Hanger Orthopedic Group Inc. (NYSE:HGR) posted fourth-quarter sales of $205.1 million for the three months ended Dec. 31, 2009, up 10.6 percent compared with $185.5 million during the same period in 2008. Net income rose 51.9 percent to $11.9 million, compared with $7.8 million during Q4 2008:
Hanger Orthopedic Group, Inc. Reports an Increase of 42.3% in Earnings Per Share, to $0.37 on a 10.6% Sales Increase, for the Fourth Quarter 2009
BETHESDA, Md., Feb. 10 /PRNewswire-FirstCall/ — Hanger Orthopedic Group, Inc. (NYSE: HGR) announced net sales of $205.1 million for the quarter ended December 31, 2009, an increase of $19.6 million, or 10.6%, from $185.5 million in the prior year. Earnings per share for the fourth quarter of 2009 were $0.37 per diluted share compared to proforma earnings per diluted share of $0.26 for the same period in 2008, a 42.3% increase.
The $19.6 million, or 10.6%, sales increase for the quarter ended December 31, 2009 was primarily the result of a $10.8 million, or 6.6%, increase in same-center sales in our patient care centers, a $2.4 million, or 12.1%, increase in sales of the Company’s distribution segment and a $6.4 million increase principally related to sales from acquired entities. The combination of increased sales and effective expense management caused income from operations to increase by $5.6 million, or 25.4%, to $27.5 million for the fourth quarter of 2009, compared to $21.9 million last year.
Net income increased $3.6 million, or 43.7%, to $11.9 million in the fourth quarter of 2009 compared to proforma net income of $8.3 million last year. The proforma results for the fourth quarter of 2008 exclude the impact of a non-cash mark-to-market pre-tax adjustment of $0.7 million related to interest rate swaps. In addition to improved income from operations, net income benefited from lower variable interest cost in the fourth quarter of 2009.
Net sales for the year ended December 31, 2009 increased by $57.0 million, or 8.1%, to $760.1 million from $703.1 million last year. The sales increase was principally the result of a $29.6 million, or 4.9%, increase in same-center sales in our patient care centers, a $7.3 million, or 9.1%, increase in sales of the Company’s distribution segment and a $20.1 million increase principally related to sales from acquired entities.
The growth in sales combined with effective expense management caused income from operations to increase by $12.8 million, or 16.5%, to $90.5 million for the year end December 31, 2009. Operating income as a percentage of sales improved 80 basis points to 11.9% in 2009 compared to 11.1% in the prior year.
Net income applicable to common stock for year ended December 31, 2009 increased by 32.7% to $36.1 million, or $1.13 per diluted share, compared to pro forma net income applicable to common stock of $27.2 million, or $0.86 per diluted share, in the prior year. In addition to improved income from operations, net income benefited from lower variable interest costs during 2009. The pro forma results for the year ended December 31, 2008 assume that the one-time, in-kind preferred stock dividend described below occurred and the preferred stock was converted to common stock at the beginning of the period. Net income applicable to common stock for year ended December 31, 2008 on a GAAP basis was $21.1 million, or $0.78 per diluted share.
Cash from operations for the year ended December 31, 2008 was $73.1 million, a $19.9 million, or 37.4% increase, compared to 2008. The improvement was primarily the result of improved operating results. The Company had total liquidity of $148.5 million, comprised of $84.6 million of cash and $63.9 million available under its revolving credit facility at December 31, 2009.
“The year 2009 presented a challenging environment due to the uncertainty surrounding proposed changes to federal health care regulations and reimbursement and the impact of the ongoing recession. In spite of these challenges, we delivered record sales, profits and cash flows,” commented Thomas F. Kirk, President and Chief Executive Officer of Hanger Orthopedic Group. Mr. Kirk added, “The combination of an 8.1% increase in revenue and a focused effort on expense management generated an 80 basis point improvement in our operating margin. I am proud of our employees’ efforts in 2009 and I am optimistic about our opportunities in 2010.”
For 2010, the Company expects revenues to be between $815 million and $825 million an increase of 7.2 % to 8.5% compared to 2009. The Company expects diluted EPS for 2010 to be in the range of $1.27 to $1.29, which would represent a 12.4% to 14.2% increase over 2009 diluted EPS. We expect to improve operating margins by 20-40 basis points and to generate cash flow from operations of $60 to $70 million. During 2010 the Company will be relocating its corporate headquarters from Bethesda, Maryland to Austin, Texas and the cost of this move will be reported as a separate component of income from operations. The Company expects to incur severance and relocation cost of approximately $10.0 million to $12.0 million, as well as, lease exit cost of approximately $3.0 million to $5.0 million. Once complete, the Company anticipates that the move will result in a reduction of operating expenses of approximately $2.5 million to $3.5 million annually.
In June 2008, the Company’s common stock performance triggered an acceleration of preferred stock dividends as a result of the Company’s average closing price of its common stock exceeding the Company’s forced conversion price of the Series A Convertible Preferred Stock by 200% for a 20-trading day period. This event accelerated the payment of these dividends due from the time of the event through May 26, 2011. The accelerated dividends were paid in the form of increased stated value of preferred stock, in lieu of cash. As a result, the Company recorded an in-kind dividend on its preferred stock of $5.3 million in the quarter ended June 30, 2008, which represented 0.7 million additional common shares on an as-converted basis.