Hanger Orthopedic Group Reports Earnings of $0.45 Per Diluted Share for the Second Quarter 2011

AUSTIN, Texas, July 27, 2011 /PRNewswire/ -- Hanger Orthopedic Group, Inc. (NYSE: HGR) announced net sales of $234.8 million for the quarter ended June 30, 2011, an increase of $29.0 million, or 14.1%, from $205.8 million for the second quarter of 2010.  Diluted earnings per share were $0.45 for the second quarter of 2011, a 50.0% increase compared to $0.30 in the same period in 2010. Excluding costs related to the relocation of corporate headquarters, adjusted earnings per diluted share increased 21.6% to $0.45 for the second quarter from $0.37 for the second quarter of 2010.

The $29.0 million increase in sales for the second quarter of 2011 was the result of a $15.8 million increase from the therapeutic solutions segment, principally from the acquisition of Accelerated Care Plus ("ACP"); a $7.4 million or 4.1% increase in same-center sales in the patient care services segment; a $4.5 million increase due to acquisitions in the patient care services segment; and a $1.3 million or 5.6% increase in sales in the Company's distribution segment.  Income from operations for the quarter ended June 30, 2011 was $32.9 million compared to $23.1 million in the prior year.  Excluding the headquarters relocation costs, adjusted income from operations increased 20.5% for the three months ended June 30, 2011. Adjusted income from operations as a percentage of revenue increased 70 basis points to 14.0% for the second quarter of 2011, with 30 basis points attributable to the acquisition of ACP and the remainder to improved leverage from the Company's existing businesses.

Net sales for the six months ended June 30, 2011 increased by $51.1 million, or 13.3%, to $435.2 million from $384.1 million in 2010.  The sales increase was driven by a $31.7 million increase in the therapeutic solutions segment, resulting primarily from the acquisition of ACP; a $7.7 million or 2.3% increase in same-center sales in the patient care services segment; an $8.7 million increase due to acquisitions in the patient care services segment; and a $3.0 million increase in sales in the Company's distribution segment.  As a percentage of sales adjusted income from operations increased by 50 basis points due to improved leverage in our core business and the acquisition of ACP.  Diluted earnings per share were $0.63 for the six months ended June 30, 2011, a 50.0% increase compared to $0.42 in the same period in 2010. Excluding the headquarters relocation costs, diluted earnings per share increased $0.11 or 20.8%, to $0.64 for the six months ended June 30, 2011 from $0.53 in the 2010 period.

The Company generated $22.1 million in cash flows from operations during the second quarter of 2011 compared to $19.6 million in the same prior-year quarter.  As of June 30, 2011, the Company had $116.1 million in total liquidity, which included $19.5 million of cash and $96.6 million, net of $3.4 million in letters of credit, available under its revolving credit facility.  The Company's leverage ratio, as defined in its credit facilities, improved to 3.27 at the end of the second quarter of 2011.

"This quarter our patient care services segment proved to be resilient, delivering same center sales growth of 4.1%.  This growth combined with the results of ACP and our continued focus on expense containment enabled us to continue to deliver double-digit earnings growth," commented Thomas F. Kirk, President and Chief Executive Officer of Hanger Orthopedic Group.  Mr. Kirk added, "We are optimistic of our prospects for continued growth for the second half of 2011.  We will continue our disciplined approach to acquisitions and diversification into new adjacent business as well as growing our business and controlling cost."

The Company has substantially completed the relocation of its corporate headquarters from Bethesda, Maryland to Austin, Texas. The cost of the move is reported as a separate component of income from operations.  The Company anticipates incurring $0.5 million to $1.5 million of additional costs in 2011 as the final employee moves are completed.

The Company expects full 2011 year revenues of between $945 million and $955 million. Based on the results for the first six months of the year, the Company believes it is more likely that sales for the full year will be at the low end of the range.  The Company expects full year adjusted diluted EPS between $1.66 to $1.71.  As in past years, the Company has a goal to increase operating margins by 20-40 basis points in its core business in 2011. Operating margins are at the high end of that range for the first six months and will likely exceed that goal for the full year. The Company expects to generate cash flow from operations of $85-$95 million and to invest $40-$50 million in new capital additions to fund its core businesses, ACP's continued expansion and the development of a comprehensive electronic practice management system.

About Hanger – Hanger Orthopedic Group, Inc., headquartered in Austin, Texas, is the world's premier provider of services and products that enhance human physical capability. Hanger provides orthotic and prosthetic patient care services, distributes O&P devices and components and provides therapeutic solutions to the broader post-acute market.  Hanger is the largest owner and operator of orthotic and prosthetic patient care centers, with in excess of 675 O&P patient care centers located in 45 states and the District of Columbia.  Hanger, through its subsidiary Southern Prosthetic Supply, is also the largest distributor of branded and private label O&P devices and components in the United States.  Hanger provides therapeutic solutions through its subsidiaries Innovative Neurotronics and Accelerated Care Plus.  Innovative Neurotronics introduces emerging neuromuscular technologies developed through independent research in a collaborative effort with industry suppliers worldwide.  Accelerated Care Plus is a developer of specialized rehabilitation technologies and the nation's leading provider of evidence-based clinical programs for post-acute rehabilitation, serving more than 4,000 long-term care facilities and other sub-acute rehabilitation providers throughout the U.S.  For more information on Hanger, visit 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.

Management relies on the non-GAAP items as the primary measures to review and assess operating performance and management teams. The Company believes it is useful to investors to provide disclosures of its operating results on the same basis as that used by management.  Management and investors also review the non-GAAP items to evaluate the Company's overall performance and to compare its current operating results with corresponding periods and with other companies in the health care industry. You should not consider the non-GAAP items in isolation or as a substitute for net income, operating cash flows or other cash flow statement data determined in accordance with accounting principles generally accepted in the United States. Because the non-GAAP items are not measures of financial performance under accounting principles generally accepted in the United States and are susceptible to varying calculations, they may not be comparable to similarly titled measures of other companies.  Adjusted net income, adjusted income from operations, and adjusted net income per diluted share are the non-GAAP financial measures.

SOURCE Hanger Orthopedic Group, Inc.