Hanger Orthopedic Group, Bethesda, Maryland, announced net sales of $169.1 million for the quarter ended March 31, 2009, an increase of $11.4 million, or 7.3 percent, from $157.7 million in the prior year. Its net income increased $0.9 million, or 26.6 percent, to $4.5 million in the first quarter of 2009 from $3.6 million last year. Net income applicable to common stock in the first quarter 2009 increased $1.4 million, or 43.4 percent, compared to last year’s $3.1 million resulting in EPS of $0.14 for the quarter compared to $0.12 in 2008.
According to Hanger, the 7.3 percent sales growth was primarily the result of a $5.6 million, or 4.1 percent, increase in same-center sales in its patient care centers, a $2 million, or 10.4 percent, increase in sales of the company’s distribution segment and a $4.1 million increase related to acquired entities.
Cost of materials increased $4.3 million, or 9.3 percent, to $51 million in the first quarter of 2009 compared to the same quarter last year principally due to the sales increase. Cost of materials as a percentage of sales was 30.2 percent for the first quarter of 2009 compared to 29.6 percent for the first quarter of 2008. The increase in cost of materials as a percentage of sales resulted from a change in the sales mix of businesses and products.
Personnel costs increased $3.7 million, or 6.2 percent, in the first quarter of 2009 compared to the first quarter of 2008. Contributing to this increase were personnel costs of $1.9 million from acquisitions, benefits costs of $1.2 million, and merit increases of $0.9 million, offset by lower temporary labor costs of $0.2 million.
Other operating costs increased $2.2 million, or 7 percent, in the first quarter of 2009 over the same quarter in the prior year due to additional variable compensation accruals of $1.9 million, higher occupancy costs of $0.8 million, acquisitions of $0.7 million, offset by lower advertising costs of $0.7 million and $0.5 million of reductions in other overhead costs.
Interest expense for the first quarter of 2009 was $0.7 million less than last year due to lower variable interest rates.
Net cash used in operations improved by $3.8 million in the first quarter of 2009. The company reported a use of $3.7 million, compared to a use of $7.5 million in 2008. The improvement in cash used for the first quarter of 2009 was primarily the result of improved operating results and a $1.4 million decrease in working capital. Days sales outstanding improved to 48 days as of March 31, 2009 from 51 days as of March 31, 2008.
As of March 31, 2009, $88.3 million, or 20.9 percent, of the company’s total debt of $422.9 million was subject to variable interest rates. The company had total liquidity of $89.8 million, comprised of $51.9 million of cash and $37.9 million available under its revolving credit facility at March 31, 2009. The company believes that it has sufficient liquidity to conduct its normal operations and fund its acquisition plan in 2009.
The company reaffirms its 2009 guidance of revenues between $750 million and $760 million, resulting in growth of 6.7 percent to 8.1 percent compared to 2008 and diluted EPS in the range of $0.96 to $0.98.
“We are very pleased with these results as they represent continued solid financial performance, especially when considering the challenges in the overall economy and some adverse weather conditions in certain parts of our country,” commented Thomas F. Kirk, Hanger president and CEO. Kirk added, “Our patient care centers turned in a solid first quarter by growing same center sales by 4.1 percent in spite of this year’s quarter having one less business day. We will continue to monitor the current economic climate and its impact on our business, while we execute on our growth initiatives for the year.”
