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Hanger Reports $0.62 Diluted EPS for the Fourth Quarter 2012

         Hanger Reports $0.62 Diluted EPS for the Fourth Quarter 2012

-- Adjusted Diluted EPS increased 16% to $0.58

-- Establishes 2013 Financial Guidance

PR Newswire

AUSTIN, Texas, Feb. 13, 2013

AUSTIN, Texas, Feb.13, 2013 /PRNewswire/ --Hanger, Inc. (NYSE: HGR)
announced net sales of $272.2 million for the quarter ended December 31, 2012,
an increase of $24.1 million, or 9.7%, from $248.1 million for the fourth
quarter of 2011. Diluted earnings per share were $0.62 for the fourth
quarter of 2012 compared to $0.52 for the same period of 2011. Adjusted
diluted earnings per share, which excludes certain tax benefits and costs
related to acquisitions, the Company's clinic management system ("Janus") and
the 2010 relocation of the Company's corporate headquarters ("the
relocation"), increased 16.0% to $0.58 for the fourth quarter of 2012, from
$0.50 for the fourth quarter of 2011.

The $24.1 million, or 9.7%, increase in net sales for the fourth quarter of
2012 was the result of a $21.8 million, or 10.5%, increase in the Patient Care
segment, comprised of a $9.8 million, or 4.7%, increase in same center sales
and a $12.0 million increase from acquired entities; a $1.3 million, or 5.1%,
increase in sales in the Distribution segment; and a $1.0 million, or 6.2%,
increase in the Therapeutic Solutions segment. Income from operations for the
quarter ended December 31, 2012 was $38.9 million, compared to $34.3 million
in the prior year. Excluding costs related to acquisitions, Janus and the
relocation, adjusted income from operations increased 13.1% to $39.8 million
for the quarter ended December 31, 2012 from $35.2 million in the prior year.
Adjusted income from operations as a percentage of revenue increased 40 basis
points to 14.6% for the fourth quarter of 2012 compared to the same period in
2011, which was primarily attributable to the sales increase in the Patient
Care segment combined with continued control of fixed costs.

Net sales increased $67.1 million, or 7.3%, to $985.6 million for the year
ended December 31, 2012 from $918.5 million for 2011. The sales increase was
primarily the result of a $30.1 million, or 4.0%, increase in same center
sales within the Patient Care segment and a $30.2 million increase from
acquired entities, as well as a $6.8 million, or 6.8%, increase in sales in
the Distribution segment. Sales in the Therapeutic Solutions segment remained
relatively flat compared to the prior year. Adjusted income from operations
increased 50 basis points as a percentage of sales from the prior year, for
the same reasons discussed in the previous paragraph. Diluted earnings per
share were $1.84 for the year ended December 31, 2012, a 14.3% increase
compared to $1.61 for 2011. Excluding certain tax benefits and costs related
to acquisitions, Janus and the relocation, adjusted diluted earnings per share
increased $0.22, or 13.8%, to $1.81 for the year ended December 31, 2012 from
$1.59 for 2011.

The Company's cash flow from operations increased $19.5 million to $81.3
million for the year ended December 31, 2012 compared to $61.8 million for
2011. As of December 31, 2012, the Company had $118.7 million in total
liquidity, including $19.2 million of cash and $99.5 million available under
its revolving credit facility, net of $0.5 million in letters of credit. The
Company's leverage ratio, as defined in its credit facilities, improved to 2.8
at December 31, 2012 from 3.0 at December 31, 2011.

"We reported excellent results across the board in the fourth quarter,"
commented Vinit K. Asar, President and Chief Executive Officer of Hanger.
"Patient Care finished the year strong with 4.7% same center sales growth and
better than anticipated sales from acquisitions, Distribution reported 5.1%
growth and Therapeutic Solutions reported sales growth for the first time in
over a year during the fourth quarter. In 2012 our Patient Care same center
sales increased 4.0%, we expanded adjusted operating margins by 50 bps, and we
increased adjusted diluted earnings per share by 13.8%. We anticipate 2013
will be another year of profitable growth, even as we continue to make key
investments in capabilities aimed at enhancing long-term productivity. We are
guiding to increase our adjusted diluted earnings per share between 11.6% and
15.5% for 2013."

The Company expects 2013 revenues of between $1.06 and $1.08 billion,
resulting from 3% to 5% same center sales growth in its Patient Care segment,
along with 3% to 5% growth in both its Distribution and Therapeutic Solutions
segments. The Company anticipates adjusted diluted earnings per share between
$2.02 and $2.09 for 2013, excluding approximately $0.05 for training costs
related to the implementation of Janus and an increase in adjusted operating
margins of between 30 to 50 basis points. The Company anticipates generating
cash flow from operations of between $80 million and $100 million in 2013, and
investing a total of $40 million to $50 million in capital additions. During
2013 the Company will continue its acquisition program with a goal of closing
acquisitions that total approximately $20 million in annualized revenues.

A conference call to discuss these results is scheduled to begin at 9:00 a.m.
Eastern, on Thursday, February 14, 2013. Those wishing to participate should
call 1-877-312-5846. In addition, a replay will be available until Thursday,
February 21, 2013 by dialing 1-855-859-2056 and referencing Conference ID #
85713907.

About Hanger, Inc. – Built on the legacy of James Edward Hanger, the first
amputee of the American Civil War, Hanger, Inc. (NYSE: HGR) delivers orthotic
and prosthetic (O&P) patient care, distributes O&P devices and components, and
provides therapeutic solutions to the broader post-acute market. Through its
Hanger Clinic business, Hanger is the largest owner and operator of O&P
patient care clinics with in excess of 740 locations nationwide. Through its
subsidiary Southern Prosthetic Supply, Inc. (SPS), Hanger distributes branded
and private label O&P devices, products, and components in the United States.
The Company provides therapeutic solutions through its Innovative Neurotronics
and Accelerated Care Plus businesses. Steeped in over 150 years of clinical
excellence and innovation, Hanger's vision is to be the partner of choice for
products and services that enhance human physical capability. For more
information on Hanger, visit www.hanger.com and follow us at
www.Facebook.com/HangerNews, www.Twitter.com/HangerNews, and
www.YouTube.com/HangerNews. 

This document contains forward-looking statements relating to the Company's
results of operations. The United States Private Securities Litigation Reform
Act of 1995 provides a "safe harbor" for certain forward-looking statements.
Statements relating to future results of operations in this document reflect
the current views of management. However, various risks, uncertainties and
contingencies could cause actual results or performance to differ materially
from those expressed in, or implied by, these statements, including the
Company's ability to enter into and derive benefits from managed care
contracts, the demand for the Company's orthotic and prosthetic services and
products and the other factors identified in the Company's periodic reports on
Form 10-K and Form 10-Q filed with the Securities and Exchange Commission
under the Securities Exchange Act of 1934. The Company disclaims any intent
or obligation to update publicly these forward-looking statements, whether as
a result of new information, future events or otherwise.

Hanger, Inc.
(in thousands, except for share and per share amounts)
(Unaudited)
                      Three Months Ended            Twelve Month Ended
                      December 31,                  December 31,
Income Statement:     2012           2011           2012           2011
Net sales             $   272,202  $  248,088   $   985,550  $  
                                                                   918,539
Material costs        78,136         71,693         288,243        267,677
Personnel costs       89,782         80,736         340,971        322,765
Other operating       55,678         52,317         190,554        178,335
expenses
Relocation expenses   -              495            -              1,185
Acquisition expenses  480            412            1,171          781
Depreciation and      9,220          8,117          34,652         30,969
amortization
Income from           38,906         34,318         129,959        116,827
operations
Interest expense      7,958          7,855          31,169         31,821
Income before taxes   30,948         26,463         98,790         85,006
Provision for income  9,164          8,500          34,721         29,987
taxes
Net income            $           $   17,963  $           $   
                      21,784                        64,069         55,019
Basic Per Common
Share Data:
Net income            $         $          $         $     
                      0.63           0.53          1.87           1.64
Shares used to
compute basic per     34,453,084     33,745,397     34,282,591     33,544,813
share amounts
Diluted Per Common
Share Data:
Net income           $         $          $         $     
                      0.62           0.52          1.84           1.61
Shares used to
compute diluted per   34,945,547     34,260,030     34,832,830     34,220,256
share amounts
Reconciliation of
GAAP financial
measures to Non-GAAP
financial measures:
Income from           $           $   34,318  $   129,959  $  
operations            38,906                                       116,827
Relocation expenses   -              495            -              1,185
Acquisition expenses  480            412            1,171          781
Janus expenses        438            -              533            -
Adjusted Income from  $           $   35,225  $   131,663  $  
operations            39,824                                       118,793
Net income           $           $   17,963  $           $   
                      21,784                        64,069         55,019
Relocation expenses   -              495            -              1,185
Acquisition expenses  480            412            1,171          781
Janus expenses        438            -              533            -
Tax effect of         (344)          (354)          (638)          (767)
adjustments
Non-recurring tax     (2,080)        (1,320)        (2,080)        (1,780)
benefits
Adjusted net income  $           $   17,196  $           $   
                      20,278                        63,055         54,438
Adjusted net income   $         $          $         $     
per diluted share     0.58           0.50          1.81           1.59
                      Three Months Ended            Twelve Month Ended
                      December 31,                  December 31,
Income Statement as a 2012           2011           2012           2011
% of Net Sales:
Net sales             100.0%         100.0%         100.0%         100.0%
Material costs        28.7%          28.9%          29.2%          29.1%
Personnel costs       33.0%          32.5%          34.6%          35.1%
Other operating       20.4%          21.1%          19.4%          19.4%
expenses
Relocation expenses   0.0%           0.2%           0.0%           0.1%
Acquisition expenses  0.2%           0.2%           0.1%           0.1%
Depreciation and      3.5%           3.3%           3.5%           3.4%
amortization
Income from           14.2%          13.8%          13.2%          12.8%
operations
Interest expense      2.9%           3.2%           3.2%           3.5%
Income before taxes   11.3%          10.6%          10.0%          9.3%
Provision for income  3.3%           3.4%           3.5%           3.3%
taxes
Net income           8.0%           7.2%           6.5%           6.0%
Adjusted income from  14.6%          14.2%          13.4%          12.9%
operations
Adjusted net income   7.4%           6.9%           6.4%           5.9%



Hanger, Inc.
( in thousands, except for statistical data)
(Unaudited)
                             Three Months Ended     Twelve Months Ended
                             December 31,           December 31,
Cash Flow Data:              2012        2011       2012          2011
Cash flow provided by        $ 22,312   $ 24,654   $  81,319    $  61,804
operations
Capital expenditures         $  7,429  $  6,370  $  32,306    $  28,674
Increase/(decrease) in cash  $(36,409)   $ 11,459   $ (23,685)    $   6,588
and cash equivalents
Balance Sheet Data:                                 December 31,  December 31,
                                                    2012          2011
Cash and cash equivalents                           $  19,211    $  42,896
Days Sales Outstanding                              58            54
(DSO's)
Working Capital                                    $ 252,923     $ 241,729
Total Debt                                          $ 520,646     $ 508,033
Shareholders' Equity                                $ 504,552     $ 429,664
                             Three Months Ended     Twelve Months Ended
                             December 31,           December 31,
                             2012        2011       2012          2011
Revenue Mix:
Patient Care                 84.2%       83.6%      82.5%         82.1%
Distribution                 9.6%        10.1%      10.9%         10.9%
Therapeutic solutions        6.2%        6.3%       6.6%          7.0%
Patient Care Payor Mix:
Commercial and other         60.4%       60.9%      59.6%         60.0%
Medicare                     28.0%       27.6%      28.6%         28.1%
Medicaid                     5.6%        5.8%       5.7%          6.4%
VA                           6.0%        5.7%       6.1%          5.5%

Management relies on the non-GAAP items as the primary measures to review and
assess operating performance and management teams. The Company believes it is
useful to investors to provide disclosures of its operating results on the
same basis as that used by management. Management and investors also review
the non-GAAP items to evaluate the Company's overall performance and to
compare its current operating results with corresponding periods and with
other companies in the health care industry. You should not consider the
non-GAAP items in isolation or as a substitute for net income, operating cash
flows or other cash flow statement data determined in accordance with
accounting principles generally accepted in the United States. Because the
non-GAAP items are not measures of financial performance under accounting
principles generally accepted in the United States and are susceptible to
varying calculations, they may not be comparable to similarly titled measures
of other companies. Adjusted net income, Adjusted income from operations, and
Adjusted net income per diluted share are the non-GAAP financial measures.

SOURCE Hanger Orthopedic Group, Inc.

Website: http://www.hanger.com
Contact: George E. McHenry, +1-512-777-3800, or Russell G. Allen,
+1-512-777-3800
 
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