Hanger Inc.’s HGR share price continued to plummet for the fourth consecutive day and closed at $22.92 on Mar 26, down 4.02% (96 cents) from the previous trading session. We note that share price has lost 12.6% value over the last five trading days, after the company received delisting notification from NYSE and Moody’s MCO downgraded its Corporate Family Rating (CFR).
Moody’s Investor Services downgraded Hanger’s CFR to B1 from Ba3 and Probability of Default Rating to B1-PD from Ba3-PD. Concurrently, Moody's downgraded Hanger's senior unsecured notes to B3 from B1. In addition, the Speculative Grade Liquidity Rating was downgraded to SGL-4 from SGL-2. The ratings remain under review for further downgrade.
The downgrade of the CFR follows Hanger's failure to file its 2014 10K. As previously announced on Feb 17, the company is set to restate sections of its previously-issued financial data. Owing to this, Hanger did not release third and fourth quarter results and refrained from filing related 10Q for the third quarter and the 10K.
Moody’s also noted that a delay in implementing Hanger’s clinic management system (Janus), reduction in the company’s revolver availability (from $200 million to $146.3 million) and NYSE notice on Mar 23, prompted the downgrades.
Hanger recently filed an 8-K to inform investors that the company has received a notice from the New York Stock Exchange (NYSE) on Mar 18. Per the notice, Hanger is not complying with the NYSE's continued listing requirements under the timely filing criteria.
Hanger’s failure to file its Annual Report on Form 10-K in time prompted the NYSE action. Hanger is also reportedly working to complete and file its Form 10-Q for the quarter ended Sep 30, 2014.
The NYSE, under its existing set of rules, has given Hanger six months’ time until Sep 17, 2015, to file its Form 10-K with the U.S. Securities and Exchange Commission (SEC). The company is looking to regain compliance with the NYSE listing standards prior to that date by duly filing its Form 10-K.
We believe that the uncertainty related to the completion time of the restatement process will remain a major overhang on the stock in the near term. Moreover, the company continues to face macroeconomic headwinds like reimbursement uncertainties, sequestration, and RAC audits that are likely to keep overall results under pressure over the next few quarters.
Nevertheless, we note Hanger’s dominant position in the orthotic and prosthetic (O&P) market, expanding customer base and accretive acquisitions are major positives.
Stocks to Consider
Currently, Hanger has a Zacks Rank #3 (Hold). Better-ranked stocks are Abiomed ABMD and SurModics SRDX with a Zacks Rank #1 (Strong Buy).
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