SEGMENT AND RELATED INFORMATION

9 Months Ended

Sep. 30, 2011

SEGMENT AND RELATED INFORMATION

SEGMENT AND RELATED INFORMATION

NOTE L — SEGMENT AND RELATED INFORMATION

The Company has identified three reportable segments in which it operates based on the products and services it provides. The Company evaluates segment performance and allocates resources based on the segments’ income from operations. In December 2010, as a result of the acquisition of ACP, the Company realigned its reportable segments and identified the third operating segment. Therapeutic Solutions includes ACP and IN, Inc., which previously was included in Other. The results of IN, Inc. have been reclassified to Therapeutic Solutions in all years presented.

The reportable segments are: (i) Patient-Care Services (ii) Distribution and (iii) Therapeutic Solutions. The reportable segments are described further below:

Patient-Care Services—This segment consists of the Company’s owned and operated patient-care centers and fabrication centers of O&P components. The patient-care centers provide services to design and fit O&P devices to patients. These centers also instruct patients in the use, care and maintenance of the devices. Fabrication centers are involved in the fabrication of O&P components for both the O&P industry and the Company’s own patient-care centers.

Distribution—This segment distributes O&P products and components to both the O&P industry and the Company’s own patient-care practices.

Therapeutic Solutions—This segment consists of the leasing of rehabilitation equipment by ACP as well the operations of IN, Inc. ACP is a developer of specialized rehabilitation technologies and provides evidence-based clinical programs for post-acute rehabilitation. IN, Inc. specializes in bringing emerging MyoOrthotics Technologies® to the O&P market. MyoOrthotics Technologies represents the merging of orthotic technologies with electrical stimulation.

Other—This consists of Hanger corporate and Linkia. Linkia is a national managed-care agent for O&P services and a patient referral clearing house.

The accounting policies of the segments are the same as those described in the summary of “Significant Accounting Policies” in Note B to the consolidated financial statements.

Summarized financial information concerning the Company’s reportable segments is shown in the following table. Intersegment sales mainly include sales of O&P components from the Distribution segment to the Patient-Care Services segment and were made at prices which approximate market values.

(In thousands)	Patient-Care Services		Distribution		Therapeutic Solutions			Other			Consolidating Adjustments			Total
	(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Three Months Ended September 30, 2011
Net sales
Customers	$	192,557	$	26,448	$	16,085		$	171		$	—		$	235,261
Intersegments	—		50,063		857			99			(51,019		)	—
Depreciation and amortization	3,139		307		2,673			1,745			—			7,864
Income (loss) from operations	35,437		7,398		1,350			(12,867		)	(76		)	31,242
Interest (income) expense	7,113		835		1,441			(1,593		)	—			7,796
Income (loss) before taxes	28,324		6,563		(90		)	(11,275		)	(76		)	23,446
Three Months Ended September 30, 2010
Net sales
Customers	$	180,721	$	25,459	$	393		$	176		$	—		$	206,749
Intersegments	—		44,016		870			—			(44,886		)	—
Depreciation and amortization	2,746		248		116			1,361			—			4,471
Income (loss) from operations	33,676		8,437		(1,790		)	(22,050		)	42			18,315
Interest (income) expense	7,096		848		—			(308		)	—			7,636
Income (loss) before taxes	26,580		7,589		(1,790		)	(21,742		)	42			10,679
Nine Months Ended September 30, 2011
Net sales
Customers	$	546,084	$	75,487	$	48,408		$	472		$	—		$	670,451
Intersegments	—		140,630		2,589			99			(143,318		)	—
Depreciation and amortization	9,129		889		7,750			5,084			—			22,852
Income (loss) from operations	96,815		21,763		2,912			(38,964		)	(17		)	82,509
Interest (income) expense	21,322		2,532		4,321			(4,209		)	—			23,966
Income (loss) before taxes	75,493		19,231		(1,409		)	(34,755		)	(17		)	58,543
Capital expenditures	9,299		1,057		3,372			8,026			—			21,754
Nine Months Ended September 30, 2010
Net sales
Customers	$	517,927	$	71,506	$	1,057		$	384		$	—		$	590,874
Intersegments	—		125,452		2,989			—			(128,441		)	—
Depreciation and amortization	8,364		750		336			3,792			—			13,242
Income (loss) from operations	93,732		22,299		(4,751		)	(55,606		)	2			55,676
Interest (income) expense	21,278		2,554		—			(1,148		)	—			22,684
Income (loss) before taxes	72,454		19,745		(4,751		)	(54,458		)	2			32,992
Capital expenditures	12,182		878		687			5,996			—			19,743
Total Assets
September 30, 2011	1,253,052		167,137		137,519			(469,061		)	—			1,088,647
December 31, 2010	1,054,270		146,166		142,970			(281,927		)	—			1,061,479