Hanger, Austin, Texas, announced net sales of $233.5 million for the quarter ended March 31, 2013, an increase of $15.4 million, or 7.1 percent, from $218.1 million for the first quarter (1Q) of 2012. Diluted earnings per share (EPS) were $0.27 for 1Q 2013 compared to $0.25 for 1Q 2012. Adjusted diluted EPS, which excludes costs related to acquisitions and the roll out of the company’s clinic management system, Janus, increased 12 percent to $0.28 for 1Q 2013 from $0.25 for 1Q 2012.
In 1Q 2013, Hanger said it realigned its reporting segments and management structure to better reflect its dual strategy of growth within the existing O&P market and expansion into adjacent markets. The company has divided its operations into two segments: patient care and products and services. The patient care segment will now include its contracting and network management division, Linkia, which was previously reported within the “other” segment. The products and services segment will combine the two segments previously reported as distribution and therapeutic solutions. The change will allow both segments to better focus on growth strategies and operating efficiencies that leverage their scale and market position, according to a Hanger press release.
The 1Q net sales increase of $15.4 million was the result of a $16.7 million increase in the patient care segment and a $1.3 million decrease in the products and services segment. The $16.7 million increase in patient care segment sales comprised a $3 million increase in same center sales and a $13.7 million increase driven primarily by acquisitions closed in 2012. The $1.3 million decline in external products and services sales was a result of lower sales from the company’s distribution business, SPS, headquartered in Alpharetta, Georgia, partially offset by increased sales from its rehabilitative solutions business, Accelerated Care Plus (ACP), based in Reno Nevada. The decline in sales at SPS resulted from a number of its largest independent O&P customers being acquired by the patient care segment during 2012, additional pressure put on independent O&P customers by the continuation of the Centers for Medicare & Medicaid Services (CMS) Recovery Audit Contractor (RAC) program, and weather conditions, according to Hanger.
Income from operations for 1Q 2013 was $22.7 million, compared to $21.7 million in the prior year. Excluding costs related to acquisitions and Janus, adjusted income from operations increased to $23.2 million for 1Q 2013 from $21.9 million in the prior year. Cash flow from operations increased $0.4 million to $1.7 million for the three months ended March 31, 2013, compared to a $1.3 million cash inflow for the same period in 2012. As of March 31, 2013, Hanger had $114.5 million in total liquidity, including $15 million of cash and $99.5 million available under its revolving credit facility, net of $0.5 million in letters of credit.
“We are pleased with our 12 percent adjusted EPS growth in the quarter and with our 7 percent top-line growth, which took us above $1 billion in trailing-12-months sales for the first time in our history,” said Vinit K. Asar, president and CEO of Hanger. “While same center sales growth in our patient care segment was affected by the high 2012 comparison and severe weather, our underlying sales momentum remains strong…. We expect products and services sales to improve in the remainder of the year due to an increased focus on growth and execution driven by our realignment of the segment….. Despite headwinds like sequestration, we remain focused on delivering quality care for our patients and continued growth for our shareholders.”
For 2013, Hanger expects revenues of between $1.06 and $1.08 billion, and adjusted diluted EPS between $2.02 and $2.09, excluding approximately $0.05 for training costs related to the implementation of Janus. The company also expects to generate cash flow from operations of between $80 million and $100 million, invest $40 million to $50 million in capital additions, and continue its acquisition program with a goal of closing acquisitions that total about $20 million in annualized revenues.
