Hanger Orthopedic Group, Inc. announced net sales of $235.3 million for the quarter ended September 30, 2011, an increase of $28.6 million, or 13.8%, from $206.7 million for the third quarter of 2010. Adjusted diluted earnings per share, which excludes the costs to relocate the company’s corporate headquarters and the costs related to acquisitions, increased 24.3% to $0.46 for the third quarter from $0.37 for the third quarter of 2010. Diluted earnings per share were $0.45 for the third quarter of 2011 compared with $0.21 in the same period in 2010.
The $28.6 million increase in sales for the third quarter of 2011 was the result of a $15.7 million increase from the therapeutic solutions segment, principally from the acquisition of Accelerated Care Plus (ACP); a $7.2 million or 4.0% increase in same-center sales in the patient care services segment; a $4.7 million increase due to acquisitions in the patient care services segment; and a $1.0 million, or 3.9% increase, in sales in the company’s distribution segment. Income from operations for the quarter ended September 30, 2011 was $31.2 million compared with $18.3 million in the prior year. Excluding the headquarters relocation and acquisition costs, adjusted income from operations increased 18.0% for the 3 months ending September 30, 2011. Adjusted income from operations as a percentage of revenue increased 50 basis points to 13.5% for the third quarter of 2011, which was primarily attributable to the acquisition of ACP.
Net sales for the 9 months ending September 30, 2011 increased by $79.6 million, or 13.5%, to $670.5 million from $590.9 million in the same period of 2010. The sales increase was driven by a $47.4 million increase in the therapeutic solutions segment, resulting primarily from the acquisition of ACP; a $14.7 million, or 2.9%, increase in same-center sales in the patient care services segment; a $13.5 million increase due to acquisitions in the patient care services segment; and a $4.0 million, or a 5.6%, increase in sales in the company’s distribution segment. As a percentage of sales, adjusted income from operations increased by 60 basis points due to improved leverage in core business and the acquisition of ACP. Diluted earnings per share were $1.08 for the 9 months ending September 30, 2011, a 71.4% increase compared with $0.63 in the same period in 2010. Excluding the headquarters relocation costs and acquisition cost, adjusted diluted earnings per share increased $0.20, or 22.2%, to $1.10 for the 9 months ending September 30, 2011 from $0.90 in the 2010 period.
The company generated $35.2 million in cash flows from operations during the first 9 months of 2011 compared with $37.4 million for the same period of the prior year. As of September 30, 2011, the company had $128.0 million in total liquidity, which included $31.4 million of cash and $96.6 million, net of $3.4 million in letters of credit, available under its revolving credit facility. The company’s leverage ratio, as defined in its credit facilities, improved to 3.12 at the end of the third quarter of 2011.
“We continue to deliver double digit growth in adjusted earnings though sales growth and cost containment. Our sales growth is primarily attributable to the acquisition of ACP and continued same center growth in our patient care services segment,” Thomas F. Kirk, Chief executive officer of Hanger Orthopedic Group, stated in a press release. “While we are pleased with our third quarter results, we experienced increased pressure on sales volumes and operating margin this quarter compared to the first half of the year, which we attribute to the cumulative weakness in the national economy, persistent high unemployment, uncertainty in the minds of our customers on the impact of health care reforms and state governments looking for ways to cover budget shortfalls. We remain optimistic about our ability to continue to produce profitable growth; however, given the current environment we are lowering our fourth quarter EPS growth expectations to a range of 7% to 13%. With this revision, we now expect 17% to 19% growth in full year adjusted earnings per diluted share.”
The company expects fourth quarter 2011 revenues between $243 million and $247 million and adjusted diluted EPS between $0.49 and $0.52, which results in full year revenues between $914 million and $918 million and adjusted diluted EPS of $1.59 to $1.62. The company’s goal is to increase operating margins for the full year by 20 to 40 basis points in its core business. The Company anticipates generating cash flow from operations of $70 million to $75 million in 2011 and investing a total of $30 million to $35 million in new capital additions in 2011 to fund its core businesses, including the development of a comprehensive electronic practice management system during the year.