BETHESDA, Md., Feb. 10 /PRNewswire-FirstCall/ -- Hanger Orthopedic
Group, Inc. (NYSE:HGR) announced net sales of $205.1 million for
the quarter ended December 31, 2009, an increase of $19.6 million,
or 10.6%, from $185.5 million in the prior year. Earnings per share
for the fourth quarter of 2009 were $0.37 per diluted share
compared to proforma earnings per diluted share of $0.26 for the
same period in 2008, a 42.3% increase. The $19.6 million, or 10.6%,
sales increase for the quarter ended December 31, 2009 was
primarily the result of a $10.8 million, or 6.6%, increase in
same-center sales in our patient care centers, a $2.4 million, or
12.1%, increase in sales of the Company's distribution segment and
a $6.4 million increase principally related to sales from acquired
entities. The combination of increased sales and effective expense
management caused income from operations to increase by $5.6
million, or 25.4%, to $27.5 million for the fourth quarter of 2009,
compared to $21.9 million last year. Net income increased $3.6
million, or 43.7%, to $11.9 million in the fourth quarter of 2009
compared to proforma net income of $8.3 million last year. The
proforma results for the fourth quarter of 2008 exclude the impact
of a non-cash mark-to-market pre-tax adjustment of $0.7 million
related to interest rate swaps. In addition to improved income from
operations, net income benefited from lower variable interest cost
in the fourth quarter of 2009. Net sales for the year ended
December 31, 2009 increased by $57.0 million, or 8.1%, to $760.1
million from $703.1 million last year. The sales increase was
principally the result of a $29.6 million, or 4.9%, increase in
same-center sales in our patient care centers, a $7.3 million, or
9.1%, increase in sales of the Company's distribution segment and a
$20.1 million increase principally related to sales from acquired
entities. The growth in sales combined with effective expense
management caused income from operations to increase by $12.8
million, or 16.5%, to $90.5 million for the year end December 31,
2009. Operating income as a percentage of sales improved 80 basis
points to 11.9% in 2009 compared to 11.1% in the prior year. Net
income applicable to common stock for year ended December 31, 2009
increased by 32.7% to $36.1 million, or $1.13 per diluted share,
compared to pro forma net income applicable to common stock of
$27.2 million, or $0.86 per diluted share, in the prior year. In
addition to improved income from operations, net income benefited
from lower variable interest costs during 2009. The pro forma
results for the year ended December 31, 2008 assume that the
one-time, in-kind preferred stock dividend described below occurred
and the preferred stock was converted to common stock at the
beginning of the period. Net income applicable to common stock for
year ended December 31, 2008 on a GAAP basis was $21.1 million, or
$0.78 per diluted share. Cash from operations for the year ended
December 31, 2008 was $73.1 million, a $19.9 million, or 37.4%
increase, compared to 2008. The improvement was primarily the
result of improved operating results. The Company had total
liquidity of $148.5 million, comprised of $84.6 million of cash and
$63.9 million available under its revolving credit facility at
December 31, 2009. "The year 2009 presented a challenging
environment due to the uncertainty surrounding proposed changes to
federal health care regulations and reimbursement and the impact of
the ongoing recession. In spite of these challenges, we delivered
record sales, profits and cash flows," commented Thomas F. Kirk,
President and Chief Executive Officer of Hanger Orthopedic Group.
Mr. Kirk added, "The combination of an 8.1% increase in revenue and
a focused effort on expense management generated an 80 basis point
improvement in our operating margin. I am proud of our employees'
efforts in 2009 and I am optimistic about our opportunities in
2010." For 2010, the Company expects revenues to be between $815
million and $825 million an increase of 7.2 % to 8.5% compared to
2009. The Company expects diluted EPS for 2010 to be in the range
of $1.27 to $1.29, which would represent a 12.4% to 14.2% increase
over 2009 diluted EPS. We expect to improve operating margins by
20-40 basis points and to generate cash flow from operations of $60
to $70 million. During 2010 the Company will be relocating its
corporate headquarters from Bethesda, Maryland to Austin, Texas and
the cost of this move will be reported as a separate component of
income from operations. The Company expects to incur severance and
relocation cost of approximately $10.0 million to $12.0 million, as
well as, lease exit cost of approximately $3.0 million to $5.0
million. Once complete, the Company anticipates that the move will
result in a reduction of operating expenses of approximately $2.5
million to $3.5 million annually. In June 2008, the Company's
common stock performance triggered an acceleration of preferred
stock dividends as a result of the Company's average closing price
of its common stock exceeding the Company's forced conversion price
of the Series A Convertible Preferred Stock by 200% for a
20-trading day period. This event accelerated the payment of these
dividends due from the time of the event through May 26, 2011. The
accelerated dividends were paid in the form of increased stated
value of preferred stock, in lieu of cash. As a result, the Company
recorded an in-kind dividend on its preferred stock of $5.3 million
in the quarter ended June 30, 2008, which represented 0.7 million
additional common shares on an as-converted basis. Hanger
Orthopedic Group, Inc., headquartered in Bethesda, Maryland, is the
world's premier provider of orthotic and prosthetic patient care
services. Hanger is the market leader in the United States, owning
and operating 677 patient care centers in 45 states and the
District of Columbia, with over 3,700 employees including 1,127
practitioners as of December 31, 2009. Hanger is organized into
four units. The two key operating units are patient care, which
consists of nationwide orthotic and prosthetic practice centers,
and distribution, which consists of distribution centers managing
the supply chain of orthotic and prosthetic componentry to Hanger
and third party patient care centers. The third is Linkia, which is
the first and only provider network management company for the
orthotics and prosthetics industry. The fourth unit, Innovative
Neurotronics, introduces emerging neuromuscular technologies
developed through independent research in a collaborative effort
with industry suppliers worldwide. For more information on
Innovative Neurotronics, Inc. or the WalkAide®, visit
http://www.ininc.us/. For more information on Hanger, visit
http://www.hanger.com/. This document contains forward-looking
statements relating to the Company's results of operations. The
United States Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for certain forward-looking statements.
Statements relating to future results of operations in this
document reflect the current views of management. However, various
risks, uncertainties and contingencies could cause actual results
or performance to differ materially from those expressed in, or
implied by, these statements, including the Company's ability to
enter into and derive benefits from managed care contracts, the
demand for the Company's orthotic and prosthetic services and
products and the other factors identified in the Company's periodic
reports on Form 10-K and Form 10-Q filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934. The
Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information,
future events or otherwise. -tables to follow- Hanger Orthopedic
Group, Inc. (Dollars in thousands, except for share and per share
amounts) (Unaudited) Three Months Ended Twelve Months Ended
December 31, December 31, Income Statement: 2009 2008 2009 2008
----------------- ---- ---- ---- ---- Net sales $205,104 $185,547
$760,070 $703,129 Cost of goods sold - materials 59,512 54,915
228,295 210,323 Personnel costs 67,799 62,639 264,581 248,234 Other
operating expenses 46,269 41,711 160,355 149,661 Depreciation and
amortization 4,053 4,378 16,319 17,183 ----- ----- ------ ------
Income from operations 27,471 21,904 90,520 77,728 Interest expense
7,799 8,241 30,693 32,549 Unrealized (loss)/gain from interest rate
swap - (738) 167 (738) ---- ---- ---- ---- Income before taxes
19,672 12,925 59,994 44,441 Provision for income taxes 7,772 5,089
23,901 17,695 ----- ----- ------ ------ Net income 11,900 7,836
36,093 26,746 Less preferred stock dividend - Series A Convertible
Preferred Stock - - - 5,670 ----- ----- ----- ----- Net income
applicable to common stock $11,900 $7,836 $36,093 $21,076 =======
====== ======= ======= Basic Per Common Share Data:
---------------- Net income $0.37 $0.25 $1.15 $0.81 ===== =====
===== ===== Shares used to compute basic per common share amounts
31,746,875 30,817,549 31,383,895 25,930,096 ========== ==========
========== ========== Diluted Per Common Share Data:
------------------ Net income $0.37 $0.24 $1.13 $0.78 ===== =====
===== ===== Shares used to compute diluted per common share amounts
32,401,072 32,057,689 32,068,325 27,090,817 ========== ==========
========== ========== Three Months Ended Twelve Months Ended
December 31, 2008 December 31, 2008 Pro-forma: ---------- Net
income applicable to common stock 7,836 21,076 Preferred stock
dividend - Series A Convertible Preferred Stock 5,670 Loss from
interest rate swap (net of $295 tax) (1) 443 443 --- --- Pro-forma
net income applicable to common stock $8,279 $27,189 ====== =======
Diluted Per Share Data: ----------------------- Pro-forma net
income per diluted common share $0.26 $0.86 ===== ===== Shares used
to compute diluted per common share amounts 32,057,689 27,090,817
Effects of conversion of convertible preferred stock (2) -
4,567,956 --------- --------- Shares used to compute diluted per
common share amounts, Pro-forma basis 32,057,689 31,658,773
========== ========== (1) The loss from interest rate swap results
from ineffectiveness that occurred during the quarter and year
ending December 31, 2008. The Company fully intends to hold the
swap until its maturity in May 2011, in which case the valuation
reserve will over time reverse and result in our recording an equal
amount of income. (2) Assumes Preferred Stock dividend acceleration
event occurred January 1, 2008. The Company believes the
presentation of the pro-forma results, adjusted for the effects of
the acceleration of the Preferred Stock dividend at the beginning
of the period, is more reflective of the Company's current diluted
operating results and provides investors with additional useful
information to measure the Company's on-going performance. Three
Months Ended Twelve Months Ended Income Statement December 31,
December 31, as a % of Net Sales: 2009 2008 2009 2008
--------------------- ---- ---- ---- ---- Net sales 100.0% 100.0%
100.0% 100.0% Cost of goods sold - materials 29.0% 29.6% 30.0%
29.9% Personnel costs 33.0% 33.7% 34.9% 35.3% Other operating
expenses 22.6% 22.5% 21.1% 21.3% Depreciation and amortization 2.0%
2.4% 2.1% 2.4% --- --- --- --- Income from operations 13.4% 11.8%
11.9% 11.1% Interest expense 3.8% 4.4% 4.0% 4.6% Unrealized gain
(loss) from interest rate swap 0.0% -0.4% 0.0% -0.1% --- ---- ---
---- Income before taxes 9.6% 7.0% 7.9% 6.4% Provision for income
taxes 3.8% 2.7% 3.2% 2.5% --- --- --- --- Net income 5.8% 4.3% 4.7%
3.9% === === === === Hanger Orthopedic Group, Inc. (Dollars in
thousands, except for share and per share amounts) (Unaudited)
Three Months Ended Twelve Months Ended December 31, December 31,
Cash Flow Data: 2009 2008 2009 2008 --------------- ---- ---- ----
---- Cash flow from operations $26,979 $18,367 $73,131 $53,220
Capital expenditures $8,595 $7,317 $21,270 $19,330 Increase in cash
$6,176 $4,888 $26,145 $31,475 Balance Sheet Data: Dec. 31, 2009
Dec. 31, 2008 ------------------- ------------- ------------- Cash
and cash equivalents $84,558 $58,413 Days Sales Outstanding (DSO's)
50 51 Working Capital $216,664 $200,248 Total Debt $410,472
$422,324 Shareholders' Equity $315,893 $266,865 Three Months Ended
Twelve Months Ended December 31, December 31, Percentage of net
sales from: 2009 2008 2009 2008 ---- ---- ---- ---- Patient-care
services 89.0% 89.2% 88.2% 88.2% Distribution 10.8% 10.6% 11.6%
11.5% Payor mix: Commercial and other 60.5% 61.1% 59.5% 60.3%
Medicare 28.1% 27.8% 29.1% 28.3% Medicaid 6.2% 6.0% 6.2% 6.1% VA
5.2% 5.1% 5.2% 5.3% Statistical Data: ----------------- Twelve
Months Ended December 31, 2009 2008 ---- ---- Patient-care centers
677 668 Number of practitioners 1,127 1,070 Number of states
(including D.C.) 46 46 DATASOURCE: Hanger Orthopedic Group, Inc.
CONTACT: Thomas F. Kirk, George E. McHenry, or Thomas C.
Hofmeister, +1-301-986-0701, all of Hanger Orthopedic Group, Inc.
Web Site: http://www.hanger.com/
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