Hanger Orthopedic Group Inc. announced net sales of $200.4 million for the quarter that ended March 31, an increase of $22.1 million from the first quarter of 2010. Adjusted diluted earnings per share, which excludes the costs to relocate the company’s corporate headquarters, were $0.19 for the first quarter of 2011, an 18.8% increase compared the same period in 2010. The company incurred relocation costs of $0.4 million and $2.1 million in the 3 months that ended March 31, 2011 and 2010, respectively. Including the relocation costs, diluted earnings per share were $0.18 and $0.12 for the quarter that ended March 31, 2011 and 2010.
The $22.1 million increase in sales for the first quarter of 2011 was primarily the result of a $15.9 million increase from the therapeutic solutions segment resulting principally from the acquisition of Accelerated Care Plus (ACP), a $1.6 million increase from the Company’s distribution segment, a $0.3 million increase in same-center sales in the patient care centers and a $4.3 million increase due to acquisitions in the patient care segment. Income from operations for the quarter that ended March 31 was $18.4 million compared to $14.2 million in the prior year. Excluding relocation costs, income from operations increased 15.3% to $18.8 million for the 3 months ending March 31 from $16.3 million in the first quarter of 2010.
Net cash used in operations improved $0.6 million in the first quarter of 2011 compared to 2010. During the first quarter of 2011, Hanger paid out approximately $4.8 million more in incentive compensation as compared to the same period in the prior year. During March 2011, the company amended its existing credit agreement to lower the applicable interest rates and modify certain other covenants. The company estimates that the changes will increase EPS by $0.03 during fiscal 2011 and has adjusted guidance accordingly. As of March 31, the company had $106.3 million in total liquidity, which included $19.7 million of cash and $86.6 million available under the revolving credit facility.
“This quarter our patient care centers were challenged with an extended period of bad weather affecting many parts of the country. Our team rose to the occasion by controlling expenses, which allowed us to meet our EPS target and to deliver double-digit earnings growth for the quarter,” Thomas F. Kirk, president and chief executive officer of Hanger Orthopedic Group stated in a press release. “We are comfortable with the prospects for growth in our patient care business for the remainder of 2011. The assimilation of ACP into the Hanger family is progressing as planned. As a result, we remain optimistic about the balance of the year.”
The Company has substantially completed the relocation of its corporate headquarters from Bethesda, Md. to Austin, Texas. The cost of the move is reported as a separate component of income from operations. The company anticipates incurring $1 to $2 million of additional costs in 2011 as the final employee moves are completed.
For 2011, Hanger is increasing guidance. The Company continues to expect full-year revenues of between $945 million and $955 million. As in past years, the Company has a goal to increase operating margins by 20 to 40 basis points in its core business. The company expects to generate cash flow from operations of $85 to $95 million and plans to invest $40 to $50 million in new capital additions to fund its core businesses, ACP’s continued expansion and the development of a comprehensive electronic practice management system.