Hanger Orthopedic Group, Bethesda, Maryland, announced net sales of $205.8 million for the quarter ended June 30, 2010, an increase of $12.3 million, or 6.4 percent, from $193.5 million in the prior year. Pro forma diluted earnings per share (EPS), which excludes the cost of relocating the company’s corporate headquarters, were $0.37 per diluted share for the second quarter of 2010, a 19.4 percent increase compared to $0.31 per diluted share for the same period in 2009. Reported diluted EPS including the relocation cost were $0.30 for the second quarter of 2010.
The sales increase for the quarter ended June 30, 2010, was primarily the result of a $6.8 million, or 4 percent, increase in same-center sales in the patient care segment, a $2.3 million, or 10.4 percent, increase in sales from the company’s distribution segment, and a $3.2 million increase principally related to sales from acquired entities. Income from operations for the quarter ended June 30, 2010 was $23.1 million compared to $24.2 million in the prior year. Excluding the $4.2 million relocation cost, income from operations increased 13.2 percent to $27.3 million due to the growth in sales and continued expense-management efforts. Pro forma income from operations as a percentage of sales increased 80 basis points to 13.3 percent in 2010 compared to 12.5 percent in 2009.
Net sales for the six months ended June 30, 2010, increased by $21.5 million, or 5.9 percent, to $384.1 million from $362.6 million last year. The sales increase was principally the result of a $12.4 million, or 3.9 percent increase in same-center sales in the patient care centers, a $3.2 million, or 7.4 percent, increase in sales of the company’s distribution segment and a $5.9 million increase principally related to sales from acquired entities. Income from operations for the six months ended June 30, 2010, was $37.4 million compared to $39.3 million in the prior year. Excluding the $6.2 million relocation cost, income from operations increased 11.0 percent to $43.6 million. As was the case for the second quarter, the pro forma income from operations increased due to the growth in sales and continued expense-management efforts. Pro forma diluted EPS for the six-month period, which excludes the $6.2 million relocation cost, increased 15.2 percent to $0.53 from $0.46 in the prior year. Reported diluted EPS for the six months ended June 30, 2010, were $0.42.
Hanger generated $19.6 million in cash in the second quarter of 2010 compared to $24.5 million in the prior year. The decrease is principally due to funding of relocation-related expenses. The company had total liquidity of $135.6 million, comprised of $72.1 million of cash and $63.5 million available under its revolving credit facility on June 30, 2010.
“The second quarter was our 18th consecutive quarter of meeting or beating consensus earnings estimates,” Noted Hanger President and CEO Thomas F. Kirk. “Year to date, our patient care and distribution segments have delivered solid revenue growth, which combined with continued focus on expense management resulted in a 60 basis point expansion in our pro forma operating margin and 15.2 percent growth in pro forma diluted earnings per share.”
For 2010, the company expects full-year revenues to be between $815 million and $825 million and diluted EPS, excluding cost related to the corporate relocation, in the range of $1.27 to $1.29. As announced in February, the company is in the process of relocating its corporate headquarters from Bethesda, Maryland, to Austin, Texas, and anticipates the move will be substantially completed by the end of the third quarter of 2010. The cost of the move is reported as a separate component of income from operations. In connection with the move, Hanger incurred severance and relocation costs of $4.2 million and $6.2 million for the three and six months ended June 30, 2010, respectively. The company anticipates incurring approximately $4 million to $6 million of additional severance and relocation costs through the third quarter of 2010, as well as a lease-exit cost of approximately $3 million to $5 million. Once complete, the company anticipates that the move will result in an operating expense reduction of approximately $2.5 million to $3.5 million annually.