| Segments |
NOTE 9 — SEGMENTS
The Company has two reportable operating segments: (1) home
respiratory therapy and home medical equipment and (2) home
infusion therapy. Within these two operating segments there are
four core service lines: home respiratory therapy, home medical
equipment, home infusion therapy, including TPN services, and
enteral nutrition services. The home respiratory therapy and home
medical equipment segment provides services and equipment to assist
patients who require oxygen systems, sleep apnea equipment /
supplies, and ambulatory aids in the home, as well as respiratory
medications and related services. The home infusion therapy segment
primarily provides patients with pharmaceuticals, medical equipment
and clinical services prescribed in conjunction with the
administration of nutrients or medication intravenously or through
a gastrointestinal tube (“tube feeding”).
Segment financial results are based on directly assignable net
revenues, cost of goods sold, bad debt expenses and selling,
distribution and administrative costs, where available. Costs that
are not directly assignable, such as corporate costs and certain
selling, distribution and administrative expenses, are allocated
based on various metrics including billed census, headcount and
branch locations by segment, among others.
During the fourth quarter of 2012, the Company revised its
allocation to its reporting segments. This allocation is based
on how the Company currently manages and discusses its
operations.
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| |
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Net Revenue |
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| |
|
Three Months Ended
September
30, |
|
|
Nine Months Ended
September
30, |
|
| (in thousands) |
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Respiratory Therapy and Home Medical Equipment
|
|
$ |
278,097 |
|
|
$ |
301,199 |
|
|
$ |
867,287 |
|
|
$ |
905,525 |
|
|
Home Infusion Therapy
|
|
|
329,100 |
|
|
|
307,274 |
|
|
|
975,288 |
|
|
|
906,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
|
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$ |
607,197 |
|
|
$ |
608,473 |
|
|
$ |
1,842,575 |
|
|
$ |
1,811,858 |
|
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|
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EBIT |
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| |
|
Three Months Ended
September
30, |
|
|
Nine Months Ended
September
30, |
|
| (in thousands) |
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Respiratory Therapy and Home Medical Equipment
|
|
$ |
(7,794 |
) |
|
$ |
(199,770 |
) |
|
$ |
(7,166 |
) |
|
$ |
(226,503 |
) |
|
Home Infusion Therapy
|
|
|
15,806 |
|
|
|
(49,981 |
) |
|
|
87,811 |
|
|
|
12,223 |
|
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|
|
|
|
|
|
|
|
|
|
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|
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Total
|
|
$ |
8,012 |
|
|
$ |
(249,751 |
) |
|
$ |
80,645 |
|
|
$ |
(214,280 |
) |
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
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| |
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Depreciation and
Amortization |
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| |
|
Three Months Ended
September
30, |
|
|
Nine Months Ended
September
30, |
|
| (in thousands) |
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Respiratory Therapy and Home Medical Equipment
|
|
$ |
27,691 |
|
|
$ |
24,041 |
|
|
$ |
76,281 |
|
|
$ |
73,623 |
|
|
Home Infusion Therapy
|
|
|
3,975 |
|
|
|
4,156 |
|
|
|
11,835 |
|
|
|
12,800 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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Total
|
|
$ |
31,666 |
|
|
$ |
28,197 |
|
|
$ |
88,116 |
|
|
$ |
86,423 |
|
|
|
|
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|
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The Company’s Chief Operating Decision Maker
(“CODM”) does not review assets assigned to segments.
Therefore, such items are not reflected in the table above.
Earnings before interest and taxes (“EBIT”). EBIT is
the measure used by the Company’s management to measure
operating performance. EBIT is defined as net income (loss) plus
interest expense, loss on early retirement of debt and income
taxes. EBIT is not a recognized term under Generally Accepted
Accounting Principles (“GAAP”) and does not purport to
be an alternative to net income as a measure of operating
performance or to cash flows from operating activities as a measure
of liquidity.
The following table provides a reconciliation from net loss to
EBIT:
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|
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| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
| (in thousands) |
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
Net loss(a)
|
|
$ |
(15,785 |
) |
|
$ |
(175,711 |
) |
|
$ |
(53,776 |
) |
|
$ |
(208,054 |
) |
|
Interest expense, net(b)
|
|
|
22,969 |
|
|
|
33,483 |
|
|
|
88,205 |
|
|
|
100,107 |
|
|
Loss on early retirement of debt(c)
|
|
|
— |
|
|
|
— |
|
|
|
44,221 |
|
|
|
— |
|
|
Income tax expense
|
|
|
828 |
|
|
|
(107,523 |
) |
|
|
1,995 |
|
|
|
(106,333 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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EBIT
|
|
$ |
8,012 |
|
|
$ |
(249,751 |
) |
|
$ |
80,645 |
|
|
$ |
(214,280 |
) |
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| (a) |
Net loss for the three and nine
months periods ended September 30, 2012 reflects the following
non-cash impairment charge based on the results of the
Company’s impairment testing as of September 30, 2012
and the tax impact associated with the impairment charge: |
| |
(i) |
Trade name impairment of $280.0
million, $200.0 million of which relates to the home respiratory
therapy/home medical equipment reporting unit and $80.0 million of
which relates to the home infusion therapy reporting unit; and |
| |
(ii) |
Tax benefit of $104.0 million
relating to the intangible assets impairment. |
All of these items resulted in a $176.0 million increase in the net
loss in the three and nine months ended September 30,
2012.
| (b) |
Reflects $23.2 million of interest
expense, net of $0.2 million of interest income for the three
months ended September 30, 2013. Reflects $33.8 million of
interest expense, net of $0.3 million of interest income for the
three months ended September 30, 2012. Reflects $89.5 million
of interest expense, net of $1.3 million of interest income for the
nine months ended September 30, 2013. Reflects $101.2 million
of interest expense, net of $1.1 million of interest income for the
nine months ended September 30, 2012. |
| (c) |
Reflects $24.6 million of premiums
paid to the holders of the redeemed Series A-1 Notes and the
portion of the Series A-2 Notes that were redeemed for the nine
months ended September 30, 2013. Reflects $19.6 million of
unamortized debt issuance costs related to the Series A-1 Notes and
the portion of the Series A-2 Notes that were redeemed in the nine
months ended September 30, 2013. |
The Company allocates certain corporate expenses that are not
directly attributable to a product line based upon Company metrics.
The following table shows corporate costs allocated to each segment
for the three and nine months ended September 30, 2013 and
September 30, 2012.
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| |
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
| (in millions) |
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
|
Operating Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Respiratory Therapy and Home Medical Equipment
|
|
$ |
31,470 |
|
|
$ |
33,518 |
|
|
$ |
95,252 |
|
|
$ |
107,727 |
|
|
Home Infusion Therapy
|
|
$ |
18,267 |
|
|
$ |
16,336 |
|
|
$ |
49,480 |
|
|
$ |
41,733 |
|
|
