Hanger Reports Sales and Income Growth

In an announcement of its 2008 second-quarter financials, Hanger Orthopedic Group, Inc., Bethesda, Maryland, reported an increase of 13 percent in net sales and a 57.2 percent increase in net income over the same quarter of last year. Its net sales for the quarter totaled $181.2 million, and its net sales totaled $8 million. Gross profit for the quarter increased as well, comprising an additional half percent of net sales over the same quarter of 2007.

Thomas F. Kirk, Hanger president and CEO, remarked, "I am extremely pleased with our second quarter results, the tenth consecutive quarter in meeting or exceeding First Call consensus estimates. Same-center growth in our patient care division continues to drive a large portion of our business, with sales growth of 8.9 percent. Our distribution business also accelerated its sales growth with an increase of 20.6 percent in the second quarter, and now it represents 11.6 percent of our total sales for the quarter. We continue to gain leverage on our infrastructure costs due to our business model and our ongoing efforts to monitor expenses... We are all energized on carrying the momentum of our operating focus and our growth projects into the second half of the year."

According to Hanger, the increase in gross margin was due principally to the increase in sales. Income from operations in the reported quarter was 20 percent higher than that of the same period of 2007, and was partially offset by $7.6 million in higher selling, general, and administrative expenses. Net interest expense for the reported quarter had dropped $1.1 million from the same quarter last year, primarily due to a May 2008 contractual arrangement in which the company entered into two $75 million swap contracts, fixing $150 million of floating-rate debt and locking in the London Interbank Offered Rate (LIBOR) at 3.4 percent for three years. As of June 30, 2008, 18 percent of the company's total debt of $406.4 million was subject to variable interest rates.

Hanger also listed increases for the first six months of 2008. It reported that net income had increased by $4.7 million, or 68.3 percent over the prior year's period, and net sales had increased by $34.6 million, or 11.4 percent. The sales growth, it stated, was principally the result of a 6.7 percent increase in same-center sales in patient care, a 23.5 percent increase in distribution sales, and a $9.1 million increase related to acquisitions.

It also reported that gross profits for the first six months of 2008 had increased, comprising an additional 0.4 percent of net sales over the prior-year period. Operations income had increased to $35.6 million, offset by a $12.6 million increase in selling, general, and administrative expenses. Net interest expense for the half year decreased by $2.2 million, or 11.7 percent, from the same period in the prior year, primarily due to lower variable rates.

Hanger stock value for the six month period increased $0.15 per diluted share to $0.37, a 60.9 percent increase over the prior-year period.

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