10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 1-10670

HANGER, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	84-0904275 (I.R.S. Employer Identification No.)
10910 Domain Drive, Suite 300, Austin, TX (Address of principal executive offices)	78758 (Zip Code)

Registrant’s telephone number, including area code: (512) 777-3800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HNGR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

As of October 27, 2021, the registrant had 38,708,566 shares of its Common Stock outstanding.

TABLE OF CONTENTS

Hanger, Inc.
Part I Financial Information
	Item 1. Condensed Consolidated Financial Statements (unaudited)	1
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
	Item 4. Controls and Procedures	40
Part II Other Information
	Item 1. Legal Proceedings	41
	Item 1A. Risk Factors	41
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
	Item 3. Defaults Upon Senior Securities	42
	Item 4. Mine Safety Disclosures	42
	Item 5. Other Information	42
	Item 6. Exhibits	42
Exhibits Index		43
Signatures		44

ii

PART 1.    FINANCIAL INFORMATION

HANGER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except par value and share amounts)

(Unaudited)

	As of September 30,		As of December 31,
	2021		2020
ASSETS
Current assets:
Cash and cash equivalents	$	75,587	$	144,602
Accounts receivable, net	136,112		128,596
Inventories	84,747		76,429
Income taxes receivable	8,135		12,888
Other current assets	16,896		12,357
Total current assets	321,477		374,872
Non-current assets:
Property, plant, and equipment, net	83,821		84,873
Goodwill	322,699		277,223
Other intangible assets, net	20,600		18,431
Deferred income taxes	51,445		54,877
Operating lease right-of-use assets	124,502		124,741
Other assets	18,184		15,734
Total assets	$	942,728	$	950,751
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	11,700	$	10,085
Accounts payable	61,721		65,091
Accrued expenses and other current liabilities	59,172		62,861
Accrued compensation related costs	41,793		72,541
Current portion of operating lease liabilities	36,421		35,002
Total current liabilities	210,807		245,580
Long-term liabilities:
Long-term debt, less current portion	495,279		493,012
Operating lease liabilities	101,759		104,589
Other liabilities	45,361		56,593
Total liabilities	853,206		899,774
Commitments and contingencies (Note P)
Shareholders’ equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 38,878,293 shares issued and 38,735,472 shares outstanding at 2021, and 38,321,796 shares issued and 38,178,975 shares outstanding at 2020, respectively	389		383
Additional paid-in capital	370,858		365,503
Accumulated other comprehensive loss	(14,977)		(20,215)
Accumulated deficit	(266,052)		(293,998)
Treasury stock, at cost; 142,821 shares at 2021 and 2020, respectively	(696)		(696)
Total shareholders’ equity	89,522		50,977
Total liabilities and shareholders’ equity	$	942,728	$	950,751

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

HANGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share and per share amounts)

(Unaudited)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net revenues	$	289,827	$	256,637	$	808,116	$	723,810
Material costs	92,561		81,462		257,002		228,675
Personnel costs	98,948		89,727		286,377		252,734
Other operating costs	34,871		29,979		99,157		74,207
General and administrative expenses	29,620		33,591		93,633		98,918
Depreciation and amortization	8,159		8,803		24,164		26,513
Income from operations	25,668		13,075		47,783		42,763
Interest expense, net	7,313		8,013		21,805		24,918
Non-service defined benefit plan expense	167		158		501		474
Income before income taxes	18,188		4,904		25,477		17,371
Benefit for income taxes	(2,929)		(1,911)		(2,469)		(4,750)
Net income	$	21,117	$	6,815	$	27,946	$	22,121
Basic and Diluted Per Common Share Data:
Basic income per share	$	0.55	$	0.18	$	0.72	$	0.58
Weighted average shares used to compute basic earnings per common share	38,730,468		38,133,598		38,550,307		37,878,753
Diluted income per share	$	0.54	$	0.18	$	0.71	$	0.57
Weighted average shares used to compute diluted earnings per common share	39,240,974		38,637,536		39,238,370		38,491,965

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

HANGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

(Unaudited)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	21,117	$	6,815	$	27,946	$	22,121
Other comprehensive income (loss):
Unrealized gain (loss) on cash flow hedges, net of tax provision (benefit) of $419, $488, $1,603, and $(2,509), respectively	$	1,321	$	1,542	$	5,058	$	(7,933)
Unrealized gain on defined benefit plan, net of tax provision of $19, $9, $57, and $27, respectively	60		28		180		84
Total other comprehensive income (loss)	1,381		1,570		5,238		(7,849)
Comprehensive income	$	22,498	$	8,385	$	33,184	$	14,272

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

HANGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Nine Months Ended September 30, 2021

(dollars and share amounts in thousands)

(Unaudited)

	Common Shares, Balance	Common Stock, Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total
Balance, December 31, 2020	38,179	$	383	$	365,503	$	(20,215)	$	(293,998)	$	(696)	$	50,977
Net loss	—	—		—		—		(3,330)		—		(3,330)
Share-based compensation expense	—	—		3,179		—		—		—		3,179
Issuance in connection with the exercise of stock options	29	—		366		—		—		—		366
Issuance of common stock upon vesting of restricted stock units	365	4		(4)		—		—		—		—
Effect of shares withheld to cover taxes	—	—		(4,520)		—		—		—		(4,520)
Total other comprehensive income	—	—		—		2,572		—		—		2,572
Balance, March 31, 2021	38,573	$	387	$	364,524	$	(17,643)	$	(297,328)	$	(696)	$	49,244
Net income	—	—		—		—		10,159		—		10,159
Share-based compensation expense	—	—		3,239		—		—		—		3,239
Issuance in connection with the exercise of stock options	80	1		4		—		—		—		5
Issuance of common stock upon vesting of restricted stock units	69	1		(1)		—		—		—		—
Effect of shares withheld to cover taxes	—	—		(40)		—		—		—		(40)
Total other comprehensive income	—	—		—		1,285		—		—		1,285
Balance, June 30, 2021	38,722	$	389	$	367,726	$	(16,358)	$	(287,169)	$	(696)	$	63,892
Net income	—	—		—		—		21,117		—		21,117
Share-based compensation expense	—	—		2,989		—		—		—		2,989
Issuance in connection with the exercise of stock options	12	—		153		—		—		—		153
Issuance of common stock upon vesting of restricted stock units	6	—		—		—		—		—		—
Effect of shares withheld to cover taxes	—	—		(10)		—		—		—		(10)
Total other comprehensive income	—	—		—		1,381		—		—		1,381
Balance, September 30, 2021	38,740	$	389	$	370,858	$	(14,977)	$	(266,052)	$	(696)	$	89,522

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

HANGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

For the Nine Months Ended September 30, 2020

(dollars and share amounts in thousands)

(Unaudited)

	Common Shares, Balance	Common Stock, Par Value		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total
Balance, December 31, 2019	37,460	$	376	$	354,326	$	(12,551)	$	(331,951)	$	(696)	$	9,504
Cumulative effect of a change in accounting for credit losses	—	—		—		—		(238)		—		(238)
Balance, January 1, 2020	37,460	376		354,326		(12,551)		(332,189)		(696)		9,266
Net loss	—	—		—		—		(15,748)		—		(15,748)
Share-based compensation expense	—	—		3,501		—		—		—		3,501
Issuance of common stock upon vesting of restricted stock units	354	4		(4)		—		—		—		—
Effect of shares withheld to cover taxes	—	—		(4,146)		—		—		—		(4,146)
Total other comprehensive loss	—	—		—		(8,873)		—		—		(8,873)
Balance, March 31, 2020	37,814	$	380	$	353,677	$	(21,424)	$	(347,937)	$	(696)	$	(16,000)
Net income	—	—		—		—		31,054		—		31,054
Share-based compensation expense	—	—		8,984		—		—		—		8,984
Issuance in connection with the exercise of stock options	3	—		38		—		—		—		38
Issuance of common stock upon vesting of restricted stock units	316	3		(3)		—		—		—		—
Effect of shares withheld to cover taxes	—	—		(2,682)		—		—		—		(2,682)
Total other comprehensive loss	—	—		—		(546)		—		—		(546)
Balance, June 30, 2020	38,133	$	383	$	360,014	$	(21,970)	$	(316,883)	$	(696)	$	20,848
Net income	—	—		—		—		6,815		—		6,815
Share-based compensation expense	—	—		3,081		—		—		—		3,081
Issuance in connection with the exercise of stock options	—	—		—		—		—		—		—
Issuance of common stock upon vesting of restricted stock units	2	—		—		—		—		—		—
Effect of shares withheld to cover taxes	—	—		(13)		—		—		—		(13)
Total other comprehensive income	—	—		—		1,570		—		—		1,570
Balance, September 30, 2020	38,135	$	383	$	363,082	$	(20,400)	$	(310,068)	$	(696)	$	32,301

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

HANGER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2021		2020
Cash flows provided by operating activities:
Net income	$	27,946	$	22,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,164		26,513
(Benefit) provision for doubtful accounts	(194)		629
Share-based compensation expense	9,407		15,565
Deferred income taxes	1,253		2,067
Amortization of debt discounts and issuance costs	1,429		1,564
Gain on sale and disposal of fixed assets	(1,004)		(729)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(5,120)		39,531
Inventories	(6,361)		(3,834)
Other current assets and other assets	(7,170)		(3,115)
Income taxes	4,753		(6,814)
Accounts payable	(4,134)		12,912
Accrued expenses and other current liabilities	(7,670)		6,914
Accrued compensation related costs	(30,902)		2,339
Other liabilities	(4,579)		8,016
Operating lease liabilities, net of amortization of right-of-use assets	(1,173)		1,559
Changes in operating assets and liabilities:	(62,356)		57,508
Net cash provided by operating activities	645		125,238
Cash flows used in investing activities:
Acquisitions, net of cash acquired	(39,253)		(16,854)
Purchase of property, plant, and equipment	(17,201)		(19,352)
Purchase of therapeutic program equipment leased to third parties under operating leases	(1,709)		(3,194)
Proceeds from sale of property, plant, and equipment	1,812		1,578
Purchase of company-owned life insurance investment	—		(250)
Net cash used in investing activities	(56,351)		(38,072)
Cash flows used in financing activities:
Borrowings under revolving credit agreement	—		79,000
Repayment of borrowings under revolving credit agreement	—		(79,000)
Payment of employee taxes on share-based compensation	(4,570)		(6,841)
Repayment of term loan	(3,788)		(3,788)
Payment on Seller Notes	(3,319)		(2,200)
Payments under vendor financing arrangements	(1,375)		(550)
Payments of financing lease obligations	(781)		(521)
Payment of debt issuance costs	—		(214)
Proceeds from the exercise of options	524		39
Net cash used in financing activities	(13,309)		(14,075)
(Decrease) increase in cash and cash equivalents	(69,015)		73,091
Cash and cash equivalents at beginning of period	144,602		74,419
Cash and cash equivalents at end of period	$	75,587	$	147,510

Non-cash financing and investing activities:

Seller Notes and other non-cash consideration related to acquisitions	$	12,192	$	29,420
Purchase of property, plant, and equipment in accounts payable at period end	4,109		4,299
Right-of-use assets obtained in exchange for finance lease obligations	119		1,975

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

HANGER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note A — Organization and Summary of Significant Accounting Policies

Description of Business

Hanger, Inc. (“we,” “our,” or “us”) is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries. We provide orthotic and prosthetic (“O&P”) services, distribute O&P devices and components, manage O&P networks, and provide therapeutic solutions to patients and businesses in acute, post-acute, and clinic settings. We operate through two segments, Patient Care and Products & Services.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements.  These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), as previously filed with the Securities and Exchange Commission (the “SEC”).

In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position, and cash flows. All such adjustments are of a normal, recurring nature.  The results of operations for the interim periods are not necessarily indicative of those to be expected for the full year.

A detailed description of our significant accounting policies and management judgments is contained in our 2020 Form 10-K.

Reclassifications

We have reclassified certain amounts in the prior year condensed consolidated financial statements to be consistent with the current year presentation. These relate to classifications within the condensed consolidated statements of operations.

Recent Developments Regarding COVID-19

We are subject to risks and uncertainties as a result of the outbreak of the novel coronavirus (“COVID-19”) pandemic (“COVID-19 pandemic”). The extent and duration of the impact of the COVID-19 pandemic on our operations and financial condition remain uncertain and difficult to predict. As a result of the COVID-19 pandemic, we believe that our patients are continuing to defer visits to our O&P clinics, as well as elective surgical procedures, both of which impact our business volumes through decreased patient encounters and physician referrals. We believe that the COVID-19 pandemic will continue to affect our business volumes for at least the remainder of 2021 when compared to pre-pandemic levels. Nevertheless, the overall adverse impact of the COVID-19 pandemic on our business volumes has diminished and stabilized over time, and our patient appointment and other business volumes continue to gradually improve as the prevalence of the virus decreases and COVID-19 vaccines become more widely available and accepted. It remains possible that further outbreaks of COVID-19, including the spread of variants such as the delta variant, or reinstitution of restrictive measures by federal, state and local governments could cause a recessionary environment impacting the healthcare industry generally, including the O&P industry. The United States government has responded with fiscal policy measures intended to support the healthcare industry and economy as a whole, including the passage of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) in March 2020.

CARES Act

The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $203.5 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid- enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue and health-care related expenses that are attributable to the COVID-19 pandemic. In April 2020, the U.S. Department of Health and Human Services (“HHS”) began making payments to healthcare providers from the $203.5 billion appropriation. These are grants, rather than loans, to healthcare providers, and will not need to be repaid.

During 2020, we recognized a total benefit of $24.0 million in our consolidated statement of operations within Other operating costs for the grant proceeds we received under the CARES Act (“Grants”) from HHS. We recognize income related to grants on a systematic and rational basis when it becomes probable that we have complied with the terms and conditions of the grant and in the period in which the corresponding costs or income related to the grant are recognized. We recognized the benefit from the Grants within Other operating costs in our Patient Care segment. In April 2021, we recognized an additional $0.7 million in proceeds received from grants under the CARES Act.

The CARES Act also provided for a deferral of the employer portion of payroll taxes incurred during the COVID-19 pandemic through December 2020. The provisions allowed us to defer half of such payroll taxes until December 2021 and the remaining half until December 2022. We paid the current portion of $5.9 million in September 2021, and deferred $5.9 million of payroll taxes within Other liabilities in the condensed consolidated balance sheet as of September 30, 2021.

Recent Accounting Pronouncements, Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU, effective beginning on March 12, 2020, provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. We are currently evaluating the effects that the adoption of this guidance, and related clarifying standards, will have on our condensed consolidated financial statements and the related disclosures.

Note B — Earnings Per Share

Basic earnings per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common shares outstanding during the period plus any potentially dilutive common shares, such as stock options, restricted stock units, and performance-based units calculated using the treasury stock method. Total anti-dilutive shares excluded from the diluted earnings per share were 2,610 and 2,400 for the three and nine months ended September 30, 2021, and 34,379 and 20,202 for the three and nine months ended September 30, 2020.

Our Credit Agreement (as defined below) restricts the payment of dividends or other distributions to our shareholders by us or any of our subsidiaries. See Note K - “Debt and Other Obligations” within these condensed consolidated financial statements.

The reconciliation of the numerators and denominators used to calculate basic and diluted net income per share are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands except share and per share amounts)	2021		2020		2021		2020
Net income	$	21,117	$	6,815	$	27,946	$	22,121
Weighted average shares outstanding - basic	38,730,468		38,133,598		38,550,307		37,878,753
Effect of potentially dilutive restricted stock units and options	510,506		503,938		688,063		613,212
Weighted average shares outstanding - diluted	39,240,974		38,637,536		39,238,370		38,491,965
Basic income per share	$	0.55	$	0.18	$	0.72	$	0.58
Diluted income per share	$	0.54	$	0.18	$	0.71	$	0.57

7

Note C — Revenue Recognition

Patient Care Segment

Revenue in our Patient Care segment is primarily derived from contracts with third party payors for the provision of O&P devices and is recognized upon the transfer of control of promised products or services to the patient at the time the patient receives the device. At, or subsequent to delivery, we issue an invoice to the third party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, the U.S. Department of Veterans Affairs (the “VA”), or private or patient pay (“Private Pay”) individuals. We recognize revenue for the amounts we expect to receive from payors based on expected contractual reimbursement rates, which are net of estimated contractual discounts and implicit price concessions. These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances.

The following table disaggregates revenue from contracts with customers in our Patient Care segment for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Patient Care Segment
Medicare	$	79,586	$	68,135	$	211,169	$	194,052
Medicaid	42,739		34,541		120,475		96,612
Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care)	83,396		75,966		232,828		213,234
Veterans Administration	22,901		19,339		64,298		54,057
Private Pay	15,734		14,683		48,055		40,751
Total	$	244,356	$	212,664	$	676,825	$	598,706

The impact to revenue related to prior period performance obligations was not material for the three and nine months ended September 30, 2021 and 2020.

Products & Services Segment

Revenue in our Products & Services segment is derived from the distribution of O&P components and from therapeutic solutions which includes the leasing and sale of rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training.

The following table disaggregates revenue from contracts with customers in our Products & Services segment for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Products & Services Segment
Distribution services, net of intersegment revenue eliminations	$	34,656	$	32,711	$	98,591	$	90,928
Therapeutic solutions	10,815		11,262		32,700		34,176
Total	$	45,471	$	43,973	$	131,291	$	125,104

Note D — Accounts Receivable, Net

Accounts receivable, net represents outstanding amounts we expect to collect from the transfer of our products and services. Principally, these amounts are comprised of receivables from Medicare, Medicaid, and commercial insurance plans. Our accounts receivable represent amounts outstanding from our gross charges, net of contractual discounts, sales returns, and other implicit price concessions including estimates for payor disallowances and patient non-payments.

8

We are exposed to credit losses primarily through our accounts receivable. These receivables are short in nature because their due date varies between due upon receipt of invoice and 90 days. We assess our receivables, divide them into similar risk pools, and monitor our ongoing credit exposure through active review of our aging buckets. Our activities include timely account reconciliations, dispute resolution, and payment confirmations. We also employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

Our expected loss methodology is developed using historical liquidation rates, current and future economic and market conditions, and a review of the current status of our patients and customers’ trade accounts receivable balances. We also grouped our receivables into similar risk pools to better measure the risks for each pool. After evaluating the risk for each pool, we determined that additional credit loss risk was immaterial for the Patient Care segment. For the Products & Services segment, an allowance for doubtful accounts is recorded, which is deducted from gross accounts receivable to arrive at “Accounts receivable, net.” As of September 30, 2021, we have considered the current and future economic and market conditions resulting in a decrease to the allowance for doubtful accounts by approximately $0.8 million since December 31, 2020.

Accounts receivable, net as of September 30, 2021 and December 31, 2020 is comprised of the following:

	As of September 30, 2021						As of December 31, 2020
(in thousands)	Patient Care		Products & Services		Consolidated		Patient Care		Products & Services		Consolidated
Gross charges before estimates for implicit price concessions	$	161,888	$	21,336	$	183,224	$	156,504	$	21,300	$	177,804
Less estimates for implicit price concessions:
Payor disallowances	(37,211)		—		(37,211)		(39,343)		—		(39,343)
Patient non-payments	(7,890)		—		(7,890)		(7,042)		—		(7,042)
Accounts receivable, gross	116,787		21,336		138,123		110,119		21,300		131,419
Allowance for doubtful accounts	—		(2,011)		(2,011)		—		(2,823)		(2,823)
Accounts receivable, net	$	116,787	$	19,325	$	136,112	$	110,119	$	18,477	$	128,596

Note E — Inventories

Our inventories are comprised of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Raw materials	$	21,411	$	19,716
Work in process	19,053		12,040
Finished goods	44,283		44,673
Total inventories	$	84,747	$	76,429

Note F — Acquisitions

2021 Acquisition Activity

During 2021, we completed the following acquisitions of O&P clinics with the intention of expanding the geographic footprint of our patient care offerings through the acquisition of these high quality O&P providers. None of the acquisitions were individually material to our financial position, results of operations, or cash flows.

•In the first quarter of 2021, we completed the acquisitions of all the outstanding equity interests of three O&P businesses and the assets of one O&P business for total consideration of $24.2 million, of which $19.2 million was cash consideration, net of cash acquired, $4.0 million was issued in the form of notes to shareholders at fair value, and $1.0 million in additional consideration.

9

•In the second quarter of 2021, we completed the acquisitions of all the outstanding equity interests of two O&P businesses for total consideration of $21.0 million, of which $16.0 million was cash consideration, net of cash acquired, $4.9 million was issued in the form of notes to shareholders at fair value, and $0.1 million in additional consideration.

•In the third quarter of 2021, we completed the acquisitions of all the outstanding equity interests of three O&P businesses and the assets of one O&P business for total consideration of $6.2 million, of which $3.9 million was cash consideration, net of cash acquired, $1.5 million was issued in the form of notes to shareholders at fair value, and $0.8 million in additional consideration.

We accounted for these transactions under the acquisition method of accounting and have reported the results of operations of each acquisition as of the respective dates of the acquisitions. We based the estimated fair values of intangible assets on an income approach utilizing the excess earnings method for customer relationships. The income approach utilizes management’s estimates of future operating results and cash flows using a weighted average cost of capital that reflects market participant assumptions. Other significant judgments used in the valuation of tangible assets acquired in the acquisition include estimated selling price of inventory and estimated replacement cost for acquired property, plant, and equipment. For all other assets acquired and liabilities assumed, the fair value reflects the carrying value of the asset or liability due to their short maturity. We recorded the excess of the fair value of the consideration transferred in the acquisitions over the fair value of net assets acquired as goodwill. The goodwill reflects our expectations of favorable future growth opportunities, anticipated synergies through the scale of our O&P operations, and the assembled workforce. We expect that the majority of the goodwill acquired in the first quarter of 2021, which has been assigned to our Patient Care reporting unit, will not be deductible for federal income tax purposes. We expect that substantially all of the goodwill acquired in the second and third quarters of 2021, which has been assigned to our Patient Care reporting unit, will be deductible for federal income tax purposes.

Acquisition-related costs are included in general and administrative expenses in our condensed consolidated statements of operations. Total acquisition-related costs incurred during the three and nine months ended September 30, 2021 were $0.6 million and $1.4 million, respectively, which includes those costs for transactions that are in progress or were not completed during the respective period. Acquisition-related costs incurred for the acquisitions completed during the three and nine months ended September 30, 2021 were $0.2 million and $0.7 million, respectively.

We have not presented pro forma combined results for these acquisitions because the impact on previously reported statements of operations would not have been material individually or in the aggregate.

Purchase Price Allocation

We have performed a preliminary valuation analysis of the fair market value of the assets acquired and liabilities assumed in the acquisitions. The final purchase price allocations will be determined when we have completed and fully reviewed the detailed valuations and could differ materially from the preliminary allocations. The final allocations may include changes in allocations of acquired intangible assets as well as goodwill and other changes to assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary.

10

The aggregate purchase price of these acquisitions were allocated on a preliminary basis as follows:

(in thousands)
Cash paid, net of cash acquired	$	39,104
Issuance of Seller Notes at fair value	10,442
Additional consideration, net	1,892
Aggregate purchase price	51,438
Accounts receivable	2,609
Inventories	1,957
Customer relationships (Weighted average useful life of 5.0 years)	5,505
Non-compete agreements (Weighted average useful life of 5.0 years)	62
Other assets and liabilities, net	(3,915)
Net assets acquired	6,218
Goodwill	$	45,220

Right-of-use assets and lease liabilities related to operating leases recognized in connection with the acquisitions completed during the nine months ended September 30, 2021 was $4.0 million.

2020 Acquisition Activity

During 2020, we completed the following acquisitions of O&P clinics with the intention of expanding the geographic footprint of our patient care offerings through the acquisition of these high quality O&P providers. None of the acquisitions were individually material to our financial position, results of operations, or cash flows.

•In the second quarter of 2020, we acquired all of the outstanding equity interests of an O&P business for total consideration of $46.2 million at fair value, of which $16.8 million was cash consideration, net of cash acquired, $21.9 million was issued in the form of notes to the former shareholders, $3.5 million in the form of a deferred payment obligation to the former shareholders, and $4.0 million in additional consideration. Of the $21.9 million in notes issued to the former shareholders, approximately $18.1 million of the notes were paid in October 2020 in a lump sum payment and the remaining $3.8 million of the notes are payable in annual installments over a period of three years on the anniversary date of the acquisition. Total payments of $4.0 million under the deferred payment obligation are due in annual installments beginning in the fourth year following the acquisition and for three years thereafter. Additional consideration includes approximately $3.6 million in liabilities incurred to the shareholders as part of the business combination payable in October 2020 and is included in Accrued expenses and other liabilities in the consolidated balance sheet. The remaining $0.4 million in additional consideration represents the effective settlement of amounts due to us from the acquired O&P business as of the acquisition date.

•In the fourth quarter of 2020, we completed the acquisitions of all the outstanding equity interests of four O&P businesses for total consideration of $7.1 million, of which $4.9 million was cash consideration, net of cash acquired, $1.9 million was issued in the form of notes to shareholders at fair value, and $0.3 million in additional consideration.

11

The aggregate purchase price of these acquisitions were allocated on a preliminary basis as follows:

(in thousands)
Cash paid, net of cash acquired	$	21,709
Issuance of Seller Notes at fair value	23,766
Deferred payment obligation at fair value	3,468
Additional consideration, net	4,319
Aggregate purchase price	53,262
Accounts receivable	4,224
Inventories	2,276
Customer relationships (Weighted average useful life of 5.0 years)	6,358
Non-compete agreements (Weighted average useful life of 5.0 years)	200
Other assets and liabilities, net	(4,561)
Net assets acquired	8,497
Goodwill	$	44,765

Right-of-use assets and lease liabilities related to operating leases recognized in connection with acquisitions completed for the year ended December 31, 2020 were $5.5 million.

Note G — Goodwill and Other Intangible Assets

We assess goodwill and indefinite-lived intangible assets for impairment annually as of October 1st, and between annual tests if an event occurs, or circumstances change, that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value.

The following table summarizes the activity in goodwill of the Patient Care operating segment for the periods indicated:

	For the Nine Months Ended September 30, 2021
(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
As of December 31, 2020	$	705,891	$	(428,668)	$	277,223
Additions from acquisitions	45,220		—		45,220
Measurement period adjustments (1)	256		—		256
As of September 30, 2021	$	751,367	$	(428,668)	$	322,699

(1) Measurement period adjustments relate to 2021 acquisitions of approximately $(0.4) million and acquisitions in prior years of approximately $0.7 million for a net increase to goodwill. These measurement period adjustments are primarily attributable to adjustments to the accounts receivables and accounts payables balances.

	For the Year Ended December 31, 2020
(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
As of December 31, 2019	$	660,912	$	(428,668)	$	232,244
Additions from acquisitions	45,144		—		45,144
Measurement period adjustments (1)	(165)		—		(165)
As of December 31, 2020	$	705,891	$	(428,668)	$	277,223

(1) Measurement period adjustments reducing goodwill relate to acquisitions in the current and prior year of approximately $0.2 million and are primarily attributable to adjustments to the preliminary allocations of customer relationship intangibles.

As of December 31, 2017, goodwill of approximately $139.3 million within the Products & Services operating segment was impaired in full.

12

The balances related to intangible assets as of September 30, 2021 and December 31, 2020 are as follows:

	As of September 30, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	22,384	$	(8,705)	$	—	$	13,679
Trade name	255		(195)		—		60
Patents and other intangibles	9,056		(6,312)		—		2,744
Definite-lived intangible assets	31,695		(15,212)		—		16,483
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	40,765	$	(15,212)	$	(4,953)	$	20,600

	As of December 31, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	16,879	$	(5,845)	$	—	$	11,034
Trade name	255		(176)		—		79
Patents and other intangibles	9,011		(5,810)		—		3,201
Definite-lived intangible assets	26,145		(11,831)		—		14,314
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	35,215	$	(11,831)	$	(4,953)	$	18,431

Amortization expense related to other intangible assets was approximately $1.2 million and $3.4 million for the three and nine months ended September 30, 2021 and $1.6 million and $4.6 million for the three and nine months ended September 30, 2020.

Estimated aggregate amortization expense for definite-lived intangible assets for each of the next five years ended December 31, and thereafter is as follows:

(in thousands)
2021 (remainder of the year)	$	1,252
2022	4,941
2023	4,698
2024	3,207
2025	2,019
Thereafter	366
Total	$	16,483

Note H — Other Current Assets and Other Assets

Other current assets consist of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Non-trade receivables	$	6,270	$	6,063
Prepaid maintenance	5,293		2,942
Prepaid insurance	978		266
Other prepaid assets	4,355		3,086
Total other current assets	$	16,896	$	12,357

13

Other assets consist of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Implementation costs for cloud computing arrangements	$	7,058	$	4,811
Cash surrender value of company-owned life insurance	4,503		3,973
Finance lease right-of-use assets	2,566		3,016
Deposits	2,182		2,144
Non-trade receivables	1,444		1,274
Other	431		516
Total other assets	$	18,184	$	15,734

Note I — Accrued Expenses and Other Current Liabilities and Other Liabilities

Accrued expenses and other current liabilities consist of:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Patient prepayments, deposits, and refunds payable	$	25,075	$	27,195
Accrued sales taxes and other taxes	9,456		9,863
Insurance and self-insurance accruals	7,518		7,651
Derivative liability	7,461		7,686
Accrued professional fees	1,177		1,016
Accrued interest payable	581		440
Other current liabilities	7,904		9,010
Total	$	59,172	$	62,861

Other liabilities consist of:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Supplemental executive retirement plan obligations	$	21,184	$	21,503
Derivative liability	7,953		14,388
Long-term insurance accruals	7,894		7,326
Deferred payroll taxes	5,918		5,918
Unrecognized tax benefits	300		5,465
Other	2,112		1,993
Total	$	45,361	$	56,593

Note J — Income Taxes

We recorded a benefit for income taxes of $2.9 million and $2.5 million for the three and nine months ended September 30, 2021. The effective tax rate was (16.1)% and (9.7)% for the three and nine months ended September 30, 2021. We recorded a benefit for income taxes of $1.9 million and $4.8 million for the three and nine months ended September 30, 2020. The effective tax rate was (39.0)% and (27.3)% for the three and nine months ended September 30, 2020.

14

The increase in the effective tax rate for the three months ended September 30, 2021 compared with the three months ended September 30, 2020 is primarily attributable to the net tax benefit of the loss carryback claim recognized in the three months ended September 30, 2020, as well as an increase in pre-tax book income for the three months ended September 30, 2021 partially offset by the release of reserves for uncertain tax positions for the three months ended September 30, 2021. Our effective tax rate for the three months ended September 30, 2021 differed from the federal statutory tax rate of 21% primarily due to an accrual true-up for actual research and development costs included on our recently filed tax return, non-deductible expenses, and the release of reserves for uncertain tax positions. Our effective tax rate for the three months ended September 30, 2020 differed from the federal statutory tax rate of 21% primarily due to the net tax benefit of the loss carryback claim and non-deductible expenses.

The increase in the effective tax rate for the nine months ended September 30, 2021 compared with the nine months ended September 30, 2020 is primarily attributable to the 2017 through 2019 research and development tax credits recognized in the nine months ended September 30, 2020, partially offset by a windfall from share-based compensation and the release of reserves for uncertain tax positions for the nine months ended September 30, 2021. Our effective tax rate for the nine months ended September 30, 2021 differed from the federal statutory tax rate of 21% primarily due to an accrual true-up for actual research and development costs included on our recently filed tax return, non-deductible expenses, a windfall from share-based compensation, and the release of reserves for uncertain tax positions. Our effective tax rate for the nine months ended September 30, 2020 differed from the federal statutory tax rate of 21% primarily due to research and development tax credits, the net tax benefit of the loss carryback claim, and non-deductible expenses.

For the year ended December 31, 2020, we completed a formal study to identify qualifying research and development expenses resulting in the recognition of federal tax benefits of $3.8 million, net of tax reserves, related to 2020 and $6.1 million, net of tax reserves, related to prior years. We recorded the tax benefit, before tax reserves, as a deferred tax asset. For the year ended December 31, 2021, we estimate a federal tax benefit of $4.6 million, net of tax reserves.

During the three months ended September 30, 2021, we released $3.5 million of unrecognized tax benefits and $1.2 million of interest expense due to lapse of statute of limitations for the applicable tax years. We do not anticipate further significant release of unrecognized tax benefits within the next twelve months.

Note K — Debt and Other Obligations

Debt consists of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Debt:
Term Loan B	$	487,325	$	491,113
Seller Notes	18,626		11,510
Deferred payment obligation	4,000		4,000
Finance lease liabilities and other	3,229		3,869
Total debt before unamortized discount and debt issuance costs	513,180		510,492
Unamortized discount and debt issuance costs, net	(6,201)		(7,395)
Total debt	$	506,979	$	503,097
Current portion of long-term debt:
Term Loan B	$	5,050	$	5,050
Seller Notes	5,770		4,060
Finance lease liabilities and other	880		975
Total current portion of long-term debt	11,700		10,085
Long-term debt	$	495,279	$	493,012

15

Refinancing of Credit Agreement and Term B Borrowings

On March 6, 2018, we entered into a new $605.0 million Senior Credit Facility (the “Credit Agreement”). The Credit Agreement provides for (i) a revolving credit facility with an initial maximum aggregate amount of availability of $100.0 million that matures in March 2023 and (ii) a $505.0 million Term Loan B facility due in quarterly principal installments commencing June 29, 2018, with all remaining outstanding principal due at maturity in March 2025. Availability under the revolving credit facility is reduced by outstanding letters of credit, which were approximately $5.1 million as of September 30, 2021. We may (a) increase the aggregate principal amount of any outstanding tranche of term loans or add one or more additional tranches of term loans under the loan documents, and/or (b) increase the aggregate principal amount of revolving commitments or add one or more additional revolving loan facilities under the loan documents by an aggregate amount of up to the sum of (1) $125.0 million and (2) an amount such that, after giving effect to such incurrence of such amount (but excluding the cash proceeds of such incremental facilities and certain other indebtedness, and treating all commitments in respect of revolving indebtedness as fully drawn), the consolidated first lien net leverage ratio is equal to or less than 3.80 to 1.00, if certain conditions are satisfied, including the absence of a default or an event of default under the Credit Agreement at the time of the increase and that we obtain the consent of each lender providing any incremental facility.

We had approximately $94.9 million in available borrowing capacity under our $100.0 million revolving credit facility as of September 30, 2021.

Our obligations under the Credit Agreement are currently guaranteed by our material domestic subsidiaries and will from time to time be guaranteed by, subject in each case to certain exceptions, any domestic subsidiaries that may become material in the future. Subject to certain exceptions, the Credit Agreement is secured by first-priority perfected liens and security interests in substantially all of our personal property and each subsidiary guarantor.

Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) Bank of America, N.A.’s prime rate, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin. For the three months ended September 30, 2021, the weighted average interest rate on outstanding borrowings under our Term Loan B facility was approximately 3.5%. We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note M - “Derivative Financial Instruments.”

We must also pay (i) an unused commitment fee ranging from 0.375% to 0.500% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement, and (ii) a per annum fee equal to (a) for each performance standby letter of credit outstanding under the Credit Agreement with respect to nonfinancial contractual obligations, 50% of the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit, and (b) for each other letter of credit outstanding under the Credit Agreement, the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn for such letter of credit.

The Credit Agreement contains various restrictions and covenants, including: (i) requirements that we maintain certain financial ratios at prescribed levels, (ii) a prohibition on payment of dividends and other distributions and (iii) restrictions on our ability and certain of our subsidiaries to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, or consummate acquisitions outside the healthcare industry. The Credit Agreement includes the following financial covenants applicable for so long as any revolving loans and/or revolving commitments remain outstanding under the Credit Agreement (some of which were amended in May 2020 by the Amendment (as defined and described below)): (i) a maximum consolidated first lien net leverage ratio (“Net Leverage Ratio”) (defined as, with certain adjustments and exclusions, the ratio of consolidated first-lien indebtedness to consolidated net income before interest, taxes, depreciation, amortization, non-cash charges and certain other items (“EBITDA”) for the most recently ended period of four fiscal quarters for which financial statements are available) of 4.25 to 1.00 for the fiscal quarters ended September 30, 2021 through March 31, 2022; and 3.75 to 1.00 for the fiscal quarter ended June 30, 2022 and the last day of each fiscal quarter thereafter; and (ii) a minimum interest coverage ratio (defined as, with certain adjustments, the ratio of our EBITDA to consolidated interest expense to the extent paid or payable in cash) of 2.75 to 1.00 as of the last day of any fiscal quarter.

16

The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable; provided, however, that the occurrence of an event of default as a result of a breach of a financial covenant under the Credit Agreement does not constitute a default or event of default with respect to any term facility under the Credit Agreement unless and until the required revolving lenders shall have terminated their revolving commitments and declared all amounts outstanding under the revolving credit facility to be due and payable. In addition, if we or any subsidiary guarantor becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency, or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable. Loans outstanding under the Credit Agreement will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) upon acceleration of such loans, (ii) while a payment event of default exists or (iii) upon the lenders’ request, during the continuance of any other event of default.

In May 2020, we entered into an amendment to the Credit Agreement (the “Amendment”) that provided for, amongst other things, an increase in the maximum Net Leverage Ratio to 5.00 to 1.00 for the fiscal quarter ended September 30, 2021; and 4.75 to 1.00 for the quarter ended December 31, 2021 and the last day of each fiscal quarter thereafter. In addition, the Amendment changed the definition of EBITDA used in the Net Leverage Ratio and minimum interest coverage ratio to adjust for declines in net revenue attributable to the COVID-19 pandemic. Borrowings under the revolving credit facility will bear interest at a variable rate equal to the greater of LIBOR or 1%, plus 3.75%. In addition, the Amendment contained certain restrictions and covenants that further limit our ability, and certain of our subsidiaries’ ability, to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, or consummate acquisitions not financed with the proceeds of an equity offering, except that certain acquisitions are permitted after September 30, 2020, in the event we maintain certain leverage and liquidity thresholds. We capitalized debt issuance costs of $0.2 million in connection with the Amendment, which were recorded in Other assets.

We were in compliance with all covenants at September 30, 2021.

Seller Notes and the Deferred Payment Obligation

We typically issue subordinated promissory notes (“Seller Notes”) as a part of the consideration transferred when making acquisitions. The Seller Notes are unsecured and are presented net of unamortized discount of $0.8 million and $0.9 million as of September 30, 2021 and December 31, 2020, respectively. We measure these instruments at their estimated fair values as of the respective acquisition dates. The stated interest rates on these instruments range from 2.50% to 3.00%. Principal and interest are payable in quarterly or annual installments and mature through August 2026.

Amounts due under the deferred payment obligation to the former shareholders of an acquired O&P business are unsecured and presented net of unamortized discount of $0.4 million and $0.5 million as of September 30, 2021 and December 31, 2020, respectively. The deferred payment obligation was measured at its estimated fair value as of the acquisition date and accrues interest at a rate of 3.0%. Principal and interest payments under the deferred payment obligation are due in annual installments beginning in 2024 and for three years thereafter.

Scheduled Maturities of Total Debt

Scheduled maturities of debt at September 30, 2021 were as follows:

(in thousands)
2021 (remainder of year)	$	2,405
2022	12,155
2023	11,818
2024	11,181
2025	473,069
Thereafter	2,552
Total debt before unamortized discount and debt issuance costs, net	513,180
Unamortized discount and debt issuance costs, net	(6,201)
Total debt	$	506,979

17

Note L — Fair Value Measurements

Financial Instruments

The carrying value of our outstanding term loan as of September 30, 2021 (excluding unamortized discounts and debt issuance costs of $5.4 million) was $487.3 million compared to its fair value of $486.7 million. The carrying value of our outstanding term loan as of December 31, 2020 (excluding unamortized discounts and debt issuance costs of $6.5 million) was $491.1 million compared to its fair value of $489.9 million. Our estimates of fair value are based on a discounted cash flow model and an indicative quote using unobservable inputs, primarily, our risk-adjusted credit spread, which represents a Level 3 measurement.

We have interest rate swap agreements designated as cash flow hedges and are measured at fair value based on inputs other than quoted market prices that are observable, which represents a Level 2 measurement. See Note K - “Debt and Other Obligations” and Note M - “Derivative Financial Instruments” for further information.

We believe that the carrying value of the Seller Notes and the deferred payment obligation approximates their fair values based on a discounted cash flow model using unobservable inputs, primarily, our credit spread for subordinated debt, which represents a Level 3 measurement. The carrying value of our outstanding Seller Notes and the deferred payment obligation issued in connection with past acquisitions as of September 30, 2021 and December 31, 2020 was $21.8 million and $14.6 million, net of unamortized discounts of $0.8 million and $0.9 million, respectively.

Note M — Derivative Financial Instruments

Cash Flow Hedges of Interest Rate Risk

In March 2018, we entered into interest rate swap agreements with notional values of $325.0 million at inception, which reduces $12.5 million annually until the swaps mature on March 6, 2024. As of September 30, 2021 and December 31, 2020, our swaps had a notional value outstanding of $287.5 million and $300.0 million, respectively.

Change in Net Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Loss

The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the three months ended September 30, 2021 and 2020, respectively:

(in thousands)	Cash Flow Hedges
Balance as of June 30, 2021	$	(13,034)
Unrealized loss recognized in other comprehensive income, net of tax	(646)
Reclassification to interest expense, net	1,967
Balance as of September 30, 2021	$	(11,713)
Balance as of June 30, 2020	$	(19,612)
Unrealized loss recognized in other comprehensive income, net of tax	(455)
Reclassification to interest expense, net	1,997
Balance as of September 30, 2020	$	(18,070)

18

The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the nine months ended September 30, 2021 and 2020, respectively:

(in thousands)	Cash Flow Hedges
Balance as of December 31, 2020	$	(16,771)
Unrealized loss recognized in other comprehensive income, net of tax	(829)
Reclassification to interest expense, net	5,887
Balance as of September 30, 2021	$	(11,713)
Balance as of December 31, 2019	$	(10,137)
Unrealized loss recognized in other comprehensive loss, net of tax	(12,518)
Reclassification to interest expense, net	4,585
Balance as of September 30, 2020	$	(18,070)

The following table presents the fair value of derivative liabilities within the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020:

	As of September 30, 2021				As of December 31, 2020
(in thousands)	Assets		Liabilities		Assets		Liabilities
Derivatives designated as cash flow hedging instruments:
Accrued expenses and other current liabilities	$	—	$	7,461	$	—	$	7,686
Other liabilities	—		7,953		—		14,388

Note N — Share-Based Compensation

On May 17, 2019, our shareholders approved the Hanger, Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan authorizes the issuance of (a) up to 2,025,000 shares of Common Stock, plus (b) 243,611 shares available for issuance under the Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”). Upon approval of the 2019 Plan, the 2016 Plan was no longer available for future awards.

On May 19, 2017, the Board of Directors approved the Hanger, Inc. Special Equity Plan (the “Special Equity Plan”). The Special Equity Plan authorized up to 1.5 million shares of Common Stock and operates completely independent from our 2016 Omnibus Incentive Plan. All awards under the Special Equity Plan were made on May 19, 2017, which consisted of 0.8 million stock options and 0.3 million performance-based stock awards. No further grants of awards will be authorized or issued under the Special Equity Plan.

As of September 30, 2021, there were 1,395,922 unvested restricted stock awards outstanding. This was comprised of 1,004,549 employee service-based awards with a weighted average grant date fair value of $21.31 per share, 342,017 employee performance-based awards with a weighted average grant date fair value of $21.61 per share, and 49,356 director service-based awards with a weighted average grant date value of $25.53 per share. As of September 30, 2021, there were 312,014 outstanding options exercisable with a weighted average exercise price of $12.77 and average remaining contractual term of 5 years.

The 2017 Special Equity Plan was amended in May 2020 to modify the performance period ending date for purposes of the compounded annual growth rate calculation to February 20, 2020, shortening the performance period to approximately 33 months, representing a reduction of three months. This adjustment was considered a modification per ASC 718 Compensation - Stock Compensation and, therefore, any incremental fair value arising from the modification of an award with market conditions would be recognized over the remaining service period. As a result of the modification, we recognized an additional $5.9 million in share-based compensation expense during the second quarter of 2020.

We recognized a total of approximately $3.0 million and $9.4 million of share-based compensation expense for the three and nine months ended September 30, 2021 and a total of approximately $3.1 million and $15.6 million for the three and nine months ended September 30, 2020, respectively. Share-based compensation expense, net of forfeitures, relates to restricted stock units, performance-based restricted stock units, and stock options.

19

Note O — Supplemental Executive Retirement Plans

Defined Benefit Supplemental Executive Retirement Plan

Effective January 2004, we implemented an unfunded noncontributory defined benefit plan (“DB SERP”) for certain senior executives. The DB SERP, which we administer, calls for fifteen annual payments upon retirement with the payment amount based on years of service and final average salary. Benefit costs and liability balances are calculated based on certain assumptions including benefits earned, discount rates, interest costs, mortality rates, and other factors. Actual results that differ from the assumptions are accumulated and amortized over future periods, affecting the recorded obligation and expense in future periods.

We believe the assumptions used are appropriate; however, changes in assumptions or differences in actual experience may affect our benefit obligation and future expenses. The change in net benefit cost and obligation during the three and nine months ended September 30, 2021 and 2020 is as follows:

Change in Benefit Obligation:
(in thousands)	2021		2020
Benefit obligation as of June 30	$	18,278	$	17,763
Service cost	123		98
Interest cost	87		121
Payments	(12)		(12)
Benefit obligation as of September 30	$	18,476	$	17,970
Benefit obligation as of December 31, 2020 and 2019, respectively	$	19,746	$	19,214
Service cost	370		294
Interest cost	261		363
Payments	(1,901)		(1,901)
Benefit obligation as of September 30	$	18,476	$	17,970

Amounts Recognized in the Condensed Consolidated Balance Sheets:
	As of September 30,		As of December 31,
(in thousands)	2021		2020
Current accrued expenses and other current liabilities	$	1,913	$	1,913
Non-current other liabilities	16,563		17,833
Total accrued liabilities	$	18,476	$	19,746

Defined Contribution Supplemental Executive Retirement Plan

In 2013, we established a defined contribution plan (“DC SERP”) that covers certain of our senior executives. Each participant is given a notional account to manage his or her annual distributions and allocate the funds among various investment options (e.g. mutual funds). These accounts are tracking accounts only for the purpose of calculating the participant’s benefit. The participant does not have ownership of the underlying mutual funds. When a participant initiates or changes the allocation of his or her notional account, we will generally make an allocation of our investments to match those chosen by the participant. While the allocation of our sub accounts is generally intended to mirror the participant’s account records (i.e. the distributions and gains or losses on those funds), the employee does not have legal ownership of any funds until payout upon retirement. The underlying investments are owned by the insurance company with which we own an insurance policy.

As of September 30, 2021 and December 31, 2020, the estimated accumulated obligation benefit is $4.6 million and $4.5 million, of which $4.2 million and $4.0 million is funded and $0.4 million and $0.5 million is unfunded at September 30, 2021 and December 31, 2020, respectively.

20

In connection with the DC SERP benefit obligation, we maintain a company-owned life insurance policy (“COLI”). The carrying value of the COLI is measured at its cash surrender value and is presented within “Other assets” in our condensed consolidated balance sheets. See Note H - “Other Current Assets and Other Assets” for additional information.

Note P — Commitments and Contingencies

Guarantees and Indemnification

In the ordinary course of our business, we may enter into service agreements with service providers in which we agree to indemnify or limit the service provider against certain losses and liabilities arising from the service provider’s performance of the agreement. We have reviewed our existing contracts containing indemnification or clauses of guarantees and do not believe that our liability under such agreements is material.

Other Matters

From time to time we are subject to legal proceedings and claims which arise in the ordinary course of our business, and are also subject to additional payments under business purchase agreements. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a materially adverse effect on our consolidated financial position, liquidity or results of our operations.

We operate in a highly regulated industry and receive regulatory agency inquiries from time to time in the ordinary course of our business, including inquiries relating to our billing activities. No assurance can be given that any discrepancies identified during a regulatory review will not have a material adverse effect on our consolidated financial statements.

Note Q — Segment and Related Information

We have identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each segment’s income from operations. The operating segments are described further below.

Patient Care - This segment consists of (i) our owned and operated patient care clinics, and (ii) our contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care, and maintenance of the devices. The principal reimbursement sources for our services are:

•Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, health management organizations (“HMOs”), preferred provider organizations (“PPOs”), hospitals, vocational rehabilitation, workers’ compensation programs, and similar sources;

•Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain persons with disabilities, which provides reimbursement for O&P products and services based on prices set forth in published fee schedules (generally with either 10 regional pricing areas or state level prices) for prosthetics and orthotics and by state for durable medical equipment (DMEPOS);

•Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons requiring financial assistance, regardless of age, which may supplement Medicare benefits for persons aged 65 or older requiring financial assistance; and

•the VA.

Our contract and network management business, known as Linkia, is the only network management company dedicated solely to serving the O&P market and is focused on managing the O&P services of national and regional insurance companies. We partner with healthcare insurance companies by securing a national or regional contract either as a preferred provider or to manage their O&P network of providers.

Products & Services - This segment consists of our distribution business, which distributes and fabricates O&P products and components to sell to both the O&P industry and our own patient care clinics, and our therapeutic solutions business. The therapeutic solutions business leases and sells rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training.

21

Corporate & Other - This consists of corporate overhead and includes unallocated expense such as personnel costs, professional fees, and corporate offices expenses.

The accounting policies of the segments are the same as those described in Note A - “Organization and Summary of Significant Accounting Policies” in our 2020 Form 10-K.

Intersegment revenue primarily relates to sales of O&P components from the Products & Services segment to the Patient Care segment. The sales are priced at the cost of the related materials plus overhead.

Summarized financial information concerning our reporting segments is shown in the following tables. Total assets for each of the segments has not materially changed from December 31, 2020.

	Patient Care				Products & Services
	For the Three Months Ended September 30,				For the Three Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Third party	$	244,356	$	212,664	$	45,471	$	43,973
Intersegments	—		—		58,495		50,011
Total net revenues	244,356		212,664		103,966		93,984
Material costs
Third party suppliers	65,356		56,599		27,205		24,863
Intersegments	9,408		7,339		49,087		42,672
Total material costs	74,764		63,938		76,292		67,535
Personnel expenses	84,479		76,989		14,469		12,738
Other expenses	38,923		34,713		6,636		5,957
Depreciation & amortization	4,870		4,786		1,974		2,633
Segment income from operations	$	41,320	$	32,238	$	4,595	$	5,121

	Patient Care				Products & Services
	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Third party	$	676,825	$	598,706	$	131,291	$	125,104
Intersegments	—		—		160,986		138,899
Total net revenues	676,825		598,706		292,277		264,003
Material costs
Third party suppliers	179,060		160,212		77,942		68,463
Intersegments	27,343		18,639		133,643		120,260
Total material costs	206,403		178,851		211,585		188,723
Personnel expenses	243,431		216,910		42,946		35,824
Other expenses	112,509		86,462		19,202		18,614
Depreciation & amortization	14,472		14,089		5,872		7,883
Segment income from operations	$	100,010	$	102,394	$	12,672	$	12,959

22

A reconciliation of the total of the reportable segments’ income from operations to consolidated net income is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Income from operations
Patient Care	$	41,320	$	32,238	$	100,010	$	102,394
Products & Services	4,595		5,121		12,672		12,959
Corporate & other	(20,247)		(24,284)		(64,899)		(72,590)
Income from operations	25,668		13,075		47,783		42,763
Interest expense, net	7,313		8,013		21,805		24,918
Non-service defined benefit plan expense	167		158		501		474
Income before income taxes	18,188		4,904		25,477		17,371
Benefit for income taxes	(2,929)		(1,911)		(2,469)		(4,750)
Net income	$	21,117	$	6,815	$	27,946	$	22,121

A reconciliation of the reportable segments’ net revenues to consolidated net revenues is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Patient Care	$	244,356	$	212,664	$	676,825	$	598,706
Products & Services	103,966		93,984		292,277		264,003
Corporate & other	—		—		—		—
Consolidating adjustments	(58,495)		(50,011)		(160,986)		(138,899)
Consolidated net revenues	$	289,827	$	256,637	$	808,116	$	723,810

A reconciliation of the reportable segments’ material costs to consolidated material costs is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Material costs
Patient Care	$	74,764	$	63,938	$	206,403	$	178,851
Products & Services	76,292		67,535		211,585		188,723
Corporate & other	—		—		—		—
Consolidating adjustments	(58,495)		(50,011)		(160,986)		(138,899)
Consolidated material costs	$	92,561	$	81,462	$	257,002	$	228,675

During the third quarter 2021, we have reclassified certain amounts related to the intercompany cost transfer between segment net revenues, segment material costs, and consolidating adjustments from the first six months of 2021 to be consistent with current presentation.

23

Note R — Subsequent Events

During the fourth quarter of 2021 to date, we completed the acquisitions of four O&P businesses for a total purchase price of $38.7 million. Total consideration transferred for these acquisitions is comprised of $30.0 million in cash consideration, and $8.7 million in the form of notes to the former shareholders. Due to the proximity of these transactions to the filing of this Form 10-Q, it is not practicable to provide a preliminary purchase price allocation of the fair value of the assets purchased and liabilities assumed in these acquisitions. Acquisition-related expenses related to these transactions were not material.

In October 2021, we entered into definitive share purchase agreements in connection with the acquisitions of two O&P businesses for a total purchase price of approximately $14.3 million. Due to the proximity of these transactions to the filing of this Form 10-Q, it is not practicable to provide a preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed in these acquisitions.

24

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report contains statements that are forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information concerning our liquidity and our possible or assumed future results of operations, including descriptions of our business strategies. These statements often include words such as “believe,” “expect,” “project,” “potential,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may,” “would,” “should,” “could,” “forecasts,” or similar words. These statements are based on certain assumptions that we have made in light of our experience in the industry as well as our perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate in these circumstances. We believe these assumptions are reasonable, but you should understand that these statements are not guarantees of performance or results, and our actual results could differ materially from those expressed in the forward-looking statements due to a variety of important factors, both positive and negative, that may be revised or supplemented in subsequent reports.

These statements involve risks, estimates, assumptions, and uncertainties that could cause actual results to differ materially from those expressed in these statements and elsewhere in this report. These uncertainties include, but are not limited to, the financial and business impacts of the COVID-19 pandemic on our operations and the operations of our customers, suppliers, governmental and private payors, and others in the healthcare industry and beyond; federal laws governing the health care industry; governmental policies affecting O&P operations, including with respect to reimbursement; failure to successfully implement a new enterprise resource planning system or other disruptions to information technology systems; the inability to successfully execute our acquisition strategy, including integration of recently acquired O&P clinics into our existing business; changes in the demand for our O&P products and services, including additional competition in the O&P services market; disruptions to our supply chain; our ability to enter into and derive benefits from managed-care contracts; our ability to successfully attract and retain qualified O&P clinicians; labor shortages and increased turnover in our employee base; contractual, inflationary and other general cost increases, including with regard to costs of labor, raw materials and freight; and other risks and uncertainties generally affecting the health care industry.

Readers are cautioned that all forward-looking statements involve known and unknown risks and uncertainties including, without limitation, those described in Item 1A. “Risk Factors”, contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), as well as those described in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q, some of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements contained therein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. Actual results could differ materially and adversely from those contemplated by any forward-looking statement. In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements in this discussion to reflect events and circumstances occurring after the date hereof or to reflect unanticipated events. Forward-looking statements and our liquidity, financial condition, and results of operations may be affected by the risks set forth in Item 1A. “Risk Factors”, contained in our 2020 Form 10-K, in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q, or by other unknown risks and uncertainties.

Non-GAAP Measures

We refer to certain financial measures and statistics that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We utilize these non-GAAP measures in order to evaluate the underlying factors that affect our business performance and trends. These non-GAAP measures should not be considered in isolation and should not be considered superior to, or as a substitute for, financial measures calculated in accordance with GAAP. We have defined and provided a reconciliation of these non-GAAP measures to their most comparable GAAP measures. The non-GAAP measure used in this Management’s Discussion and Analysis is as follows:

Same Clinic Revenues Per Day - measures the year-over-year change in revenue from clinics that have been open a full calendar year or more. Examples of clinics not included in the same center population are closures and acquisitions. Day-adjusted growth normalizes sales for the number of days a clinic was open in each comparable period.

25

Business Overview

General

We are a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries, and we and our predecessor companies have provided O&P services for nearly 160 years. We provide O&P services, distribute O&P devices and components, manage O&P networks, and provide therapeutic solutions to patients and businesses in acute, post-acute, and clinic settings. We operate through two segments - Patient Care and Products & Services.

Our Patient Care segment is primarily comprised of Hanger Clinic, which specializes in the design, fabrication, and delivery of custom O&P devices through 725 patient care clinics and 111 satellite locations in 47 states and the District of Columbia as of September 30, 2021. We also provide payor network contracting services to other O&P providers through this segment.

Our Products & Services segment is comprised of our distribution services and therapeutic solutions businesses. As a leading provider of O&P products in the United States, we engage in the distribution of a broad catalog of O&P parts, componentry, and devices to independent O&P providers nationwide. The other business in our Products & Services segment is our therapeutic solutions business, which develops specialized rehabilitation technologies and provides evidence-based clinical programs for post-acute rehabilitation to patients at approximately 3,900 skilled nursing and post-acute providers nationwide.

For the three and nine months ended September 30, 2021, our net revenues were $289.8 million and $808.1 million, respectively, and we recorded net income of $21.1 million and $27.9 million, respectively. For the three and nine months ended September 30, 2020, our net revenues were $256.6 million and $723.8 million, respectively, and we recorded net income of $6.8 million and $22.1 million, respectively.

Industry Overview

We estimate that approximately $4.3 billion is spent in the United States each year for prescription-based O&P products and services through O&P clinics. We believe our Patient Care segment currently accounts for approximately 21% of the market, providing a comprehensive portfolio of orthotic, prosthetic, and post-operative solutions to patients in acute, post-acute, and patient care clinic settings.

The O&P patient care services market in the United States is highly fragmented and is characterized by regional and local independent O&P businesses operated predominantly by independent operators, but also including two O&P product manufacturers with substantial international patient care services operations. We do not believe that any single competitor accounts for 2% or more of the nation’s total estimated O&P clinic revenues.

The industry is characterized by stable, recurring revenues, primarily resulting from new patients as well as the need for periodic replacement and modification of O&P devices. We anticipate that the demand for O&P services will continue to grow as the nation’s population increases, and as a result of several trends, including the aging of the U.S. population, there will be an increase in the prevalence of disease-related disability and the demand for new and advanced devices. We believe the typical replacement time for prosthetic devices is three to five years, while the typical replacement time for orthotic devices varies, depending on the device.

We estimate that approximately $1.8 billion is spent in the United States each year by providers of O&P patient care services for the O&P products, components, devices, and supplies used in their businesses. Our Products & Services segment distributes to independent providers of O&P services. We estimate that our distribution sales account for approximately 9% of the market for O&P products, components, devices, and supplies (excluding sales to our Patient Care segment).

We estimate the market for rehabilitation technologies, integrated clinical programs, and clinician training in skilled nursing facilities (“SNFs”) to be approximately $150 million annually. We currently provide these products and services to approximately 25% of the estimated 15,000 SNFs located in the U.S. We estimate the market for rehabilitation technologies, clinical programs, and training within the broader post-acute rehabilitation markets to be approximately $400 million annually. We do not currently provide a meaningful amount of products and services to this broader market.

26

Business Description

Patient Care

Our Patient Care segment employs approximately 1,600 clinical prosthetists, orthotists, and pedorthists, which we refer to as clinicians, substantially all of which are certified by either the American Board for Certification (“ABC”) or the Board of Certification of Orthotists and Prosthetists, which are the two boards that certify O&P clinicians. To facilitate timely service to our patients, we also employ technicians, fitters, and other ancillary providers to assist our clinicians in the performance of their duties. Through this segment, we additionally provide network contracting services to independent providers of O&P.

Patients are typically referred to Hanger Clinic by an attending physician who determines a patient’s treatment and writes a prescription. Our clinicians then consult with both the referring physician and the patient with a view toward assisting in the selection of an orthotic or prosthetic device to meet the patient’s needs. O&P devices are increasingly technologically advanced and custom designed to add functionality and comfort to patients’ lives, shorten the rehabilitation process, and lower the cost of rehabilitation.

Based on the prescription written by a referring physician, our clinicians examine and evaluate the patient and either design a custom device or, in the case of certain orthotic needs, utilize a non-custom device, including, in appropriate circumstances, an “off the shelf” device, to address the patient’s needs. When fabricating a device, our clinicians ascertain the specific requirements, componentry, and measurements necessary for the construction of the device. Custom devices are constructed using componentry provided by a variety of third party manufacturers who specialize in O&P, coupled with sockets and other elements that are fabricated by our clinicians and technicians, to meet the individual patient’s physical and ambulatory needs. Our clinicians and technicians typically utilize castings, electronic scans, and other techniques to fabricate items that are specialized for the patient. After fabricating the device, a fitting process is undertaken and adjustments are made to ensure the achievement of proper alignment, fit, and patient comfort. The fitting process often involves several stages to successfully achieve desired functional and cosmetic results.

Given the differing physical weight and size characteristics, location of injury or amputation, capability for physical activity and mobility, cosmetic, and other needs of each individual patient, each fabricated prosthesis and orthosis is customized for each particular patient. These custom devices are commonly fabricated at one of our regional or national fabrication facilities.

We have earned a reputation within the O&P industry for the development and use of innovative technology in our products, which has increased patient comfort and capability and can significantly enhance the rehabilitation process. We utilize multiple scanning and imaging technologies in the fabrication process, depending on the patient’s individual needs, including our proprietary Insignia scanning system. The Insignia system scans the patient and produces an accurate computer-generated image, resulting in a faster turnaround for the patient’s device and a more professional overall experience.

In recent years, we have established a centralized revenue cycle management organization that assists our clinics in pre-authorization, patient eligibility, denial management, collections, payor audit coordination, and other accounts receivable processes.

The principal reimbursement sources for our services are:

•Commercial private payors and other non-governmental organizations, which consist of individuals, rehabilitation providers, commercial insurance companies, HMOs, PPOs, hospitals, vocational rehabilitation centers, workers’ compensation programs, third party administrators, and similar sources;

•Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain persons with disabilities;

•Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons requiring financial assistance, regardless of age, which may supplement Medicare benefits for persons aged 65 or older requiring financial assistance; and

•the U.S. Department of Veterans Affairs (the “VA”).

27

We typically enter into contracts with third party payors that allow us to perform O&P services for a referred patient and to be reimbursed for our services. These contracts usually have a stated term of one to three years and generally may be terminated without cause by either party on 60 to 90 days’ notice, or on 30 days’ notice if we have not complied with certain licensing, certification, program standards, Medicare or Medicaid requirements, or other regulatory requirements. Reimbursement for services is typically based on a fee schedule negotiated with the third party payor that reflects various factors, including market conditions, geographic area, and number of persons covered. Many of our commercial contracts are indexed to the commensurate Medicare fee schedule that relates to the products or services being provided.

Government reimbursement is comprised of Medicare, Medicaid, and the VA. These payors set maximum reimbursement levels for O&P services and products. Medicare prices are adjusted each year based on the Consumer Price Index for All Urban Consumers (“CPI-U”) unless Congress acts to change or eliminate the adjustment. The CPI-U is adjusted further by an efficiency factor known as the “Productivity Adjustment” or the “Multi-Factor Productivity Adjustment” in order to determine the final rate adjustment each year. There can be no assurance that future adjustments will not reduce reimbursements for O&P services and products from these sources.

We, and the O&P industry in general, are subject to various Medicare compliance audits, including Recovery Audit Contractor (“RAC”) audits, Comprehensive Error Rate Testing (“CERT”) audits, Targeted Probe and Educate (“TPE”) audits, Supplemental Medical Review Contractor (“SMRC”) audits, and Unified Program Integrity Contractor (“UPIC”) audits. TPE audits are generally pre-payment audits, while RAC, CERT, and SMRC audits are generally post-payment audits. UPIC audits can be both pre- or post-payment audits, with a majority currently pre-payment. TPE audits replaced the previous Medicare Administrative Contractor audits. Adverse post-payment audit determinations generally require Hanger to reimburse Medicare for payments previously made, while adverse pre-payment audit determinations generally result in the denial of payment. In either case, we can request a redetermination or appeal, if we believe the adverse determination is unwarranted, which can take an extensive period of time to resolve, currently up to six years or more.

Products & Services

Through our wholly-owned subsidiary, Southern Prosthetic Supply, Inc. (“SPS”), we distribute O&P components to independent O&P clinics and other customers. Through our wholly-owned subsidiary, Accelerated Care Plus Corp. (“ACP”), our therapeutic solutions business is a leading provider of rehabilitation technologies and integrated clinical programs to skilled nursing and post-acute rehabilitation providers. Our value proposition is to provide our customers with a full-service “total solutions” approach encompassing proven medical technology, evidence-based clinical programs, and ongoing consultative education and training. Our services support increasingly advanced treatment options for a broader patient population and more medically complex conditions. We currently serve approximately 3,900 skilled nursing and post-acute providers nationwide. Through our SureFit subsidiary, we also manufacture and sell therapeutic footwear for diabetic patients in the podiatric market. We also operate the Hanger Fabrication Network, which fabricates custom O&P devices for our patient care clinics, as well as for independent O&P clinics.

Through our internal “supply chain” organization, we purchase, warehouse, and distribute over 475,000 SKUs from approximately 400 different manufacturers through SPS or directly to our own clinics within our Patient Care segment. Our warehousing and distribution facilities in Nevada, Georgia, Illinois, and Texas provide us with the ability to deliver products to the vast majority of our customers in the United States within two business days. The distribution facility we formerly operated in Pennsylvania ceased operations in September 2020.

Our supply chain organization enables us to:

•centralize our purchasing and thus lower our material costs by negotiating purchasing discounts from manufacturers;

•better manage our patient care clinic inventory levels and improve inventory turns;

•improve inventory quality control;

•encourage our patient care clinics to use the most clinically appropriate products; and

•coordinate new product development efforts with key vendors.

28

Effects of the COVID-19 Pandemic

As disclosed previously, we began to see a reduction in business volumes as a result of the COVID-19 pandemic starting in the last weeks of March 2020. As federal, state, and local authorities implemented social distancing and suppression measures to respond to an increasing number of nationwide COVID-19 infections, we experienced a decrease in our patient appointments and general business volumes. In response, during the last week of March 2020, we made certain changes to our operations, implemented a broad number of cost reduction measures, and delayed certain capital investment projects. Although our business volumes have shown gradual improvement from their initial significant decline in mid-2020, the adverse impact of the COVID-19 pandemic on our business has continued through the third quarter of 2021. As a result, our comparative financial and operational results when viewed as a whole for the periods impacted by the COVID-19 pandemic, including temporary labor and cost reduction measures largely in place during the second and third quarters of 2020, may not be indicative of future financial and operational performance. The volume effects and our operating responses are discussed further in this section, and the effects of COVID-19 on our financial condition is discussed in the “Financial Condition, Liquidity and Capital Resources” section below. Our results of operations for any quarter during the COVID-19 pandemic may not be indicative of results of operations that may be achieved for a subsequent quarter or the full year, and may not be similar to results of operations experienced in prior years. In addition, results in any given period in 2021 may be different than 2020 as a result of the depressed conditions in 2020 stemming from the COVID-19 pandemic.

Effect on Business Volumes

Patient appointments in our clinics during the third quarter of 2021 increased by approximately 10% as compared to the corresponding period in 2020. During the quarter, our prosthetics and orthotics day-adjusted sales, excluding acquisitions, increased by approximately 10.5% and 11.0%, respectively, with same clinic revenues increasing by 10.7% on a per day basis, when compared to the same period in the prior year. Patient appointments in our clinics during the third quarter of 2021 were approximately 92% of the volumes experienced in the third quarter of 2019 and same clinic revenues were 99% of those reported in the third quarter of 2019.

Throughout the COVID-19-affected periods of 2020 through the third quarter of 2021, revenues from orthotics have generally dropped more significantly than revenues from prosthetics. While prosthetic revenues seem to have recovered, the recovery in orthotics has been more gradual when comparing 2021 over the 2019 periods.

Billings for componentry delivered to independent providers of orthotics and prosthetics by our distribution services business were similar during the third quarter of 2021, as compared to the same period in 2019. Due to significant geographic product mix and timing differences, there can be no assurance that these volumes or billing amounts will be reflective of our future results and are solely provided for the purposes of giving context to the effect of the COVID-19 pandemic on our business during the periods impacted by the COVID-19 pandemic.

In the early months of 2021, vaccines for combating COVID-19 were authorized by the US Food and Drug Administration, and the US government commenced a phased roll out. However, the initial quantities of the vaccines were limited, and the US government prioritized distribution to front-line health care workers and other essential workers, followed by individual populations that were most susceptible to the severe effects of COVID-19. As vaccines became more readily available, social adversity to vaccination and other factors affected the achievement of nationwide vaccination goals. The lack of achievement of broad immunity coupled with an increase in infections caused by the new “Delta” variant in the third quarter contributed to an increase in the duration and effect of COVID-19 on our business volumes. Currently, we believe our business volumes are primarily being inhibited by reduced medical procedures due to surgical constraints, reduced referral volumes from in-patient and out-patient providers due to decreases in their volumes and the effect of COVID related protocols on their businesses, patient hesitancy to seek care during the pandemic and increased patient mortality. Additionally, we believe to a lessor extent that our patient volumes are being affected by our own labor constraints in technician and office administrative positions as well as decreases in our sales of off-the-shelf orthotic devices.

Given these factors, we believe that the COVID-19 pandemic will continue to affect our business volumes for at least the remainder of 2021 when compared to pre-pandemic levels. Nevertheless, the overall adverse impact of the COVID-19 pandemic on our business volumes has diminished and stabilized over time, and our patient appointment and other business volumes continue to gradually improve as the prevalence of the virus decreases and COVID-19 vaccines become more widely available and accepted.

29

Operating, Cost Reduction, and Other Responses

Throughout the periods affected by the COVID-19 pandemic, given that our services are considered essential, we have continued to operate our businesses. However, due to the risks posed to our clinicians, other employees, and patients, we made certain changes to our operating practices in order to promote safety and to minimize the risk of virus transmission. These included the implementation of certain patient screening protocols and the relocation of certain administrative and support personnel to a “work at home” environment.

As a result of the COVID-19 pandemic in 2020, we found it necessary to reduce our personnel costs in response to significant decreases in business volumes. Commencing at the start of April 2020, personnel cost reductions were implemented through (i) an average 32% decrease in the salaries of all of our exempt employees, the percentage of which varied from lower amounts for lower salaried employees up to reduction amounts ranging from 47% to 100% for our senior leadership team; (ii) the furloughing of certain employees on a voluntary and involuntary basis; (iii) the reduction of work hours for non-exempt employees; (iv) modification of bonus, commission, and other variable incentive plans; (v) the reduction of overtime expenses; (vi) the elimination of certain open positions; (vii) a reduction in the use of contract employees, and (viii) the temporary suspension of certain auto allowances. During the period April 2020 through September 2020, salaries were gradually reinstated, with full reinstatement of all exempt employees’ salaries being effective on September 19, 2020. We believe this approach allowed us to retain as many employees as possible to preserve the experience, culture, and patient service capabilities of our workforce for periods subsequent to the COVID-19 pandemic.

In addition to these reductions in operating expenses, we temporarily delayed the implementation of our supply chain and financial systems, further discussed in the “New Systems Implementations” section. We also suspended construction of our new fabrication facility in Tempe, Arizona, and other projects related to the reconfiguration of our distribution facilities. We resumed construction of the Tempe, Arizona fabrication facility in the first quarter of 2021, and recommenced the remaining activities in the second quarter of 2021.

While it’s not yet a requirement that all Hanger employees be vaccinated, we are strongly encouraging it. We are already seeing that federal, state, and local regulations are starting to require certain employees, particularly those who provide healthcare services, to be vaccinated. We are closely monitoring the evolving and growing requirements to ensure we as a company are continuing to take the appropriate actions to ensure our impacted employees are compliant.

CARES Act

The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $203.5 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid-enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue attributable to the COVID-19 pandemic, such as lost revenues attributable to canceled procedures, as well as to provide support for health-care related expenses. In April 2020, HHS began making payments to healthcare providers from the $203.5 billion appropriation. These are grants, rather than loans, to healthcare providers, and will not need to be repaid.

During 2020, we recognized a total benefit of $24.0 million in our consolidated statement of operations within Other operating costs for the grant proceeds we received under the CARES Act from HHS. In April 2021, we received approximately $0.7 million in additional grant proceeds under the CARES Act from HHS.

30

Other Products & Services Performance Considerations

As discussed in our 2020 Form 10-K, under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, several of the larger independent O&P providers we served through the distribution of componentry encountered financial difficulties during the year ended December 31, 2020, which resulted in our discontinuing distribution services to these customers. Generally, we believe our distribution customers encounter reimbursement pressures similar to those we experience in our own Patient Care segment and, depending on their ability to adapt to the increased claims documentation standards that have emerged in our industry, this may either limit the rate of growth of some of our customers, or otherwise affect the rate of growth we experience in our distribution of O&P componentry to independent providers. In certain circumstances, we may pursue acquisition of inventory in advance to preserve pricing to offset inflation and potential supply chain constraints. During future periods, in addition to the adverse effects of the COVID-19 pandemic discussed above, we currently believe our rate of revenue growth in this segment may decrease as we choose to limit the extent to which we distribute certain low margin orthotic products. Additionally, to the extent that we acquire independent O&P providers who are pre-existing customers of our distribution services, our revenue growth in this segment would be adversely affected as we would no longer recognize external revenue from the components we provide them.

Within our Products & Services segment, in addition to our distribution of products, we provide therapeutic equipment and services to patients at SNFs and other healthcare provider locations. Since 2016, a number of our clients, including several of our larger SNF clients, have been discontinuing their use of our therapeutic services. We believe these discontinuances relate primarily to their overall efforts to reduce the costs they bear for therapy-related services within their facilities. As a part of those terminations of service, in a number of cases, we elected to sell terminating clients the equipment that we had utilized for their locations. Within this portion of our business, we have and continue to respond to these historical trends through the expansion of our products and services offerings.

Reimbursement Trends

In our Patient Care segment, we are reimbursed primarily through employer-based plans offered by commercial insurance carriers, Medicare, Medicaid, and the VA. The following is a summary of our payor mix, expressed as an approximate percentage of net revenues for the periods indicated:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Medicare	32.6	%	32.0	%	31.2	%	32.4	%
Medicaid	17.5	%	16.2	%	17.8	%	16.1	%
Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care)	34.1	%	35.7	%	34.4	%	35.6	%
Veterans Administration	9.4	%	9.1	%	9.5	%	9.0	%
Private Pay	6.4	%	7.0	%	7.1	%	6.9	%
Patient Care	100.0	%	100.0	%	100.0	%	100.0	%

Patient Care constituted 84.3% and 83.8% of our net revenues for the three and nine months ended September 30, 2021 and 82.9% and 82.7% for the three and nine months ended September 30, 2020. Our remaining net revenues were provided by our Products & Services segment which derives its net revenues from commercial transactions with independent O&P providers, healthcare facilities, and other customers. In contrast to net revenues from our Patient Care segment, payment for these products and services are not directly subject to third party reimbursement from health care payors. Our reimbursement from Medicare is normally updated by the Centers for Medicare and Medicaid Studies (“CMS”) annually, and that update is currently based on changes in the consumer price index, adjusted for increases in productivity. Our contracts with commercial and other payors are based on negotiated rates, or fixed fee schedules, and do not generally provide for automatic increases based on changes in inflation. Overall, approximately half of our reimbursement arrangements have an inherent reference to inflation, or can be adjusted by us to reflect increases in inflation, while the other half do not have such accommodations.

31

The amount of our reimbursement varies based on the nature of the O&P device we fabricate for our patients. Given the particular physical weight and size characteristics, location of injury or amputation, capability for physical activity, and mobility, cosmetic, and other needs of each individual patient, each fabricated prostheses and orthoses is customized for each particular patient. The nature of this customization and the manner by which our claims submissions are reviewed by payors makes our reimbursement process administratively difficult.

To receive reimbursement for our work, we must ensure that our clinical, administrative, and billing personnel receive and verify certain medical and health plan information, record detailed documentation regarding the services we provide, and accurately and timely perform a number of claims submission and related administrative tasks. It is our belief the increased nationwide efforts to reduce health care costs has driven changes in industry trends with increases in payor pre-authorization processes, documentation requirements, pre-payment reviews, and pre- and post-payment audits, and our ability to successfully undertake these tasks using our traditional approach has become increasingly challenging. For example, the Medicare contractor for Pricing, Data Analysis and Coding (referred to as “PDAC”) recently announced verification requirements and code changes that has reduced the reimbursement level for certain prosthetic feet, and the VA is in the process of reassessing the method it uses to determine reimbursement levels for O&P services and products provided under certain miscellaneous codes.

A measure of our effectiveness in securing reimbursement for our services can be found in the degree to which payors ultimately disallow payment of our claims. Payors can deny claims due to their determination that a physician who referred a patient to us did not sufficiently document that a device was medically necessary or clearly establish the ambulatory (or “activity”) level of a patient. Claims can also be denied based on our failure to ensure that a patient was currently eligible under a payor’s health plan, that the plan provides full O&P benefits, that we received prior authorization, or that we filed or appealed the payor’s determination timely, as well as on the basis of our coding, failure by certain classes of patients to pay their portion of a claim, or for various other reasons. If any portion of, or administrative factor within, our claim is found by the payor to be lacking, then the entirety of the claim amount may be denied reimbursement.

In recent years, we have taken a number of actions to manage payor disallowance trends. These initiatives included: (i) the creation of a central revenue cycle management function; (ii) the implementation of a patient management and electronic health record system; and (iii) the establishment of new clinic-level procedures and training regarding the collection of supporting documentation and the importance of diligence in our claims submission processes.

Payor disallowances is considered an adjustment to the transaction price. Estimated uncollectible amounts due to us by patients are generally considered implicit price concessions and are presented as a reduction of net revenues. These amounts recorded in net revenues within the Patient Care segment for the three and nine months ended September 30, 2021 and 2020 are as follows:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(dollars in thousands)	2021			2020			2021			2020
Gross charges	$	253,824		$	222,950		$	700,471		$	625,440
Less estimated implicit price concessions arising from:
Payor disallowances	7,349			9,369			18,665			24,020
Patient non-payments	2,119			917			4,981			2,714
Payor disallowances and patient non-payments	9,468			10,286			23,646			26,734
Net revenues	$	244,356		$	212,664		$	676,825		$	598,706
Payor disallowances	$	7,349		$	9,369		$	18,665		$	24,020
Patient non-payments	2,119			917			4,981			2,714
Payor disallowances and patient non-payments	$	9,468		$	10,286		$	23,646		$	26,734
Payor disallowances %	2.9		%	4.2		%	2.7		%	3.8		%
Patient non-payments %	0.8		%	0.4		%	0.7		%	0.4		%
Percent of gross charges	3.7		%	4.6		%	3.4		%	4.2		%

32

During 2020 and through the third quarter of 2021, we benefited from reductions in claims denials and increases in our rates of collection compared to prior periods. This has been due to a variety of factors, including increases in our revenue cycle management staffing and an increased focus on collections and liquidity during a period of reduced business volumes, a possible temporary relaxing of payor review procedures during the COVID-19 pandemic, the benefit of CARES Act funds on the ability of patients to pay their portion of claims and other factors relating to our pre-authorization and documentation procedures for devices. We do not believe this favorable trend will necessarily be sustainable in future periods as the COVID-19 pandemic subsides and patient volumes and resulting revenues increase.

Acquisitions

During 2021, we completed the following acquisitions of O&P clinics with the intention of expanding the geographic footprint of our patient care offerings through the acquisition of these high quality O&P providers. None of the acquisitions were individually material to our financial position, results of operations, or cash flows.

•In the first quarter of 2021, we completed the acquisitions of all the outstanding equity interests of three O&P businesses and the assets of one O&P business for total consideration of $24.2 million, of which $19.2 million was cash consideration, net of cash acquired, $4.0 million was issued in the form of notes to shareholders at fair value, and $1.0 million in additional consideration.

•In the second quarter of 2021, we completed the acquisitions of all the outstanding equity interests of two O&P businesses for total consideration of $21.0 million, of which $16.0 million was cash consideration, net of cash acquired, $4.9 million was issued in the form of notes to shareholders at fair value, and $0.1 million in additional consideration.

•In the third quarter of 2021, we completed the acquisitions of all the outstanding equity interests of three O&P businesses and the assets of one O&P business for total consideration of $6.2 million, of which $3.9 million was cash consideration, net of cash acquired, $1.5 million was issued in the form of notes to shareholders at fair value, and $0.8 million in additional consideration.

During 2020, we completed the following acquisitions of O&P clinics with the intention of expanding the geographic footprint of our patient care offerings through the acquisition of these high quality O&P providers. None of the acquisitions were individually material to our financial position, results of operations, or cash flows.

•In the second quarter of 2020, we acquired all of the outstanding equity interests of an O&P business for total consideration of $46.2 million at fair value, of which $16.8 million was cash consideration, net of cash acquired, $21.9 million was issued in the form of notes to the former shareholders, $3.5 million in the form of a deferred payment obligation to the former shareholders, and $4.0 million in additional consideration. Of the $21.9 million in notes issued to the former shareholders, approximately $18.1 million of the notes were paid in October 2020 in a lump sum payment and the remaining $3.8 million of the notes are payable in annual installments over a period of three years on the anniversary date of the acquisition. Total payments of $4.0 million under the deferred payment obligation are due in annual installments beginning in the fourth year following the acquisition and for three years thereafter. Additional consideration includes approximately $3.6 million in liabilities incurred to the shareholders as part of the business combination payable in October 2020 and is included in Accrued expenses and other liabilities in the consolidated balance sheet. The remaining $0.4 million in additional consideration represents the effective settlement of amounts due to us from the acquired O&P business as of the acquisition date.

•In the fourth quarter of 2020, we completed the acquisitions of all the outstanding equity interests of four O&P businesses for total consideration of $7.1 million, of which $4.9 million was cash consideration, net of cash acquired, $1.9 million was issued in the form of notes to shareholders at fair value, and $0.3 million in additional consideration.

33

Acquisition-related costs are included in general and administrative expenses in our condensed consolidated statements of operations. Total acquisition-related costs incurred during the three and nine months ended September 30, 2021 were $0.6 million and $1.4 million, respectively, which includes those costs for transactions that are in progress or were not completed during the respective period. Acquisition-related costs incurred for the acquisitions completed during the three and nine months ended September 30, 2021 were $0.2 million and $0.7 million, respectively. Total acquisition-related costs incurred during the year ended December 31, 2020 were $0.9 million, which includes those costs for transactions that are in progress or not completed during the respective period. Acquisition-related costs incurred for acquisitions completed during the year ended December 31, 2020 were $0.6 million.

New Systems Implementations

During 2019, we commenced the design, planning, and initial implementation of new financial and supply chain systems (“New Systems Implementations”), and planned to invest in new servers and software that operate as a part of our technology infrastructure. As discussed in the “Effects of the COVID-19 Pandemic” section, we elected in 2020 to temporarily delay our New Systems Implementations as part of our efforts to preserve liquidity. We recommenced these activities in the second quarter of 2021, and transitioned our corporate financial systems to the Oracle Cloud Financials platform in the third quarter of 2021.

In connection with our new financial and supply chain systems, for the three and nine month period ended September 30, 2021, we have expensed $1.8 million and $4.1 million, respectively, and for the three and nine month period ended September 30, 2020, we expensed $0.5 million and $2.0 million, respectively. For the year ended December 31, 2020, we expensed $2.6 million. We currently anticipate that we will spend $5.4 million for the full year 2021 on these systems.

As of September 30, 2021, we capitalized $7.7 million of implementation costs for cloud computing arrangements, net of accumulated amortization, and recorded in other current assets and other assets in the condensed consolidated balance sheet.

Personnel

While we have traditionally been able to recruit and retain adequate staffing to operate and support our business, our ability to support growth is dependent on our ability to add new personnel. Nevertheless, like many other employers, we are currently finding it difficult to recruit and retain personnel in certain positions, including clinic front office administrative, distribution center, and fabrication center technician positions. In certain cases, we have also found it necessary to make individual market adjustments for clinical and professional staff to attract or retain them. Our inability to successfully recruit and maintain staffing levels for these positions could introduce constraints on our ability to achieve our revenue growth objectives in coming quarters. We may find it necessary to further increase wages in these areas in coming quarters if we find that we are unable to attract a sufficient number of personnel. Additionally, when coupled with the generally fixed nature of our reimbursement arrangements, increases in our personnel costs caused by current inflation conditions may put increasing pressure on our ability to maintain or increase our margins. Please refer to Part II, Item 1A. “Risk Factors” in this report for further discussion.

Seasonality

We believe our business is affected by the degree to which patients have otherwise met the deductibles for which they are responsible in their medical plans during the course of the year. The first quarter is normally our lowest relative net revenue quarter, followed by the second and third quarters, which are somewhat higher and consistent with one another. Due to the general fulfillment by patients of their health plan co-payments and deductible requirements towards the year’s end, our fourth quarter is normally our highest revenue producing quarter. However, historical seasonality patterns have been impacted by the COVID-19 pandemic and may not be reflective of our prospective financial results and operations. Please refer to the “Effects of the COVID-19 Pandemic” section for further discussion.

34

Our results are also affected, to a lesser extent, by our holding of an education fair in the first quarter of each year. This event is conducted to assist our clinicians in maintaining their training and certification requirements and to facilitate a national meeting with our clinical leaders. We also invite manufacturers of the componentry for the devices we fabricate to these annual events so they can demonstrate their products and otherwise assist in our training process. Due to the COVID-19 pandemic, we conducted our first virtual education fair in 2021. During the three months ended March 31, 2021 and 2020 we spent $0.3 million and $2.3 million on travel and other costs associated with this event, respectively. In addition to the costs we incur associated with this annual event, we also lose the productivity of a significant portion of our clinicians during the period in which this event occurs, which contributes to the lower seasonal revenue level we experience during the first quarter of each year.

Critical Accounting Policies

Our analysis and discussion of our financial condition and results of operations is based upon the condensed consolidated financial statements that have been prepared in accordance with GAAP. The preparation of consolidated 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 consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. GAAP provides the framework from which to make these estimates, assumptions, and disclosures. We have chosen accounting policies within GAAP that management believes are appropriate to fairly present, in all material respects, our operating results, and financial position. We believe the following accounting policies are critical to understanding our results of operations and the more significant judgments and estimates used in the preparation of our condensed consolidated financial statements:

•Revenue recognition

•Accounts receivable, net

•Inventories

•Business combinations

•Goodwill and other intangible assets, net

•Income taxes

The use of different estimates, assumptions, or judgments could have a material effect on reported amounts of assets, liabilities, revenue, expenses, and related disclosures as of the date of the financial statements and during the reporting period. These critical accounting policies are described in more detail in our 2020 Form 10-K, under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note A - “Organization and Summary of Significant Accounting Policies” contained within these condensed consolidated financial statements.

Reclassifications

We have reclassified certain amounts in the prior year condensed consolidated financial statements to be consistent with the current year presentation. These relate to classifications within the condensed consolidated statements of operations.

35

Results of Operations

Our results of operations for the three months ended September 30, 2021 and 2020 were as follows (unaudited):

	For the Three Months Ended September 30,				Percent Change
(dollars in thousands)	2021		2020		2021 vs 2020
Net revenues	$	289,827	$	256,637	12.9	%
Material costs	92,561		81,462		13.6	%
Personnel costs	98,948		89,727		10.3	%
Other operating costs	34,871		29,979		16.3	%
General and administrative expenses	29,620		33,591		(11.8)	%
Depreciation and amortization	8,159		8,803		(7.3)	%
Operating expenses	264,159		243,562		8.5	%
Income from operations	25,668		13,075		96.3	%
Interest expense, net	7,313		8,013		(8.7)	%
Non-service defined benefit plan expense	167		158		5.7	%
Income before income taxes	18,188		4,904		270.9	%
Benefit for income taxes	(2,929)		(1,911)		(53.3)	%
Net income	$	21,117	$	6,815	209.9	%

During these periods, our operating expenses as a percentage of net revenues were as follows:

	For the Three Months Ended September 30,
	2021		2020
Material costs	31.9	%	31.7	%
Personnel costs	34.1	%	35.0	%
Other operating costs	12.1	%	11.7	%
General and administrative expenses	10.2	%	13.1	%
Depreciation and amortization	2.8	%	3.4	%
Operating expenses	91.1	%	94.9	%

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

Relevance of Third Quarter Results to Comparative and Future Periods. As discussed in “Effects of the COVID-19 Pandemic” above, commencing late in the first quarter of 2020, our revenues and operating results began to be adversely affected by the COVID-19 pandemic, a trend that continued throughout 2020 and into 2021. The effects of this public health emergency on our revenues and earnings, particularly in 2020, impacted the comparison to our historical financial results. As a result, our comparative financial and operational results when viewed as a whole for the periods impacted by the COVID-19 pandemic, including temporary labor and other cost reduction measures largely in place during the second and third quarters of 2020, may not be indicative of future financial and operational performance. Please refer to the “Effects of the COVID-19 Pandemic” section above and the “Financial Condition, Liquidity and Capital Resources” section below for additional forward-looking information concerning our current expectations regarding the effect of the COVID-19 pandemic on our prospective results and financial condition.

36

Net revenues. Net revenues for the three months ended September 30, 2021 were $289.8 million, an increase of $33.2 million, or 12.9%, from $256.6 million for the three months ended September 30, 2020. Net revenues by operating segment, after elimination of intersegment activity, were as follows:

	For the Three Months Ended September 30,				Change		Percent Change
(dollars in thousands)	2021		2020
Patient Care	$	244,356	$	212,664	$	31,692	14.9	%
Products & Services	45,471		43,973		1,498		3.4	%
Net revenues	$	289,827	$	256,637	$	33,190	12.9	%

Patient Care net revenues for the three months ended September 30, 2021 were $244.4 million, an increase of $31.7 million, or 14.9%, from $212.7 million for the same period in the prior year. Same clinic revenues increased $21.9 million for the three months ended September 30, 2021 compared to the same period in the prior year, reflecting an increase of 10.7% on a per-day basis. Net revenues from acquired clinics increased $9.7 million, and revenues from consolidations and other services increased $0.1 million. During the third quarter, we estimate that our same clinic net revenues were approximately 99% of the level we reported in the third quarter of 2019, prior to the pandemic, while our patient appointment volumes during the quarter were 92% of those in the 2019 period. This increase in revenue relative to patient volumes related primarily to reductions in patient encounters for lower value “off the shelf” orthotic devices as well as increases in the volume of technology-related prosthetic devices during the third quarter.

Prosthetics constituted approximately 55% of our total Patient Care revenues for the three months ended September 30, 2021 and 56% for the same period in 2020, excluding the impact of acquisitions. Prosthetic revenues for the three months ended September 30, 2021 were 10.5% higher, on a per-day basis, than the same period in the prior year, excluding the impact of acquisitions. Orthotics, shoes, inserts, and other products increased by 11.0% on a per-day basis compared to the same comparative prior periods, excluding the impact of acquisitions. Revenues in the third quarter of 2020, particularly orthotic revenues, were adversely affected due to a decline in patient appointment volumes as a result of the onset of the COVID-19 pandemic and other factors impacting our business volumes discussed in the “Effects of the COVID-19 Pandemic” section.

Products & Services net revenues for the three months ended September 30, 2021 were $45.5 million, an increase of $1.5 million, or 3.4% from the same period in the prior year. This was primarily attributable to an increase of $1.9 million, or 5.9%, in the distribution of O&P componentry to independent providers in the period stemming primarily from lower volumes in the same period of 2020 due to the COVID-19 pandemic, as discussed in the “Effects of the COVID-19 Pandemic” section above. In addition, net revenues from therapeutic solutions decreased $0.4 million, or 4.0%, primarily as a result of historical customer lease cancellations and discounts, partially offset by lease installations.

Material costs. Material costs for the three months ended September 30, 2021 were $92.6 million, an increase of $11.1 million or 13.6%, from the same period in the prior year. Total material costs as a percentage of net revenues increased to 31.9% in the three months ended September 30, 2021 from 31.7% in the three months ended September 30, 2020 primarily due to changes in our Products & Services segment business and product mix. While we have not experienced significant inflation in our material costs during the current year, we believe the effect of inflation may increase during 2022. Material costs by operating segment, after elimination of intersegment activity, were as follows:

	For the Three Months Ended September 30,				Change		Percent Change
(dollars in thousands)	2021		2020
Patient Care	$	74,764	$	63,938	$	10,826	16.9	%
Products & Services	17,797		17,524		273		1.6	%
Material costs	$	92,561	$	81,462	$	11,099	13.6	%

Patient Care material costs increased $10.8 million, or 16.9%, for the three months ended September 30, 2021 compared to the same period in the prior year as a result of the increase in segment net sales, additional costs as a result of our acquisitions, and changes in the segment product mix. Patient Care material costs as a percent of segment net revenues increased to 30.6% for the three months ended September 30, 2021 from 30.1% for the three months ended September 30, 2020.

37

Products & Services material costs increased $0.3 million, or 1.6%, for the three months ended September 30, 2021 compared to the same period in the prior year. As a percent of net revenues in the Products & Services segment, material costs were 39.1% for the three months ended September 30, 2021 as compared to 39.9% in the same period of 2020. The decrease in cost of materials as a percent of segment net revenues was primarily due to a change in business volume and product mix within the segment.

Personnel costs. Personnel costs for the three months ended September 30, 2021 were $98.9 million, an increase of $9.2 million, or 10.3%, from $89.7 million for the same period in the prior year. Personnel costs by operating segment were as follows:

	For the Three Months Ended September 30,				Change		Percent Change
(dollars in thousands)	2021		2020
Patient Care	$	84,479	$	76,989	$	7,490	9.7	%
Products & Services	14,469		12,738		1,731		13.6	%
Personnel costs	$	98,948	$	89,727	$	9,221	10.3	%

Personnel costs for the Patient Care segment were $84.5 million for the three months ended September 30, 2021, an increase of $7.5 million, or 9.7%, from $77.0 million in the same period of the prior year. The increase in Patient Care personnel costs during the three months ended September 30, 2021 was primarily related to an increase in salary expense of $11.1 million from the prior period due to the personnel cost reductions implemented as a result of the COVID-19 pandemic during the three months ended September 30, 2020. Additionally, payroll taxes increased $0.5 million and commissions increased $0.1 million compared to the three months ended September 30, 2020. These increases were offset by a decrease in incentive compensation and other personnel costs of $2.9 million and a $1.3 million decrease in benefits compared to the same period in the prior year.

Personnel costs in the Products & Services segment were $14.5 million for the three months ended September 30, 2021, an increase of $1.7 million compared to the same period in the prior year. The increase is primarily related to an increase in salary expense of $2.2 million due to the personnel cost reductions implemented as a result of the COVID-19 pandemic during the three months ended September 30, 2020. Bonus, commissions, benefits, and other personnel cost decreased $0.5 million for the three months ended September 30, 2021 compared to the same period in the prior year.

Other operating costs. Other operating costs for the three months ended September 30, 2021 were $34.9 million, an increase of $4.9 million, or 16.3%, from $30.0 million for the same period in the prior year. Travel increased $1.8 million, rent, utilities, occupancy, office expenses increased $0.9 million, professional fees increased $0.8 million, bad debt expense increased $0.6 million, and other expenses increased $0.8 million as compared to the same period in the prior year.

General and administrative expenses. General and administrative expenses for the three months ended September 30, 2021 were $29.6 million, a decrease of $4.0 million, or 11.8%, from the same period in the prior year. The decrease is the result of a $5.5 million decrease in incentive compensation and other personnel-related costs and a $2.4 million decrease in other compensation costs related to the qualified disaster relief payments to employees in the prior year quarter, partially offset by increases in salary expense of $1.1 million and other operating expenses of $2.8 million compared to the three months ended September 30, 2020.

Depreciation and amortization. Depreciation and amortization for the three months ended September 30, 2021 was $8.2 million, a decrease of $0.6 million, or 7.3%, from the same period in the prior year. Amortization expense decreased $0.3 million and depreciation expense decreased $0.3 million when compared to the same period in the prior year.

Interest expense, net. Interest expense for the three months ended September 30, 2021 decreased 8.7% to $7.3 million from $8.0 million for the same period in the prior year.

38

Benefit for income taxes. The benefit for income taxes for the three months ended September 30, 2021 was $2.9 million, or (16.1)% of income before income taxes, compared to a benefit of $1.9 million, or (39.0)% of income before income taxes for the three months ended September 30, 2020. The increase in the effective tax rate for the three months ended September 30, 2021 compared with the three months ended September 30, 2020 is primarily attributable to the net tax benefit of the loss carryback claim recognized in the three months ended September 30, 2020, as well as an increase in pre-tax book income for the three months ended September 30, 2021 partially offset by the release of reserves for uncertain tax positions for the three months ended September 30, 2021. Our effective tax rate for the three months ended September 30, 2021 differed from the federal statutory tax rate of 21% primarily due to an accrual true-up for actual research and development costs included on our recently filed tax return, non-deductible expenses, and the release of reserves for uncertain tax positions.

We evaluate our deferred tax assets quarterly to determine whether adjustments to the valuation allowance are appropriate in light of changes in facts or circumstances, such as changes in expected future pre-tax earnings, tax law, interactions with taxing authorities, and developments in case law. Our material assumptions include forecasts of future pre-tax earnings and the nature and timing of future deductions and income represented by the deferred tax assets and liabilities, all of which involve the exercise of significant judgment. As of September 30, 2021, our valuation allowance was approximately $2.1 million.

For the year ending December 31, 2021, we estimate a research and development tax credit of $4.6 million, net of tax reserves. We record the tax benefit, net of tax reserves, as a deferred tax asset. For the year ended December 31, 2020, we recognized research and development tax credits of $3.8 million, net of tax reserves, related to 2020, and $6.1 million, net of tax reserves, related to prior years.

Our results of operations for the nine months ended September 30, 2021 and 2020 were as follows (unaudited):

	For the Nine Months Ended September 30,				Percent Change
(dollars in thousands)	2021		2020		2021 vs 2020
Net revenues	$	808,116	$	723,810	11.6	%
Material costs	257,002		228,675		12.4	%
Personnel costs	286,377		252,734		13.3	%
Other operating costs	99,157		74,207		33.6	%
General and administrative expenses	93,633		98,918		(5.3)	%
Depreciation and amortization	24,164		26,513		(8.9)	%
Operating expenses	760,333		681,047		11.6	%
Income from operations	47,783		42,763		11.7	%
Interest expense, net	21,805		24,918		(12.5)	%
Non-service defined benefit plan expense	501		474		5.7	%
Income before income taxes	25,477		17,371		46.7	%
Benefit for income taxes	(2,469)		(4,750)		48.0	%
Net income	$	27,946	$	22,121	26.3	%

During these periods, our operating expenses as a percentage of net revenues were as follows:

	For the Nine Months Ended September 30,
	2021		2020
Material costs	31.8	%	31.6	%
Personnel costs	35.4	%	34.9	%
Other operating costs	12.3	%	10.2	%
General and administrative expenses	11.6	%	13.7	%
Depreciation and amortization	3.0	%	3.7	%
Operating expenses	94.1	%	94.1	%

39

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

Relevance of Nine Months Ended Results to Comparative and Future Periods. As discussed in “Effects of the COVID-19 Pandemic” above, commencing late in the first quarter of 2020, our revenues and operating results began to be adversely affected by the COVID-19 pandemic, a trend that continued throughout 2020 and into 2021. The effects of this public health emergency on our revenues and earnings in the, particularly in 2020, impacted the comparison to our historical financial results. As a result, our comparative financial and operational results when viewed as a whole for the periods impacted by the COVID-19 pandemic, including temporary labor and other cost reduction measures largely in place during the second and third quarters of 2020, may not be indicative of future financial and operational performance. Please refer to the “Effects of the COVID-19 Pandemic” section above and the “Financial Condition, Liquidity and Capital Resources” section below for additional forward-looking information concerning our current expectations regarding the effect of the COVID-19 pandemic on our prospective results and financial condition.

Net revenues. Net revenues for the nine months ended September 30, 2021 were $808.1 million, an increase of $84.3 million, or 11.6%, from $723.8 million for the nine months ended September 30, 2020. Net revenues by operating segment, after elimination of intersegment activity, were as follows:

	For the Nine Months Ended September 30,				Change		Percent Change
(dollars in thousands)	2021		2020
Patient Care	$	676,825	$	598,706	$	78,119	13.0	%
Products & Services	131,291		125,104		6,187		4.9	%
Net revenues	$	808,116	$	723,810	$	84,306	11.6	%

Patient Care net revenues for the nine months ended September 30, 2021 were $676.8 million, an increase of $78.1 million, or 13.0%, from $598.7 million for the same period in the prior year. Same clinic revenues increased $52.9 million for the nine months ended September 30, 2021 compared to the same period in the prior year, reflecting an increase of 10.2% on a per-day basis. Net revenues from acquired clinics increased $24.7 million, and revenues from consolidations and other services increased $0.5 million. For the year-to-date, we estimate that our same clinic net revenues were approximately 98% of the level we reported for the first nine months of 2019, prior to the pandemic. Given this, we are not currently operating in a manner that utilizes our capacity at the same levels as we did prior to the pandemic, and this has been a primary contributing factor to the decrease in our earnings and margins when compared to that pre-pandemic period.

Prosthetics constituted approximately 54% of our total Patient Care revenues for the nine months ended September 30, 2021 and 56% for the same period in 2020, excluding the impact of acquisitions. Prosthetic revenues for the nine months ended September 30, 2021 were 5.5% higher, on a per-day basis, than the same period in the prior year, excluding the impact of acquisitions. Orthotics, shoes, inserts, and other products increased by 16.3% on a per-day basis compared to the same comparative prior periods, excluding the impact of acquisitions. Revenues through the third quarter of 2020, particularly orthotic revenues, were adversely affected due to a decline in patient appointment volumes as a result of the onset of the COVID-19 pandemic, governmental suppression measures implemented in response to the COVID-19 pandemic, and other factors impacting our business volumes discussed in the “Effects of the COVID-19 Pandemic” section.

Products & Services net revenues for the nine months ended September 30, 2021 were $131.3 million, an increase of $6.2 million, or 4.9% from the same period in the prior year. This was primarily attributable to an increase of $7.7 million, or 8.4%, in the distribution of O&P componentry in the period to independent providers stemming primarily from lower volumes in the same period of 2020 due to the COVID-19 pandemic, as discussed in the “Effects of the COVID-19 Pandemic” section above, and a $1.5 million, or 4.3%, decrease in net revenues from therapeutic solutions primarily as a result of historical customer lease cancellations and discounts, partially offset by lease installations.

40

Material costs. Material costs for the nine months ended September 30, 2021 were $257.0 million, an increase of $28.3 million or 12.4%, from the same period in the prior year. Total material costs as a percentage of net revenues increased to 31.8% in the nine months ended September 30, 2021 from 31.6% in the nine months ended September 30, 2020 due to changes in our Products & Services segment business and product mix. While we have not experienced significant inflation in our material costs during the current year, we believe the effect of inflation may increase during 2022. Material costs by operating segment, after elimination of intersegment activity, were as follows:

	For the Nine Months Ended September 30,				Change		Percent Change
(dollars in thousands)	2021		2020
Patient Care	$	206,403	$	178,851	$	27,552	15.4	%
Products & Services	50,599		49,824		775		1.6	%
Material costs	$	257,002	$	228,675	$	28,327	12.4	%

Patient Care material costs increased $27.6 million, or 15.4%, for the nine months ended September 30, 2021 compared to the same period in the prior year as a result of the increase in segment net sales, additional costs as a result of our acquisitions, and changes in the segment product mix. Patient Care material costs as a percent of segment net revenues increased to 30.5% for the nine months ended September 30, 2021 from 29.9% for the nine months ended September 30, 2020.

Products & Services material costs increased $0.8 million, or 1.6%, for the nine months ended September 30, 2021 compared to the same period in the prior year. As a percent of net revenues in the Products & Services segment, material costs were 38.5% for the nine months ended September 30, 2021 as compared to 39.8% in the same period of 2020. The decrease in material costs as a percent of segment net revenues was due to a change in business and product mix within the segment, as well as cost savings related to certain supply chain initiatives.

Personnel costs. Personnel costs for the nine months ended September 30, 2021 were $286.4 million, an increase of $33.6 million, or 13.3%, from $252.7 million for the same period in the prior year. Personnel costs by operating segment were as follows:

	For the Nine Months Ended September 30,				Change		Percent Change
(dollars in thousands)	2021		2020
Patient Care	$	243,431	$	216,910	$	26,521	12.2	%
Products & Services	42,946		35,824		7,122		19.9	%
Personnel costs	$	286,377	$	252,734	$	33,643	13.3	%

Personnel costs for the Patient Care segment were $243.4 million for the nine months ended September 30, 2021, an increase of $26.5 million, or 12.2%, from $216.9 million for the same period in the prior year. The increase in Patient Care personnel costs during the nine months ended September 30, 2021 was primarily related to an increase in salary expense of $31.1 million from the prior year period due to the personnel cost reductions implemented as a result of the COVID-19 pandemic during the nine months ended September 30, 2020. Additionally, payroll taxes increased $1.7 million, commissions increased $0.5 million, and benefits increased $0.4 million compared to the nine months ended September 30, 2020. These increases were offset by a $7.2 million decrease in incentive compensation and other personnel costs compared to the same period in the prior year.

Personnel costs in the Products & Services segment were $42.9 million for the nine months ended September 30, 2021, an increase of $7.1 million compared to the same period in the prior year. The increase is primarily related to an increase in salary expense of $6.5 million due to the personnel cost reductions implemented as a result of the COVID-19 pandemic during the nine months ended September 30, 2020. Bonus, commissions, and other personnel cost increased $0.6 million for the nine months ended September 30, 2021 compared to the same period in the prior year.

41

Other operating costs. Other operating costs for the nine months ended September 30, 2021 were $99.2 million, an increase of $25.0 million, or 33.6%, from $74.2 million for the same period in the prior year. Other operating costs increased by $21.4 million, largely due to the benefit associated with the recognition of $20.5 million in proceeds from grants under the CARES Act included in Other operating costs, as discussed in the “Effects of the COVID-19 Pandemic” section, in the nine months ended September 30, 2020. Additionally rent, utilities, occupancy, and office expenses increased $3.2 million and travel, professional education, professional fees, and other expenses increased $1.2 million, partially offset by a decrease in bad debt expense of $0.8 million, as compared to the same period in the prior year. In general, the increase in other operating costs are the result of the cost mitigation efforts implemented in the prior year period as a result of the COVID-19 pandemic, and to a lesser extent due to new, renewed, and acquired leases in the current year.

General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2021 were $93.6 million, a decrease of $5.3 million, or 5.3%, from the same period in the prior year. The decrease is the result of incremental share-based compensation expense of $5.9 million recognized during the comparative period of 2020 due to the modification of certain equity awards granted in 2017, a decrease in incentive compensation and other personnel-related costs of $6.3 million, and a decrease in other compensation costs of $2.4 million related to the qualified disaster relief payments made in the prior year, offset by increases in salary expense of $5.4 million and other expenses of $3.9 million compared to the nine months ended September 30, 2020 largely as the result of cost mitigation efforts implemented in the prior year period as a result of the COVID-19 pandemic.

Depreciation and amortization. Depreciation and amortization for the nine months ended September 30, 2021 was $24.2 million, a decrease of $2.3 million, or 8.9%, from the same period in the prior year. Depreciation expense decreased $1.2 million and amortization expense decreased $1.1 million when compared to the same period in the prior year.

Interest expense, net. Interest expense for the nine months ended September 30, 2021 decreased 12.5% to $21.8 million from $24.9 million for the same period in the prior year. This is largely due to a decrease in LIBOR as compared to the prior year period, as well as interest payments made in the prior year on the revolving debt balance, which was undrawn during the nine months ended September 30, 2021.

Benefit for income taxes. The benefit for income taxes for the nine months ended September 30, 2021 was $2.5 million, or (9.7)% of income before income taxes, compared to a benefit of $4.8 million, or (27.3)% of income before income taxes for the nine months ended September 30, 2020. The increase in the effective tax rate for the nine months ended September 30, 2021 compared with the nine months ended September 30, 2020 is primarily attributable to the 2017 through 2019 research and development tax credits recognized in the nine months ended September 30, 2020, partially offset by a windfall from share-based compensation and the release of reserves for uncertain tax positions for the nine months ended September 30, 2021. Our effective tax rate for the nine months ended September 30, 2021 differed from the federal statutory tax rate of 21% primarily due to an accrual true-up for actual research and development costs included on our recently filed tax return, non-deductible expenses, a windfall from share-based compensation and the release of reserves for uncertain tax positions.

We evaluate our deferred tax assets quarterly to determine whether adjustments to the valuation allowance are appropriate in light of changes in facts or circumstances, such as changes in expected future pre-tax earnings, tax law, interactions with taxing authorities, and developments in case law. Our material assumptions include forecasts of future pre-tax earnings and the nature and timing of future deductions and income represented by the deferred tax assets and liabilities, all of which involve the exercise of significant judgment. As of September 30, 2021, our valuation allowance approximated $2.1 million.

For the year ending December 31, 2021, we estimate a research and development tax credit of $4.6 million, net of tax reserves. We record the tax benefit, net of tax reserves, as a deferred tax asset. For the year ended December 31, 2020, we recognized research and development tax credits of $3.8 million, net of tax reserves, related to 2020, and $6.1 million, net of tax reserves, related to prior years.

Financial Condition, Liquidity, and Capital Resources

Liquidity

Our cash and cash equivalents, and any amounts we have available for borrowing under our revolving credit facility, are immediately available to provide cash for our operations and capital expenditures. We refer to the sum of these two amounts as our “liquidity.”

42

At September 30, 2021, we had total liquidity of $170.5 million, which reflected a decrease of $68.9 million from the $239.4 million in liquidity we had as of December 31, 2020. Our liquidity at September 30, 2021 was comprised of cash and cash equivalents of $75.6 million and $94.9 million in available borrowing capacity under our $100.0 million revolving credit facility. This decrease in liquidity primarily related to a decrease in cash of $69.0 million, comprised of cash paid for acquisitions, net of cash acquired, of $39.3 million, capital expenditures of $18.9 million, and net cash used in financing activities of $13.3 million.

Our Credit Agreement contains customary representations and warranties, as well as financial covenants, including that we maintain compliance with certain leverage and interest coverage ratios. If we are not compliant with our debt covenants in any period, absent a waiver or amendment of our Credit Agreement, we may be unable to access funds under our revolving credit facility. Due to the additional borrowings under our revolving credit facility in March 2020, which were repaid in full during the third quarter of 2020, and in anticipation of the potential economic impact of the COVID-19 pandemic, we entered into an amendment to the Credit Agreement that provided for, among other things, increases in the allowable level of indebtedness we may carry relative to our earnings, changes in the definition of EBITDA used to compute certain financial ratios, certain restrictions regarding investments and payments we made until the completion of the first quarter of 2021 and increases in the interest costs associated with borrowings under our revolving credit facility. We were in compliance with our debt covenants as of September 30, 2021.

For additional information, please refer to the Liquidity Outlook section below.

Working Capital and Days Sales Outstanding

At September 30, 2021, we had working capital of $110.7 million compared to working capital of $129.3 million at December 31, 2020. Our working capital decreased $18.6 million during the nine months ended September 30, 2021 due to a decrease in current assets of $53.4 million, partially offset by a decrease in current liabilities of $34.8 million.

The decrease in current assets of $53.4 million was primarily attributable to a decrease in Cash and cash equivalents of $69.0 million discussed in the “Liquidity” section above, and a decrease in Income taxes receivable of $4.7 million. The decreases were offset by an increase of approximately $8.3 million in Inventories, $7.5 million in Accounts receivable, net, and $4.5 million in Other current assets.

The decrease in current liabilities of $34.8 million was primarily attributable to a net decrease in accrued incentive compensation related costs of $30.7 million, primarily due to the payment of $42.9 million in annual incentive compensation and the employer 401(k) matching contribution made during the first quarter of the year. The remainder of the decrease is primarily attributable to a decrease of $3.7 million in Accrued expenses and other current liabilities and $3.4 million in Accounts payable.

Days sales outstanding (“DSO”) is a calculation that approximates the average number of days between the billing for our services and the date of our receipt of payment, which we estimate using a 90-day rolling period of net revenue. This computation can provide a relative measure of the effectiveness of our billing and collections activities. Clinics acquired during the past 90-day period are excluded from the calculation. As of September 30, 2021, our DSO was 42 days, which compares favorably to a DSO of 43 days as of September 30, 2020. The reduction is attributable to improved collections experience due to the targeted efforts of our centralized revenue cycle management function.

Sources and Uses of Cash for the Nine Months Ended September 30, 2021 Compared to September 30, 2020

Net cash flows provided by operating activities decreased $124.6 million to $0.6 million for the nine months ended September 30, 2021 from $125.2 million for the nine months ended September 30, 2020. The most significant decrease in cash provided by operating activities was due to a $44.7 million increase in cash used in Accounts receivable, net as revenue volumes increased. The remaining decrease in cash flows provided by operations is largely attributable to cash used in the satisfaction of Accounts payable and Accrued expenses and other current liabilities of $31.6 million, and a change in Accrued compensation related costs of $33.2 million.

Cash flows used in investing activities increased $18.3 million to $56.4 million for the nine months ended September 30, 2021, from $38.1 million for the nine months ended September 30, 2020. The increase in cash used in investing activities was due to an increase of $22.4 million in cash paid for acquisitions, net of cash acquired, partially offset by $3.6 million less in capital expenditures.

43

Cash flows used in financing activities was $13.3 million for the nine months ended September 30, 2021, as compared to cash used in financing activities of $14.1 million for the nine months ended September 30, 2020. The decrease in cash used in financing activities is primarily due to a decrease in payments of employee taxes on stock-based compensation of $2.3 million, offset by an increase in payments on Seller Notes and other activities of $1.5 million.

Effect of Indebtedness

On March 6, 2018, we entered into a $605.0 million Credit Agreement, which provides for (i) a revolving credit facility with an initial maximum aggregate amount of availability of $100.0 million that matures in March 2023 and (ii) a $505.0 million Term Loan B facility due in quarterly principal installments commencing June 29, 2018, with all remaining outstanding principal due at maturity in March 2025. For additional discussion surrounding the Credit Agreement, see Note K - “Debt and Other Obligations,” in the notes to the condensed consolidated financial statements contained elsewhere in this report. Cash paid for interest totaled $19.7 million and $22.2 million for the nine months ended September 30, 2021 and 2020, respectively.

In May 2020, we entered into an amendment to the Credit Agreement (the “Amendment”) that provided for, amongst other things, an increase in the maximum Net Leverage Ratio to 5.25 to 1.00 for the fiscal quarter ended March 31, 2021; 5.00 to 1.00 for the fiscal quarters ended June 30, 2021 through September 30, 2021; and 4.75 to 1.00 for the quarter ended December 31, 2021 and the last day of each fiscal quarter thereafter. In addition, the Amendment changed the definition of EBITDA used in the Net Leverage Ratio and minimum interest coverage ratio to adjust for declines in net revenue attributable to the COVID-19 pandemic through the third quarter of 2020. Borrowings under the revolving credit facility will bear interest at a variable rate equal to the greater of LIBOR or 1.00%, plus 3.75%. In addition, the Amendment contained certain restrictions and covenants that further limited our ability, and certain of our subsidiaries’ ability, to consolidate or merge, create liens, incur additional indebtedness, or dispose of assets. During the fourth quarter of 2020, we recommenced our acquisition of O&P providers as we met certain Amendment parameters around leverage and liquidity thresholds.

Scheduled maturities of debt as of September 30, 2021 were as follows:

(in thousands)
2021 (remainder of year)	$	2,405
2022	12,155
2023	11,818
2024	11,181
2025	473,069
Thereafter	2,552
Total debt before unamortized discount and debt issuance costs, net	513,180
Unamortized discount and debt issuance costs, net	(6,201)
Total debt	$	506,979

Liquidity Outlook

Our Credit Agreement has a term loan facility with $487.3 million in principal outstanding at September 30, 2021, due in quarterly principal installments equal to 0.25% of the original aggregate principal amount of $505.0 million, with all remaining outstanding principal due at maturity in March 2025, and, as of September 30, 2021, a revolving credit facility with no borrowings and available borrowing capacity of $94.9 million that matures in March 2023.

Our primary sources of liquidity are cash and cash equivalents, and available borrowings under our revolving credit facility. Due to the economic and social activity impacts outlined in the “Effects of the COVID-19 Pandemic” section above, we expect the continuing disruption to have an unfavorable impact on our operations, financial condition, and results of operations. While the duration and extent of the impact from the COVID-19 pandemic on our operations and liquidity depends on future developments which cannot be predicted with certainty, we believe that our existing sources of liquidity, when combined with our operating cash flows and other measures taken to enhance our liquidity position and cost structure, will continue to allow us to finance our operations for the foreseeable future. Please refer to the “Effects of the COVID-19 Pandemic” section above for additional discussion.

44

As business volumes return to more typical pre-pandemic levels, it is likely that we will experience a natural corresponding increase in our investment in working capital. Additionally, during 2021, we currently estimate that we will expend $25 million to $30 million for capital expenditures. We also anticipate that we will continue to pursue acquisitions and other growth initiatives that provide value to our shareholders.

With these factors in mind, we continue to anticipate we will generate positive operating cash flows that, together with our retained cash and revolving credit facility, will allow us to invest in acquisitions and other growth opportunities to provide value to our shareholders. From time to time, we may seek additional funding through the issuance of debt or equity securities to provide additional liquidity to fund acquisitions aligned with our strategic priorities and for other general corporate purposes.

CARES Act

The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $203.5 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid-enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue and health-care related expenses that are attributable to the COVID-19 pandemic. In April 2020, the U.S. Department of Health and Human Services (“HHS”) began making payments to healthcare providers from the $203.5 billion appropriation. These are payments, rather than loans, to healthcare providers, and will not need to be repaid.

During 2020, we recognized a total benefit of $24.0 million in our condensed consolidated statement of operations within Other operating costs Grants from HHS. We recognize income related to grants on a systematic and rational basis when it becomes probable that we have complied with the terms and conditions of the grant and in the period in which the corresponding costs or income related to the grant are recognized. We recognized the benefit from the Grants within Other operating costs in our Patient Care segment. In April 2021, we recognized an additional $0.7 million in proceeds received from grants under the CARES Act.

The CARES Act also provided for a deferral of the employer portion of payroll taxes incurred during the COVID-19 pandemic through December 2020. The provisions allowed us to defer half of such payroll taxes until December 2021 and the remaining half until December 2022. We paid the current portion of $5.9 million in September 2021, and deferred $5.9 million of payroll taxes within Other liabilities in the condensed consolidated balance sheet as of September 30, 2021.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that may or could have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

45

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our future financial results are subject to a variety of risks, including interest rate risk. Our interest expense is sensitive to changes in market interest rates. To manage the impact of the interest rate risk associated with our Credit Agreement, we enter into interest rate swaps from time to time, effectively converting a portion of the cash flows related to variable-rate debt into fixed-rate cash flows.

As of September 30, 2021, we had a combined principal amount of $487.3 million of variable rate debt under our Term Loan B and revolving credit facility and a notional amount of $287.5 million of fixed to variable interest rate swap agreements. Based on our hedged and unhedged positions, a hypothetical increase in interest rates of 1.0% would impact our annual interest expense by $2.0 million and a decrease in interest rates of 1.0% would impact our annual interest expense by $0.2 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and effectiveness of our disclosure controls and procedures as of September 30, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2021.

Changes in Internal Control over Financial Reporting

We are implementing an enterprise resource planning (“ERP”) system, and transitioned from our prior corporate financial systems to the new ERP system in the third quarter of 2021. In connection with the implementation, we modified the design and documentation of certain internal control processes and procedures as necessary. The new ERP system implementation is continuing in a phased approach and will continue to be evaluated for effect on our internal controls over financial reporting.

In accordance with Rule 13a-15(d) of the Exchange Act and with the participation of our Chief Executive Officer and our Chief Financial Officer, management determined there have been no other material changes to our internal control over financial reporting during the three month period ended September 30, 2021.

46

PART II.    OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition or results of operations. We have also identified the following additional risk factors, which supplement those discussed in our Form 10-K and are grouped within the category of “II. Risks Relating to Our Operations and Strategy”:

Our results of operations can be adversely affected by labor shortages, turnover and labor cost increases.

We have from time-to-time experienced labor shortages and other labor-related issues. These labor shortages have become more pronounced as a result of the COVID-19 pandemic. A number of factors may adversely affect the labor force available to us in one or more of our markets, including high employment levels, federal unemployment subsidies, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices and immigration. These factors can also impact the cost of labor. Increased turnover rates within our employee base can lead to decreased efficiency and increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees. An overall labor shortage or lack of skilled labor, increased turnover or labor inflation could have a material adverse effect on our results of operations.

Our results of operations can be adversely affected by inflation and other general cost increases.

We are subject to both contractual, inflationary, and other general cost increases, including with regard to our labor costs and purchases of raw materials and transportation services. General economic conditions may result in higher inflation, which may increase our exposure to higher costs. If we are unable to offset these cost increases by price increases, growth, and/or cost reductions in our operations, these inflationary and other general cost increases could have a material adverse effect on our results of operations.

In 2020, our total company costs including our materials costs, personnel costs, other operating costs, and general & administrative expenses, totaled $894.4 million. A 1% inflationary increase in this amount would increase costs by approximately $8.9 million.

COVID-19 vaccination mandates adopted by federal, state and local governments, as well as by certain healthcare systems, could have a material adverse impact on our business and results of operations.

On September 9, 2021, President Biden issued an executive order requiring all employers with U.S. government contracts to ensure that their U.S.-based employees, contractors, and subcontractors that work on or in support of U.S. government contracts are fully vaccinated against COVID-19 by December 8, 2021. The executive order includes on-site and remote U.S.-based employees, contractors, and subcontractors and it only permits limited exceptions for medical and religious reasons.

Also on September 9, 2021, President Biden announced that he has directed OSHA to develop a new temporary emergency standard (“ETS”) mandating either the full vaccination or weekly COVID-19 testing of employees for employers with 100 or more employees. OSHA has not yet issued the ETS or provided any additional information on its contents or requirements, including whether employers must pay for the vaccinations or testing.

Additionally, many state and local governments in which our business operates, as well as certain healthcare systems that serve as referral sources for Hanger Clinic patients, have implemented or announced COVID-19 vaccination requirements applicable to certain of our employees, and additional vaccination mandates may be announced in the future.

47

It is currently not possible to predict with certainty the impact these vaccination mandates will have on our business, especially on our workforce. Our implementation of these requirements may result in costs to us in the form of vaccinations or testing of employees. These requirements may also result in attrition in our workforce, including attrition of critically skilled employees, and difficulty securing future employment needs, which could have a material adverse effect on our business, financial condition, and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There has been no share repurchase activity during the three months ended September 30, 2021.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There have been no defaults upon senior securities during the three months ended September 30, 2021.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None to report.

ITEM 6. EXHIBITS

The documents in the accompanying Exhibits Index are filed, furnished, or incorporated by reference as part of this report and such Exhibits Index is incorporated herein by reference.

48

EXHIBITS INDEX

Exhibit No.	Document
31.1	Written Statement of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002. (Filed herewith.)
31.2	Written Statement of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002. (Filed herewith.)
32	Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002. (Filed herewith.)
101.INS	XBRL Instance Document. (Filed herewith.)
101.SCH	XBRL Taxonomy Extension Schema. (Filed herewith.)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase. (Filed herewith.)
101.LAB	XBRL Taxonomy Extension Label Linkbase. (Filed herewith.)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase. (Filed herewith.)
101.DEF	XBRL Taxonomy Extension Definition Linkbase. (Filed herewith.)
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.)

49

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

		HANGER, INC.
Dated: November 8, 2021	By:	/s/ THOMAS E. KIRALY
		Thomas E. Kiraly
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)
Dated: November 8, 2021	By:	/s/ GABRIELLE B. ADAMS
		Gabrielle B. Adams
		Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

50

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes‑Oxley Act and Rule 13a‑ 14(a)

or 15d‑14(a) under the Securities Exchange Act of 1934

I, Vinit K. Asar, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Hanger, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:

a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2021	By:	/s/ VINIT K. ASAR
		Vinit K. Asar
		Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes‑Oxley Act and Rule 13a‑ 14(a)

or 15d‑14(a) under the Securities Exchange Act of 1934

I, Thomas E. Kiraly, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Hanger, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:

a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 8, 2021	By:	/s/ THOMAS E. KIRALY
		Thomas E. Kiraly
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32

Written Statement of the Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, as Adopted

Pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002

Solely for the purposes of complying with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer and Chief Financial Officer of Hanger, Inc. (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ VINIT K. ASAR

Vinit K. Asar

Chief Executive Officer

(Principal Executive Officer)

/s/ THOMAS E. KIRALY

Thomas E. Kiraly

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Dated: November 8, 2021

XML

Cover - shares	9 Months Ended
	Sep. 30, 2021	Oct. 27, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	1-10670
Entity Registrant Name	HANGER, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	84-0904275
Entity Address, Address Line One	10910 Domain Drive
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78758
City Area Code	512
Local Phone Number	777-3800
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	HNGR
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		38,708,566
Entity Central Index Key	0000722723
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 75,587	$ 144,602
Accounts receivable, net	136,112	128,596
Inventories	84,747	76,429
Income taxes receivable	8,135	12,888
Other current assets	16,896	12,357
Total current assets	321,477	374,872
Non-current assets:
Property, plant, and equipment, net	83,821	84,873
Goodwill	322,699	277,223
Other intangible assets, net	20,600	18,431
Deferred income taxes	51,445	54,877
Operating lease right-of-use assets	124,502	124,741
Other assets	18,184	15,734
Total assets	942,728	950,751
Current liabilities:
Current portion of long-term debt	11,700	10,085
Accounts payable	61,721	65,091
Accrued expenses and other current liabilities	59,172	62,861
Accrued compensation related costs	41,793	72,541
Current portion of operating lease liabilities	36,421	35,002
Total current liabilities	210,807	245,580
Long-term liabilities:
Long-term debt, less current portion	495,279	493,012
Operating lease liabilities	101,759	104,589
Other liabilities	45,361	56,593
Total liabilities	853,206	899,774
Commitments and contingencies (Note P)
Shareholders’ equity:
Common stock, $0.01 par value; 60,000,000 shares authorized; 38,878,293 shares issued and 38,735,472 shares outstanding at 2021, and 38,321,796 shares issued and 38,178,975 shares outstanding at 2020, respectively	389	383
Additional paid-in capital	370,858	365,503
Accumulated other comprehensive loss	(14,977)	(20,215)
Accumulated deficit	(266,052)	(293,998)
Treasury stock, at cost; 142,821 shares at 2021 and 2020, respectively	(696)	(696)
Total shareholders’ equity	89,522	50,977
Total liabilities and shareholders’ equity	$ 942,728	$ 950,751

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock authorized (in shares)	60,000,000	60,000,000
Common stock issued (in shares)	38,878,293	38,321,796
Common stock outstanding (in shares)	38,735,472	38,178,975
Treasury stock (in shares)	142,821	142,821

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Statement [Abstract]
Net revenues	$ 289,827	$ 256,637	$ 808,116	$ 723,810
Material costs	92,561	81,462	257,002	228,675
Personnel costs	98,948	89,727	286,377	252,734
Other operating costs	34,871	29,979	99,157	74,207
General and administrative expenses	29,620	33,591	93,633	98,918
Depreciation and amortization	8,159	8,803	24,164	26,513
Income from operations	25,668	13,075	47,783	42,763
Interest expense, net	7,313	8,013	21,805	24,918
Non-service defined benefit plan expense	167	158	501	474
Income before income taxes	18,188	4,904	25,477	17,371
Benefit for income taxes	(2,929)	(1,911)	(2,469)	(4,750)
Net income	$ 21,117	$ 6,815	$ 27,946	$ 22,121
Basic and Diluted Per Common Share Data:
Basic income per share (in dollars per share)	$ 0.55	$ 0.18	$ 0.72	$ 0.58
Weighted average shares used to compute basic earnings per common share (in shares)	38,730,468	38,133,598	38,550,307	37,878,753
Diluted income per share (in dollars per share)	$ 0.54	$ 0.18	$ 0.71	$ 0.57
Weighted average shares used to compute diluted earnings per common share (in shares)	39,240,974	38,637,536	39,238,370	38,491,965

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 21,117	$ 6,815	$ 27,946	$ 22,121
Other comprehensive income (loss):
Unrealized gain (loss) on cash flow hedges, net of tax provision (benefit) of $419, $488, $1,603, and $(2,509), respectively	1,321	1,542	5,058	(7,933)
Unrealized gain on defined benefit plan, net of tax provision of $19, $9, $57, and $27, respectively	60	28	180	84
Total other comprehensive income (loss)	1,381	1,570	5,238	(7,849)
Comprehensive income	$ 22,498	$ 8,385	$ 33,184	$ 14,272

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Unrealized gain (loss) on cash flow hedges tax	$ 419	$ 488	$ 1,603	$ (2,509)
Unrealized gain on defined benefit plan tax	$ 19	$ 9	$ 57	$ 27

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Cumulative Effect, Period of Adoption, Adjusted Balance	Common Stock	Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance	Additional Paid-in Capital	Additional Paid-in Capital Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss Cumulative Effect, Period of Adoption, Adjusted Balance	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjusted Balance	Treasury Stock	Treasury Stock Cumulative Effect, Period of Adoption, Adjusted Balance
Beginning balance at Dec. 31, 2019	$ 9,504	$ (238)	$ 9,266	$ 376	$ 376	$ 354,326	$ 354,326	$ (12,551)	$ (12,551)	$ (331,951)	$ (238)	$ (332,189)	$ (696)	$ (696)
Beginning balance (in shares) at Dec. 31, 2019				37,460,000	37,460,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(15,748)									(15,748)
Share-based compensation expense	3,501					3,501
Issuance of common stock upon vesting of restricted stock units	0			$ 4		(4)
Issuance of common stock upon vesting of restricted stock units (in shares)				354,000
Effect of shares withheld to cover taxes	(4,146)					(4,146)
Total other comprehensive income (loss)	(8,873)							(8,873)
Ending balance at Mar. 31, 2020	(16,000)			$ 380		353,677		(21,424)		(347,937)			(696)
Ending balance (in shares) at Mar. 31, 2020				37,814,000
Beginning balance at Dec. 31, 2019	9,504	$ (238)	$ 9,266	$ 376	$ 376	354,326	$ 354,326	(12,551)	$ (12,551)	(331,951)	$ (238)	$ (332,189)	(696)	$ (696)
Beginning balance (in shares) at Dec. 31, 2019				37,460,000	37,460,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	22,121
Total other comprehensive income (loss)	(7,849)
Ending balance at Sep. 30, 2020	32,301			$ 383		363,082		(20,400)		(310,068)			(696)
Ending balance (in shares) at Sep. 30, 2020				38,135,000
Beginning balance at Mar. 31, 2020	(16,000)			$ 380		353,677		(21,424)		(347,937)			(696)
Beginning balance (in shares) at Mar. 31, 2020				37,814,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	31,054									31,054
Share-based compensation expense	8,984					8,984
Issuance in connection with the exercise of stock options	38					38
Issuance in connection with the exercise of stock options (in shares)				3,000
Issuance of common stock upon vesting of restricted stock units	0			$ 3		(3)
Issuance of common stock upon vesting of restricted stock units (in shares)				316,000
Effect of shares withheld to cover taxes	(2,682)					(2,682)
Total other comprehensive income (loss)	(546)							(546)
Ending balance at Jun. 30, 2020	20,848			$ 383		360,014		(21,970)		(316,883)			(696)
Ending balance (in shares) at Jun. 30, 2020				38,133,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	6,815									6,815
Share-based compensation expense	3,081					3,081
Issuance of common stock upon vesting of restricted stock units (in shares)				2,000
Effect of shares withheld to cover taxes	(13)					(13)
Total other comprehensive income (loss)	1,570							1,570
Ending balance at Sep. 30, 2020	32,301			$ 383		363,082		(20,400)		(310,068)			(696)
Ending balance (in shares) at Sep. 30, 2020				38,135,000
Beginning balance at Dec. 31, 2020	$ 50,977			$ 383		365,503		(20,215)		(293,998)			(696)
Beginning balance (in shares) at Dec. 31, 2020	38,178,975			38,179,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ (3,330)									(3,330)
Share-based compensation expense	3,179					3,179
Issuance in connection with the exercise of stock options	366					366
Issuance in connection with the exercise of stock options (in shares)				29,000
Issuance of common stock upon vesting of restricted stock units	0			$ 4		(4)
Issuance of common stock upon vesting of restricted stock units (in shares)				365,000
Effect of shares withheld to cover taxes	(4,520)					(4,520)
Total other comprehensive income (loss)	2,572							2,572
Ending balance at Mar. 31, 2021	49,244			$ 387		364,524		(17,643)		(297,328)			(696)
Ending balance (in shares) at Mar. 31, 2021				38,573,000
Beginning balance at Dec. 31, 2020	$ 50,977			$ 383		365,503		(20,215)		(293,998)			(696)
Beginning balance (in shares) at Dec. 31, 2020	38,178,975			38,179,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	$ 27,946
Total other comprehensive income (loss)	5,238
Ending balance at Sep. 30, 2021	$ 89,522			$ 389		370,858		(14,977)		(266,052)			(696)
Ending balance (in shares) at Sep. 30, 2021	38,735,472			38,740,000
Beginning balance at Mar. 31, 2021	$ 49,244			$ 387		364,524		(17,643)		(297,328)			(696)
Beginning balance (in shares) at Mar. 31, 2021				38,573,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	10,159									10,159
Share-based compensation expense	3,239					3,239
Issuance in connection with the exercise of stock options	5			$ 1		4
Issuance in connection with the exercise of stock options (in shares)				80,000
Issuance of common stock upon vesting of restricted stock units	0			$ 1		(1)
Issuance of common stock upon vesting of restricted stock units (in shares)				69,000
Effect of shares withheld to cover taxes	(40)					(40)
Total other comprehensive income (loss)	1,285							1,285
Ending balance at Jun. 30, 2021	63,892			$ 389		367,726		(16,358)		(287,169)			(696)
Ending balance (in shares) at Jun. 30, 2021				38,722,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	21,117									21,117
Share-based compensation expense	2,989					2,989
Issuance in connection with the exercise of stock options	153					153
Issuance in connection with the exercise of stock options (in shares)				12,000
Issuance of common stock upon vesting of restricted stock units (in shares)				6,000
Effect of shares withheld to cover taxes	(10)					(10)
Total other comprehensive income (loss)	1,381							1,381
Ending balance at Sep. 30, 2021	$ 89,522			$ 389		$ 370,858		$ (14,977)		$ (266,052)			$ (696)
Ending balance (in shares) at Sep. 30, 2021	38,735,472			38,740,000

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows (used in) provided by operating activities:
Net income	$ 27,946	$ 22,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,164	26,513
(Benefit) provision for doubtful accounts	(194)	629
Share-based compensation expense	9,407	15,565
Deferred income taxes	1,253	2,067
Amortization of debt discounts and issuance costs	1,429	1,564
Gain on sale and disposal of fixed assets	(1,004)	(729)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(5,120)	39,531
Inventories	(6,361)	(3,834)
Other current assets and other assets	(7,170)	(3,115)
Income taxes	4,753	(6,814)
Accounts payable	(4,134)	12,912
Accrued expenses and other current liabilities	(7,670)	6,914
Accrued compensation related costs	(30,902)	2,339
Other liabilities	(4,579)	8,016
Operating lease liabilities, net of amortization of right-of-use assets	(1,173)	1,559
Changes in operating assets and liabilities:	(62,356)	57,508
Net cash provided by operating activities	645	125,238
Cash flows used in investing activities:
Acquisitions, net of cash acquired	(39,253)	(16,854)
Purchase of property, plant, and equipment	(17,201)	(19,352)
Purchase of therapeutic program equipment leased to third parties under operating leases	(1,709)	(3,194)
Proceeds from sale of property, plant, and equipment	1,812	1,578
Purchase of company-owned life insurance investment	0	(250)
Net cash used in investing activities	(56,351)	(38,072)
Cash flows used in financing activities:
Borrowings under revolving credit agreement	0	79,000
Repayment of borrowings under revolving credit agreement	0	(79,000)
Payment of employee taxes on share-based compensation	(4,570)	(6,841)
Repayment of term loan	(3,788)	(3,788)
Payment on Seller Notes	(3,319)	(2,200)
Payments under vendor financing arrangements	(1,375)	(550)
Payments of financing lease obligations	(781)	(521)
Payment of debt issuance costs	0	(214)
Proceeds from the exercise of options	524	39
Net cash used in financing activities	(13,309)	(14,075)
(Decrease) increase in cash and cash equivalents	(69,015)	73,091
Cash and cash equivalents at beginning of period	144,602	74,419
Cash and cash equivalents at end of period	75,587	147,510
Non-cash financing and investing activities:
Seller Notes and other non-cash consideration related to acquisitions	12,192	29,420
Purchase of property, plant, and equipment in accounts payable at period end	4,109	4,299
Right-of-use assets obtained in exchange for finance lease obligations	$ 119	$ 1,975

XML

Organization and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

Description of Business

Hanger, Inc. (“we,” “our,” or “us”) is a leading national provider of products and services that assist in enhancing or restoring the physical capabilities of patients with disabilities or injuries. We provide orthotic and prosthetic (“O&P”) services, distribute O&P devices and components, manage O&P networks, and provide therapeutic solutions to patients and businesses in acute, post-acute, and clinic settings. We operate through two segments, Patient Care and Products & Services.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements.  These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), as previously filed with the Securities and Exchange Commission (the “SEC”).

In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position, and cash flows. All such adjustments are of a normal, recurring nature.  The results of operations for the interim periods are not necessarily indicative of those to be expected for the full year.

A detailed description of our significant accounting policies and management judgments is contained in our 2020 Form 10-K.

Reclassifications

We have reclassified certain amounts in the prior year condensed consolidated financial statements to be consistent with the current year presentation. These relate to classifications within the condensed consolidated statements of operations.

Recent Developments Regarding COVID-19

We are subject to risks and uncertainties as a result of the outbreak of the novel coronavirus (“COVID-19”) pandemic (“COVID-19 pandemic”). The extent and duration of the impact of the COVID-19 pandemic on our operations and financial condition remain uncertain and difficult to predict. As a result of the COVID-19 pandemic, we believe that our patients are continuing to defer visits to our O&P clinics, as well as elective surgical procedures, both of which impact our business volumes through decreased patient encounters and physician referrals. We believe that the COVID-19 pandemic will continue to affect our business volumes for at least the remainder of 2021 when compared to pre-pandemic levels. Nevertheless, the overall adverse impact of the COVID-19 pandemic on our business volumes has diminished and stabilized over time, and our patient appointment and other business volumes continue to gradually improve as the prevalence of the virus decreases and COVID-19 vaccines become more widely available and accepted. It remains possible that further outbreaks of COVID-19, including the spread of variants such as the delta variant, or reinstitution of restrictive measures by federal, state and local governments could cause a recessionary environment impacting the healthcare industry generally, including the O&P industry. The United States government has responded with fiscal policy measures intended to support the healthcare industry and economy as a whole, including the passage of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) in March 2020.

CARES Act

The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $203.5 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid- enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue and health-care related expenses that are attributable to the COVID-19 pandemic. In April 2020, the U.S. Department of Health and Human Services (“HHS”) began making payments to healthcare providers from the $203.5 billion appropriation. These are grants, rather than loans, to healthcare providers, and will not need to be repaid.

During 2020, we recognized a total benefit of $24.0 million in our consolidated statement of operations within Other operating costs for the grant proceeds we received under the CARES Act (“Grants”) from HHS. We recognize income related to grants on a systematic and rational basis when it becomes probable that we have complied with the terms and conditions of the grant and in the period in which the corresponding costs or income related to the grant are recognized. We recognized the benefit from the Grants within Other operating costs in our Patient Care segment. In April 2021, we recognized an additional $0.7 million in proceeds received from grants under the CARES Act.

The CARES Act also provided for a deferral of the employer portion of payroll taxes incurred during the COVID-19 pandemic through December 2020. The provisions allowed us to defer half of such payroll taxes until December 2021 and the remaining half until December 2022. We paid the current portion of $5.9 million in September 2021, and deferred $5.9 million of payroll taxes within Other liabilities in the condensed consolidated balance sheet as of September 30, 2021.

Recent Accounting Pronouncements, Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU, effective beginning on March 12, 2020, provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. We are currently evaluating the effects that the adoption of this guidance, and related clarifying standards, will have on our condensed consolidated financial statements and the related disclosures.

XML

Earnings Per Share

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common shares outstanding during the period plus any potentially dilutive common shares, such as stock options, restricted stock units, and performance-based units calculated using the treasury stock method. Total anti-dilutive shares excluded from the diluted earnings per share were 2,610 and 2,400 for the three and nine months ended September 30, 2021, and 34,379 and 20,202 for the three and nine months ended September 30, 2020.

Our Credit Agreement (as defined below) restricts the payment of dividends or other distributions to our shareholders by us or any of our subsidiaries. See Note K - “Debt and Other Obligations” within these condensed consolidated financial statements.

The reconciliation of the numerators and denominators used to calculate basic and diluted net income per share are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands except share and per share amounts)	2021		2020		2021		2020
Net income	$	21,117	$	6,815	$	27,946	$	22,121
Weighted average shares outstanding - basic	38,730,468		38,133,598		38,550,307		37,878,753
Effect of potentially dilutive restricted stock units and options	510,506		503,938		688,063		613,212
Weighted average shares outstanding - diluted	39,240,974		38,637,536		39,238,370		38,491,965
Basic income per share	$	0.55	$	0.18	$	0.72	$	0.58
Diluted income per share	$	0.54	$	0.18	$	0.71	$	0.57

XML

Revenue Recognition

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Patient Care Segment

Revenue in our Patient Care segment is primarily derived from contracts with third party payors for the provision of O&P devices and is recognized upon the transfer of control of promised products or services to the patient at the time the patient receives the device. At, or subsequent to delivery, we issue an invoice to the third party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, the U.S. Department of Veterans Affairs (the “VA”), or private or patient pay (“Private Pay”) individuals. We recognize revenue for the amounts we expect to receive from payors based on expected contractual reimbursement rates, which are net of estimated contractual discounts and implicit price concessions. These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances.

The following table disaggregates revenue from contracts with customers in our Patient Care segment for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Patient Care Segment
Medicare	$	79,586	$	68,135	$	211,169	$	194,052
Medicaid	42,739		34,541		120,475		96,612
Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care)	83,396		75,966		232,828		213,234
Veterans Administration	22,901		19,339		64,298		54,057
Private Pay	15,734		14,683		48,055		40,751
Total	$	244,356	$	212,664	$	676,825	$	598,706

The impact to revenue related to prior period performance obligations was not material for the three and nine months ended September 30, 2021 and 2020.

Products & Services Segment

Revenue in our Products & Services segment is derived from the distribution of O&P components and from therapeutic solutions which includes the leasing and sale of rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training.

The following table disaggregates revenue from contracts with customers in our Products & Services segment for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Products & Services Segment
Distribution services, net of intersegment revenue eliminations	$	34,656	$	32,711	$	98,591	$	90,928
Therapeutic solutions	10,815		11,262		32,700		34,176
Total	$	45,471	$	43,973	$	131,291	$	125,104

XML

Accounts Receivable, Net

9 Months Ended

Sep. 30, 2021

Accounts Receivable, after Allowance for Credit Loss [Abstract]

Accounts Receivable, Net

Accounts Receivable, NetAccounts receivable, net represents outstanding amounts we expect to collect from the transfer of our products and services. Principally, these amounts are comprised of receivables from Medicare, Medicaid, and commercial insurance plans. Our accounts receivable represent amounts outstanding from our gross charges, net of contractual discounts, sales returns, and other implicit price concessions including estimates for payor disallowances and patient non-payments.

We are exposed to credit losses primarily through our accounts receivable. These receivables are short in nature because their due date varies between due upon receipt of invoice and 90 days. We assess our receivables, divide them into similar risk pools, and monitor our ongoing credit exposure through active review of our aging buckets. Our activities include timely account reconciliations, dispute resolution, and payment confirmations. We also employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

Our expected loss methodology is developed using historical liquidation rates, current and future economic and market conditions, and a review of the current status of our patients and customers’ trade accounts receivable balances. We also grouped our receivables into similar risk pools to better measure the risks for each pool. After evaluating the risk for each pool, we determined that additional credit loss risk was immaterial for the Patient Care segment. For the Products & Services segment, an allowance for doubtful accounts is recorded, which is deducted from gross accounts receivable to arrive at “Accounts receivable, net.” As of September 30, 2021, we have considered the current and future economic and market conditions resulting in a decrease to the allowance for doubtful accounts by approximately $0.8 million since December 31, 2020.

Accounts receivable, net as of September 30, 2021 and December 31, 2020 is comprised of the following:

	As of September 30, 2021						As of December 31, 2020
(in thousands)	Patient Care		Products & Services		Consolidated		Patient Care		Products & Services		Consolidated
Gross charges before estimates for implicit price concessions	$	161,888	$	21,336	$	183,224	$	156,504	$	21,300	$	177,804
Less estimates for implicit price concessions:
Payor disallowances	(37,211)		—		(37,211)		(39,343)		—		(39,343)
Patient non-payments	(7,890)		—		(7,890)		(7,042)		—		(7,042)
Accounts receivable, gross	116,787		21,336		138,123		110,119		21,300		131,419
Allowance for doubtful accounts	—		(2,011)		(2,011)		—		(2,823)		(2,823)
Accounts receivable, net	$	116,787	$	19,325	$	136,112	$	110,119	$	18,477	$	128,596

XML

Inventories

9 Months Ended

Sep. 30, 2021

Inventory Disclosure [Abstract]

Inventories

Inventories

Our inventories are comprised of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Raw materials	$	21,411	$	19,716
Work in process	19,053		12,040
Finished goods	44,283		44,673
Total inventories	$	84,747	$	76,429

XML

Acquisitions

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

2021 Acquisition Activity

During 2021, we completed the following acquisitions of O&P clinics with the intention of expanding the geographic footprint of our patient care offerings through the acquisition of these high quality O&P providers. None of the acquisitions were individually material to our financial position, results of operations, or cash flows.

•In the first quarter of 2021, we completed the acquisitions of all the outstanding equity interests of three O&P businesses and the assets of one O&P business for total consideration of $24.2 million, of which $19.2 million was cash consideration, net of cash acquired, $4.0 million was issued in the form of notes to shareholders at fair value, and $1.0 million in additional consideration.

•In the second quarter of 2021, we completed the acquisitions of all the outstanding equity interests of two O&P businesses for total consideration of $21.0 million, of which $16.0 million was cash consideration, net of cash acquired, $4.9 million was issued in the form of notes to shareholders at fair value, and $0.1 million in additional consideration.

•In the third quarter of 2021, we completed the acquisitions of all the outstanding equity interests of three O&P businesses and the assets of one O&P business for total consideration of $6.2 million, of which $3.9 million was cash consideration, net of cash acquired, $1.5 million was issued in the form of notes to shareholders at fair value, and $0.8 million in additional consideration.

We accounted for these transactions under the acquisition method of accounting and have reported the results of operations of each acquisition as of the respective dates of the acquisitions. We based the estimated fair values of intangible assets on an income approach utilizing the excess earnings method for customer relationships. The income approach utilizes management’s estimates of future operating results and cash flows using a weighted average cost of capital that reflects market participant assumptions. Other significant judgments used in the valuation of tangible assets acquired in the acquisition include estimated selling price of inventory and estimated replacement cost for acquired property, plant, and equipment. For all other assets acquired and liabilities assumed, the fair value reflects the carrying value of the asset or liability due to their short maturity. We recorded the excess of the fair value of the consideration transferred in the acquisitions over the fair value of net assets acquired as goodwill. The goodwill reflects our expectations of favorable future growth opportunities, anticipated synergies through the scale of our O&P operations, and the assembled workforce. We expect that the majority of the goodwill acquired in the first quarter of 2021, which has been assigned to our Patient Care reporting unit, will not be deductible for federal income tax purposes. We expect that substantially all of the goodwill acquired in the second and third quarters of 2021, which has been assigned to our Patient Care reporting unit, will be deductible for federal income tax purposes.

Acquisition-related costs are included in general and administrative expenses in our condensed consolidated statements of operations. Total acquisition-related costs incurred during the three and nine months ended September 30, 2021 were $0.6 million and $1.4 million, respectively, which includes those costs for transactions that are in progress or were not completed during the respective period. Acquisition-related costs incurred for the acquisitions completed during the three and nine months ended September 30, 2021 were $0.2 million and $0.7 million, respectively.

We have not presented pro forma combined results for these acquisitions because the impact on previously reported statements of operations would not have been material individually or in the aggregate.

Purchase Price Allocation

We have performed a preliminary valuation analysis of the fair market value of the assets acquired and liabilities assumed in the acquisitions. The final purchase price allocations will be determined when we have completed and fully reviewed the detailed valuations and could differ materially from the preliminary allocations. The final allocations may include changes in allocations of acquired intangible assets as well as goodwill and other changes to assets and liabilities, including deferred taxes. The estimated useful lives of acquired intangible assets are also preliminary.

The aggregate purchase price of these acquisitions were allocated on a preliminary basis as follows:

(in thousands)
Cash paid, net of cash acquired	$	39,104
Issuance of Seller Notes at fair value	10,442
Additional consideration, net	1,892
Aggregate purchase price	51,438
Accounts receivable	2,609
Inventories	1,957
Customer relationships (Weighted average useful life of 5.0 years)	5,505
Non-compete agreements (Weighted average useful life of 5.0 years)	62
Other assets and liabilities, net	(3,915)
Net assets acquired	6,218
Goodwill	$	45,220

Right-of-use assets and lease liabilities related to operating leases recognized in connection with the acquisitions completed during the nine months ended September 30, 2021 was $4.0 million.

2020 Acquisition Activity

During 2020, we completed the following acquisitions of O&P clinics with the intention of expanding the geographic footprint of our patient care offerings through the acquisition of these high quality O&P providers. None of the acquisitions were individually material to our financial position, results of operations, or cash flows.

•In the second quarter of 2020, we acquired all of the outstanding equity interests of an O&P business for total consideration of $46.2 million at fair value, of which $16.8 million was cash consideration, net of cash acquired, $21.9 million was issued in the form of notes to the former shareholders, $3.5 million in the form of a deferred payment obligation to the former shareholders, and $4.0 million in additional consideration. Of the $21.9 million in notes issued to the former shareholders, approximately $18.1 million of the notes were paid in October 2020 in a lump sum payment and the remaining $3.8 million of the notes are payable in annual installments over a period of three years on the anniversary date of the acquisition. Total payments of $4.0 million under the deferred payment obligation are due in annual installments beginning in the fourth year following the acquisition and for three years thereafter. Additional consideration includes approximately $3.6 million in liabilities incurred to the shareholders as part of the business combination payable in October 2020 and is included in Accrued expenses and other liabilities in the consolidated balance sheet. The remaining $0.4 million in additional consideration represents the effective settlement of amounts due to us from the acquired O&P business as of the acquisition date.

•In the fourth quarter of 2020, we completed the acquisitions of all the outstanding equity interests of four O&P businesses for total consideration of $7.1 million, of which $4.9 million was cash consideration, net of cash acquired, $1.9 million was issued in the form of notes to shareholders at fair value, and $0.3 million in additional consideration.

The aggregate purchase price of these acquisitions were allocated on a preliminary basis as follows:

(in thousands)
Cash paid, net of cash acquired	$	21,709
Issuance of Seller Notes at fair value	23,766
Deferred payment obligation at fair value	3,468
Additional consideration, net	4,319
Aggregate purchase price	53,262
Accounts receivable	4,224
Inventories	2,276
Customer relationships (Weighted average useful life of 5.0 years)	6,358
Non-compete agreements (Weighted average useful life of 5.0 years)	200
Other assets and liabilities, net	(4,561)
Net assets acquired	8,497
Goodwill	$	44,765

Right-of-use assets and lease liabilities related to operating leases recognized in connection with acquisitions completed for the year ended December 31, 2020 were $5.5 million.

XML

Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

We assess goodwill and indefinite-lived intangible assets for impairment annually as of October 1st, and between annual tests if an event occurs, or circumstances change, that would more-likely-than-not reduce the fair value of a reporting unit below its carrying value.

The following table summarizes the activity in goodwill of the Patient Care operating segment for the periods indicated:

	For the Nine Months Ended September 30, 2021
(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
As of December 31, 2020	$	705,891	$	(428,668)	$	277,223
Additions from acquisitions	45,220		—		45,220
Measurement period adjustments (1)	256		—		256
As of September 30, 2021	$	751,367	$	(428,668)	$	322,699

(1) Measurement period adjustments relate to 2021 acquisitions of approximately $(0.4) million and acquisitions in prior years of approximately $0.7 million for a net increase to goodwill. These measurement period adjustments are primarily attributable to adjustments to the accounts receivables and accounts payables balances.

	For the Year Ended December 31, 2020
(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
As of December 31, 2019	$	660,912	$	(428,668)	$	232,244
Additions from acquisitions	45,144		—		45,144
Measurement period adjustments (1)	(165)		—		(165)
As of December 31, 2020	$	705,891	$	(428,668)	$	277,223

(1) Measurement period adjustments reducing goodwill relate to acquisitions in the current and prior year of approximately $0.2 million and are primarily attributable to adjustments to the preliminary allocations of customer relationship intangibles.

As of December 31, 2017, goodwill of approximately $139.3 million within the Products & Services operating segment was impaired in full.

The balances related to intangible assets as of September 30, 2021 and December 31, 2020 are as follows:

	As of September 30, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	22,384	$	(8,705)	$	—	$	13,679
Trade name	255		(195)		—		60
Patents and other intangibles	9,056		(6,312)		—		2,744
Definite-lived intangible assets	31,695		(15,212)		—		16,483
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	40,765	$	(15,212)	$	(4,953)	$	20,600

	As of December 31, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	16,879	$	(5,845)	$	—	$	11,034
Trade name	255		(176)		—		79
Patents and other intangibles	9,011		(5,810)		—		3,201
Definite-lived intangible assets	26,145		(11,831)		—		14,314
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	35,215	$	(11,831)	$	(4,953)	$	18,431

Amortization expense related to other intangible assets was approximately $1.2 million and $3.4 million for the three and nine months ended September 30, 2021 and $1.6 million and $4.6 million for the three and nine months ended September 30, 2020.

Estimated aggregate amortization expense for definite-lived intangible assets for each of the next five years ended December 31, and thereafter is as follows:

(in thousands)
2021 (remainder of the year)	$	1,252
2022	4,941
2023	4,698
2024	3,207
2025	2,019
Thereafter	366
Total	$	16,483

XML

Other Current Assets and Other Assets

9 Months Ended

Sep. 30, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Current Assets and Other Assets

Other Current Assets and Other Assets

Other current assets consist of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Non-trade receivables	$	6,270	$	6,063
Prepaid maintenance	5,293		2,942
Prepaid insurance	978		266
Other prepaid assets	4,355		3,086
Total other current assets	$	16,896	$	12,357

Other assets consist of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Implementation costs for cloud computing arrangements	$	7,058	$	4,811
Cash surrender value of company-owned life insurance	4,503		3,973
Finance lease right-of-use assets	2,566		3,016
Deposits	2,182		2,144
Non-trade receivables	1,444		1,274
Other	431		516
Total other assets	$	18,184	$	15,734

XML

Accrued Expenses and Other Current Liabilities and Other Liabilities

9 Months Ended

Sep. 30, 2021

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities and Other Liabilities

Accrued Expenses and Other Current Liabilities and Other Liabilities

Accrued expenses and other current liabilities consist of:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Patient prepayments, deposits, and refunds payable	$	25,075	$	27,195
Accrued sales taxes and other taxes	9,456		9,863
Insurance and self-insurance accruals	7,518		7,651
Derivative liability	7,461		7,686
Accrued professional fees	1,177		1,016
Accrued interest payable	581		440
Other current liabilities	7,904		9,010
Total	$	59,172	$	62,861

Other liabilities consist of:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Supplemental executive retirement plan obligations	$	21,184	$	21,503
Derivative liability	7,953		14,388
Long-term insurance accruals	7,894		7,326
Deferred payroll taxes	5,918		5,918
Unrecognized tax benefits	300		5,465
Other	2,112		1,993
Total	$	45,361	$	56,593

XML

Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesWe recorded a benefit for income taxes of $2.9 million and $2.5 million for the three and nine months ended September 30, 2021. The effective tax rate was (16.1)% and (9.7)% for the three and nine months ended September 30, 2021. We recorded a benefit for income taxes of $1.9 million and $4.8 million for the three and nine months ended September 30, 2020. The effective tax rate was (39.0)% and (27.3)% for the three and nine months ended September 30, 2020.

The increase in the effective tax rate for the three months ended September 30, 2021 compared with the three months ended September 30, 2020 is primarily attributable to the net tax benefit of the loss carryback claim recognized in the three months ended September 30, 2020, as well as an increase in pre-tax book income for the three months ended September 30, 2021 partially offset by the release of reserves for uncertain tax positions for the three months ended September 30, 2021. Our effective tax rate for the three months ended September 30, 2021 differed from the federal statutory tax rate of 21% primarily due to an accrual true-up for actual research and development costs included on our recently filed tax return, non-deductible expenses, and the release of reserves for uncertain tax positions. Our effective tax rate for the three months ended September 30, 2020 differed from the federal statutory tax rate of 21% primarily due to the net tax benefit of the loss carryback claim and non-deductible expenses.

The increase in the effective tax rate for the nine months ended September 30, 2021 compared with the nine months ended September 30, 2020 is primarily attributable to the 2017 through 2019 research and development tax credits recognized in the nine months ended September 30, 2020, partially offset by a windfall from share-based compensation and the release of reserves for uncertain tax positions for the nine months ended September 30, 2021. Our effective tax rate for the nine months ended September 30, 2021 differed from the federal statutory tax rate of 21% primarily due to an accrual true-up for actual research and development costs included on our recently filed tax return, non-deductible expenses, a windfall from share-based compensation, and the release of reserves for uncertain tax positions. Our effective tax rate for the nine months ended September 30, 2020 differed from the federal statutory tax rate of 21% primarily due to research and development tax credits, the net tax benefit of the loss carryback claim, and non-deductible expenses.

For the year ended December 31, 2020, we completed a formal study to identify qualifying research and development expenses resulting in the recognition of federal tax benefits of $3.8 million, net of tax reserves, related to 2020 and $6.1 million, net of tax reserves, related to prior years. We recorded the tax benefit, before tax reserves, as a deferred tax asset. For the year ended December 31, 2021, we estimate a federal tax benefit of $4.6 million, net of tax reserves.

During the three months ended September 30, 2021, we released $3.5 million of unrecognized tax benefits and $1.2 million of interest expense due to lapse of statute of limitations for the applicable tax years. We do not anticipate further significant release of unrecognized tax benefits within the next twelve months.

XML

Debt and Other Obligations

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt and Other Obligations

Debt and Other Obligations

Debt consists of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Debt:
Term Loan B	$	487,325	$	491,113
Seller Notes	18,626		11,510
Deferred payment obligation	4,000		4,000
Finance lease liabilities and other	3,229		3,869
Total debt before unamortized discount and debt issuance costs	513,180		510,492
Unamortized discount and debt issuance costs, net	(6,201)		(7,395)
Total debt	$	506,979	$	503,097
Current portion of long-term debt:
Term Loan B	$	5,050	$	5,050
Seller Notes	5,770		4,060
Finance lease liabilities and other	880		975
Total current portion of long-term debt	11,700		10,085
Long-term debt	$	495,279	$	493,012

Refinancing of Credit Agreement and Term B Borrowings

On March 6, 2018, we entered into a new $605.0 million Senior Credit Facility (the “Credit Agreement”). The Credit Agreement provides for (i) a revolving credit facility with an initial maximum aggregate amount of availability of $100.0 million that matures in March 2023 and (ii) a $505.0 million Term Loan B facility due in quarterly principal installments commencing June 29, 2018, with all remaining outstanding principal due at maturity in March 2025. Availability under the revolving credit facility is reduced by outstanding letters of credit, which were approximately $5.1 million as of September 30, 2021. We may (a) increase the aggregate principal amount of any outstanding tranche of term loans or add one or more additional tranches of term loans under the loan documents, and/or (b) increase the aggregate principal amount of revolving commitments or add one or more additional revolving loan facilities under the loan documents by an aggregate amount of up to the sum of (1) $125.0 million and (2) an amount such that, after giving effect to such incurrence of such amount (but excluding the cash proceeds of such incremental facilities and certain other indebtedness, and treating all commitments in respect of revolving indebtedness as fully drawn), the consolidated first lien net leverage ratio is equal to or less than 3.80 to 1.00, if certain conditions are satisfied, including the absence of a default or an event of default under the Credit Agreement at the time of the increase and that we obtain the consent of each lender providing any incremental facility.

We had approximately $94.9 million in available borrowing capacity under our $100.0 million revolving credit facility as of September 30, 2021.

Our obligations under the Credit Agreement are currently guaranteed by our material domestic subsidiaries and will from time to time be guaranteed by, subject in each case to certain exceptions, any domestic subsidiaries that may become material in the future. Subject to certain exceptions, the Credit Agreement is secured by first-priority perfected liens and security interests in substantially all of our personal property and each subsidiary guarantor.

Borrowings under the Credit Agreement bear interest at a variable rate equal to (i) LIBOR plus a specified margin, or (ii) the base rate (which is the highest of (a) Bank of America, N.A.’s prime rate, (b) the federal funds rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR) plus a specified margin. For the three months ended September 30, 2021, the weighted average interest rate on outstanding borrowings under our Term Loan B facility was approximately 3.5%. We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note M - “Derivative Financial Instruments.”

We must also pay (i) an unused commitment fee ranging from 0.375% to 0.500% per annum of the average daily unused portion of the aggregate revolving credit commitments under the Credit Agreement, and (ii) a per annum fee equal to (a) for each performance standby letter of credit outstanding under the Credit Agreement with respect to nonfinancial contractual obligations, 50% of the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn under such letter of credit, and (b) for each other letter of credit outstanding under the Credit Agreement, the applicable margin over LIBOR under the revolving credit facility in effect from time to time multiplied by the daily amount available to be drawn for such letter of credit.

The Credit Agreement contains various restrictions and covenants, including: (i) requirements that we maintain certain financial ratios at prescribed levels, (ii) a prohibition on payment of dividends and other distributions and (iii) restrictions on our ability and certain of our subsidiaries to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, or consummate acquisitions outside the healthcare industry. The Credit Agreement includes the following financial covenants applicable for so long as any revolving loans and/or revolving commitments remain outstanding under the Credit Agreement (some of which were amended in May 2020 by the Amendment (as defined and described below)): (i) a maximum consolidated first lien net leverage ratio (“Net Leverage Ratio”) (defined as, with certain adjustments and exclusions, the ratio of consolidated first-lien indebtedness to consolidated net income before interest, taxes, depreciation, amortization, non-cash charges and certain other items (“EBITDA”) for the most recently ended period of four fiscal quarters for which financial statements are available) of 4.25 to 1.00 for the fiscal quarters ended September 30, 2021 through March 31, 2022; and 3.75 to 1.00 for the fiscal quarter ended June 30, 2022 and the last day of each fiscal quarter thereafter; and (ii) a minimum interest coverage ratio (defined as, with certain adjustments, the ratio of our EBITDA to consolidated interest expense to the extent paid or payable in cash) of 2.75 to 1.00 as of the last day of any fiscal quarter.

The Credit Agreement also contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable; provided, however, that the occurrence of an event of default as a result of a breach of a financial covenant under the Credit Agreement does not constitute a default or event of default with respect to any term facility under the Credit Agreement unless and until the required revolving lenders shall have terminated their revolving commitments and declared all amounts outstanding under the revolving credit facility to be due and payable. In addition, if we or any subsidiary guarantor becomes the subject of voluntary or involuntary proceedings under any bankruptcy, insolvency, or similar law, then any outstanding obligations under the Credit Agreement will automatically become immediately due and payable. Loans outstanding under the Credit Agreement will bear interest at a rate of 2.00% per annum in excess of the otherwise applicable rate (i) upon acceleration of such loans, (ii) while a payment event of default exists or (iii) upon the lenders’ request, during the continuance of any other event of default.

In May 2020, we entered into an amendment to the Credit Agreement (the “Amendment”) that provided for, amongst other things, an increase in the maximum Net Leverage Ratio to 5.00 to 1.00 for the fiscal quarter ended September 30, 2021; and 4.75 to 1.00 for the quarter ended December 31, 2021 and the last day of each fiscal quarter thereafter. In addition, the Amendment changed the definition of EBITDA used in the Net Leverage Ratio and minimum interest coverage ratio to adjust for declines in net revenue attributable to the COVID-19 pandemic. Borrowings under the revolving credit facility will bear interest at a variable rate equal to the greater of LIBOR or 1%, plus 3.75%. In addition, the Amendment contained certain restrictions and covenants that further limit our ability, and certain of our subsidiaries’ ability, to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, or consummate acquisitions not financed with the proceeds of an equity offering, except that certain acquisitions are permitted after September 30, 2020, in the event we maintain certain leverage and liquidity thresholds. We capitalized debt issuance costs of $0.2 million in connection with the Amendment, which were recorded in Other assets.

We were in compliance with all covenants at September 30, 2021.

Seller Notes and the Deferred Payment Obligation

We typically issue subordinated promissory notes (“Seller Notes”) as a part of the consideration transferred when making acquisitions. The Seller Notes are unsecured and are presented net of unamortized discount of $0.8 million and $0.9 million as of September 30, 2021 and December 31, 2020, respectively. We measure these instruments at their estimated fair values as of the respective acquisition dates. The stated interest rates on these instruments range from 2.50% to 3.00%. Principal and interest are payable in quarterly or annual installments and mature through August 2026.

Amounts due under the deferred payment obligation to the former shareholders of an acquired O&P business are unsecured and presented net of unamortized discount of $0.4 million and $0.5 million as of September 30, 2021 and December 31, 2020, respectively. The deferred payment obligation was measured at its estimated fair value as of the acquisition date and accrues interest at a rate of 3.0%. Principal and interest payments under the deferred payment obligation are due in annual installments beginning in 2024 and for three years thereafter.

Scheduled Maturities of Total Debt

Scheduled maturities of debt at September 30, 2021 were as follows:

(in thousands)
2021 (remainder of year)	$	2,405
2022	12,155
2023	11,818
2024	11,181
2025	473,069
Thereafter	2,552
Total debt before unamortized discount and debt issuance costs, net	513,180
Unamortized discount and debt issuance costs, net	(6,201)
Total debt	$	506,979

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Financial Instruments

The carrying value of our outstanding term loan as of September 30, 2021 (excluding unamortized discounts and debt issuance costs of $5.4 million) was $487.3 million compared to its fair value of $486.7 million. The carrying value of our outstanding term loan as of December 31, 2020 (excluding unamortized discounts and debt issuance costs of $6.5 million) was $491.1 million compared to its fair value of $489.9 million. Our estimates of fair value are based on a discounted cash flow model and an indicative quote using unobservable inputs, primarily, our risk-adjusted credit spread, which represents a Level 3 measurement.

We have interest rate swap agreements designated as cash flow hedges and are measured at fair value based on inputs other than quoted market prices that are observable, which represents a Level 2 measurement. See Note K - “Debt and Other Obligations” and Note M - “Derivative Financial Instruments” for further information.

We believe that the carrying value of the Seller Notes and the deferred payment obligation approximates their fair values based on a discounted cash flow model using unobservable inputs, primarily, our credit spread for subordinated debt, which represents a Level 3 measurement. The carrying value of our outstanding Seller Notes and the deferred payment obligation issued in connection with past acquisitions as of September 30, 2021 and December 31, 2020 was $21.8 million and $14.6 million, net of unamortized discounts of $0.8 million and $0.9 million, respectively.

XML

Derivative Financial Instruments

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Cash Flow Hedges of Interest Rate Risk

In March 2018, we entered into interest rate swap agreements with notional values of $325.0 million at inception, which reduces $12.5 million annually until the swaps mature on March 6, 2024. As of September 30, 2021 and December 31, 2020, our swaps had a notional value outstanding of $287.5 million and $300.0 million, respectively.

Change in Net Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Loss

The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the three months ended September 30, 2021 and 2020, respectively:

(in thousands)	Cash Flow Hedges
Balance as of June 30, 2021	$	(13,034)
Unrealized loss recognized in other comprehensive income, net of tax	(646)
Reclassification to interest expense, net	1,967
Balance as of September 30, 2021	$	(11,713)
Balance as of June 30, 2020	$	(19,612)
Unrealized loss recognized in other comprehensive income, net of tax	(455)
Reclassification to interest expense, net	1,997
Balance as of September 30, 2020	$	(18,070)

The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the nine months ended September 30, 2021 and 2020, respectively:

(in thousands)	Cash Flow Hedges
Balance as of December 31, 2020	$	(16,771)
Unrealized loss recognized in other comprehensive income, net of tax	(829)
Reclassification to interest expense, net	5,887
Balance as of September 30, 2021	$	(11,713)
Balance as of December 31, 2019	$	(10,137)
Unrealized loss recognized in other comprehensive loss, net of tax	(12,518)
Reclassification to interest expense, net	4,585
Balance as of September 30, 2020	$	(18,070)

The following table presents the fair value of derivative liabilities within the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020:

	As of September 30, 2021				As of December 31, 2020
(in thousands)	Assets		Liabilities		Assets		Liabilities
Derivatives designated as cash flow hedging instruments:
Accrued expenses and other current liabilities	$	—	$	7,461	$	—	$	7,686
Other liabilities	—		7,953		—		14,388

XML

Share-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

On May 17, 2019, our shareholders approved the Hanger, Inc. 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan authorizes the issuance of (a) up to 2,025,000 shares of Common Stock, plus (b) 243,611 shares available for issuance under the Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”). Upon approval of the 2019 Plan, the 2016 Plan was no longer available for future awards.

On May 19, 2017, the Board of Directors approved the Hanger, Inc. Special Equity Plan (the “Special Equity Plan”). The Special Equity Plan authorized up to 1.5 million shares of Common Stock and operates completely independent from our 2016 Omnibus Incentive Plan. All awards under the Special Equity Plan were made on May 19, 2017, which consisted of 0.8 million stock options and 0.3 million performance-based stock awards. No further grants of awards will be authorized or issued under the Special Equity Plan.

As of September 30, 2021, there were 1,395,922 unvested restricted stock awards outstanding. This was comprised of 1,004,549 employee service-based awards with a weighted average grant date fair value of $21.31 per share, 342,017 employee performance-based awards with a weighted average grant date fair value of $21.61 per share, and 49,356 director service-based awards with a weighted average grant date value of $25.53 per share. As of September 30, 2021, there were 312,014 outstanding options exercisable with a weighted average exercise price of $12.77 and average remaining contractual term of 5 years.

The 2017 Special Equity Plan was amended in May 2020 to modify the performance period ending date for purposes of the compounded annual growth rate calculation to February 20, 2020, shortening the performance period to approximately 33 months, representing a reduction of three months. This adjustment was considered a modification per ASC 718 Compensation - Stock Compensation and, therefore, any incremental fair value arising from the modification of an award with market conditions would be recognized over the remaining service period. As a result of the modification, we recognized an additional $5.9 million in share-based compensation expense during the second quarter of 2020.

We recognized a total of approximately $3.0 million and $9.4 million of share-based compensation expense for the three and nine months ended September 30, 2021 and a total of approximately $3.1 million and $15.6 million for the three and nine months ended September 30, 2020, respectively. Share-based compensation expense, net of forfeitures, relates to restricted stock units, performance-based restricted stock units, and stock options.

XML

Supplemental Executive Retirement Plans

9 Months Ended

Sep. 30, 2021

Retirement Benefits [Abstract]

Supplemental Executive Retirement Plans

Supplemental Executive Retirement Plans

Defined Benefit Supplemental Executive Retirement Plan

Effective January 2004, we implemented an unfunded noncontributory defined benefit plan (“DB SERP”) for certain senior executives. The DB SERP, which we administer, calls for fifteen annual payments upon retirement with the payment amount based on years of service and final average salary. Benefit costs and liability balances are calculated based on certain assumptions including benefits earned, discount rates, interest costs, mortality rates, and other factors. Actual results that differ from the assumptions are accumulated and amortized over future periods, affecting the recorded obligation and expense in future periods.

We believe the assumptions used are appropriate; however, changes in assumptions or differences in actual experience may affect our benefit obligation and future expenses. The change in net benefit cost and obligation during the three and nine months ended September 30, 2021 and 2020 is as follows:

Change in Benefit Obligation:
(in thousands)	2021		2020
Benefit obligation as of June 30	$	18,278	$	17,763
Service cost	123		98
Interest cost	87		121
Payments	(12)		(12)
Benefit obligation as of September 30	$	18,476	$	17,970
Benefit obligation as of December 31, 2020 and 2019, respectively	$	19,746	$	19,214
Service cost	370		294
Interest cost	261		363
Payments	(1,901)		(1,901)
Benefit obligation as of September 30	$	18,476	$	17,970

Amounts Recognized in the Condensed Consolidated Balance Sheets:
	As of September 30,		As of December 31,
(in thousands)	2021		2020
Current accrued expenses and other current liabilities	$	1,913	$	1,913
Non-current other liabilities	16,563		17,833
Total accrued liabilities	$	18,476	$	19,746

Defined Contribution Supplemental Executive Retirement Plan

In 2013, we established a defined contribution plan (“DC SERP”) that covers certain of our senior executives. Each participant is given a notional account to manage his or her annual distributions and allocate the funds among various investment options (e.g. mutual funds). These accounts are tracking accounts only for the purpose of calculating the participant’s benefit. The participant does not have ownership of the underlying mutual funds. When a participant initiates or changes the allocation of his or her notional account, we will generally make an allocation of our investments to match those chosen by the participant. While the allocation of our sub accounts is generally intended to mirror the participant’s account records (i.e. the distributions and gains or losses on those funds), the employee does not have legal ownership of any funds until payout upon retirement. The underlying investments are owned by the insurance company with which we own an insurance policy.

As of September 30, 2021 and December 31, 2020, the estimated accumulated obligation benefit is $4.6 million and $4.5 million, of which $4.2 million and $4.0 million is funded and $0.4 million and $0.5 million is unfunded at September 30, 2021 and December 31, 2020, respectively.

In connection with the DC SERP benefit obligation, we maintain a company-owned life insurance policy (“COLI”). The carrying value of the COLI is measured at its cash surrender value and is presented within “Other assets” in our condensed consolidated balance sheets. See Note H - “Other Current Assets and Other Assets” for additional information.

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Guarantees and Indemnification

In the ordinary course of our business, we may enter into service agreements with service providers in which we agree to indemnify or limit the service provider against certain losses and liabilities arising from the service provider’s performance of the agreement. We have reviewed our existing contracts containing indemnification or clauses of guarantees and do not believe that our liability under such agreements is material.

Other Matters

From time to time we are subject to legal proceedings and claims which arise in the ordinary course of our business, and are also subject to additional payments under business purchase agreements. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions will not have a materially adverse effect on our consolidated financial position, liquidity or results of our operations.

We operate in a highly regulated industry and receive regulatory agency inquiries from time to time in the ordinary course of our business, including inquiries relating to our billing activities. No assurance can be given that any discrepancies identified during a regulatory review will not have a material adverse effect on our consolidated financial statements.

XML

Segment and Related Information

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segment and Related Information

Segment and Related Information

We have identified two operating segments and both performance evaluation and resource allocation decisions are determined based on each segment’s income from operations. The operating segments are described further below.

Patient Care - This segment consists of (i) our owned and operated patient care clinics, and (ii) our contracting and network management business. The patient care clinics provide services to design and fit O&P devices to patients. These clinics also instruct patients in the use, care, and maintenance of the devices. The principal reimbursement sources for our services are:

•Commercial private payors and other, which consist of individuals, rehabilitation providers, commercial insurance companies, health management organizations (“HMOs”), preferred provider organizations (“PPOs”), hospitals, vocational rehabilitation, workers’ compensation programs, and similar sources;

•Medicare, a federally funded health insurance program providing health insurance coverage for persons aged 65 or older and certain persons with disabilities, which provides reimbursement for O&P products and services based on prices set forth in published fee schedules (generally with either 10 regional pricing areas or state level prices) for prosthetics and orthotics and by state for durable medical equipment (DMEPOS);

•Medicaid, a health insurance program jointly funded by federal and state governments providing health insurance coverage for certain persons requiring financial assistance, regardless of age, which may supplement Medicare benefits for persons aged 65 or older requiring financial assistance; and

•the VA.

Our contract and network management business, known as Linkia, is the only network management company dedicated solely to serving the O&P market and is focused on managing the O&P services of national and regional insurance companies. We partner with healthcare insurance companies by securing a national or regional contract either as a preferred provider or to manage their O&P network of providers.

Products & Services - This segment consists of our distribution business, which distributes and fabricates O&P products and components to sell to both the O&P industry and our own patient care clinics, and our therapeutic solutions business. The therapeutic solutions business leases and sells rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training.

Corporate & Other - This consists of corporate overhead and includes unallocated expense such as personnel costs, professional fees, and corporate offices expenses.

The accounting policies of the segments are the same as those described in Note A - “Organization and Summary of Significant Accounting Policies” in our 2020 Form 10-K.

Intersegment revenue primarily relates to sales of O&P components from the Products & Services segment to the Patient Care segment. The sales are priced at the cost of the related materials plus overhead.

Summarized financial information concerning our reporting segments is shown in the following tables. Total assets for each of the segments has not materially changed from December 31, 2020.

	Patient Care				Products & Services
	For the Three Months Ended September 30,				For the Three Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Third party	$	244,356	$	212,664	$	45,471	$	43,973
Intersegments	—		—		58,495		50,011
Total net revenues	244,356		212,664		103,966		93,984
Material costs
Third party suppliers	65,356		56,599		27,205		24,863
Intersegments	9,408		7,339		49,087		42,672
Total material costs	74,764		63,938		76,292		67,535
Personnel expenses	84,479		76,989		14,469		12,738
Other expenses	38,923		34,713		6,636		5,957
Depreciation & amortization	4,870		4,786		1,974		2,633
Segment income from operations	$	41,320	$	32,238	$	4,595	$	5,121

	Patient Care				Products & Services
	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Third party	$	676,825	$	598,706	$	131,291	$	125,104
Intersegments	—		—		160,986		138,899
Total net revenues	676,825		598,706		292,277		264,003
Material costs
Third party suppliers	179,060		160,212		77,942		68,463
Intersegments	27,343		18,639		133,643		120,260
Total material costs	206,403		178,851		211,585		188,723
Personnel expenses	243,431		216,910		42,946		35,824
Other expenses	112,509		86,462		19,202		18,614
Depreciation & amortization	14,472		14,089		5,872		7,883
Segment income from operations	$	100,010	$	102,394	$	12,672	$	12,959

A reconciliation of the total of the reportable segments’ income from operations to consolidated net income is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Income from operations
Patient Care	$	41,320	$	32,238	$	100,010	$	102,394
Products & Services	4,595		5,121		12,672		12,959
Corporate & other	(20,247)		(24,284)		(64,899)		(72,590)
Income from operations	25,668		13,075		47,783		42,763
Interest expense, net	7,313		8,013		21,805		24,918
Non-service defined benefit plan expense	167		158		501		474
Income before income taxes	18,188		4,904		25,477		17,371
Benefit for income taxes	(2,929)		(1,911)		(2,469)		(4,750)
Net income	$	21,117	$	6,815	$	27,946	$	22,121

A reconciliation of the reportable segments’ net revenues to consolidated net revenues is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Patient Care	$	244,356	$	212,664	$	676,825	$	598,706
Products & Services	103,966		93,984		292,277		264,003
Corporate & other	—		—		—		—
Consolidating adjustments	(58,495)		(50,011)		(160,986)		(138,899)
Consolidated net revenues	$	289,827	$	256,637	$	808,116	$	723,810

A reconciliation of the reportable segments’ material costs to consolidated material costs is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Material costs
Patient Care	$	74,764	$	63,938	$	206,403	$	178,851
Products & Services	76,292		67,535		211,585		188,723
Corporate & other	—		—		—		—
Consolidating adjustments	(58,495)		(50,011)		(160,986)		(138,899)
Consolidated material costs	$	92,561	$	81,462	$	257,002	$	228,675

During the third quarter 2021, we have reclassified certain amounts related to the intercompany cost transfer between segment net revenues, segment material costs, and consolidating adjustments from the first six months of 2021 to be consistent with current presentation.

XML

Subsequent Events

9 Months Ended

Sep. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

During the fourth quarter of 2021 to date, we completed the acquisitions of four O&P businesses for a total purchase price of $38.7 million. Total consideration transferred for these acquisitions is comprised of $30.0 million in cash consideration, and $8.7 million in the form of notes to the former shareholders. Due to the proximity of these transactions to the filing of this Form 10-Q, it is not practicable to provide a preliminary purchase price allocation of the fair value of the assets purchased and liabilities assumed in these acquisitions. Acquisition-related expenses related to these transactions were not material.

In October 2021, we entered into definitive share purchase agreements in connection with the acquisitions of two O&P businesses for a total purchase price of approximately $14.3 million. Due to the proximity of these transactions to the filing of this Form 10-Q, it is not practicable to provide a preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed in these acquisitions.

XML

Organization and Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Organization and Summary of Significant Accounting Policies

Basis of Presentation

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements.  These financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), as previously filed with the Securities and Exchange Commission (the “SEC”).

In our opinion, the information contained herein reflects all adjustments necessary for a fair statement of our results of operations, financial position, and cash flows. All such adjustments are of a normal, recurring nature.  The results of operations for the interim periods are not necessarily indicative of those to be expected for the full year.

A detailed description of our significant accounting policies and management judgments is contained in our 2020 Form 10-K.

Reclassifications

Reclassifications

We have reclassified certain amounts in the prior year condensed consolidated financial statements to be consistent with the current year presentation. These relate to classifications within the condensed consolidated statements of operations.

Recent Developments Regarding COVID-19

Recent Developments Regarding COVID-19

We are subject to risks and uncertainties as a result of the outbreak of the novel coronavirus (“COVID-19”) pandemic (“COVID-19 pandemic”). The extent and duration of the impact of the COVID-19 pandemic on our operations and financial condition remain uncertain and difficult to predict. As a result of the COVID-19 pandemic, we believe that our patients are continuing to defer visits to our O&P clinics, as well as elective surgical procedures, both of which impact our business volumes through decreased patient encounters and physician referrals. We believe that the COVID-19 pandemic will continue to affect our business volumes for at least the remainder of 2021 when compared to pre-pandemic levels. Nevertheless, the overall adverse impact of the COVID-19 pandemic on our business volumes has diminished and stabilized over time, and our patient appointment and other business volumes continue to gradually improve as the prevalence of the virus decreases and COVID-19 vaccines become more widely available and accepted. It remains possible that further outbreaks of COVID-19, including the spread of variants such as the delta variant, or reinstitution of restrictive measures by federal, state and local governments could cause a recessionary environment impacting the healthcare industry generally, including the O&P industry. The United States government has responded with fiscal policy measures intended to support the healthcare industry and economy as a whole, including the passage of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) in March 2020.

CARES Act

The CARES Act established the Public Health and Social Services Emergency Fund, also referred to as the Cares Act Provider Relief Fund, which set aside $203.5 billion to be administered through grants and other mechanisms to hospitals, public entities, not-for-profit entities and Medicare- and Medicaid- enrolled suppliers and institutional providers. The purpose of these funds is to reimburse providers for lost revenue and health-care related expenses that are attributable to the COVID-19 pandemic. In April 2020, the U.S. Department of Health and Human Services (“HHS”) began making payments to healthcare providers from the $203.5 billion appropriation. These are grants, rather than loans, to healthcare providers, and will not need to be repaid.

During 2020, we recognized a total benefit of $24.0 million in our consolidated statement of operations within Other operating costs for the grant proceeds we received under the CARES Act (“Grants”) from HHS. We recognize income related to grants on a systematic and rational basis when it becomes probable that we have complied with the terms and conditions of the grant and in the period in which the corresponding costs or income related to the grant are recognized. We recognized the benefit from the Grants within Other operating costs in our Patient Care segment. In April 2021, we recognized an additional $0.7 million in proceeds received from grants under the CARES Act.

The CARES Act also provided for a deferral of the employer portion of payroll taxes incurred during the COVID-19 pandemic through December 2020. The provisions allowed us to defer half of such payroll taxes until December 2021 and the remaining half until December 2022. We paid the current portion of $5.9 million in September 2021, and deferred $5.9 million of payroll taxes within Other liabilities in the condensed consolidated balance sheet as of September 30, 2021.

Recent Accounting Pronouncements, Not Yet Adopted

Recent Accounting Pronouncements, Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU, effective beginning on March 12, 2020, provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. We are currently evaluating the effects that the adoption of this guidance, and related clarifying standards, will have on our condensed consolidated financial statements and the related disclosures.

Revenue from Contract with Customer

Revenue in our Patient Care segment is primarily derived from contracts with third party payors for the provision of O&P devices and is recognized upon the transfer of control of promised products or services to the patient at the time the patient receives the device. At, or subsequent to delivery, we issue an invoice to the third party payor, which primarily consists of commercial insurance companies, Medicare, Medicaid, the U.S. Department of Veterans Affairs (the “VA”), or private or patient pay (“Private Pay”) individuals. We recognize revenue for the amounts we expect to receive from payors based on expected contractual reimbursement rates, which are net of estimated contractual discounts and implicit price concessions. These revenue amounts are further revised as claims are adjudicated, which may result in additional disallowances. Revenue in our Products & Services segment is derived from the distribution of O&P components and from therapeutic solutions which includes the leasing and sale of rehabilitation equipment and ancillary consumable supplies combined with equipment maintenance, education, and training.

XML

Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Schedule of reconciliation of numerators and denominators used to calculate basic and diluted net income per share

The reconciliation of the numerators and denominators used to calculate basic and diluted net income per share are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands except share and per share amounts)	2021		2020		2021		2020
Net income	$	21,117	$	6,815	$	27,946	$	22,121
Weighted average shares outstanding - basic	38,730,468		38,133,598		38,550,307		37,878,753
Effect of potentially dilutive restricted stock units and options	510,506		503,938		688,063		613,212
Weighted average shares outstanding - diluted	39,240,974		38,637,536		39,238,370		38,491,965
Basic income per share	$	0.55	$	0.18	$	0.72	$	0.58
Diluted income per share	$	0.54	$	0.18	$	0.71	$	0.57

XML

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Schedule of disaggregates of revenue from contracts with customers

The following table disaggregates revenue from contracts with customers in our Patient Care segment for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Patient Care Segment
Medicare	$	79,586	$	68,135	$	211,169	$	194,052
Medicaid	42,739		34,541		120,475		96,612
Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care)	83,396		75,966		232,828		213,234
Veterans Administration	22,901		19,339		64,298		54,057
Private Pay	15,734		14,683		48,055		40,751
Total	$	244,356	$	212,664	$	676,825	$	598,706

The following table disaggregates revenue from contracts with customers in our Products & Services segment for the three and nine months ended September 30, 2021 and 2020:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Products & Services Segment
Distribution services, net of intersegment revenue eliminations	$	34,656	$	32,711	$	98,591	$	90,928
Therapeutic solutions	10,815		11,262		32,700		34,176
Total	$	45,471	$	43,973	$	131,291	$	125,104

XML

Accounts Receivable, Net (Tables)

9 Months Ended

Sep. 30, 2021

Accounts Receivable, after Allowance for Credit Loss [Abstract]

Schedule of accounts receivable, net

Accounts receivable, net as of September 30, 2021 and December 31, 2020 is comprised of the following:

	As of September 30, 2021						As of December 31, 2020
(in thousands)	Patient Care		Products & Services		Consolidated		Patient Care		Products & Services		Consolidated
Gross charges before estimates for implicit price concessions	$	161,888	$	21,336	$	183,224	$	156,504	$	21,300	$	177,804
Less estimates for implicit price concessions:
Payor disallowances	(37,211)		—		(37,211)		(39,343)		—		(39,343)
Patient non-payments	(7,890)		—		(7,890)		(7,042)		—		(7,042)
Accounts receivable, gross	116,787		21,336		138,123		110,119		21,300		131,419
Allowance for doubtful accounts	—		(2,011)		(2,011)		—		(2,823)		(2,823)
Accounts receivable, net	$	116,787	$	19,325	$	136,112	$	110,119	$	18,477	$	128,596

XML

Inventories (Tables)

9 Months Ended

Sep. 30, 2021

Inventory Disclosure [Abstract]

Schedule of inventories

Our inventories are comprised of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Raw materials	$	21,411	$	19,716
Work in process	19,053		12,040
Finished goods	44,283		44,673
Total inventories	$	84,747	$	76,429

XML

Acquisitions (Tables)

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Schedule of aggregate purchase price of acquisitions allocated on a preliminary basis

The aggregate purchase price of these acquisitions were allocated on a preliminary basis as follows:

(in thousands)
Cash paid, net of cash acquired	$	39,104
Issuance of Seller Notes at fair value	10,442
Additional consideration, net	1,892
Aggregate purchase price	51,438
Accounts receivable	2,609
Inventories	1,957
Customer relationships (Weighted average useful life of 5.0 years)	5,505
Non-compete agreements (Weighted average useful life of 5.0 years)	62
Other assets and liabilities, net	(3,915)
Net assets acquired	6,218
Goodwill	$	45,220

The aggregate purchase price of these acquisitions were allocated on a preliminary basis as follows:

(in thousands)
Cash paid, net of cash acquired	$	21,709
Issuance of Seller Notes at fair value	23,766
Deferred payment obligation at fair value	3,468
Additional consideration, net	4,319
Aggregate purchase price	53,262
Accounts receivable	4,224
Inventories	2,276
Customer relationships (Weighted average useful life of 5.0 years)	6,358
Non-compete agreements (Weighted average useful life of 5.0 years)	200
Other assets and liabilities, net	(4,561)
Net assets acquired	8,497
Goodwill	$	44,765

XML

Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill allocated to the Company's reportable segments

The following table summarizes the activity in goodwill of the Patient Care operating segment for the periods indicated:

	For the Nine Months Ended September 30, 2021
(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
As of December 31, 2020	$	705,891	$	(428,668)	$	277,223
Additions from acquisitions	45,220		—		45,220
Measurement period adjustments (1)	256		—		256
As of September 30, 2021	$	751,367	$	(428,668)	$	322,699

(1) Measurement period adjustments relate to 2021 acquisitions of approximately $(0.4) million and acquisitions in prior years of approximately $0.7 million for a net increase to goodwill. These measurement period adjustments are primarily attributable to adjustments to the accounts receivables and accounts payables balances.

	For the Year Ended December 31, 2020
(in thousands)	Goodwill, Gross		Accumulated Impairment		Goodwill, Net
As of December 31, 2019	$	660,912	$	(428,668)	$	232,244
Additions from acquisitions	45,144		—		45,144
Measurement period adjustments (1)	(165)		—		(165)
As of December 31, 2020	$	705,891	$	(428,668)	$	277,223

(1) Measurement period adjustments reducing goodwill relate to acquisitions in the current and prior year of approximately $0.2 million and are primarily attributable to adjustments to the preliminary allocations of customer relationship intangibles.

Schedule of balances related to indefinite-lived intangible assets

The balances related to intangible assets as of September 30, 2021 and December 31, 2020 are as follows:

	As of September 30, 2021
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	22,384	$	(8,705)	$	—	$	13,679
Trade name	255		(195)		—		60
Patents and other intangibles	9,056		(6,312)		—		2,744
Definite-lived intangible assets	31,695		(15,212)		—		16,483
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	40,765	$	(15,212)	$	(4,953)	$	20,600

	As of December 31, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Accumulated Impairment		Net Carrying Amount
Customer lists	$	16,879	$	(5,845)	$	—	$	11,034
Trade name	255		(176)		—		79
Patents and other intangibles	9,011		(5,810)		—		3,201
Definite-lived intangible assets	26,145		(11,831)		—		14,314
Indefinite-lived trade name	9,070		—		(4,953)		4,117
Total other intangible assets	$	35,215	$	(11,831)	$	(4,953)	$	18,431

Schedule of estimated aggregate amortization expense for definite-lived intangible assets

Estimated aggregate amortization expense for definite-lived intangible assets for each of the next five years ended December 31, and thereafter is as follows:

(in thousands)
2021 (remainder of the year)	$	1,252
2022	4,941
2023	4,698
2024	3,207
2025	2,019
Thereafter	366
Total	$	16,483

XML

Other Current Assets and Other Assets (Tables)

9 Months Ended

Sep. 30, 2021

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of other current assets

Other current assets consist of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Non-trade receivables	$	6,270	$	6,063
Prepaid maintenance	5,293		2,942
Prepaid insurance	978		266
Other prepaid assets	4,355		3,086
Total other current assets	$	16,896	$	12,357

Schedule of other assets

Other assets consist of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Implementation costs for cloud computing arrangements	$	7,058	$	4,811
Cash surrender value of company-owned life insurance	4,503		3,973
Finance lease right-of-use assets	2,566		3,016
Deposits	2,182		2,144
Non-trade receivables	1,444		1,274
Other	431		516
Total other assets	$	18,184	$	15,734

XML

Accrued Expenses and Other Current Liabilities and Other Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

Payables and Accruals [Abstract]

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Patient prepayments, deposits, and refunds payable	$	25,075	$	27,195
Accrued sales taxes and other taxes	9,456		9,863
Insurance and self-insurance accruals	7,518		7,651
Derivative liability	7,461		7,686
Accrued professional fees	1,177		1,016
Accrued interest payable	581		440
Other current liabilities	7,904		9,010
Total	$	59,172	$	62,861

Schedule of other liabilities

Other liabilities consist of:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Supplemental executive retirement plan obligations	$	21,184	$	21,503
Derivative liability	7,953		14,388
Long-term insurance accruals	7,894		7,326
Deferred payroll taxes	5,918		5,918
Unrecognized tax benefits	300		5,465
Other	2,112		1,993
Total	$	45,361	$	56,593

XML

Debt and Other Obligations (Tables)

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Schedule of debt

Debt consists of the following:

	As of September 30,		As of December 31,
(in thousands)	2021		2020
Debt:
Term Loan B	$	487,325	$	491,113
Seller Notes	18,626		11,510
Deferred payment obligation	4,000		4,000
Finance lease liabilities and other	3,229		3,869
Total debt before unamortized discount and debt issuance costs	513,180		510,492
Unamortized discount and debt issuance costs, net	(6,201)		(7,395)
Total debt	$	506,979	$	503,097
Current portion of long-term debt:
Term Loan B	$	5,050	$	5,050
Seller Notes	5,770		4,060
Finance lease liabilities and other	880		975
Total current portion of long-term debt	11,700		10,085
Long-term debt	$	495,279	$	493,012

Schedule of maturities of debt

Scheduled maturities of debt at September 30, 2021 were as follows:

(in thousands)
2021 (remainder of year)	$	2,405
2022	12,155
2023	11,818
2024	11,181
2025	473,069
Thereafter	2,552
Total debt before unamortized discount and debt issuance costs, net	513,180
Unamortized discount and debt issuance costs, net	(6,201)
Total debt	$	506,979

XML

Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of activity of cash flow hedges included in accumulated other comprehensive income (loss)

The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the three months ended September 30, 2021 and 2020, respectively:

(in thousands)	Cash Flow Hedges
Balance as of June 30, 2021	$	(13,034)
Unrealized loss recognized in other comprehensive income, net of tax	(646)
Reclassification to interest expense, net	1,967
Balance as of September 30, 2021	$	(11,713)
Balance as of June 30, 2020	$	(19,612)
Unrealized loss recognized in other comprehensive income, net of tax	(455)
Reclassification to interest expense, net	1,997
Balance as of September 30, 2020	$	(18,070)

The following table presents the activity of cash flow hedges included in accumulated other comprehensive loss for the nine months ended September 30, 2021 and 2020, respectively:

(in thousands)	Cash Flow Hedges
Balance as of December 31, 2020	$	(16,771)
Unrealized loss recognized in other comprehensive income, net of tax	(829)
Reclassification to interest expense, net	5,887
Balance as of September 30, 2021	$	(11,713)
Balance as of December 31, 2019	$	(10,137)
Unrealized loss recognized in other comprehensive loss, net of tax	(12,518)
Reclassification to interest expense, net	4,585
Balance as of September 30, 2020	$	(18,070)

Schedule of fair value of derivative liabilities within the consolidated balance sheets

The following table presents the fair value of derivative liabilities within the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020:

	As of September 30, 2021				As of December 31, 2020
(in thousands)	Assets		Liabilities		Assets		Liabilities
Derivatives designated as cash flow hedging instruments:
Accrued expenses and other current liabilities	$	—	$	7,461	$	—	$	7,686
Other liabilities	—		7,953		—		14,388

XML

Supplemental Executive Retirement Plans (Tables)

9 Months Ended

Sep. 30, 2021

Retirement Benefits [Abstract]

Schedule of Change in Benefit Obligation

The change in net benefit cost and obligation during the three and nine months ended September 30, 2021 and 2020 is as follows:

Change in Benefit Obligation:
(in thousands)	2021		2020
Benefit obligation as of June 30	$	18,278	$	17,763
Service cost	123		98
Interest cost	87		121
Payments	(12)		(12)
Benefit obligation as of September 30	$	18,476	$	17,970
Benefit obligation as of December 31, 2020 and 2019, respectively	$	19,746	$	19,214
Service cost	370		294
Interest cost	261		363
Payments	(1,901)		(1,901)
Benefit obligation as of September 30	$	18,476	$	17,970

Schedule of Amounts Recognized in the Consolidated Balance Sheets

Amounts Recognized in the Condensed Consolidated Balance Sheets:
	As of September 30,		As of December 31,
(in thousands)	2021		2020
Current accrued expenses and other current liabilities	$	1,913	$	1,913
Non-current other liabilities	16,563		17,833
Total accrued liabilities	$	18,476	$	19,746

XML

Segment and Related Information (Tables)

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Summary of financial information concerning the Company's reporting segments

	Patient Care				Products & Services
	For the Three Months Ended September 30,				For the Three Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Third party	$	244,356	$	212,664	$	45,471	$	43,973
Intersegments	—		—		58,495		50,011
Total net revenues	244,356		212,664		103,966		93,984
Material costs
Third party suppliers	65,356		56,599		27,205		24,863
Intersegments	9,408		7,339		49,087		42,672
Total material costs	74,764		63,938		76,292		67,535
Personnel expenses	84,479		76,989		14,469		12,738
Other expenses	38,923		34,713		6,636		5,957
Depreciation & amortization	4,870		4,786		1,974		2,633
Segment income from operations	$	41,320	$	32,238	$	4,595	$	5,121

	Patient Care				Products & Services
	For the Nine Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Third party	$	676,825	$	598,706	$	131,291	$	125,104
Intersegments	—		—		160,986		138,899
Total net revenues	676,825		598,706		292,277		264,003
Material costs
Third party suppliers	179,060		160,212		77,942		68,463
Intersegments	27,343		18,639		133,643		120,260
Total material costs	206,403		178,851		211,585		188,723
Personnel expenses	243,431		216,910		42,946		35,824
Other expenses	112,509		86,462		19,202		18,614
Depreciation & amortization	14,472		14,089		5,872		7,883
Segment income from operations	$	100,010	$	102,394	$	12,672	$	12,959

Schedule of reconciliation of reportable segments

A reconciliation of the total of the reportable segments’ income from operations to consolidated net income is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Income from operations
Patient Care	$	41,320	$	32,238	$	100,010	$	102,394
Products & Services	4,595		5,121		12,672		12,959
Corporate & other	(20,247)		(24,284)		(64,899)		(72,590)
Income from operations	25,668		13,075		47,783		42,763
Interest expense, net	7,313		8,013		21,805		24,918
Non-service defined benefit plan expense	167		158		501		474
Income before income taxes	18,188		4,904		25,477		17,371
Benefit for income taxes	(2,929)		(1,911)		(2,469)		(4,750)
Net income	$	21,117	$	6,815	$	27,946	$	22,121

A reconciliation of the reportable segments’ net revenues to consolidated net revenues is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Net revenues
Patient Care	$	244,356	$	212,664	$	676,825	$	598,706
Products & Services	103,966		93,984		292,277		264,003
Corporate & other	—		—		—		—
Consolidating adjustments	(58,495)		(50,011)		(160,986)		(138,899)
Consolidated net revenues	$	289,827	$	256,637	$	808,116	$	723,810

A reconciliation of the reportable segments’ material costs to consolidated material costs is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2021		2020		2021		2020
Material costs
Patient Care	$	74,764	$	63,938	$	206,403	$	178,851
Products & Services	76,292		67,535		211,585		188,723
Corporate & other	—		—		—		—
Consolidating adjustments	(58,495)		(50,011)		(160,986)		(138,899)
Consolidated material costs	$	92,561	$	81,462	$	257,002	$	228,675

XML

Organization and Summary of Significant Accounting Policies (Details) $ in Millions	1 Months Ended		9 Months Ended	12 Months Ended
	Sep. 30, 2021 USD ($)	Apr. 30, 2021 USD ($)	Sep. 30, 2021 USD ($) segment	Dec. 31, 2020 USD ($)
Organization and Summary of Significant Accounting Policies
Number of operating segments | segment			2
Proceeds received from grant		$ 0.7		$ 24.0
Payments of deferred payroll taxes	$ 5.9
Deferred payroll taxes under CARES Act	$ 5.9		$ 5.9

XML

Earnings Per Share - Narrative (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Share [Abstract]
Total anti-dilutive shares (in shares)	2,610	34,379	2,400	20,202

XML

Earnings Per Share - Schedule of reconciliation of numerators and denominators used to calculate basic and diluted net income per share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Share [Abstract]
Net income	$ 21,117	$ 10,159	$ (3,330)	$ 6,815	$ 31,054	$ (15,748)	$ 27,946	$ 22,121
Weighted average shares outstanding - basic (in shares)	38,730,468			38,133,598			38,550,307	37,878,753
Effect of potentially dilutive restricted stock units and options (in shares)	510,506			503,938			688,063	613,212
Weighted average shares outstanding - diluted (in shares)	39,240,974			38,637,536			39,238,370	38,491,965
Basic income per share (in dollars per share)	$ 0.55			$ 0.18			$ 0.72	$ 0.58
Diluted income per share (in dollars per share)	$ 0.54			$ 0.18			$ 0.71	$ 0.57

XML

Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenue Recognition
Net revenues	$ 289,827	$ 256,637	$ 808,116	$ 723,810
Patient Care
Revenue Recognition
Net revenues	244,356	212,664	676,825	598,706
Patient Care | Operating Segments
Revenue Recognition
Net revenues	244,356	212,664	676,825	598,706
Patient Care | Medicare | Operating Segments
Revenue Recognition
Net revenues	79,586	68,135	211,169	194,052
Patient Care | Medicaid | Operating Segments
Revenue Recognition
Net revenues	42,739	34,541	120,475	96,612
Patient Care | Commercial Insurance / Managed Care (excluding Medicare and Medicaid Managed Care) | Operating Segments
Revenue Recognition
Net revenues	83,396	75,966	232,828	213,234
Patient Care | Veterans Administration | Operating Segments
Revenue Recognition
Net revenues	22,901	19,339	64,298	54,057
Patient Care | Private Pay | Operating Segments
Revenue Recognition
Net revenues	15,734	14,683	48,055	40,751
Products & Services
Revenue Recognition
Net revenues	103,966	93,984	292,277	264,003
Products & Services | Operating Segments
Revenue Recognition
Net revenues	45,471	43,973	131,291	125,104
Products & Services | Distribution services, net of intersegment revenue eliminations | Operating Segments
Revenue Recognition
Net revenues	34,656	32,711	98,591	90,928
Products & Services | Therapeutic solutions | Operating Segments
Revenue Recognition
Net revenues	$ 10,815	$ 11,262	$ 32,700	$ 34,176

XML

Accounts Receivable, Net - Narrative (Details) $ in Millions	9 Months Ended
	Sep. 30, 2021 USD ($)
Accounts Receivable, after Allowance for Credit Loss [Abstract]
Decrease in allowance for doubtful accounts	$ 0.8

XML

Accounts Receivable, Net - Schedule of accounts receivable, net (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Accounts Receivable, net
Gross charges before estimates for implicit price concessions	$ 183,224	$ 177,804
Less estimates for implicit price concessions:
Payor disallowances	(37,211)	(39,343)
Patient non-payments	(7,890)	(7,042)
Accounts receivable, gross	138,123	131,419
Allowance for doubtful accounts	(2,011)	(2,823)
Accounts receivable, net	136,112	128,596
Patient Care
Accounts Receivable, net
Gross charges before estimates for implicit price concessions	161,888	156,504
Less estimates for implicit price concessions:
Payor disallowances	(37,211)	(39,343)
Patient non-payments	(7,890)	(7,042)
Accounts receivable, gross	116,787	110,119
Allowance for doubtful accounts	0	0
Accounts receivable, net	116,787	110,119
Products & Services
Accounts Receivable, net
Gross charges before estimates for implicit price concessions	21,336	21,300
Less estimates for implicit price concessions:
Payor disallowances	0	0
Patient non-payments	0	0
Accounts receivable, gross	21,336	21,300
Allowance for doubtful accounts	(2,011)	(2,823)
Accounts receivable, net	$ 19,325	$ 18,477

XML

Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Inventories
Raw materials	$ 21,411	$ 19,716
Work in process	19,053	12,040
Finished goods	44,283	44,673
Total inventories	$ 84,747	$ 76,429

XML

Acquisitions - Narrative (Details) $ in Thousands	1 Months Ended		3 Months Ended					9 Months Ended		12 Months Ended
	Oct. 31, 2021 USD ($)	Oct. 31, 2020 USD ($)	Sep. 30, 2021 USD ($) business	Jun. 30, 2021 USD ($) business	Mar. 31, 2021 USD ($) business	Dec. 31, 2020 USD ($) business	Jun. 30, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Acquisitions
Cash paid, net of cash acquired								$ 39,253	$ 16,854
Acquisition-related costs			$ 200					700
General and Administrative Expense
Acquisitions
Acquisition-related costs			$ 600					1,400
2021 Acquisitions
Acquisitions
Number of businesses acquired | business			3	2	3
Number of business' assets acquired | business			1		1
Aggregate purchase price			$ 6,200	$ 21,000	$ 24,200			51,438
Cash paid, net of cash acquired			3,900	16,000	19,200			39,104
Issuance of Seller Notes at fair value			1,500	4,900	4,000			10,442
Additional consideration issued			800	$ 100	$ 1,000			1,892
Operating right-of-use assets			4,000					4,000
Operating lease liabilities			$ 4,000					$ 4,000
2020 Acquisitions
Acquisitions
Number of businesses acquired | business						4
Aggregate purchase price						$ 7,100	$ 46,200			$ 53,262
Cash paid, net of cash acquired						4,900	16,800			21,709
Issuance of Seller Notes at fair value						1,900	21,900			23,766
Additional consideration issued		$ 3,600				300	4,000			4,319
Operating right-of-use assets						5,500				5,500
Operating lease liabilities						$ 5,500				5,500
Deferred payment obligation at fair value							$ 3,500			$ 3,468
Payment period of liabilities incurred							3 years
Payment period following acquisition							3 years
Consideration through settlement of amounts due from acquiree		$ 400
2020 Acquisitions | Subsequent Event
Acquisitions
Repayments of debt	$ 18,100
Remaining liabilities payable	$ 3,800

XML

Acquisitions - Schedule of aggregate purchase price of acquisitions allocated on a preliminary basis (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended					9 Months Ended		12 Months Ended
	Oct. 31, 2020	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Acquisitions
Cash paid, net of cash acquired							$ 39,253	$ 16,854
2021 Acquisitions
Acquisitions
Cash paid, net of cash acquired		$ 3,900	$ 16,000	$ 19,200			39,104
Issuance of Seller Notes at fair value		1,500	4,900	4,000			10,442
Additional consideration, net		800	100	1,000			1,892
Aggregate purchase price		6,200	$ 21,000	$ 24,200			51,438
Accounts receivable		2,609					2,609
Inventories		1,957					1,957
Other assets and liabilities, net		(3,915)					(3,915)
Net assets acquired		6,218					6,218
Goodwill							45,220
2021 Acquisitions | Customer relationships
Acquisitions
Other intangible assets, net		5,505					$ 5,505
Weighted average useful life of intangible assets							5 years
2021 Acquisitions | Non-compete agreements
Acquisitions
Other intangible assets, net		$ 62					$ 62
Weighted average useful life of intangible assets							5 years
2020 Acquisitions
Acquisitions
Cash paid, net of cash acquired					$ 4,900	$ 16,800			$ 21,709
Issuance of Seller Notes at fair value					1,900	21,900			23,766
Deferred payment obligation at fair value						3,500			3,468
Additional consideration, net	$ 3,600				300	4,000			4,319
Aggregate purchase price					7,100	$ 46,200			53,262
Accounts receivable					4,224				4,224
Inventories					2,276				2,276
Other assets and liabilities, net					(4,561)				(4,561)
Net assets acquired					8,497				8,497
Goodwill									44,765
2020 Acquisitions | Customer relationships
Acquisitions
Other intangible assets, net					6,358				$ 6,358
Weighted average useful life of intangible assets									5 years
2020 Acquisitions | Non-compete agreements
Acquisitions
Other intangible assets, net					$ 200				$ 200
Weighted average useful life of intangible assets									5 years

XML

Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Goodwill allocated
Goodwill, Net as of beginning of the year	$ 277,223
Goodwill, Net as of end of the year	322,699	$ 277,223
Measurement period adjustments related to acquisitions	200
2021 Acquisitions
Goodwill allocated
Additions from acquisitions	45,220
Measurement period adjustments related to acquisitions	(400)
2020 Acquisitions
Goodwill allocated
Additions from acquisitions		44,765
Measurement period adjustments related to acquisitions	700
Patient Care
Goodwill allocated
Goodwill, Gross as of beginning of the period	705,891	660,912
Accumulated Impairment as of beginning of the period	(428,668)	(428,668)
Goodwill, Net as of beginning of the year	277,223	232,244
Additions from acquisitions	45,220	45,144
Measurement period adjustments	256	(165)
Goodwill, Gross as of end of the period	751,367	705,891
Accumulated Impairment as of end of the period	(428,668)	(428,668)
Goodwill, Net as of end of the year	$ 322,699	$ 277,223

XML

Goodwill and Other Intangible Assets - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2017
Goodwill
Goodwill	$ 322,699		$ 322,699		$ 277,223
Amortization expense	$ 1,200	$ 1,600	$ 3,400	$ 4,600
Products & Services
Goodwill
Goodwill						$ 139,300

XML

Goodwill and Other Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
GOODWILL AND OTHER INTANGIBLE ASSETS
Definite-lived, Gross Carrying Amount	$ 31,695	$ 26,145
Definite-lived, Accumulated Amortization	(15,212)	(11,831)
Definite-lived, Net Carrying Amount	16,483	14,314
Total other intangible assets, Gross Carrying Amount	40,765	35,215
Total other intangible assets, Accumulated Amortization	(15,212)	(11,831)
Accumulated Impairment	(4,953)	(4,953)
Total other intangible assets, Net Carrying Amount	20,600	18,431
Trade name
GOODWILL AND OTHER INTANGIBLE ASSETS
Indefinite lived, Gross Carrying Amount	9,070	9,070
Indefinite lived, Accumulated Impairment	(4,953)	(4,953)
Indefinite lived, Net Carrying Amount	4,117	4,117
Customer lists
GOODWILL AND OTHER INTANGIBLE ASSETS
Definite-lived, Gross Carrying Amount	22,384	16,879
Definite-lived, Accumulated Amortization	(8,705)	(5,845)
Definite-lived, Net Carrying Amount	13,679	11,034
Trade name
GOODWILL AND OTHER INTANGIBLE ASSETS
Definite-lived, Gross Carrying Amount	255	255
Definite-lived, Accumulated Amortization	(195)	(176)
Definite-lived, Net Carrying Amount	60	79
Patents and other intangibles
GOODWILL AND OTHER INTANGIBLE ASSETS
Definite-lived, Gross Carrying Amount	9,056	9,011
Definite-lived, Accumulated Amortization	(6,312)	(5,810)
Definite-lived, Net Carrying Amount	$ 2,744	$ 3,201

XML

Goodwill and Other Intangible Assets - Estimated Amortization (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Estimated aggregate amortization expense for definite-lived intangible assets
2021 (remainder of the year)	$ 1,252
2022	4,941
2023	4,698
2024	3,207
2025	2,019
Thereafter	366
Total	$ 16,483

XML

Other Current Assets and Other Assets - Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Non-trade receivables	$ 6,270	$ 6,063
Prepaid maintenance	5,293	2,942
Prepaid insurance	978	266
Other prepaid assets	4,355	3,086
Total other current assets	$ 16,896	$ 12,357

XML

Other Current Assets and Other Assets - Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Implementation costs for cloud computing arrangements	$ 7,058	$ 4,811
Cash surrender value of company-owned life insurance	4,503	3,973
Finance lease right-of-use assets	2,566	3,016
Deposits	2,182	2,144
Non-trade receivables	1,444	1,274
Other	431	516
Total other assets	$ 18,184	$ 15,734

XML

Accrued Expenses and Other Current Liabilities and Other Liabilities - Accrued expenses and other current liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Patient prepayments, deposits, and refunds payable	$ 25,075	$ 27,195
Accrued sales taxes and other taxes	9,456	9,863
Insurance and self-insurance accruals	7,518	7,651
Derivative liability	7,461	7,686
Accrued professional fees	1,177	1,016
Accrued interest payable	581	440
Other current liabilities	7,904	9,010
Total	$ 59,172	$ 62,861

XML

Accrued Expenses and Other Current Liabilities and Other Liabilities - Other liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Payables and Accruals [Abstract]
Supplemental executive retirement plan obligations	$ 21,184	$ 21,503
Derivative liability	7,953	14,388
Long-term insurance accruals	7,894	7,326
Deferred payroll taxes	5,918	5,918
Unrecognized tax benefits	300	5,465
Other	2,112	1,993
Total	$ 45,361	$ 56,593

XML

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Income Tax Examination [Line Items]
Income tax expense (benefit)	$ (2,929)	$ (1,911)	$ (2,469)	$ (4,750)
Effective tax rate (as a percent)	(16.10%)	(39.00%)	(9.70%)	(27.30%)
Recognition of tax benefits, current year						$ 3,800
Recognition of tax benefits, prior years						$ 6,100
Release of unrecognized tax benefits due to lapse of statute of limitations	$ 3,500
Release of interest expense due to lapse of statute of limitations	$ 1,200
Forecast
Income Tax Examination [Line Items]
Recognition of tax benefits, current year					$ 4,600

XML

Debt and Other Obligations (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Debt and Other Obligations
Total debt before unamortized discount and debt issuance costs	$ 513,180	$ 510,492
Unamortized discount and debt issuance costs, net	(6,201)	(7,395)
Total debt	506,979	503,097
Total current portion of long-term debt	11,700	10,085
Long-term debt	495,279	493,012
Term Loan B
Debt and Other Obligations
Total debt before unamortized discount and debt issuance costs	487,325	491,113
Total current portion of long-term debt	5,050	5,050
Seller Notes
Debt and Other Obligations
Total debt before unamortized discount and debt issuance costs	18,626	11,510
Total current portion of long-term debt	5,770	4,060
Deferred payment obligation
Debt and Other Obligations
Total debt before unamortized discount and debt issuance costs	4,000	4,000
Finance lease liabilities and other
Debt and Other Obligations
Total debt before unamortized discount and debt issuance costs	3,229	3,869
Total current portion of long-term debt	$ 880	$ 975

XML

Debt and Other Obligations - Refinancing of Credit Agreement and Term B Borrowings (Details)		1 Months Ended	9 Months Ended
	Mar. 06, 2018 USD ($)	May 31, 2020 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Debt and Other Obligations
Outstanding amount of debt			$ 513,180,000		$ 510,492,000
Letters of credit outstanding amount			5,100,000
Payment of debt issuance costs		$ 200,000	$ 0	$ 214,000
London Interbank Offered Rate (LIBOR)
Debt and Other Obligations
Minimum interest base (as a percent)		1.00%
London Interbank Offered Rate (LIBOR) | Maximum
Debt and Other Obligations
Increase in margin (as a percent)		3.75%
Fiscal quarters ended June 30, 2021 through September 30, 2021
Debt and Other Obligations
Consolidated leverage ratio		500.00%
December 31, 2021 and the last day of each fiscal quarter thereafter
Debt and Other Obligations
Consolidated leverage ratio		475.00%
Loans Payable
Debt and Other Obligations
Outstanding amount of debt	$ 505,000,000
Weighted average interest rate			3.50%
Revolving Credit Facility
Debt and Other Obligations
Maximum borrowing capacity	605,000,000
Letters of credit outstanding amount			$ 100,000,000
Increase in additional borrowing capacity	$ 125,000,000
Leverage ratio to increase credit commitment	3.80
Available borrowing capacity			$ 94,900,000
Increase in margin (as a percent)	50.00%
Interest rate in excess of applicable rate upon acceleration and default (as a percent)	2.00%
Revolving Credit Facility | Minimum
Debt and Other Obligations
Unused commitment fee (as a percent)	0.375%
Revolving Credit Facility | Maximum
Debt and Other Obligations
Unused commitment fee (as a percent)	0.50%
Revolving Credit Facility | Fed Funds Effective Rate Overnight Index Swap Rate
Debt and Other Obligations
Interest rate margin (as a percent)	0.50%
Revolving Credit Facility | London Interbank Offered Rate (LIBOR)
Debt and Other Obligations
Interest rate margin (as a percent)	1.00%
Revolving Credit Facility | Fiscal quarters ended June 30, 2021 through March 31, 2022
Debt and Other Obligations
Consolidated leverage ratio	425.00%
Revolving Credit Facility | Fiscal quarters ended June 30, 2022 and the last day of each fiscal quarter thereafter
Debt and Other Obligations
Consolidated leverage ratio	375.00%
Revolving Credit Facility | Last day of any fiscal quarter
Debt and Other Obligations
Consolidated leverage ratio	275.00%
Revolving Credit Facility | Revolving Credit Facility
Debt and Other Obligations
Maximum borrowing capacity	$ 100,000,000

XML

Debt and Other Obligations - Seller Notes and the Deferred Payment Obligation (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Seller Notes
Debt and Other Obligations
Unamortized discount	$ 0.8	$ 0.9
Seller Notes | Minimum
Debt and Other Obligations
Stated interest rates (as a percent)	2.50%
Seller Notes | Maximum
Debt and Other Obligations
Stated interest rates (as a percent)	3.00%
Deferred payment obligation
Debt and Other Obligations
Unamortized discount	$ 0.4	$ 0.5
Stated interest rates (as a percent)	3.00%
Annual installment payment period	3 years

XML

Debt and Other Obligations - Maturities of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Maturities of debt
2021 (remainder of year)	$ 2,405
2022	12,155
2023	11,818
2024	11,181
2025	473,069
Thereafter	2,552
Total debt before unamortized discount and debt issuance costs, net	513,180	$ 510,492
Unamortized discount and debt issuance costs, net	(6,201)	(7,395)
Total debt	$ 506,979	$ 503,097

XML

Fair Value Measurements - Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
FAIR VALUE MEASUREMENTS
Unamortized discount and debt issuance costs, net	$ 6,201	$ 7,395
Loans Payable
FAIR VALUE MEASUREMENTS
Unamortized discount and debt issuance costs, net	5,400	6,500
Loans Payable | Reported Value Measurement
FAIR VALUE MEASUREMENTS
Debt	487,300	491,100
Loans Payable | Fair Value, Recurring | Fair Value, Inputs, Level 3 | Estimate of Fair Value Measurement
FAIR VALUE MEASUREMENTS
Debt	486,700	489,900
Seller Notes | Fair Value, Inputs, Level 3 | Reported Value Measurement
FAIR VALUE MEASUREMENTS
Unamortized discount and debt issuance costs, net	800	900
Outstanding amount	$ 21,800	$ 14,600

XML

Derivative Financial Instruments - Cash Flow Hedge (Details) - Interest Rate Swap - Cash Flow Hedging - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020	Mar. 31, 2018
DERIVATIVE FINANCIAL INSTRUMENTS
Notional amount of derivative instrument	$ 287.5	$ 300.0	$ 325.0
Annual reduction in notional amount of derivative			$ 12.5

XML

Derivative Financial Instruments - Changes in Net Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) (Details) - Interest Rate Swap - Cash Flow Hedging - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Changes in Net Gain or Loss on Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)
Balance at the beginning of the period	$ (13,034)	$ (19,612)	$ (16,771)	$ (10,137)
Unrealized loss recognized in other comprehensive income, net of tax	(646)	(455)	(829)	(12,518)
Reclassification to interest expense, net	1,967	1,997	5,887	4,585
Balance at the end of the period	$ (11,713)	$ (18,070)	$ (11,713)	$ (18,070)

XML

Derivative Financial Instruments - Fair Value of Derivative Assets and Liabilities (Details) - Cash Flow Hedging - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Accrued expenses and other current liabilities
Derivatives designated as cash flow hedging instruments:
Assets	$ 0	$ 0
Liabilities	7,461	7,686
Other liabilities
Derivatives designated as cash flow hedging instruments:
Assets	0	0
Liabilities	$ 7,953	$ 14,388

XML

Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended	3 Months Ended			9 Months Ended
	May 19, 2017	May 31, 2020	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	May 17, 2019
Share Based Compensation
Options outstanding and exercisable (in share)			312,014			312,014
Weighted average exercise price of options exercisable (in dollars per share)			$ 12.77			$ 12.77
Average remaining contractual term of options exercisable						5 years
Stock-based compensation expense			$ 3.0	$ 3.1		$ 9.4	$ 15.6
2019 Omnibus Incentive Plan
Share Based Compensation
Shares of common stock authorized for issuance under the share-based compensation plan (in shares)								2,025,000
2016 Omnibus Incentive Plan
Share Based Compensation
Available for issuance (in shares)								243,611
Special Equity Plan
Share Based Compensation
Shares of common stock authorized for issuance under the share-based compensation plan (in shares)	1,500,000
Stock Options | Special Equity Plan
Share Based Compensation
Shares issued (in shares)	800,000
Performance-Based Stock Awards
Share Based Compensation
Shares outstanding (in shares)			342,017			342,017
Weighted average grant date fair value (in dollars per share)			$ 21.61			$ 21.61
Performance-Based Stock Awards | Special Equity Plan
Share Based Compensation
Shares issued (in shares)	300,000
Performance period		33 months
Reduction in performance period		3 months
Incremental fair value					$ 5.9
Restricted Stock
Share Based Compensation
Shares outstanding (in shares)			1,395,922			1,395,922
Employee Service Based Awards
Share Based Compensation
Shares outstanding (in shares)			1,004,549			1,004,549
Weighted average grant date fair value (in dollars per share)			$ 21.31			$ 21.31
Director Service Based Awards
Share Based Compensation
Shares outstanding (in shares)			49,356			49,356
Weighted average grant date fair value (in dollars per share)			$ 25.53			$ 25.53

XML

Supplemental Executive Retirement Plans - Plan Details and Change in Benefit Obligation (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) payment	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Retirement Benefits [Abstract]
Number of annual payments | payment			15
Change in Benefit Obligation
Benefit obligation at the beginning of the period	$ 18,278	$ 17,763	$ 19,746	$ 19,214
Service cost	123	98	370	294
Interest cost	87	121	261	363
Payments	(12)	(12)	(1,901)	(1,901)
Benefit obligation at the end of the period	18,476	$ 17,970	18,476	$ 17,970
Amounts Recognized in the Condensed Consolidated Balance Sheets:
Current accrued expenses and other current liabilities	1,913		1,913		$ 1,913
Non-current other liabilities	16,563		16,563		17,833
Total accrued liabilities	$ 18,476		$ 18,476		$ 19,746

XML

Supplemental Executive Retirement Plans - DC SERP (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Retirement Benefits [Abstract]
Estimated accumulated benefit obligation	$ 4.6	$ 4.5
Funded estimated accumulated benefit obligation	4.2	4.0
Unfunded estimated accumulated benefit obligation	$ 0.4	$ 0.5

XML

Segment and Related Information - Paragraphs (Details)	9 Months Ended
	Sep. 30, 2021 segment
Segment Reporting [Abstract]
Number of operating segments	2

XML

Segment and Related Information - Financial Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Net revenue
Net revenues	$ 289,827	$ 256,637	$ 808,116	$ 723,810
Material costs	92,561	81,462	257,002	228,675
Personnel expenses	98,948	89,727	286,377	252,734
Depreciation & amortization	8,159	8,803	24,164	26,513
Income from operations	25,668	13,075	47,783	42,763
Patient Care
Net revenue
Net revenues	244,356	212,664	676,825	598,706
Material costs	74,764	63,938	206,403	178,851
Personnel expenses	84,479	76,989	243,431	216,910
Other expenses	38,923	34,713	112,509	86,462
Depreciation & amortization	4,870	4,786	14,472	14,089
Income from operations	41,320	32,238	100,010	102,394
Patient Care | Operating Segments
Net revenue
Net revenues	244,356	212,664	676,825	598,706
Material costs	65,356	56,599	179,060	160,212
Income from operations	41,320	32,238	100,010	102,394
Patient Care | Intersegment Eliminations
Net revenue
Net revenues	0	0	0	0
Material costs	9,408	7,339	27,343	18,639
Products & Services
Net revenue
Net revenues	103,966	93,984	292,277	264,003
Material costs	76,292	67,535	211,585	188,723
Personnel expenses	14,469	12,738	42,946	35,824
Other expenses	6,636	5,957	19,202	18,614
Depreciation & amortization	1,974	2,633	5,872	7,883
Income from operations	4,595	5,121	12,672	12,959
Products & Services | Operating Segments
Net revenue
Net revenues	45,471	43,973	131,291	125,104
Material costs	27,205	24,863	77,942	68,463
Income from operations	4,595	5,121	12,672	12,959
Products & Services | Intersegment Eliminations
Net revenue
Net revenues	58,495	50,011	160,986	138,899
Material costs	$ 49,087	$ 42,672	$ 133,643	$ 120,260

XML

Segment and Related Information - Reconciliation of the Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment and Related Information
Operating Income (Loss)	$ 25,668			$ 13,075			$ 47,783	$ 42,763
Interest expense, net	7,313			8,013			21,805	24,918
Non-service defined benefit plan expense	167			158			501	474
Income before income taxes	18,188			4,904			25,477	17,371
Benefit for income taxes	(2,929)			(1,911)			(2,469)	(4,750)
Net income	21,117	$ 10,159	$ (3,330)	6,815	$ 31,054	$ (15,748)	27,946	22,121
Consolidated net revenues	289,827			256,637			808,116	723,810
Consolidated material costs	92,561			81,462			257,002	228,675
Corporate & other
Segment and Related Information
Operating Income (Loss)	(20,247)			(24,284)			(64,899)	(72,590)
Consolidating adjustments
Segment and Related Information
Consolidated net revenues	(58,495)			(50,011)			(160,986)	(138,899)
Consolidated material costs	(58,495)			(50,011)			(160,986)	(138,899)
Patient Care
Segment and Related Information
Operating Income (Loss)	41,320			32,238			100,010	102,394
Consolidated net revenues	244,356			212,664			676,825	598,706
Consolidated material costs	74,764			63,938			206,403	178,851
Patient Care | Operating Segments
Segment and Related Information
Operating Income (Loss)	41,320			32,238			100,010	102,394
Consolidated net revenues	244,356			212,664			676,825	598,706
Consolidated material costs	65,356			56,599			179,060	160,212
Products & Services
Segment and Related Information
Operating Income (Loss)	4,595			5,121			12,672	12,959
Consolidated net revenues	103,966			93,984			292,277	264,003
Consolidated material costs	76,292			67,535			211,585	188,723
Products & Services | Operating Segments
Segment and Related Information
Operating Income (Loss)	4,595			5,121			12,672	12,959
Consolidated net revenues	45,471			43,973			131,291	125,104
Consolidated material costs	$ 27,205			$ 24,863			$ 77,942	$ 68,463

XML

Subsequent Events (Details) - Subsequent Event - 2021 Acquisition activity, two O&P business $ in Millions	1 Months Ended	3 Months Ended
	Oct. 31, 2021 USD ($) item	Dec. 31, 2021 USD ($) item
Subsequent Events
Number of businesses acquired | item		4
Aggregate purchase price		$ 38.7
Consideration paid in cash		30.0
Issuance of Seller Notes at fair value		$ 8.7
Definitive share purchase agreements
Subsequent Events
Number of businesses acquired | item	2
Aggregate purchase price	$ 14.3