UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
CURRENT REPORT
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
Date of Report (Date of Earliest Event Reported): July 27, 2011
Hanger Orthopedic Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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1-10670 |
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84-0904275 |
(State or other jurisdiction |
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(Commission File Number) |
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(IRS Employer |
of incorporation) |
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Identification No.) |
10910 Domain Drive, Suite 300
Austin, Texas 78758
(Address of principal executive offices (zip code))
512-777-3800
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a - 12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13d-4(c))
Item 2.02 Results of Operations and Financial Condition
On July 27, 2011, the Registrant issued a press release announcing its financial results for the quarter ended June 30, 2011. A copy of the Registrants press release is furnished herewith as Exhibit 99 to this Current Report.
Item 9.01: Financial Statements and Exhibits
(d) |
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Exhibits. | |
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99 |
Press Release Issued by the Registrant on July 27, 2011 |
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 hereunto duly authorized.
HANGER ORTHOPEDIC GROUP, INC. |
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By: |
/s/George E. McHenry |
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George E. McHenry |
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Chief Financial Officer |
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Dated: July 27, 2011 |
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Exhibit 99
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Contacts: |
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Thomas F. Kirk |
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(512) 777-3800 |
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George E. McHenry |
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(512) 777-3800 |
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Thomas C. Hofmeister |
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(512) 777-3800 |
News Release
Hanger Orthopedic Group Reports Earnings of $0.45 Per Diluted Share for the Second Quarter 2011
· 14.1% Increase in Net Sales
· 4.1% Growth in Patient Care Same Center Sales
· Adjusted EPS Growth of 21.6%
· Reaffirms Full Year Guidance
Austin, Texas, July 27, 2011 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 Companys 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 Companys 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 Companys 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 Companys 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, ACPs continued expansion and the development of a comprehensive electronic practice management system.
About Hanger Hanger Orthopedic Group, Inc., headquartered in Austin, Texas, is the worlds 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 nations 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 Companys 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 Companys ability to enter into and derive benefits from managed care contracts, the demand for the Companys orthotic and prosthetic services and products and the other factors identified in the Companys 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.
Hanger Orthopedic Group, Inc
( in thousands, except for share and per share amounts)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Income Statement: |
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Net sales |
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$ |
234,751 |
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$ |
205,808 |
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$ |
435,190 |
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$ |
384,124 |
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Cost of goods sold - materials |
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68,514 |
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62,753 |
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126,622 |
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116,403 |
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Personnel costs |
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81,014 |
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70,552 |
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159,903 |
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139,321 |
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Other operating expenses |
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44,603 |
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40,710 |
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81,993 |
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76,025 |
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Relocation expenses |
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42 |
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4,185 |
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417 |
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6,244 |
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Depreciation and amortization |
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7,696 |
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4,460 |
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14,988 |
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8,771 |
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Income from operations |
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32,882 |
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23,148 |
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51,267 |
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37,360 |
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Interest expense |
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7,791 |
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7,506 |
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16,170 |
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15,048 |
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Income before taxes |
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25,091 |
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15,642 |
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35,097 |
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22,312 |
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Provision for income taxes |
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9,660 |
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5,880 |
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13,453 |
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8,548 |
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Net income |
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$ |
15,431 |
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$ |
9,762 |
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$ |
21,644 |
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$ |
13,764 |
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Basic Per Common Share Data: |
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Net income |
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$ |
0.46 |
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$ |
0.30 |
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$ |
0.65 |
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$ |
0.43 |
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Shares used to compute basic per share amounts |
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33,499,268 |
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32,032,265 |
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33,429,502 |
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31,957,007 |
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Diluted Per Common Share Data: |
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Net income |
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$ |
0.45 |
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$ |
0.30 |
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$ |
0.63 |
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$ |
0.42 |
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Shares used to compute diluted per share amounts |
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34,365,395 |
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32,831,310 |
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34,284,513 |
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32,750,873 |
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Reconciliation of GAAP financial measures to Non-GAAP financial measures |
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Income from Operations |
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$ |
32,882 |
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$ |
23,148 |
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$ |
51,267 |
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$ |
37,360 |
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Relocation expenses |
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42 |
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4,185 |
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417 |
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6,244 |
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Adjusted Income from Operations |
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$ |
32,924 |
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$ |
27,333 |
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$ |
51,684 |
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$ |
43,604 |
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Net income |
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$ |
15,431 |
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$ |
9,762 |
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$ |
21,644 |
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$ |
13,764 |
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Relocation expenses, net of taxes |
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26 |
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2,512 |
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256 |
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3,747 |
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Adjusted net income |
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$ |
15,457 |
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$ |
12,274 |
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$ |
21,900 |
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$ |
17,511 |
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Adjusted net income per diluted share |
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$ |
0.45 |
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$ |
0.37 |
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$ |
0.64 |
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$ |
0.53 |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Income Statement as a % of Net Sales: |
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Net sales |
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100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% |
Cost of goods sold - materials |
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29.2 |
% |
30.5 |
% |
29.1 |
% |
30.3 |
% |
Personnel costs |
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34.5 |
% |
34.3 |
% |
36.7 |
% |
36.3 |
% |
Other operating expenses |
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19.0 |
% |
19.8 |
% |
18.8 |
% |
19.8 |
% |
Relocation expenses |
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0.0 |
% |
2.0 |
% |
0.1 |
% |
1.6 |
% |
Depreciation and amortization |
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3.3 |
% |
2.2 |
% |
3.4 |
% |
2.3 |
% |
Income from operations |
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14.0 |
% |
11.2 |
% |
11.9 |
% |
9.7 |
% |
Interest expense |
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3.3 |
% |
3.6 |
% |
3.7 |
% |
3.9 |
% |
Income before taxes |
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10.7 |
% |
7.6 |
% |
8.2 |
% |
5.8 |
% |
Provision for income taxes |
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4.1 |
% |
2.9 |
% |
3.1 |
% |
2.2 |
% |
Net income |
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6.6 |
% |
4.7 |
% |
5.1 |
% |
3.6 |
% |
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Adjusted income from operations |
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14.0 |
% |
13.3 |
% |
11.9 |
% |
11.4 |
% |
Adjusted net income |
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6.6 |
% |
6.0 |
% |
5.0 |
% |
4.6 |
% |
Hanger Orthopedic Group, Inc
( in thousands, except for statistical data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Cash Flow Data: |
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Cash flow provided by operations |
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$ |
22,128 |
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$ |
19,553 |
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$ |
10,633 |
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$ |
7,480 |
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Capital expenditures |
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$ |
8,732 |
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$ |
5,826 |
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$ |
14,169 |
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$ |
13,740 |
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(Decrease) increase in cash and cash equivalents |
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$ |
(140 |
) |
$ |
8,067 |
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$ |
(16,782 |
) |
$ |
(12,425 |
) |
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June 30, 2011 |
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December 31, 2010 |
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Balance Sheet Data: |
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Cash and cash equivalents |
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$ |
19,526 |
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$ |
36,308 |
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Days Sales Outstanding (DSOs) |
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50 |
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52 |
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Working Capital |
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$ |
201,576 |
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$ |
185,799 |
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Total Debt |
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$ |
506,133 |
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$ |
508,684 |
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Shareholders Equity |
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$ |
391,613 |
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$ |
364,427 |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Revenue mix: |
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Patient-care services |
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82.2 |
% |
88.0 |
% |
81.3 |
% |
87.8 |
% |
Distribution |
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10.9 |
% |
11.8 |
% |
11.3 |
% |
12.0 |
% |
Therapeutic solutions |
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6.9 |
% |
0.2 |
% |
7.4 |
% |
0.2 |
% |
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Payor mix: |
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Commercial and other |
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59.2 |
% |
59.3 |
% |
59.4 |
% |
59.3 |
% |
Medicare |
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28.5 |
% |
29.0 |
% |
28.4 |
% |
28.7 |
% |
Medicaid |
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6.9 |
% |
6.3 |
% |
6.8 |
% |
6.5 |
% |
VA |
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5.4 |
% |
5.4 |
% |
5.4 |
% |
5.4 |
% |
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 Companys 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 income per diluted share are the non-GAAP financial measures.