About Hanger -- Headquartered in Bethesda, Maryland, Hanger Prosthetics & Orthotics, a division of Hanger Orthopedic Group, Inc (NYSE: HGR), owns and operates some 600 orthotic and prosthetic (O&P) patient care centers nationwide. Staffed by nearly 900 certified practitioners, Hanger Prosthetics & Orthotics provides patients with convenient, consistent, high quality care

http://www.hanger.com

Hanger Orthopedic Group, Inc. Beats First Call Q2 EPS Estimates by $0.05 on 13% Sales Growth and 57.2% Growth in Net Income 
Raises 2008 Annual Sales and Pro Forma EPS Guidance
BETHESDA, Md., July 29 /PRNewswire-FirstCall/ -- Hanger Orthopedic Group, Inc. (NYSE: HGR) announces net sales of $181.2 million for the quarter ended June 30, 2008 an increase of 13.0% from $160.4 million in the prior year's comparable quarter. Net income increased by $2.9 million, or 57.2%, to $8.0 million in the second quarter 2008 from $5.1 million in same quarter last year.
Pro forma net income applicable to common stock was $8.0 million, or $0.25 per diluted share (a 47% increase), for the quarter ended June 30, 2008 compared to net income applicable to common stock of $5.0 million, or $0.17 per diluted share, in the second quarter of last year. The pro forma results for the second quarter 2008 assume that a one-time, in-kind preferred stock dividend occurred and the preferred stock was converted to common stock at the beginning of the period. The preferred stock dividend and conversion are explained in greater detail later in this press release. Net income applicable to common stock on a GAAP basis, which includes the full impact of the $5.3 million one-time non-cash dividend, was $2.8 million, or $0.11 per diluted share, for the quarter ended June 30, 2008.
Net sales for the quarter ended June 30, 2008 increased by $20.8 million, or 13%, to $181.2 million from $160.4 million in the prior year's comparable quarter. The sales growth was the result of a $12.7 million, or 8.9%, increase in same-center sales in our patient care business, a $3.2 million, or 20.6%, increase in sales of the Company's distribution segment, and a $4.9 million increase related to acquired entities. Gross profit for the second quarter of 2008 increased by $11.5 million, to $93.0 million, or 51.3% of net sales compared to $81.4 million, or 50.8% of net sales in the second quarter of 2007. The increase in gross margin was due principally to the increase in sales, which allowed us to leverage our relatively fixed labor costs.
Income from operations of $21.4 million in the second quarter of 2008 was $3.6 million, or 20.0% higher than that of the same period of the prior year, principally due to the aforementioned increase in gross profit, offset by $7.6 million of higher selling, general and administrative expenses. Selling, general and administrative expenses increased due to a $2.6 million increase in variable compensation accruals, $1.8 million of increased personnel costs related primarily to employee benefits, a $1.4 million increase related to acquisitions, a $1.0 million increase in professional fees and other expenses (some of which are one time expenses), $0.8 million in merit increases, and $0.6 million of additional investment in growth initiatives, offset by a $0.6 million decrease in bad debt expense.
Net interest expense for the second quarter 2008 was $1.1 million less than the same quarter last year primarily due to lower variable rates. In May 2008, the Company entered into two $75.0 million swap contracts that fixed $150.0 million of floating rate debt and locked in LIBOR at 3.4% for three years. As of June 30, 2008, $73.0 million, or 18.0%, of the Company's total debt of $406.4 million was subject to variable interest rates.
Net sales for the six months ended June 30, 2008 increased by $34.6 million, or 11.4%, to $338.8 million from $304.2 million for the same period in the prior year. The sales growth was principally the result of a $18.2 million, or 6.7%, increase in same-center sales in our patient care business, a $6.7 million, or 23.5%, increase in sales of the Company's distribution segment, and a $9.1 million increase related to acquired entities. Gross profit for the six months ended June 30, 2008 increased by $18.8 million to $171.5 million, or 50.6% of net sales, compared to $152.7 million, or 50.2% of net sales, in the first six months of the prior year. The increase in gross margin was due principally to the increase in sales, which allowed us to leverage our relatively fixed labor costs.
Income from operations increased by $5.4 million, or 17.7%, in the first six months of 2008 to $35.6 million from $30.2 million in the same period of the prior year due to the increased gross profit, offset by a $12.6 million increase in selling, general and administrative expenses. Selling, general and administrative expenses increased due to $3.3 million of increased personnel costs related principally to employee benefits, a $2.9 million increase related to acquisitions, a $2.8 million increase in variable compensation accruals, $2.0 million of additional investment in growth initiatives, $1.6 million in merit increases, a $0.8 million increase in advertising, and a $0.3 million increase in general overhead, offset by a $1.1 million decrease in bad debt expense.
Net interest expense for the six months ended June 30, 2008 decreased $2.2 million, or 11.7%, from the same period in the prior year, primarily due to lower variable rates. Net income for the six months ended June 30, 2008 increased $4.7 million, or 68.3%, to $11.6 million from $6.9 million for the prior year's period.
Pro forma net income applicable to common stock for the six months ended June 30, 2008 was $11.6 million, or $0.37 per diluted share, a 60.9% increase, compared to net income applicable to common stock of $6.0 million, or $0.23 per diluted share, in the prior year. The pro forma results for the six months ended June 30, 2008 assume that the previously described one-time, in- kind preferred stock dividend occurred and the preferred stock was converted to common stock at the beginning of the period. Net income applicable to common stock on a GAAP basis was $5.9 million, or $0.24 per diluted share, for the six months ended June 30, 2008.
Cash flow from operations was $20.0 million in the second quarter of 2008 compared to the prior year period of $18.0 million. For the six months ended June 30, 2008 cash flow from operations was $12.6 million compared to the prior period of $20.1 million. The decrease in cash flow from operations for the six months ended June 30, 2008 of $7.5 million was principally due to an $11.3 million change in cash payments related to the 2007 incentive compensation plans. The first quarter 2008 payout increased due to a combination of the elimination of two interim payments related to the practitioners' incentive compensation plan and improved performance in 2007.
The Company is also confirming existing guidance for the second half of 2008 and is increasing its full year sales guidance to a range of $680 million to $690 million and full year pro forma EPS guidance by $0.5 per diluted share to a range of $0.80 to $0.82 per diluted share, representing 25% to 28% growth compared to 2007 reported EPS.

Hanger Orthopedic Group, Inc. Announces an 11% Sales Increase and a 35% Increase in EPS to $0.23 for the Quarter Ended December 31, 2007, Compared to $0.17 in the Prior Year
BETHESDA, Md., Feb. 11 /PRNewswire-FirstCall/ -- Hanger Orthopedic Group, Inc. (NYSE: HGR) reported net sales of $170.8 million for the quarter ended December 31, 2007, an 11.0% increase from $153.9 million in the prior year's comparable quarter. Net income for the quarter was $6.6 million, or $0.23 per diluted share, a 35% increase compared to $4.5 million, or $0.17 per share, in 2006. In 2007, for the full year, revenue increased 6.4% to $637.4 million compared to $598.8 million in the prior year. Net income for the year was $17.6 million, or $0.64 per diluted share, a 31% increase compared to pro- forma net income of $14.5 million, or $0.49 per share, in the prior year. The pro-forma results for the year ended December 31, 2006, exclude the $17.0 million cost of extinguishment of debt incurred in connection with the refinancing and assumes that the new capital structure was in place on January 1, 2006.
Net sales for the quarter ended December 31, 2007 increased by $16.9 million, or 11.0%, to $170.8 million from $153.9 million in the prior year's comparable quarter. The sales growth was principally the result of an $11.2 million, or 8.0%, increase in same-center sales in our patient care business, a $2.7 million, or 21.1%, increase in sales of our distribution business and $3.0 million from acquisitions. Cost of goods sold in the fourth quarter of 2007 decreased by $1.8 million to $76.5 million, or 44.8% of net sales, compared to $78.3 million, or 50.9% of net sales, in the prior year. The decrease was principally due to labor efficiencies, the impact of the Medicare rate increase and adjustments related to our annual physical inventory.
Income from operations of $19.2 million in the fourth quarter of 2007 was $0.8 million higher than that of the same period in the prior year principally due to higher sales. Selling, general and administrative expenses increased by $17.1 million due to a $9.4 million increase in incentive and variable compensation costs as a result of our improved performance and collections and a $3.7 million increase in salary expense due to the impact of annual merit increases, increased commissions and health care costs. The balance of the increase was due to a $2.0 million investment in our growth initiatives, $0.8 million in bad debts due to the sales increase and $1.2 million in travel and other costs.
Net income applicable to common stock for the fourth quarter of 2007 was $6.6 million, or $0.23 per diluted share, compared to $4.5 million, or $0.17 per diluted share in the prior year.
Net sales for the year ended December 31, 2007 increased by $38.6 million, or 6.4%, to $637.4 million from $598.8 million in the prior year. The sales growth was principally the result of a $27.2 million, or 5.0%, increase in same-center sales in our patient care business, a $5.1 million, or 9.3%, increase in sales of the Company's distribution segment, $5.9 million from acquisitions and $1.1 million in other sales, offset by a $0.7 million decrease as a result of closed patient care centers. Cost of goods sold for the year increased by $7.9 million to $308.0 million, or 48.3% of net sales, compared to $300.1 million, or 50.1% of net sales, in the prior year. The increase was principally due to costs related to the increased sales volume which was offset by labor efficiencies, the impact of the Medicare rate increase and adjustments related to our annual physical inventory.
Income from operations increased by $5.5 million for the year ended December 31, 2007, to $68.0 million from $62.4 million in the same period of the prior year due principally to the sales increase, offset by an increase in selling, general and administrative expenses. Selling, general and administrative expenses increased by $24.0 million due to a $8.4 million increase in incentive and variable compensation costs as a result of our improved performance and collections and a $8.1 million increase in salary due to the impact of annual merit increases, increased commissions and health care costs. The balance of the increase was due to a $4.3 million investment in our growth initiatives, $1.4 million in rent and $2.2 million in travel and other costs, offset by a $0.4 million decrease in bad debt expense due to improved collections.
Net income for the year ended December 31, 2007, was $17.6 million, or $0.64 per diluted share, compared to the prior year's pro-forma net income applicable to common stock of $14.5 million, or $0.49 per diluted share. The pro-forma results for the year ended December 31, 2006, exclude the $17.0 million cost of extinguishment of debt incurred in connection with the refinancing and assumes that the new capital structure was in place on January 1, 2006. Including the costs of the refinancing, the net loss applicable to common stock was $4.1 million, or $0.18 per diluted share, for the year ended December 31, 2006.
In the fourth quarter of 2007, cash flow from operations, improved by $5.5 million to $21.4 million, compared to $15.9 million in the prior year. Cash flow from operations for the year ended December 31, 2007, improved by $22.3 million to $51.7 million, compared to the prior year's pro-forma of $29.4 million, excluding the cost of the refinancing. The increase was due to improved earnings and a reduction in working capital. Including the effect of the refinancing, cash flow from operations for the year ended December 31, 2006, was $24.0 million.