-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DCc1dHTI5hy6bU2zqdvlI1VNsZqG7nRDPWZMv/1hiuPyjY9nmQhp2iFDTtFqHAvr VE99szVtBUP9jZlyiM1LGw== 0000904456-98-000187.txt : 19980817 0000904456-98-000187.hdr.sgml : 19980817 ACCESSION NUMBER: 0000904456-98-000187 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HANGER ORTHOPEDIC GROUP INC CENTRAL INDEX KEY: 0000722723 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 840904275 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10670 FILM NUMBER: 98687783 BUSINESS ADDRESS: STREET 1: 7700 OLD GEORGETOWN RD 2ND FL CITY: BETHESDA STATE: MD ZIP: 20814 BUSINESS PHONE: 3019860701 MAIL ADDRESS: STREET 2: 7700 OLD GEORGETOWN RD 2ND FL CITY: BETHESDA STATE: MD ZIP: 20814 FORMER COMPANY: FORMER CONFORMED NAME: SEQUEL CORP DATE OF NAME CHANGE: 19890814 FORMER COMPANY: FORMER CONFORMED NAME: CELLTECH COMMUNICATIONS INC DATE OF NAME CHANGE: 19860304 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1998 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ___________________ Commission File Number 1-10670 HANGER ORTHOPEDIC GROUP, INC. -------------------------------------------------------------------- (Exact name of registrant as specified in its charter.) Delaware 84-0904275 -------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7700 Old Georgetown Road, Bethesda, MD 20814 -------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's phone number, including area code: (301) 986-0701 -------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of August 14, 1998; 18,178,751 shares of common stock, $.01 par value per share. HANGER ORTHOPEDIC GROUP, INC. INDEX
Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - June 30,1998 (unaudited) and December 31, 1997 1 Consolidated Statements of Income for the three months ended June 30, 1998 and 1997 (unaudited) 3 Consolidated Statements of Income for the six months ended June 30, 1998 and 1997 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997 (unaudited) 5 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Securityholders 16 Item 6. Exhibits and Reports on Form 8-K 17 SIGNATURES 18
HANGER ORTHOPEDIC GROUP, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1998 1997 ---------------------------------------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 8,714,387 $ 6,557,409 Accounts receivable less allowances for doubtful accounts of $7,042,000 and $4,871,000 in 1998 and 1997, respectively 32,886,968 31,145,327 Inventories 17,452,392 17,445,476 Prepaid expenses and other assets 4,938,267 4,260,656 Deferred income taxes 2,127,185 2,127,185 -------------- -------------- Total current assets 66,119,199 61,536,053 -------------- -------------- PROPERTY, PLANT AND EQUIPMENT Land 4,267,045 4,269,045 Buildings 8,362,169 8,326,732 Machinery and equipment 8,805,583 7,591,821 Furniture and fixtures 2,624,247 2,378,808 Leasehold improvements 3,721,554 3,142,244 -------------- -------------- 27,780,598 25,708,650 Less accumulated depreciation and amortization 8,793,253 7,538,385 -------------- -------------- 18,987,345 18,170,265 -------------- -------------- INTANGIBLE ASSETS Excess of cost over net assets acquired 97,247,788 81,150,328 Non-compete agreements 2,406,179 2,236,979 Other intangible assets 3,229,802 3,221,912 -------------- -------------- 102,883,769 86,609,219 Less accumulated amortization 10,454,903 9,101,531 -------------- -------------- 92,428,866 77,507,688 -------------- -------------- OTHER ASSETS Other 875,064 768,604 -------------- -------------- TOTAL ASSETS $ 178,410,474 $ 157,982,610 ============== ==============
The accompany notes are an integral part of the consolidated financial statements. 1 HANGER ORTHOPEDIC GROUP, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1998 1997 ---------------------------------------- (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 10,037,166 $ 5,747,865 Accounts payable 5,386,257 3,827,338 Accrued expenses 4,584,065 3,597,104 Customer deposits 1,143,249 1,145,001 Accrued wages and payroll taxes 7,901,961 8,037,805 Deferred revenue 154,966 150,418 -------------- -------------- Total current liabilities 29,207,664 22,505,531 -------------- -------------- Long-term debt 30,488,681 23,237,321 Deferred income taxes 3,405,833 3,405,833 Other liabilities 2,246,992 2,210,445 Mandatorily redeemable preferred stock, class C, liquidation preference of $500 per share 317,682 303,753 Mandatorily redeemable preferred stock, class F, liquidation preference of $500 per share SHAREHOLDERS' EQUITY Common stock, $.01 par value; 25,000,000 shares authorized, 15,883,939 and 15,670,100 shares issued, and 15,750,444 and 15,536,605 shares outstanding in 1998 and 1997 158,840 156,702 Additional paid-in capital 103,693,964 102,585,837 Retained earnings 9,546,380 4,232,750 -------------- -------------- 113,399,184 106,975,289 Treasury stock - (133,495 shares) (655,562) (655,562) -------------- -------------- 112,743,622 106,319,727 -------------- -------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 178,410,474 $ 157,982,610 ============== ==============
The accompany notes are an integral part of the consolidated financial statements. 2 HANGER ORTHOPEDIC GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED June 30, 1998 and 1997 (unaudited)
1998 1997 -------------- -------------- Net Sales $ 46,899,890 $ 36,644,645 Cost of products and services sold 23,261,042 18,322,122 -------------- -------------- Gross profit 23,638,848 18,322,523 Selling, general & administrative 15,454,449 12,039,572 Depreciation and amortization 776,760 744,959 Amortization of excess cost over net assets acquired 576,426 451,320 -------------- -------------- Income from operations 6,831,213 5,086,672 Other expense: Interest expense, net (699,008) (1,849,502) Other (43,236) -------------- -------------- Income before income taxes 6,132,204 3,193,934 Provision for income taxes 2,514,000 1,342,000 -------------- -------------- Net income $ 3,618,204 $ 1,851,934 ============== ============== BASIC PER COMMON SHARE DATA Net income $ .23 $ .20 ============== ============== Shares used to compute basic per common share amounts 15,704,378 9,420,120 ============== ============== DILUTED PER COMMON SHARE DATA Net income $ .21 $ .18 ============== ============== Shares used to compute diluted per common share amounts 17,442,608 10,538,768 ============== ==============
The accompany notes are an integral part of the consolidated financial statements. 3 HANGER ORTHOPEDIC GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED June 30, 1998 and 1997 (unaudited)
1998 1997 -------------- -------------- Net Sales $ 87,649,908 $ 67,594,259 Cost of products and services sold 44,564,173 34,552,051 -------------- -------------- Gross profit 43,085,735 33,042,208 Selling, general & administrative 30,183,450 22,964,207 Depreciation and amortization 1,485,782 1,494,264 Amortization of excess cost over net assets acquired 1,127,387 860,832 -------------- -------------- Income from operations 10,289,116 7,722,905 Other income expense: Interest expense, net (1,313,830) (3,376,771) Other income (expense) 30,345 (86,985) -------------- -------------- Income before income taxes 9,005,631 4,259,149 Provision for income taxes 3,692,000 1,789,300 -------------- -------------- Net income $ 5,313,630 $ 2,469,849 ============== ============== BASIC PER COMMON SHARE DATA Net income $ .34 $ .26 ============== ============== Shares used to compute basic per common share amounts 15,640,558 9,389,495 ============== ============== DILUTED PER COMMON SHARE DATA Net income $ .31 $ .24 ============== ============== Shares used to compute diluted per common share amounts 17,274,607 10,268,810 ============== ==============
The accompany notes are an integral part of the consolidated financial statements. 4 HANGER ORTHOPEDIC GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED June 30, 1998 and 1997 (unaudited)
1998 1997 -------------- -------------- Cash flows from operating activities: Net income $ 5,313,631 $ 2,469,849 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for bad debt 3,351,935 2,337,603 Depreciation and amortization 1,485,782 1,494,264 Amortization of excess cost over net assets acquired 1,127,387 860,832 Amortization of debt discount 127,406 Changes in assets and liabilities, net of effect from acquired companies: Accounts receivable (3,236,946) (4,882,718) Inventory 533,997 208,278 Prepaid and other assets (483,423) (653,807) Other assets (82,582) (86,878) Accounts payable 730,800 (1,107,765) Accrued expenses 816,325 (208,553) Accrued wages and payroll taxes (653,107) (3,062,226) Customer deposits (1,528) 351,234 Deferred revenue (193,342) (22,711) Other liabilities 36,547 126,693 -------------- -------------- Total adjustments 3,431,845 (4,518,348) -------------- -------------- Net cash provided by (used in) operating activities 8,745,476 (2,048,499) -------------- -------------- Cash flows from investing activities: Purchase of fixed assets, net (1,452,263) (1,115,007) Acquisitions, net of cash (13,153,307) (8,446,189) Purchase of patents (8,222) (73,242) Purchase of non-compete agreements (169,200) (138,150) -------------- -------------- Net cash used in investing activities (14,782,992) (9,772,588) -------------- -------------- Continued
The accompany notes are an integral part of the consolidated financial statements. 5 HANGER ORTHOPEDIC GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED June 30, (unaudited)
1998 1997 -------------- -------------- Cash flows from financing activities: Net borrowings under revolving credit facility $ 3,500,000 $ 5,500,000 Proceeds from exercise of stock options and warrants 1,124,194 431,637 Proceeds from long-term debt 6,000,000 8,256,000 Repayment of long-term debt (2,429,700) (3,194,391) -------------- -------------- Net cash provided by financing activities 8,194,494 10,993,246 -------------- -------------- Net change in cash and cash equivalents for the period 2,156,978 (827,841) Cash and cash equivalents at beginning of period 6,557,409 6,572,402 -------------- -------------- Cash and cash equivalents at end of period $ 8,714,387 $ 5,744,561 ============== ============== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 1,144,175 $ 3,156,241 ============== ============== Taxes $ 3,896,000 $ 1,328,000 ============== ============== Non-cash financing and investing activities: Issuance of common stock in connection with acquisition $ 500,000 ============== Issuance of notes in connection with acquisitions $ 4,420,957 $ 2,864,200 ============== ============== Dividends declared preferred stock $ 13,929 $ 12,735 ============== ==============
The accompany notes are an integral part of the consolidated financial statements. 6 NOTE A -- BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X. They do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of a normal recurring nature, considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the financial statements of Hanger Orthopedic Group, Inc. (the "Company") and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 1997, filed by the Company with the Securities and Exchange Commission. NOTE B - NEW ACCOUNTING STANDARDS The Company adopted Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share," effective January 1, 1997. As a result, earnings per share for the six and three months ended June 30, 1997 have been restated to conform to the provisions of this statement. Effective January 1, 1998 the Company adopted the provisions of SFAS 130, "Reporting Comprehensive Income." SFAS 130 establishes standards for reporting and display of comprehensive income and its components in the financial statements. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The adoption of SFAS 130 had no effect on the Company's consolidated financial statements. The Company will adopt the provisions of SFAS 131, "Disclosures about Segments of an Enterprise and Related Information" effective with the financial statements for the year ended December 31, 1998. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Financial statement disclosures for prior periods are required to be restated. The Company is in the process of evaluating the disclosure requirements. The adoption of SFAS 131 affects disclosure only and will not affect reported earnings, cash flows or financial position. In June 1998, the Financial Accounting Standard Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which is effective for the fiscal years beginning after June 15, 1999. SFAS 133 requires that an entity recognize all derivative instruments as either assets or liabilities on its balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part 7 of a hedge transaction, and, if it is, the type of hedge transaction. The Company will adopt SFAS 133 by the first quarter of 2000. Due to the Company's limited use of derivative instruments, SFAS 133 is not expected to have a material effect on the financial position or results of operations of the Company. NOTE C -- INVENTORY Inventories at June 30, 1998 and December 31, 1997 were comprised of the following:
June 30, 1998 December 31, 1997 -------------- -------------- (unaudited) Raw materials $ 7,989,866 $ 7,685,134 Work-in-process 1,467,133 1,437,946 Finished goods 7,995,393 8,322,396 -------------- -------------- $ 17,452,392 $ 17,445,476 ============== ==============
NOTE D - ACQUISITIONS During the first six months of 1998, the Company acquired eight orthotic and prosthetic companies. The aggregate purchase price, excluding potential earn-out provisions, was $16,868,000, comprised of $12,447,000 in cash and $4,421,000 in promissory notes. The notes are payable over three to five years with interest rates ranging from 6% to 7%. The cash portion of the purchase price for these acquisitions was borrowed under the Company's revolving and acquisition loan commitments. The excess cost of the above acquisitions over the recorded amount of net assets acquired amounted to approximately $14,967,000. During the first six months of 1998, the Company paid approximately $579,000 to the former owners of ACOR Orthopaedic, Inc. - Retail Division, pursuant to earnout provisions contained in the 1997 acquisition agreement. In addition, the Company paid approximately $297,000 to the former owners of Fort Walton Orthopedic Inc. and Mobile Limb and Brace, Inc., pursuant to working capital provisions contained in the 1997 acquisition agreement. The Company has accounted for these additional payments as additional purchase price resulting in an increase to excess of cost over net assets acquired in the amount of $876,000. 8 NOTE E - NET INCOME PER COMMON SHARE The following sets forth the calculation of the basic and diluted income per common share amounts for the three month period ended June 30, 1998 and 1997 and the six month period ended June 30, 1998 and 1997.
Three Months Ended Six Months Ended June 30 June 30 ----------------------------- ---------------------------- 1998 1997 1998 1997 ------------- ------------- ------------- ------------ Net income $ 3,618,205 $ 1,851,934 $ 5,313,630 $ 2,469,849 Less preferred stock dividends declared (7,095) (6,440) (13,929) (12,735) ------------- ------------- ------------- ------------ Income available to common stockholders used to compute basic per common share amounts $ 3,611,110 $ 1,845,494 $ 5,299,701 $ 2,457,114 ============= ============= ============= ============ Add back interest expense on convertible note payable, net of tax 14,824 0 14,824 0 Income available to common stockholders plus assumed conversions used to com- pute diluted per common share amounts $ 3,625,934 $ 1,845,494 $ 5,314,525 $ 2,457,114 ============= ============= ============= ============ Average shares of common stock outstanding used to compute basic per common share amounts 15,704,378 9,420,120 15,640,558 9,389,495 Effect of convertible note payable 115,717 0 58,817 0 Effect of dilutive options 818,910 435,443 803,213 321,508 Effect of dilutive warrants 803,603 683,205 772,019 557,807 ------------- ------------- ------------- ------------ Shares used to compute dilutive per common share amounts 17,442,608 10,538,768 17,274,607 10,268,810 ============= ============= ============= ============ Basic income per common share $ .23 $ .20 $ .34 $ .26 Diluted income per common share $ .21 $ .18 $ .31 $ .24
Options to purchase 7,785 shares of common stock were outstanding at June 30, 1998 but were not included in the computation of diluted income per common share for the six months ended June 30, 1998 because the options' exercise price was greater than the average market price of the common shares. NOTE F --- SUBSEQUENT EVENT On July 29, 1998, 3,300,000 shares of common stock of the Company were sold in an underwritten public offering at $17.00 per share. Of that amount, 2,400,000 shares were sold by the Company and 900,000 shares were sold by certain stockholders of the Company. Of the approximately $38.4 million of net proceeds of the offering received by the Company, the Company applied $26.2 million to the repayment of senior and other indebtedness. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth for the periods indicated certain items of the Company's Statements of Income and their percentage of the Company's net sales:
Six Months Three Months Ended June 30, Ended June 30, -------------- -------------- 1998 1997 1998 1997 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Cost of products and services sold 50.8 51.1 49.6 50.0 Gross profit 49.2 48.9 50.4 50.0 Selling, general & administrative expenses 34.4 34.0 33.0 32.9 Depreciation and amortization 1.7 2.2 1.7 2.0 Amortization of excess cost over net assets acquired 1.3 1.3 1.2 1.2 Income from operations 11.7 11.4 14.6 13.9 Interest expense 1.5 5.0 1.5 5.0 Provision for income taxes 4.2 2.6 5.4 3.7 Net income 6.1 3.7 7.7 5.1
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1997 NET SALES Net sales for the quarter ended June 30, 1998, were approximately $46,900,000, an increase of approximately $10,255,000, or 28.0%, over net sales of approximately $36,645,000 for the quarter ended June 30, 1997. The majority of the increase was attributable to acquisitions consummated subsequent to June 30, 1997. In addition, contributing to the increase in net sales was an 9.0% increase in sales by those Hanger patient-care centers operating throughout both quarters. GROSS PROFIT Gross profit in the quarter ended June 30, 1998 was approximately $23,639,000 an increase of approximately $5,316,000, or 29%, over gross profit of approximately $18,323,000 for the quarter ended June 30, 1997. The increase was primarily attributable to the increase in net sales. Gross profit as a percentage of net sales increased to 50.4% in the first quarter of 1998 from 50.0% in the first quarter of 1997. 10 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses in the quarter ended June 30, 1998 increased by approximately $3,415,000, or 28.4%, compared to the quarter ended June 30, 1997. Selling, general and administrative expenses as a percentage of net sales increased to 33.0% compared to 32.9% for same period in 1997. The increase in selling, general and administrative expenses as a percent of net sales occurred primarily as a result of acquisitions subsequent to June 30, 1997. INCOME FROM OPERATIONS Principally as a result of the above, income from operations in the quarter ended June 30, 1998 was approximately $6,831,000, an increase of $1,745,000, or 34.3%, over the prior year's comparable quarter. Income from operations as a percentage of net sales increased to 14.6% in the second quarter of 1998 from 13.9% for the prior year's comparable period. INTEREST EXPENSE Interest expense in the second quarter of 1998 was approximately $699,000, a decrease of approximately $1,150,000, or 62.2%, from approximately $1,850,000 incurred in the second quarter of 1997. Interest expense as a percentage of net sales decreased to 1.5% from 5.0% for the same period a year ago. The decrease in interest expense was primarily attributable to the repayment of $58.3 million of indebtedness during August of 1997 from the proceeds of an underwritten public offering consummated in that month in which the Company sold 5,750,000 shares of common stock at $11.00 per share. INCOME TAXES The Company's effective tax rate was 41% in the second quarter of 1998 versus 42.0% in 1997. The provision for income taxes in the second quarter of 1998 was approximately $2,514,000 compared to approximately $1,342,000 for the second quarter of 1997. NET INCOME As a result of the above, the Company recorded net income of $3,618,000, or $.21 per dilutive common share, in the quarter ended June 30, 1998, compared to net income of $1,852,000, or $.18 per dilutive common share, in the quarter ended June 30, 1997. 11 SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997 NET SALES Net sales for the six months ended June 30, 1998 were approximately $87,650,000, an increase of approximately $20,056,000, or 29.7%, over net sales of approximately $67,594,000 for the six months ended June 30, 1997. The majority of the increase was attributable to acquisitions consummated subsequent to June 30, 1997. In addition, contributing to the increase in net sales was an 11.2% increase in sales by those Hanger patient-care centers operating throughout both six-month periods. The Company believes that its net sales during the latter half of 1998 will exceed net sales during the latter half of 1997. GROSS PROFIT Gross profit for the six months ended June 30, 1998 was approximately $43,086,000, an increase of approximately $10,044,000, or 30.4%, over gross profit of approximately $33,042,000 for the six months ended June 30, 1997. The increase was primarily attributable to the increase in net sales. Gross profit as a percent of net sales increased from 48.9% in the six months ended June 30, 1997 to 49.2% in the six months ended June 30, 1998. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses in the six months ended June 30, 1998 increased by approximately $7,219,000, or 31.4%, compared to the six months ended June 30, 1997. Selling, general and administrative expenses as a percentage of net sales increased to 34.4% from 34.0% for the same period in 1997. The increase in selling, general and administrative expenses as a percentage of net sales occurred primarily as a result of acquisitions subsequent to June 30, 1997. INCOME FROM OPERATIONS Principally as a result of the above, income from operations in the six months ended June 30, 1998 was approximately $10,289,000, an increase of approximately $2,566,000, or 33.2%, over the prior year's comparable period. Income from operations as a percentage of net sales increased to 11.7% in the six months ended June 30, 1998 from 11.4% in the six months ended June 30, 1997. INTEREST EXPENSE Net interest expense for the first six months of 1998 was approximately $1,314,000, a decrease of approximately $2,063,000, or 61.1%, from approximately $3,377,000 incurred in the first six months of 1997. Interest expense as a percentage of net sales decreased to 1.5% from 5.0% for the same period one year ago. The decrease in interest expense was primarily 12 attributable to the repayment of $58.3 million of indebtedness during August of 1997 from the proceeds of an underwritten public offering consummated in that month in which the Company sold 5,750,000 shares of common stock at $11.00 per share. INCOME TAXES The Company's effective tax rate was 41.0% in the first six months of 1998 versus 42.0% in 1997. The provision for income taxes for the six months ended June 30, 1998 was approximately $3,692,000 compared to approximately $1,789,000 for the six months ended June 30, 1997. NET INCOME As a result of the above, the Company recorded net income of approximately $5,314,000, or $.31 per dilutive common share, in the first six months of 1998, compared to net income of approximately $2,470,000, or $.24 per dilutive common share, in the first six months of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's consolidated working capital at June 30, 1998 was approximately $36,912,000 and cash and cash equivalents available were approximately $8,714,000. The Company's cash resources were satisfactory to meet its obligations for the quarter ended June 30, 1998. The Company has a credit agreement (the "Credit Agreement") with a syndicate of banks, (collectively, the "Banks") that provides for (i) an A-Term Loan of up to $29,000,000 (the "A-Term Loan"); (ii) a B-Term Loan of up to $28,000,000 (the "B-Term Loan"); (iii) an acquisition loan of up to $25,000,000 (the "Acquisition Loan"); and (iv) a revolving loan of up to $8,000,000 (the "Revolving Loan"). The Company's total long-term debt at June 30, 1998, including a current portion of approximately $10,037,000, was approximately $40,526,000. Such indebtedness included: (i) $16,464,000 borrowed under the A-Term Loan and B-Term Loan; (ii) $6,000,000 borrowed under the Acquisition Loan; (iii) $3,500,000 borrowed under the Revolving Loan; and (iv) a total of $14,562,000 of other indebtedness. The Credit Agreement with the Banks is collateralized by substantially all the assets of the Company, restricts the payment of dividends, and contains certain affirmative and negative covenants customary in an agreement of this nature. The A-Term Loan, the Acquisition Loan and the Revolving Loan bear base interest at the Company's option of either LIBOR plus 2.50% or the Bank's prime rate plus 1.50%. The base interest rate is then reduced by .25% to 1.25% depending upon the ratio of the Company's total indebtedness to annual earnings before interest, taxes, depreciation and amortization. The outstanding amount of the A-Term Loan at June 30, 1998 was $7,944,000, which is being amortized in quarterly amounts and will mature on December 31, 2001. The B-Term Loan bears base interest at the Company's option of either LIBOR plus 2.75% or the Bank's prime rate plus 1.75%. The base interest rate is then reduced by .25% to 1.25% depending upon the ratio of the 13 Company's total indebtedness to annual earnings before interest, taxes, depreciation and amortization. The outstanding amount of the B-Term Loan at June 30, 1998 was $8,520,000, which is being amortized in quarterly amounts and will mature on December 31, 2003. All or any portion of outstanding loans under the Credit Agreement may be repaid at any time and commitments may be terminated in whole or in part at the option of the Company without premium or penalty, except that LIBOR-based loans may only be repaid at the end of the applicable interest period. Mandatory prepayments will be required in the event of certain sales of assets, debt or equity financings and under certain other circumstances. During the first six months of 1998, the Company acquired eight orthotic and prosthetic companies. The aggregate purchase price excluding potential earn-out provisions was $16,868,000, comprised of $12,447,000 in cash and $4,421,000 in promissory notes. The cash portion of the purchase price of these acquisitions was borrowed under the Company's Revolving Loan and Acquisition Loans. The Company plans to finance future acquisitions through internally generated funds or borrowings under the Acquisition Loans, the issuance of notes or shares of Common Stock of the Company, or through a combination thereof. The Company is actively engaged in ongoing discussions with prospective acquisition candidates. The Company plans to continue to expand its operations aggressively through acquisitions. On July 29, 1998, 3,300,000 shares of common stock of the Company were sold in an underwritten public offering at $17.00 per share. Of that amount, 2,400,000 shares were sold by the Company and 900,000 shares were sold by certain stockholders of the Company. Of the approximately $38.4 million of net proceeds of the offering, the Company repaid the A-Term Loan and B-Term Loan, $5.5 million principal amount of the Acquisition Loan, $4.0 million principal amount of the Revolving Loan and $1.7 million of other indebtedness. In connection with the public offering, the Company granted the underwriters an option, exercisable not later than August 28, 1998, to purchase up to 495,000 additional shares of common stock to cover over allotments. If fully exercised, the Company would receive approximately $7.9 million of additional net proceeds. 14 OTHER Inflation has not had a significant effect on the Company's operations, as increased costs to the Company generally have been offset by increased prices of products and services sold. The Company will adopt the provisions of SFAS 131, "Disclosures about Segments of an Enterprise and Related Information" effective with the financial statements for the year ended December 31, 1998. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. Financial statement disclosures for prior periods are required to be restated. The Company is in the process of evaluating the disclosure requirements. The adoption of SFAS 131 affects disclosure only and will not affect reported earnings, cash flows or financial position. In June 1998, the Financial Accounting Standard Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which is effective for the fiscal years beginning after June 15, 1999. SFAS 133 requires that an entity recognize all derivative instruments as either assets or liabilities on its balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction, and, if it is, the type of hedge transaction. The Company will adopt SFAS 133 by the first quarter of 2000. Due to the Company's limited use of derivative instruments, SFAS 133 is not expected to have a material effect on the financial position or results of operations of the Company. The Company primarily provides services and customized devices throughout the United States and is reimbursed, in large part, by the patients' third-party insurers or governmentally funded health insurance programs. The ability of the Company's debtors to meet their obligations is principally dependent upon the financial stability of the insurers of the Company's patients and future legislation and regulatory actions. The Company's management believes that its major financial and manufacturing applications are year 2000 compliant. The Company expects no material impact on its internal information systems from the year 2000 issue. The Company has recently initiated communications with its significant suppliers to determine the extent that the Company may be impacted by third parties' failure to address the issue. The Company will continue to monitor and evaluate the impact of the year 2000 on its operations. This report contains forward-looking statements setting forth the Company's beliefs or expectations relating to future revenues. Actual results may differ materially from projected or expected results due to changes in the demand for the Company's O&P services and products, uncertainties relating to 15 the results of operations or recently acquired and newly acquired O&P patient care practices, the Company's ability to attract and retain qualified O&P practitioners, governmental policies affecting O&P operations and other risks and uncertainties affecting the health-care industry generally. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to up-date publicly these forward-looking statements, whether as a result of new information, future events or otherwise. 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held on May 19, 1998. The following nine directors were elected by the following votes to serve as members of the Board of Directors for one year or until their successors are elected and qualified:
Name Votes For Votes Withheld ---- --------- -------------- Ivan R. Sabel 12,221,418 529,408 Mitchell J. Blutt, M.D. 9,509,698 3,241,130 Edmond E. Charrette, M.D. 12,381,168 369,658 Thomas P. Cooper, M.D. 12,221,418 529,408 Robert J. Glaser, M.D. 12,217,206 533,620 James G. Hellmuth 9,496,754 3,254,072 William L. McCulloch 12,220,206 530,620 H. E. Thranhardt 12,381,168 369,658 Risa J. Lavizzo-Mourey, M.D. 12,219,218 531,608
Shareholders ratified an amendment to the Company's 1991 Stock Option Plan to increase the number of shares of Common Stock authorized for issuance under that Plan from 1,500,000 shares to 3,000,000 shares. Such proposal was approved by a vote of 9,488,189 shares for and 733,116 shares against, with 72,251 abstaining. Shareholders also ratified the selection of PricewaterhouseCoopers LLP (formerly known as Coopers & Lybrand L.L.P.) as the independent accountants for the Company for the current fiscal year. Such proposal was approved by a vote of 12,811,076 shares for and 46,801 shares against, with 7,079 shares abstaining. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit 10 1991 Stock Option Plan, as amended Exhibit 27 Financial Data Schedule (b) REPORTS ON FORM 8-K None 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HANGER ORTHOPEDIC GROUP, INC. Date: August 14, 1998 /s/IVAN R. SABEL ------------------ Ivan R. Sabel, CPO Chief Executive Officer Date: August 14, 1998 /s/RICHARD A. STEIN ------------------- Richard A. Stein Vice President - Finance Principal Financial and Accounting Officer EX-10 2 EXHIBIT 10 HANGER ORTHOPEDIC GROUP, INC. 1991 STOCK OPTION PLAN (as amended) 1. PURPOSE. The purpose of the 1991 Stock Option Plan (the "Plan") of Hanger Orthopedic Group, Inc. (the "Company") is to make shares of the common stock, $.01 par value per share (the "Stock"), of the Company available for purchase by selected officers and key employees of the Company or subsidiaries of the Company, upon terms which will give them an added incentive to continue service with the Company and a more direct interest in the future success of its operations. The options granted hereunder shall either be incentive stock options ("ISOs") within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock options ("NQSOs"). ISOs and NQSOs collectively are referred to hereinafter as "Options." 2. ADMINISTRATION. (a) THE STOCK OPTION COMMITTEE. The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board") composed of not less than three directors of the Company, who shall be appointed by and serve at the pleasure of the Board. A majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Committee, shall be the acts of the Committee. Each member of the Committee shall be ineligible to be granted Options under the Plan and shall otherwise be a "disinterested person" within the meaning of Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as amended. The Committee shall keep minutes of its meetings. (b) AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan, the Committee shall have full authority and power to determine the employees to whom Options shall be granted, the number of shares of Stock to be included in each Option, the price at which the shares of Stock included therein may be purchased, the Option period and time(s) and manner of exercise and whether the Option shall be an ISO or a NQSO. All decisions of the Committee may be reviewed by the Board and modified or overruled within 10 days after the date of the Committee's decision; provided, however, that the Board shall have no power to modify or overrule a decision of the Committee with respect to the grant of an Option once the Committee has made a grant of such Option pursuant to the Plan. Nothing contained in the Plan shall be construed to give any employee the right to be granted an Option to purchase Stock or to insist upon the inclusion of any term or condition in any Option which may be granted, except such as may be authorized by the Committee. The Committee shall have the authority and power to adopt such rules and regulations and to take such action as it shall consider advisable for the administration of the Plan. The Committee shall have the authority and power to construe, interpret and administer the Plan, and the decisions of the Committee shall be final and binding upon the Company, its employees, Option holders and all other persons. No member of the Committee shall incur any liability by reason of any action or determination made in good faith with respect to the Plan or any Option. 3. PARTICIPATION. (a) ELIGIBLE EMPLOYEES. Selected officers and key employees of the Company or subsidiaries of the Company who are, in the sole opinion of the Committee, from time to time primarily responsible for the management of, or in a position to contribute materially to the growth and financial success of the Company and its subsidiaries (including employees who are members of the Board) shall be eligible to receive Options to purchase Stock under the Plan, provided, however, that no member of the Committee may be granted Options under the Plan. From such eligible employees, the Committee shall from time to time choose those to whom Options shall be granted. The Committee shall determine the number of shares of Stock subject to each such Option, whether the Option is an ISO or NQSO, and the terms and provisions of the Option agreements. An employee who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options if the Committee shall so determine. (b) LIMITATIONS. (i) Except as permitted below, no ISO may be granted under the Plan to any employee who, immediately before the granting of such ISO, owns directly or indirectly Stock possessing more than 10 percent of the total combined voting power or value of all classes of capital stock of the Company. An ISO may be granted to an employee in excess of the 10 percent limit if such ISO has an exercise price of at least 110 2 percent of the fair market value of the Stock subject to such ISO on the date of grant and if such ISO by its terms is not exercisable after the expiration of five years from the date such ISO is granted. (ii) The aggregate fair market value (determined as of the time an ISO is granted) of the Stock for which any employee may be granted ISOs in any calendar year (under this Plan and all other incentive stock option plans of the employer corporation and its parent and subsidiary corporations, if any) may exceed $100,000; provided, however, that such ISOs cannot be exercised for the first time by the employee with respect to more than $100,000 of Stock in any calendar year. 4. STOCK OPTION AGREEMENTS. Each Option granted under the Plan shall be evidenced by a written stock option agreement ("Option Agreement") which shall be entered into by the Company and the employee to whom the Option is granted (the "Option Holder"), and which shall contain the following terms and conditions, as well as such other terms and conditions not inconsistent therewith, as the Committee may consider appropriate in each case. (a) PRICE. The price at which each share of Stock covered by an Option may be purchased shall be determined in each case by the Committee and set forth in the Option Agreement. In no event shall the price be less than 100 percent of the Fair Market Value of the Stock on the date the Option is granted. "Fair Market Value" means (i) if the Stock is listed on a national securities exchange, the last sale price of the Stock as reported by the consolidated tape of such exchange on the date of grant of the Option, or, if there is no Stock transaction on such date, on the immediately preceding date on which there is a Stock transaction; (ii) if the Stock is included in the NASDAQ National Market System, the last sale price of the Stock as reported thereby on the date of grant of the Option or, if there is no Stock transaction on such date, on the immediately preceding date on which there is a Stock transaction; or (iii) if the Stock is not listed on a national securities exchange or included in the NASDAQ National Market System, the mean of the highest and lowest bid prices for the Stock in the over-the-counter market on the date of grant of the Option or the value determined to be fair and reasonable by the Committee. 3 (b) DURATION OF OPTIONS. Each Option Agreement shall state the period of time, determined by the Committee, within which the Option may be exercised by the Option Holder. Such period must end, in all cases, not more than 10 years from the date such Option is granted. No Option shall be exercisable until it has been held for at least six months from the date of grant. Any ISO granted prior to January 1, 1987 may not be exercised while any other incentive stock option within the meaning of Section 422A of the Code granted to the same Option Holder prior to January 1, 1987 is outstanding. An ISO shall be treated as outstanding until it is exercised in full or expires by reason of time. (c) TRANSFERABILITY. Each Option Agreement shall provide that the Option granted therein is not transferable by the Option Holder except by will or pursuant to the laws of descent and distribution and that such Option is exercisable during the Option Holder's lifetime only by such Option Holder. (d) AGREEMENT TO CONTINUE IN EMPLOYMENT. Each Option Agreement shall contain the Option Holder's agreement to remain in the employment of the Company, at the pleasure of the Company, for a continuous period of at least six months after the date of such Option Agreement, at the salary rate in effect on the date of such agreement or at such increased rate as may be fixed, from time to time, by the Company. (e) NATURE AND EXERCISE OF, AND PAYMENT FOR, OPTION. Each Option Agreement shall specify whether the Option is an ISO or NQSO and shall provide that the method for exercising the Option granted therein shall be by delivery to the Company of written notice specifying the number of shares of Stock with respect to which such Option is exercised. If requested by the Company, such notice shall contain the Option Holder's representation that he is purchasing the Stock for investment purposes only and his agreement not to sell any Stock so purchased in any manner which is in violation of the Securities Act of 1933, as amended, or any applicable state law. Such restrictions, or notice thereof, shall be placed on the certificates representing the Stock so purchased. The purchase of such Stock shall take place at the principal offices of the Company within 20 days following delivery of such notice. The purchase price of Stock upon exercise of any Option shall be paid in full (a) in cash, (b) in Stock valued at its Fair Market Value on the date of exercise of the Option, (c) by requesting the Company to withhold from the number of shares of Stock otherwise issuable upon exercise of the Option that number of 4 shares of Stock having an aggregate Fair Market Value on the date of exercise equal to the Option price for all of the shares of Stock subject to such exercise, or (d) by a combination thereof, in the manner provided in the Option Agreement. Certificates for such shares of Stock tendered in payment shall be in a form for good delivery and, if the certificates were issued pursuant to the exercise of an ISO, the Option Holder must have held the tendered shares for at least one year. (f) DATE OF GRANT. An Option shall be considered as having been granted on the date the Committee decides to grant the Option. (g) NOTICE OF SALE OF STOCK; WITHHOLDING. Each Option Agreement shall provide (i) that the Option Holder shall notify the Company in writing if Stock acquired under an ISO is "disposed of" within the meaning of Section 422A of the Code within two years after the date of the grant of the ISO or within one year after the transfer of such Stock to the Option Holder; and (ii) that if the Option Holder does "dispose of" Stock within such period, the Option Holder shall make appropriate arrangements with the Company to provide for the amount of additional withholding required by Sections 3102 and 3402 of the Code and applicable state income tax laws. 5. THE STOCK. The total number of shares of Stock as to which Options may be granted under this Plan shall not exceed 3,000,000 in the aggregate, except as such number of shares shall be adjusted in accordance with the provisions of Section 6 hereof. If any outstanding Option under the Plan shall expire or be terminated for any reason before the end of the 10-year period during which Options may be granted hereunder, the shares of Stock allocable to the unexercised portion of such Option may again be included in an Option under the Plan. The Company shall at all times retain as authorized and unissued Stock at least the number of shares from time to time included in outstanding Options, or otherwise assure itself of its ability to perform its obligations thereunder. 6. ADJUSTMENTS. (a) ADJUSTMENTS BY STOCK SPLIT, STOCK DIVIDEND, ETC. If the Company shall at any time increase or decrease the number of its outstanding shares of Stock, or change in any way the rights and privileges of such shares, by means of the payment of a Stock dividend or the making of any other distribution upon such shares payable in Stock, or through a Stock split or 5 subdivision of shares, or a consolidation or combination of shares, or through a reclassification or recapitalization involving the Stock, then the numbers, rights and privileges of the following shall be increased, decreased or changed in like manner as if they had been issued and outstanding, fully paid and nonassessable at the time of such occurrence: (i) the shares of Stock on which Options may be granted under the Plan; (ii) the maximum number of shares of Stock with respect to which an employee may receive an Option hereunder; and (iii) the shares of Stock then included in each outstanding Option granted hereunder. (b) DIVIDEND PAYABLE IN STOCK OF ANOTHER CORPORATION, ETC. If the Company shall at any time pay or make any dividend or other distribution upon the Stock payable in securities or other property (except money or Stock), a proportionate part of such securities or other property shall be set aside and delivered to each Option Holder then holding an Option hereunder upon exercise thereof. (c) APPORTIONMENT OF PRICE. Upon any occurrence described in the preceding subsections (a) and (b) of this Section 6, the total Option price under any then outstanding Option shall remain unchanged but shall be apportioned ratably over the increased or decreased number or changed kinds of securities or other property subject to the Option. (d) RIGHTS TO SUBSCRIBE. If the Company shall at any time grant to the holders of its Stock rights to subscribe PRO RATA for additional shares thereof or for any other securities of the Company or of any other corporation, there shall be added to the number of shares then underlying each outstanding Option the Stock or other securities which the Option Holder would have been entitled to subscribe for if immediately prior to such grant the Option Holder had exercised his entire Option, and the Option price shall be increased by the amount which would have been payable by the Option Holder for such Stock or other securities. (e) DETERMINATION BY THE COMMITTEE, ETC. Adjustments under this Section 6 shall be made by the Committee, whose determinations with regard thereto shall be final and binding. No fractional shares of Stock shall be issued on account of any such adjustment. 6 7. MERGER, CONSOLIDATION, ETC. (a) EFFECT OF TRANSACTION. Upon the occurrence of any of the following events, if the notice required by Section 7(b) hereof shall have first been given, this Plan and all Options then outstanding under it shall automatically terminate and be of no further force and effect whatsoever, without the necessity for any additional notice or other action by the Committee, the Board or the Company: (i) the merger, consolidation or liquidation of the Company or the acquisition of its assets or stock pursuant to a nontaxable reorganization, unless the surviving or acquiring corporation, as the case may be, shall assume the outstanding Options or substitute new options for them pursuant to Section 425(a) of the Code; (ii) the dissolution or liquidation of the Company; (iii) the appointment of a receiver for all or substantially all of the Company's assets or business; (iv) the appointment of a trustee for the Company after a petition has been filed for the Company's reorganization under applicable statutes; or (v) the sale, lease or exchange of all or substantially all of the Company's assets and business. (b) NOTICE OF SUCH OCCURRENCES. At least 30 days' prior written notice of any event described in Section 7(a) hereof, except the transactions described in subsections 7(a)(iii) and (iv) as to which no notice shall be required, shall be given by the Company to each Option Holder theretofore granted an Option under the Plan. The Option Holders so notified may exercise their Options at any time before the occurrence of the event requiring the giving of notice, regardless of whether all conditions of exercise relating to continuation of employment for specified periods of time have been satisfied. Such notice shall be deemed to have been given when delivered personally to an Option Holder or when mailed to an Option Holder by registered or certified mail, postage prepaid, at such Option Holder's last address known to the Company. 8. EXPIRATION. The Plan shall terminate whenever the Board adopts a resolution to that effect. If not sooner terminated under the preceding sentence hereof, the Plan shall wholly cease and expire 10 years from the effective date hereof. After termination, no Options shall be granted under the Plan, but the Company shall continue to recognize Options previously granted. 9. GENERAL PROVISIONS. (a) AMENDMENTS, ETC. The Board may from time to time amend, modify, suspend or terminate the Plan. Nevertheless, no such amendment, modification, suspension or termination shall (i) impair any Option 7 theretofore granted under the Plan or deprive any Option Holder of any shares of Stock which he may have acquired through or as a result of the Plan, or (ii) be made without the approval of the shareholders of the Company where such change would (A) materially increase the benefits accruing to Option Holders under the Plan, (B) materially increase the total number of shares of Stock which may be issued under the Plan, or (C) materially modify the requirements as to eligibility for participation in the Plan. (b) QUALIFICATION UNDER INTERNAL REVENUE CODE. The Company intends that all ISOs granted under the Plan shall constitute incentive stock options within the meaning of Section 422A of the Code and the Plan shall be construed and administered in order to effect such intention. (c) TREATMENT OF PROCEEDS. Proceeds from the sale of Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. (d) EFFECTIVE DATE. The Plan shall become effective as of the date of its approval by shareholders of the Company on September 26, 1991. ISOs previously granted under the Company's 1983 Incentive Stock Option Plan and outstanding as of the effective date of the Plan shall continue to be governed by the terms of the Option Agreements entered into in connection with such ISOs. (e) PARAGRAPH HEADINGS. The paragraph headings are included herein only for convenience and they shall have no effect on the interpretation of the Plan. 8 EX-27 3
5 0000722723 HANGER ORTHOPEDIC GROUP, INC. 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 8,714,387 0 32,886,968 7,042,000 17,452,392 66,119,199 27,780,598 8,793,253 178,410,474 29,207,664 30,488,681 317,682 0 158,840 112,584,782 178,410,474 46,899,890 46,899,890 23,261,042 23,261,042 16,807,635 0 699,008 6,132,204 2,514,000 3,618,204 0 0 0 3,618,204 0.23 0.21
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