EX-99 2 a09-32335_1ex99.htm EX-99

Exhibit 99

 

 

Two Bethesda Metro Center

 

Phone 301 · 986 · 0701

Suite 1200

 

Fax 301 · 986 · 0702

Bethesda, MD 20814

 

 

 

Contacts:

 

Thomas F. Kirk

(301) 986-0701

 

 

George E. McHenry

(301) 986-0701

 

 

Thomas C. Hofmeister

(301) 986-0701

 

News Release

 

HANGER ORTHOPEDIC GROUP, INC. REPORTS AN INCREASE OF 30.4% IN EARNINGS PER
SHARE, TO $0.30, FOR THE THIRD QUARTER 2009 AND RAISES ITS 2009 GUIDANCE

 

BETHESDA, MARYLAND, October  26, 2009 — Hanger Orthopedic Group, Inc. (NYSE:HGR) announced net sales of $192.3 million for the quarter ended September 30, 2009, an increase of $13.6 million, or 7.6%, from $178.7 million in the prior year.  Earnings per share for the third quarter of 2009 were $0.30 per diluted share compared to $0.23 per diluted share for the same period in 2008.

 

The $13.6 million, or 7.6%, sales increase for the quarter ended September 30, 2009 was primarily the result of a $6.7 million, or 4.3%, increase in same-center sales in our patient care centers, a $2.1 million, or 10.0%, increase in sales of the Company’s distribution segment and a $4.8 million increase principally related to sales from acquired entities. The combination of increased sales and effective expense management resulted in income from operations increasing $3.5 million, or 17.4%, to $23.8 million for the third quarter of 2009, compared to last year.

 

Net income increased $2.3 million, or 31.4%, to $9.6 million in the third quarter of 2009 from $7.3 million last year.  In addition to improved income from operations, net income benefited from lower variable interest cost in the third quarter of 2009.

 

Net sales for the nine months ended September 30, 2009 increased by $37.4 million, or 7.2%, to $555.0 million from $517.6 million last year.  The sales increase was principally the result of a $19.2 million, or 4.3%, increase in same-center sales in our patient care centers, a $5.0 million, or 8.1%, increase in sales of the Company’s distribution segment and a $13.2 million increase principally related to sales from acquired entities.

 


 

As was the case for the quarter, the growth in sales and expense management helped increase income from operations by $7.2 million, or 12.9%, to $63.0 million for the nine months ended September 30, 2009 compared to the same period last year.   Operating income as a percentage of sales increased to 11.4% for the nine months ended September 30, 2009 compared to 10.8% in the same period of 2008.

 

Net income applicable to common stock for the nine months ended September 30, 2009 increased by 27.9% to $24.2 million, or $0.76 per diluted share, compared to pro forma net income applicable to common stock of $18.9 million, or $0.60 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 nine months ended September 30, 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 the nine months ended September 30, 2008 on a GAAP basis was $13.2 million, or $0.52 per diluted share.

 

Cash from operations for the three months ended September 30, 2009 was $25.4 million, a $3.1 million, or 13.9% increase, compared to 2008. The improvement was primarily the result of improved operating results and a $0.8 million decrease in working capital. Days sales outstanding were reduced by 3 days to a record low of 47 days as of September 30, 2009 from 50 days as of September 30, 2008.

 

As of September 30, 2009, $76.1 million, or 18.6%, of the Company’s total debt of $409.7 million was subject to variable interest rates.  The Company had total liquidity of $131.2 million, comprised of $78.4 million of cash and $52.8 million available under its revolving credit facility at September 30, 2009.  On October 23, 2009, Barclays Bank replaced $10.0 million of the $17.8 million defaulted Lehman commitment under the revolving credit facility, which increases the current amount available under the credit facility to $62.8 million.  The Company believes that it has sufficient liquidity to conduct its normal operations and fund its acquisition plans in 2009.

 

The Company is reaffirming its full year 2009 sales guidance of $750 to $760 million and increasing its 2009 diluted EPS guidance of $1.02 to $1.04 to $1.05 to $1.07.

 

“We are very pleased with our third quarter results, as they exceeded our expectations, represented solid operational execution and generated strong cash flow,” commented Thomas F. Kirk, President and Chief Executive Officer of Hanger Orthopedic Group.  Mr. Kirk added, “Patient care centers revenues grew at 6.6%

 


 

and our efforts on expense management continue to be reflected in our results. Since the third quarter of last year, we have improved operating margins for the quarter by 100 basis points to 12.4%.   We are also extremely pleased with the added commitment to our revolver and liquidity, because it reflects the confidence our lenders have in our consistent execution.  I am proud of our teams’ efforts in this economic environment and we are actively monitoring the proposed health care reforms and how they could impact our future prospects.”

 

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 price 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 669 patient care centers in 45 states and the District of Columbia, with over 3,700 employees including 1,095 practitioners (as of September 30, 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 share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Income Statement:

 

 

 

 

 

 

 

 

 

Net sales

 

$

192,296

 

$

178,742

 

$

554,966

 

$

517,582

 

Cost of goods sold - materials

 

58,887

 

53,411

 

168,784

 

155,409

 

Personnel costs

 

66,976

 

63,712

 

196,783

 

185,595

 

Other operating expenses

 

38,669

 

37,047

 

114,085

 

107,950

 

Depreciation and amortization

 

4,002

 

4,334

 

12,265

 

12,805

 

Income from operations

 

23,762

 

20,238

 

63,049

 

55,823

 

Interest expense

 

7,692

 

8,005

 

22,894

 

24,308

 

Unrealized gain from interest rate swap

 

—

 

—

 

167

 

—

 

Income before taxes

 

16,070

 

12,233

 

40,322

 

31,515

 

Provision for income taxes

 

6,428

 

4,893

 

16,129

 

12,606

 

Net income

 

9,642

 

7,340

 

24,193

 

18,909

 

Less preferred stock dividend - Series A Convertible Preferred Stock

 

—

 

—

 

—

 

5,670

 

Net income applicable to common stock

 

$

9,642

 

$

7,340

 

$

24,193

 

$

13,239

 

 

 

 

 

 

 

 

 

 

 

Basic Per Common Share Data:

 

 

 

 

 

 

 

 

 

Net income

 

$

0.31

 

$

0.27

 

$

0.77

 

$

0.54

 

Shares used to compute basic per common share amounts

 

31,578,889

 

27,004,581

 

31,263,458

 

24,300,945

 

 

 

 

 

 

 

 

 

 

 

Diluted Per Common Share Data:

 

 

 

 

 

 

 

 

 

Net income

 

$

0.30

 

$

0.23

 

$

0.76

 

$

0.52

 

Shares used to compute diluted per common share amounts

 

32,214,321

 

31,990,924

 

31,938,613

 

25,399,721

 

 

 

 

Nine Months Ended

 

 

 

September 30, 2008

 

Pro-forma:

 

 

 

Net income applicable to common stock

 

13,239

 

Preferred stock dividend - Series A Convertible Preferred Stock

 

5,670

 

Pro-forma net income applicable to common stock

 

$

18,909

 

 

 

 

 

Diluted Per Share Data:

 

 

 

Pro-forma net income per diluted common share

 

$

0.60

 

 

 

 

 

Shares used to compute diluted per common share amounts

 

25,399,721

 

Effects of conversion of convertible preferred stock (1)

 

6,090,608

 

Shares used to compute diluted per common share amounts, Pro-forma basis

 

31,490,329

 

 

(1) 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

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Income Statement as a % of Net Sales:

 

 

 

 

 

 

 

 

 

Net sales

 

100.0

%

100.0

%

100.0

%

100.0

%

Cost of goods sold - materials

 

30.6

%

29.9

%

30.4

%

30.0

%

Personnel costs

 

34.8

%

35.6

%

35.4

%

35.9

%

Other operating expenses

 

20.1

%

20.7

%

20.6

%

20.8

%

Depreciation and amortization

 

2.1

%

2.4

%

2.2

%

2.5

%

Income from operations

 

12.4

%

11.4

%

11.4

%

10.8

%

Interest expense

 

4.0

%

4.5

%

4.1

%

4.7

%

Unrealized gain from interest rate swap

 

0.0

%

0.0

%

0.0

%

0.0

%

Income before taxes

 

8.4

%

6.9

%

7.3

%

6.1

%

Provision for income taxes

 

3.3

%

2.8

%

2.9

%

2.4

%

Net income

 

5.1

%

4.1

%

4.4

%

3.7

%

 


 

Hanger Orthopedic Group, Inc.

 (Unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

Cash Flow Data:

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operations

 

$

25,388

 

$

22,285

 

$

46,149

 

$

34,855

 

Capital expenditures

 

$

6,577

 

$

4,172

 

$

12,675

 

$

12,012

 

Increase (decrease) in cash

 

$

2,005

 

$

29,571

 

$

19,969

 

$

26,587

 

 

Balance Sheet Data:

 

Sept. 30, 2009

 

Dec. 31, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

78,382

 

$

58,413

 

 

 

 

 

Days Sales Outstanding (DSO’s)

 

47

 

51

 

 

 

 

 

Working Capital

 

$

219,025

 

$

200,248

 

 

 

 

 

Total Debt

 

$

409,714

 

$

422,324

 

 

 

 

 

Shareholders’ Equity

 

$

301,264

 

$

266,866

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Percentage of net sales from:

 

 

 

 

 

 

 

 

 

Patient-care services

 

87.9

%

88.0

%

87.9

%

87.8

%

Distribution

 

12.0

%

11.7

%

11.9

%

11.8

%

 

 

 

 

 

 

 

 

 

 

Payor mix:

 

 

 

 

 

 

 

 

 

Commercial and other

 

59.5

%

59.4

%

59.0

%

60.0

%

Medicare

 

29.1

%

28.8

%

29.5

%

28.4

%

Medicaid

 

6.1

%

6.3

%

6.2

%

6.2

%

VA

 

5.3

%

5.5

%

5.3

%

5.4

%

 

 

 

Nine Months Ended

 

 

 

September 30,

 

Statistical Data:

 

2009

 

2008

 

 

 

 

 

 

 

Patient-care centers

 

669

 

668

 

Number of practitioners

 

1,095

 

1,080

 

Number of states (including D.C.)

 

46

 

46