Hanger, Austin, Texas, announced that it will restate its previously issued unaudited interim financial information for the quarters ended March 31, 2014; March 31, 2013; September 30, 2013; December 31, 2013; and March 31, 2012; and the year-to-date periods ended June 30, 2014; June 30, 2013; September 30, 2013; and June 30, 2012. The restatements are due to errors identified in the financial statements for these periods, the company said, and therefore investors should no longer rely upon previously released financial information for these periods, or press releases or other shareholder communications that relate to that information. Hanger said it intends to file restated financial information as soon as practicable.
The company said it identified the aforementioned errors while preparing its financial statements for the quarter ended September 30, 2014. A list of the errors, including their estimated impact on pretax income, is included in the Form 8-K that Hanger filed with the Securities and Exchange Commission on February 17. The errors fall into the general categories of cost of materials, education fair, depreciation, lease accounting, and other recurring and nonrecurring errors.
Based on its review to date, Hanger has posted estimated adjustments to its unaudited income statements on its website. (Editor’s note: Click on the announcement dated 02/17/15, titled Hanger Announces Restatement of Certain Previously-Issued Unaudited Interim Financial Statements.)
In connection with the errors discovered in financial statements and the company’s ongoing assessment of its internal control over financial reporting, the board of directors’ Audit Committee has also concluded that there were material weaknesses in internal control over financial reporting in addition to those that have been previously reported. The additional material weaknesses relate to the design and operation of effective controls over leases, billing data and invoicing controls, and accounts receivable allowances.
Based on these newly identified material weaknesses, along with previously reported material weaknesses, Hanger said it has an additional material weakness in that the company did not have appropriate accounting resources to meet its financial reporting requirements.
Hanger said it is in the process of remediating its material weaknesses. Among other actions taken by the company, it has hired and appointed a new chief financial officer, a new chief accounting officer, and a new corporate controller. Further, additional accounting resources and professionals have been hired and engaged.
Third quarter 2014 results have not yet been released, nor was the company able to timely file its quarterly report on Form 10-Q for the quarter ended September 30, 2014. These items are pending until such time Hanger has finalized its lease accounting for the quarter ended September 30, 2014, and prior periods, as well as completed and filed amendments to prior reports to correct the errors discussed above. Further, the timing of the filings described above may be adversely affected by the results of a refined inventory estimation method that Hanger implemented in the fourth quarter of 2014 in connection with its continuing efforts to remediate material weaknesses identified in 2012 and 2013 related to the valuation of inventory and cost of materials. While Hanger said it is working to complete its closing processes as expeditiously as possible, it expects that in light of the circumstances, it likely will not be able to file its annual report on Form 10-K for the year ended December 31, 2014, in a timely manner.
