 83,887 | $ | 42,177 | $ | 41,210 | ||||||||||
Consolidated Statement of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 4,723 | $ | 907 | $ | 12,925 | $ | 4,462 | ||||||||||||||||||
Change in accounts receivable | $ | 851 | $ | 4,667 | $ | (16,190 | ) | $ | (7,727 | ) | ||||||||||||||||
* The other operating expense balance for the three months ended March 31, 2012 includes $0.1 million of acquisition expenses previously reported as a separate caption in the presentation of the Consolidated Statements of Income and Comprehensive Income. | ||||||||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||
September 30, 2012 | ||||||||||||||||||||||||||
(in thousands, except per share amounts) | As Previously | As Revised | ||||||||||||||||||||||||
Reported | ||||||||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net sales | $ | 713,349 | $ | 704,794 | ||||||||||||||||||||||
Material costs | $ | 210,107 | $ | 212,706 | ||||||||||||||||||||||
Personnel costs | $ | 251,189 | $ | 248,723 | ||||||||||||||||||||||
Other operating expenses | $ | 135,566 | $ | 125,099 | ||||||||||||||||||||||
Income from operations | $ | 91,055 | $ | 92,834 | ||||||||||||||||||||||
Income before taxes | $ | 67,843 | $ | 69,622 | ||||||||||||||||||||||
Provision for income taxes | $ | 25,558 | $ | 26,257 | ||||||||||||||||||||||
Net income | $ | 42,285 | $ | 43,365 | ||||||||||||||||||||||
Basic earnings per share | $ | 1.24 | $ | 1.27 | ||||||||||||||||||||||
Diluted earnings per share | $ | 1.21 | $ | 1.25 | ||||||||||||||||||||||
Consolidated Statement of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 15,926 | $ | 6,580 | ||||||||||||||||||||||
Change in accounts receivable | $ | (19,612 | ) | $ | (10,266 | ) | ||||||||||||||||||||
Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||||
December 31, 2010 | December 31, 2011 | December 31, 2012 | ||||||||||||||||||||||||
(in thousands) | As Previously | As Revised | As Previously | As Revised | As Previously | As Revised | ||||||||||||||||||||
Reported | Reported | Reported | ||||||||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||||||||||
Net Sales | $ | 817,379 | $ | 808,766 | $ | 918,539 | $ | 907,794 | $ | 985,550 | $ | 974,429 | ||||||||||||||
Other operating expenses | $ | 165,158 | $ | 156,545 | $ | 177,910 | $ | 167,165 | $ | 188,868 | $ | 177,747 | ||||||||||||||
Consolidated Statements of Cash Flows | ||||||||||||||||||||||||||
Provision for doubtful accounts | $ | 20,276 | $ | 7,252 | $ | 24,837 | $ | 9,396 | $ | 19,773 | $ | 9,589 | ||||||||||||||
Change in accounts receivable | $ | (31,041 | ) | $ | (18,017 | ) | $ | (42,024 | ) | $ | (26,583 | ) | $ | (40,443 | ) | $ | (30,259 | ) | ||||||||
Schedule of revision to previously reported Schedule II Allowance for Doubtful Accounts | ' | |||||||||||||||||||||||||
Year | Classification | Balance at | Additions | Write-offs | Balance at | |||||||||||||||||||||
(In thousands) | beginning of year | Charged to Costs | end of year | |||||||||||||||||||||||
and Expenses | ||||||||||||||||||||||||||
2012 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 22,028 | $ | 19,773 | $ | 20,422 | $ | 21,379 | ||||||||||||||||||
Revised | $ | 7,236 | $ | 9,589 | $ | 9,299 | $ | 7,526 | ||||||||||||||||||
2011 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 16,686 | $ | 22,101 | $ | 16,759 | $ | 22,028 | ||||||||||||||||||
Revised | $ | 5,153 | $ | 9,396 | $ | 7,313 | $ | 7,236 | ||||||||||||||||||
2010 | Allowance for doubtful accounts | |||||||||||||||||||||||||
Previously reported | $ | 10,526 | $ | 20,276 | $ | 14,116 | $ | 16,686 | ||||||||||||||||||
Revised | $ | 4,286 | $ | 7,252 | $ | 6,385 | $ | 5,153 | ||||||||||||||||||
GOODWILL_AND_OTHER_INTANGIBLE_1
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended | |||||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ' | |||||||||||||||||||
Schedule of goodwill allocated to the Company's operating segments | ' | |||||||||||||||||||
(In thousands) | Patient Care | Products & | Total | |||||||||||||||||
Services | ||||||||||||||||||||
Balance at December 31, 2012 | $ | 538,492 | $ | 136,282 | $ | 674,774 | ||||||||||||||
Additions due to acquisitions | 3,562 | — | 3,562 | |||||||||||||||||
Adjustments | (121 | ) | — | (121 | ) | |||||||||||||||
Balance at September 30, 2013 | $ | 541,933 | $ | 136,282 | $ | 678,215 | ||||||||||||||
Patient Care | Products & | Total | ||||||||||||||||||
Services | ||||||||||||||||||||
Balance at December 31, 2011 | $ | 474,166 | $ | 135,318 | $ | 609,484 | ||||||||||||||
Additions due to acquisitions | 63,849 | 964 | 64,813 | |||||||||||||||||
Contingent considerations (1) | 477 | — | 477 | |||||||||||||||||
Balance at December 31, 2012 | $ | 538,492 | $ | 136,282 | $ | 674,774 | ||||||||||||||
(1) Contingent considerations relates to acquisitions completed prior to the adoption of ASC 805. | ||||||||||||||||||||
Schedule of balances related to intangible assets | ' | |||||||||||||||||||
September 30, 2013 | December 31, 2012 | |||||||||||||||||||
(In thousands) | Gross | Accumulated | Net | Gross | Accumulated | Net | ||||||||||||||
Carrying | Amortization | Carrying | Carrying | Amortization | Carrying | |||||||||||||||
Amount | Amount | Amount | Amount | |||||||||||||||||
Customer Lists | $ | 46,072 | $ | (10,628 | ) | $ | 35,444 | $ | 48,044 | $ | (7,846 | ) | $ | 40,198 | ||||||
Trade Name | 9,932 | (197 | ) | 9,735 | 9,070 | — | 9,070 | |||||||||||||
Patents and Other Intangibles | 28,241 | (14,782 | ) | 13,459 | 27,810 | (12,797 | ) | 15,013 | ||||||||||||
$ | 84,245 | $ | (25,607 | ) | $ | 58,638 | $ | 84,924 | $ | (20,643 | ) | $ | 64,281 |
INVENTORIES_Tables
INVENTORIES (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
INVENTORIES | ' | |||||||
Schedule of inventory | ' | |||||||
(In thousands) | September 30, 2013 | December 31, 2012 | ||||||
Raw materials | $ | 45,150 | $ | 41,372 | ||||
Work in process | 70,053 | 56,931 | ||||||
Finished goods | 29,171 | 28,992 | ||||||
$ | 144,374 | $ | 127,295 |
LONG_TERM_DEBT_Tables
LONG TERM DEBT (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
LONG TERM DEBT | ' | |||||||
Schedule of long-term debt | ' | |||||||
September 30, | December 31, | |||||||
(In thousands) | 2013 | 2012 | ||||||
Revolving Credit Facility | $ | 26,000 | $ | — | ||||
Term Loan | 223,594 | 293,300 | ||||||
7 1/8 % Senior Notes due 2018 | 200,000 | 200,000 | ||||||
Subordinated seller notes, non-collateralized, net of unamortized discount with principal and interest payable in either monthly, quarterly or annual installments at effective interest rates ranging from 2.00% to 4.00%, maturing through November 2018 | 21,463 | 27,346 | ||||||
Total Debt | 471,057 | 520,646 | ||||||
Less current portion | (13,673 | ) | (11,082 | ) | ||||
Long Term Debt | $ | 457,384 | $ | 509,564 |
NET_INCOME_PER_COMMON_SHARE_Ta
NET INCOME PER COMMON SHARE (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
NET INCOME PER COMMON SHARE | ' | |||||||||||||
Schedule of computation of basic and diluted earnings per share | ' | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
(In thousands, except share and per share data) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Net income | $ | 21,659 | $ | 17,344 | $ | 45,228 | $ | 43,365 | ||||||
Shares of common stock outstanding used to compute basic per common share amounts | 34,902,103 | 34,362,757 | 34,783,419 | 34,224,756 | ||||||||||
Effect of dilutive restricted stock units and options (1) | 499,170 | 639,594 | 532,478 | 592,924 | ||||||||||
Shares used to compute dilutive per common share amounts | 35,401,273 | 35,002,351 | 35,315,897 | 34,817,680 | ||||||||||
Basic income per share | $ | 0.62 | $ | 0.5 | $ | 1.3 | $ | 1.27 | ||||||
Diluted income per share | $ | 0.61 | $ | 0.5 | $ | 1.28 | $ | 1.25 | ||||||
(1) There were no anti-dilutive options for the three or nine month periods ended September 30, 2013 and 2012. |
SUPPLEMENTAL_EXECUTIVE_RETIREM1
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (Tables) | 9 Months Ended | |||||
Sep. 30, 2013 | ||||||
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN | ' | |||||
Schedule of weighted average assumptions used to determine benefit obligation and net benefit cost | ' | |||||
2013 | 2012 | |||||
Discount rate | 3.25 | % | 3.9 | % | ||
Average rate of increase in compensation | 3 | % | 3 | % | ||
Summary of change in benefit obligation | ' | |||||
(In thousands) | ||||||
Net benefit cost accrued at December 31, 2012 | $ | 22,377 | ||||
Service cost | 735 | |||||
Interest cost | 519 | |||||
Payments | (1,246 | ) | ||||
Net benefit cost accrued at September 30, 2013 | $ | 22,385 | ||||
(In thousands) | ||||||
Net benefit cost accrued at December 31, 2011 | $ | 20,230 | ||||
Service cost | 690 | |||||
Interest cost | 570 | |||||
Payments | (705 | ) | ||||
Net benefit cost accrued at September 30, 2012 | $ | 20,785 |
SEGMENT_AND_RELATED_INFORMATIO1
SEGMENT AND RELATED INFORMATION (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
SEGMENT AND RELATED INFORMATION | ' | ||||||||||||||||
Summarized financial information concerning the Company's operating segments | ' | ||||||||||||||||
(In thousands) | Patient Care | Products & | Other | Consolidating | Total | ||||||||||||
Services | Adjustments | ||||||||||||||||
Three Months Ended September 30, 2013 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 221,057 | $ | 49,996 | $ | — | $ | — | $ | 271,053 | |||||||
Intersegments | — | 58,030 | — | (58,030 | ) | — | |||||||||||
Depreciation and amortization | 4,090 | 3,029 | 2,105 | — | 9,224 | ||||||||||||
Income (loss) from operations | 38,189 | 16,723 | (14,742 | ) | (264 | ) | 39,906 | ||||||||||
Interest (income) expense | 7,729 | 3,338 | (5,050 | ) | — | 6,017 | |||||||||||
Extinguishment of debt | — | — | — | — | — | ||||||||||||
Income (loss) before taxes | 30,460 | 13,385 | (9,692 | ) | (264 | ) | 33,889 | ||||||||||
Three Months Ended September 30, 2012 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 199,499 | $ | 43,037 | $ | — | $ | — | $ | 242,536 | |||||||
Intersegments | — | 53,941 | — | (53,941 | ) | — | |||||||||||
Depreciation and amortization | 3,492 | 3,173 | 2,044 | — | 8,709 | ||||||||||||
Income (loss) from operations | 36,221 | 10,051 | (10,086 | ) | (813 | ) | 35,373 | ||||||||||
Interest (income) expense | 7,520 | 2,236 | (2,005 | ) | — | 7,751 | |||||||||||
Income (loss) before taxes | 28,701 | 7,815 | (8,081 | ) | (813 | ) | 27,622 | ||||||||||
Nine Months Ended September 30, 2013 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 635,237 | $ | 132,964 | $ | — | $ | — | $ | 768,201 | |||||||
Intersegments | — | 167,963 | — | (167,963 | ) | — | |||||||||||
Depreciation and amortization | 12,223 | 9,575 | 6,221 | — | 28,019 | ||||||||||||
Income (loss) from operations | 105,198 | 37,263 | (42,389 | ) | (806 | ) | 99,266 | ||||||||||
Interest (income) expense | 23,154 | 10,011 | (11,663 | ) | — | 21,502 | |||||||||||
Extinguishment of debt | — | — | 6,645 | — | 6,645 | ||||||||||||
Income (loss) before taxes | 82,044 | 27,252 | (37,371 | ) | (806 | ) | 71,119 | ||||||||||
Capital expenditures | 11,071 | 2,271 | 14,128 | — | 27,470 | ||||||||||||
Nine Months Ended September 30, 2012 | |||||||||||||||||
Net sales | |||||||||||||||||
Customers | $ | 576,414 | $ | 128,380 | $ | — | $ | — | $ | 704,794 | |||||||
Intersegments | — | 156,500 | — | (156,500 | ) | — | |||||||||||
Depreciation and amortization | 10,306 | 9,207 | 5,919 | — | 25,432 | ||||||||||||
Income (loss) from operations | 100,551 | 29,275 | (35,734 | ) | (1,258 | ) | 92,834 | ||||||||||
Interest (income) expense | 22,657 | 6,771 | (6,216 | ) | — | 23,212 | |||||||||||
Income (loss) before taxes | 77,894 | 22,504 | (29,518 | ) | (1,258 | ) | 69,622 | ||||||||||
Capital expenditures | 9,181 | 2,233 | 13,463 | — | 24,877 | ||||||||||||
Total Assets | |||||||||||||||||
September 30, 2013 | 1,485,779 | 376,184 | — | (613,964 | ) | 1,247,999 | |||||||||||
December 31, 2012 | 1,389,223 | 336,318 | — | (488,214 | ) | 1,237,327 |
SIGNIFICANT_ACCOUNTING_POLICIE3
SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | |
Consolidated Statements of Income and Comprehensive Income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net sales | $271,053,000 | $267,798,000 | $229,350,000 | $242,536,000 | $247,902,000 | $214,355,000 | $497,148,000 | $462,257,000 | $768,201,000 | $704,794,000 | $974,429,000 | $907,794,000 | $808,766,000 |
Material costs | 79,401,000 | ' | ' | 73,109,000 | ' | ' | ' | ' | 226,585,000 | 212,706,000 | ' | ' | ' |
Personnel costs | 94,768,000 | ' | ' | 84,135,000 | ' | ' | ' | ' | 277,897,000 | 248,723,000 | ' | ' | ' |
Other operating expenses | 47,754,000 | 49,022,000 | 39,658,000 | 41,210,000 | 47,404,000 | 36,483,000 | 88,680,000 | 83,887,000 | 136,434,000 | 125,099,000 | 177,747,000 | 167,165,000 | 156,545,000 |
Income from operations | 39,906,000 | ' | ' | 35,373,000 | ' | ' | ' | ' | 99,266,000 | 92,834,000 | ' | ' | ' |
Income before taxes | 33,889,000 | ' | ' | 27,622,000 | ' | ' | ' | ' | 71,119,000 | 69,622,000 | ' | ' | ' |
Provision for income taxes | 12,230,000 | ' | ' | 10,278,000 | ' | ' | ' | ' | 25,891,000 | 26,257,000 | ' | ' | ' |
Net income | 21,659,000 | ' | ' | 17,344,000 | ' | ' | ' | ' | 45,228,000 | 43,365,000 | ' | ' | ' |
Basic earnings (in dollars per share) | $0.62 | ' | ' | $0.50 | ' | ' | ' | ' | $1.30 | $1.27 | ' | ' | ' |
Diluted earnings (in dollars per share) | $0.61 | ' | ' | $0.50 | ' | ' | ' | ' | $1.28 | $1.25 | ' | ' | ' |
Consolidated Statements of Cash Flows | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Provision for doubtful accounts | ' | ' | 1,657,000 | ' | ' | 907,000 | 4,591,000 | 4,462,000 | 8,545,000 | 6,580,000 | 9,589,000 | 9,396,000 | 7,252,000 |
Change in accounts receivable | ' | ' | 7,216,000 | ' | ' | 4,667,000 | -7,712,000 | -7,727,000 | -14,586,000 | -10,266,000 | -30,259,000 | -26,583,000 | -18,017,000 |
Other operating expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated Statements of Cash Flows | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Acquisition expenses | ' | ' | 100,000 | ' | ' | 100,000 | ' | ' | ' | ' | ' | ' | ' |
As Originally Reported | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated Statements of Income and Comprehensive Income | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net sales | ' | 273,735,000 | 233,535,000 | 243,503,000 | 251,754,000 | 218,091,000 | 507,270,000 | 469,845,000 | ' | 713,349,000 | 985,550,000 | 918,539,000 | 817,379,000 |
Material costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | 210,107,000 | ' | ' | ' |
Personnel costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | 251,189,000 | ' | ' | ' |
Other operating expenses | ' | 54,959,000 | 43,843,000 | 42,177,000 | 51,256,000 | 40,219,000 | 98,802,000 | 91,475,000 | ' | 135,566,000 | 188,868,000 | 177,910,000 | 165,158,000 |
Income from operations | ' | ' | ' | ' | ' | ' | ' | ' | ' | 91,055,000 | ' | ' | ' |
Income before taxes | ' | ' | ' | ' | ' | ' | ' | ' | ' | 67,843,000 | ' | ' | ' |
Provision for income taxes | ' | ' | ' | ' | ' | ' | ' | ' | ' | 25,558,000 | ' | ' | ' |
Net income | ' | ' | ' | ' | ' | ' | ' | ' | ' | 42,285,000 | ' | ' | ' |
Basic earnings (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1.24 | ' | ' | ' |
Diluted earnings (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1.21 | ' | ' | ' |
Consolidated Statements of Cash Flows | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Provision for doubtful accounts | ' | ' | 5,229,000 | ' | ' | 4,723,000 | 14,905,000 | 12,925,000 | ' | 15,926,000 | 19,773,000 | 24,837,000 | 20,276,000 |
Change in accounts receivable | ' | ' | 3,644,000 | ' | ' | 851,000 | -18,026,000 | -16,190,000 | ' | -19,612,000 | -40,443,000 | -42,024,000 | -31,041,000 |
As Originally Reported | Other operating expense | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated Statements of Cash Flows | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Acquisition expenses | ' | ' | $100,000 | ' | ' | $100,000 | ' | ' | ' | ' | ' | ' | ' |
SIGNIFICANT_ACCOUNTING_POLICIE4
SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
Balance at beginning of year | $7,236 | $5,153 | $4,286 |
Additions Charged to Costs and Expenses | 9,589 | 9,396 | 7,252 |
Write-offs | 9,299 | 7,313 | 6,385 |
Balance at end of year | 7,526 | 7,236 | 5,153 |
Restricted Cash | ' | ' | ' |
Restricted cash to serve as collateral for the Workers' Compensation program | 3,120 | ' | ' |
Previously reported | ' | ' | ' |
Balance at beginning of year | 22,028 | 16,686 | 10,526 |
Additions Charged to Costs and Expenses | 19,773 | 22,101 | 20,276 |
Write-offs | 20,422 | 16,759 | 14,116 |
Balance at end of year | $21,379 | $22,028 | $16,686 |
SIGNIFICANT_ACCOUNTING_POLICIE5
SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 9 Months Ended | |||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | |
Term Loan | Term Loan | Term Loan | Prior Term Loan Facility | 7.125% Senior Notes due 2018 | 7.125% Senior Notes due 2018 | Seller Notes | Seller Notes | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Prior Revolving Credit Facility | Recurring basis | Recurring basis | |||
Money Market Funds | Money Market Funds | |||||||||||||||
Fair Value of Financial Instruments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Fair value of assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $2,500,000 | $11,000,000 |
Market price (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1 | ' |
Fair value of Senior Notes | ' | ' | ' | ' | ' | ' | 213,000,000 | 211,500,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Carrying value | 471,057,000 | 520,646,000 | 223,594,000 | ' | 293,300,000 | ' | 200,000,000 | 200,000,000 | 21,463,000 | 27,346,000 | 26,000,000 | ' | 0 | ' | ' | ' |
Maximum borrowing capacity | ' | ' | ' | $225,000,000 | ' | $300,000,000 | ' | ' | ' | ' | ' | $200,000,000 | ' | $100,000,000 | ' | ' |
Revenue Recognition | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Customer contract term, minimum | '1 year | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Customer contract term, maximum | '5 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
GOODWILL_AND_OTHER_INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 |
Net | ' | ' |
Balance at the beginning of the period | $674,774 | $609,484 |
Additions due to acquisitions | 3,562 | 64,813 |
Contingent considerations | ' | 477 |
Adjustments | -121 | ' |
Balance at the end of the period | 678,215 | 674,774 |
Patient Care | ' | ' |
Net | ' | ' |
Balance at the beginning of the period | 538,492 | 474,166 |
Additions due to acquisitions | 3,562 | 63,849 |
Contingent considerations | ' | 477 |
Adjustments | -121 | ' |
Balance at the end of the period | 541,933 | 538,492 |
Products and Services | ' | ' |
Net | ' | ' |
Balance at the beginning of the period | ' | 135,318 |
Additions due to acquisitions | ' | 964 |
Balance at the end of the period | $136,282 | $136,282 |
GOODWILL_AND_OTHER_INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Intangible assets | ' | ' | ' |
Gross Carrying Amount | $84,245,000 | ' | $84,924,000 |
Accumulated Amortization | -25,607,000 | ' | -20,643,000 |
Net Carrying Amount | 58,638,000 | ' | 64,281,000 |
Amortization expense | 5,000,000 | 3,800,000 | ' |
Weighted average life of the additions to customer lists, patents and other intangibles | '7 years 8 months 12 days | ' | ' |
Trade Name | ' | ' | ' |
Intangible assets | ' | ' | ' |
Gross Carrying Amount | 9,932,000 | ' | 9,070,000 |
Accumulated Amortization | -197,000 | ' | ' |
Net Carrying Amount | 9,735,000 | ' | 9,070,000 |
Trade Name | Minimum | ' | ' | ' |
Intangible assets | ' | ' | ' |
Amortization period | '1 year | ' | ' |
Trade Name | Maximum | ' | ' | ' |
Intangible assets | ' | ' | ' |
Amortization period | '3 years | ' | ' |
Customer Lists | ' | ' | ' |
Intangible assets | ' | ' | ' |
Gross Carrying Amount | 46,072,000 | ' | 48,044,000 |
Accumulated Amortization | -10,628,000 | ' | -7,846,000 |
Net Carrying Amount | 35,444,000 | ' | 40,198,000 |
Customer Lists | Minimum | ' | ' | ' |
Intangible assets | ' | ' | ' |
Amortization period | '10 years | ' | ' |
Customer Lists | Maximum | ' | ' | ' |
Intangible assets | ' | ' | ' |
Amortization period | '14 years | ' | ' |
Patents and Other Intangibles | ' | ' | ' |
Intangible assets | ' | ' | ' |
Gross Carrying Amount | 28,241,000 | ' | 27,810,000 |
Accumulated Amortization | -14,782,000 | ' | -12,797,000 |
Net Carrying Amount | $13,459,000 | ' | $15,013,000 |
Patents | ' | ' | ' |
Intangible assets | ' | ' | ' |
Amortization period | '5 years | ' | ' |
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
INVENTORIES | ' | ' |
Raw materials | $45,150 | $41,372 |
Work in process | 70,053 | 56,931 |
Finished goods | 29,171 | 28,992 |
Total | $144,374 | $127,295 |
ACQUISITIONS_Details
ACQUISITIONS (Details) (O & P company, USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
company | company | |
clinic | clinic | |
O & P company | ' | ' |
Acquisitions | ' | ' |
Number of O&P companies acquired | 5 | 14 |
Number of patient care clinics operated by acquiree | 12 | 21 |
Aggregate purchase price of O&P businesses | $8 | $21.80 |
Promissory notes as a part of purchase price | 0.7 | 7.6 |
Contingent consideration payable reported as other liabilities | 1.2 | 1.6 |
Maximum term for payment of contingent consideration | '2 years | '5 years |
Purchase price for acquisition paid in cash | 5.6 | 12.6 |
Goodwill recorded related to acquisitions | $3.60 | $13.60 |
ACQUISITIONS_Details_2
ACQUISITIONS (Details 2) (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Acquisitions completed prior to adoption of the revised authoritative guidance | ' | ' |
Acquired intangible assets | ' | ' |
Contingent consideration paid on acquisitions prior to adoption of new authoritative guidance | $0 | $0.50 |
Amount accrued related to contingent consideration | 4.1 | ' |
Acquisitions completed subsequent to adoption of the revised authoritative guidance | ' | ' |
Acquired intangible assets | ' | ' |
Contingent consideration paid after adoption of new authoritative guidance | $1.90 | $1.30 |
LONG_TERM_DEBT_Details
LONG TERM DEBT (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 |
On or prior to November 15, 2013 | The period prior to November 15, 2014. | Revolving Credit Facility | Revolving Credit Facility | Revolving Credit Facility | Standby letters of credit | Term Loan | Term Loan | Term Loan | Term Loan | Term Loan | 7.125% Senior Notes due 2018 | 7.125% Senior Notes due 2018 | Subordinated seller notes, non-collateralized, net of unamortized discount with principal and interest payable in either monthly, quarterly or annual installments at effective interest rates ranging from 2.00% to 4.00%, maturing through November 2018 | Subordinated seller notes, non-collateralized, net of unamortized discount with principal and interest payable in either monthly, quarterly or annual installments at effective interest rates ranging from 2.00% to 4.00%, maturing through November 2018 | New credit agreement | New credit agreement | New credit agreement | Previous credit agreement | |||
Minimum | Maximum | Minimum | Maximum | ||||||||||||||||||
Long-Term Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total Debt | $471,057,000 | $520,646,000 | ' | ' | ' | $26,000,000 | $0 | ' | $223,594,000 | ' | $293,300,000 | ' | ' | $200,000,000 | $200,000,000 | $21,463,000 | $27,346,000 | ' | ' | ' | ' |
Less current portion | -13,673,000 | -11,082,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Long Term Debt | 457,384,000 | 509,564,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate stated percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 7.13% | ' | ' | ' | ' | ' | ' | ' |
Interest rate, minimum (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2.00% | ' | ' | ' | ' | ' |
Interest rate, maximum (as a percent) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4.00% | ' | ' | ' | ' | ' |
Term of agreement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 years | ' | ' | ' |
Maximum borrowing capacity | ' | ' | ' | ' | 200,000,000 | ' | ' | ' | ' | 225,000,000 | ' | ' | ' | ' | ' | ' | ' | 425,000,000 | ' | ' | 400,000,000 |
Interest, base rate | ' | ' | ' | ' | 'LIBOR | ' | ' | ' | ' | 'LIBOR | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate margin (as a percent) | ' | ' | ' | ' | 1.75% | ' | ' | ' | ' | 1.75% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Pre-tax non-cash charge related to the write-off of existing debt issuance costs associated with its previous credit agreement | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,600,000 | ' | ' | ' |
Prepayment penalties | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0 | ' | ' | ' |
Balance available under the credit facility | ' | ' | ' | ' | ' | 170,400,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amounts outstanding under the credit facility | ' | ' | ' | ' | ' | 26,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount outstanding | ' | ' | ' | ' | ' | ' | ' | 3,600,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Quarterly principal payment percentage | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.63% | 3.75% | ' | ' | ' | ' | ' | ' | ' | ' |
Mandatory prepayment | ' | ' | ' | ' | ' | ' | ' | ' | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum percentage of the aggregate principal amount up to which the notes may be redeemed | ' | ' | 35.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Percentage of the aggregate principal amount at which the notes may be redeemed | ' | ' | 107.13% | 103.60% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Consolidated interest coverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3.5 | ' | ' |
Total leverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4 | ' |
NET_INCOME_PER_COMMON_SHARE_De
NET INCOME PER COMMON SHARE (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
NET INCOME PER COMMON SHARE | ' | ' | ' | ' |
Net income | $21,659 | $17,344 | $45,228 | $43,365 |
Shares of common stock outstanding used to compute basic per common share amounts | 34,902,103 | 34,362,757 | 34,783,419 | 34,224,756 |
Effect of dilutive restricted stock units and options (in shares) | 499,170 | 639,594 | 532,478 | 592,924 |
Shares used to compute diluted per common share amounts | 35,401,273 | 35,002,351 | 35,315,897 | 34,817,680 |
Basic income per share (in dollars per share) | $0.62 | $0.50 | $1.30 | $1.27 |
Diluted income per share (in dollars per share) | $0.61 | $0.50 | $1.28 | $1.25 |
Anti-dilutive options (in shares) | 0 | 0 | 0 | 0 |
SUPPLEMENTAL_EXECUTIVE_RETIREM2
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (Details) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Weighted average assumptions used to determine the benefit obligation and net benefit cost | ' | ' |
Discount rate, to determine net benefit cost (as a percent) | 3.25% | 3.90% |
Average rate of increase in compensation, to determine net benefit cost (as a percent) | 3.00% | 3.00% |
Change in Benefit Obligation | ' | ' |
Net benefit cost accrued at the beginning of the period | $22,377 | $20,230 |
Service cost | 735 | 690 |
Interest cost | 519 | 570 |
Payments | -1,246 | -705 |
Net benefit cost accrued at the end of the period | $22,385 | $20,785 |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 0 Months Ended | 9 Months Ended | 9 Months Ended | ||||
In Millions, unless otherwise specified | 13-May-10 | Sep. 30, 2013 | 13-May-10 | 13-May-10 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 |
2010 Omnibus Incentive Plan | 2010 Omnibus Incentive Plan | 2002 Stock Incentive and Bonus Plan and 2003 Non-Employee Directors' Stock Incentive Plan | Incentive stock options | Restricted Stock Units | Restricted Stock Units | Restricted Stock Units | |
2010 Omnibus Incentive Plan | 2010 Omnibus Incentive Plan | ||||||
Stock Based Compensation | ' | ' | ' | ' | ' | ' | ' |
Shares of common stock reserved for issuance | 2.5 | ' | ' | ' | ' | ' | ' |
Shares of common stock authorized for issuance under the share-based compensation plan | 2 | ' | ' | 1.5 | ' | ' | ' |
Unissued shares carried over to 2010 Plan | ' | ' | 0.5 | ' | ' | ' | ' |
Plan expiration unless earlier terminated by the Board of Directors | '10 years | ' | ' | ' | ' | ' | ' |
Shares of common stock issued under the Plan | ' | 1.5 | ' | ' | ' | ' | ' |
Granted (in shares) | ' | ' | ' | ' | ' | ' | 0.4 |
Value of grants during the period | ' | ' | ' | ' | ' | ' | $12.10 |
Unrecognized share-based compensation cost related to unvested stock | ' | ' | ' | ' | ' | ' | 16.1 |
Period over which unrecognized share-based compensation cost will be expensed | ' | ' | ' | ' | ' | ' | '4 years |
Share- based compensation cost | ' | ' | ' | ' | $6.40 | $6.10 | ' |
SEGMENT_AND_RELATED_INFORMATIO2
SEGMENT AND RELATED INFORMATION (Details) (USD $) | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Sep. 30, 2012 | Jun. 30, 2012 | Mar. 31, 2012 | Jun. 30, 2013 | Jun. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 |
segment | |||||||||||||
SEGMENT AND RELATED INFORMATION | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of operating segments | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' |
Net sales | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Customers | $271,053 | $267,798 | $229,350 | $242,536 | $247,902 | $214,355 | $497,148 | $462,257 | $768,201 | $704,794 | $974,429 | $907,794 | $808,766 |
Depreciation and amortization | 9,224 | ' | ' | 8,709 | ' | ' | ' | ' | 28,019 | 25,432 | ' | ' | ' |
Income (loss) from operations | 39,906 | ' | ' | 35,373 | ' | ' | ' | ' | 99,266 | 92,834 | ' | ' | ' |
Interest (income) expense | 6,017 | ' | ' | 7,751 | ' | ' | ' | ' | 21,502 | 23,212 | ' | ' | ' |
Extinguishment of debt | ' | ' | ' | ' | ' | ' | ' | ' | 6,645 | ' | ' | ' | ' |
Income (loss) before taxes | 33,889 | ' | ' | 27,622 | ' | ' | ' | ' | 71,119 | 69,622 | ' | ' | ' |
Capital expenditures | ' | ' | ' | ' | ' | ' | ' | ' | 27,470 | 24,877 | ' | ' | ' |
Total assets | 1,247,999 | ' | ' | ' | ' | ' | ' | ' | 1,247,999 | ' | 1,237,327 | ' | ' |
Patient Care | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Summarized financial information concerning the Company's operating segments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Minimum age for health insurance coverage under Medicare health insurance program | 65 | ' | ' | ' | ' | ' | ' | ' | 65 | ' | ' | ' | ' |
Medicare reimbursement for O&P products and services based on prices set forth in fee schedules, number of regional service areas | 10 | ' | ' | ' | ' | ' | ' | ' | 10 | ' | ' | ' | ' |
Minimum age to supplement Medicare benefits for financially needy persons under Medicaid health insurance program | 65 | ' | ' | ' | ' | ' | ' | ' | 65 | ' | ' | ' | ' |
Estimated government reimbursement as a percentage of the company's net sales | ' | ' | ' | ' | ' | ' | ' | ' | 40.50% | 40.80% | ' | ' | ' |
Number of O&P provider locations | ' | ' | ' | ' | ' | ' | ' | ' | 1,150 | ' | ' | ' | ' |
Number of O&P independent providers | ' | ' | ' | ' | ' | ' | ' | ' | 400 | ' | ' | ' | ' |
Number of contracts with national and regional providers | ' | ' | ' | ' | ' | ' | ' | ' | 57 | ' | ' | ' | ' |
Net sales | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Customers | 221,057 | ' | ' | 199,499 | ' | ' | ' | ' | 635,237 | 576,414 | ' | ' | ' |
Depreciation and amortization | 4,090 | ' | ' | 3,492 | ' | ' | ' | ' | 12,223 | 10,306 | ' | ' | ' |
Income (loss) from operations | 38,189 | ' | ' | 36,221 | ' | ' | ' | ' | 105,198 | 100,551 | ' | ' | ' |
Interest (income) expense | 7,729 | ' | ' | 7,520 | ' | ' | ' | ' | 23,154 | 22,657 | ' | ' | ' |
Income (loss) before taxes | 30,460 | ' | ' | 28,701 | ' | ' | ' | ' | 82,044 | 77,894 | ' | ' | ' |
Capital expenditures | ' | ' | ' | ' | ' | ' | ' | ' | 11,071 | 9,181 | ' | ' | ' |
Total assets | 1,485,779 | ' | ' | ' | ' | ' | ' | ' | 1,485,779 | ' | 1,389,223 | ' | ' |
Products and Services | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net sales | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Customers | 49,996 | ' | ' | 43,037 | ' | ' | ' | ' | 132,964 | 128,380 | ' | ' | ' |
Intersegments | 58,030 | ' | ' | 53,941 | ' | ' | ' | ' | 167,963 | 156,500 | ' | ' | ' |
Depreciation and amortization | 3,029 | ' | ' | 3,173 | ' | ' | ' | ' | 9,575 | 9,207 | ' | ' | ' |
Income (loss) from operations | 16,723 | ' | ' | 10,051 | ' | ' | ' | ' | 37,263 | 29,275 | ' | ' | ' |
Interest (income) expense | 3,338 | ' | ' | 2,236 | ' | ' | ' | ' | 10,011 | 6,771 | ' | ' | ' |
Income (loss) before taxes | 13,385 | ' | ' | 7,815 | ' | ' | ' | ' | 27,252 | 22,504 | ' | ' | ' |
Capital expenditures | ' | ' | ' | ' | ' | ' | ' | ' | 2,271 | 2,233 | ' | ' | ' |
Total assets | 376,184 | ' | ' | ' | ' | ' | ' | ' | 376,184 | ' | 336,318 | ' | ' |
Other | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net sales | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Depreciation and amortization | 2,105 | ' | ' | 2,044 | ' | ' | ' | ' | 6,221 | 5,919 | ' | ' | ' |
Income (loss) from operations | -14,742 | ' | ' | -10,086 | ' | ' | ' | ' | -42,389 | -35,734 | ' | ' | ' |
Interest (income) expense | -5,050 | ' | ' | -2,005 | ' | ' | ' | ' | -11,663 | -6,216 | ' | ' | ' |
Extinguishment of debt | ' | ' | ' | ' | ' | ' | ' | ' | 6,645 | ' | ' | ' | ' |
Income (loss) before taxes | -9,692 | ' | ' | -8,081 | ' | ' | ' | ' | -37,371 | -29,518 | ' | ' | ' |
Capital expenditures | ' | ' | ' | ' | ' | ' | ' | ' | 14,128 | 13,463 | ' | ' | ' |
Consolidating Adjustments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Net sales | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Intersegments | -58,030 | ' | ' | -53,941 | ' | ' | ' | ' | -167,963 | -156,500 | ' | ' | ' |
Income (loss) from operations | -264 | ' | ' | -813 | ' | ' | ' | ' | -806 | -1,258 | ' | ' | ' |
Income (loss) before taxes | -264 | ' | ' | -813 | ' | ' | ' | ' | -806 | -1,258 | ' | ' | ' |
Total assets | ($613,964) | ' | ' | ' | ' | ' | ' | ' | ($613,964) | ' | ($488,214) | ' | ' |