Hanger Reports First Quarter Results

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.

“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.

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