Record quarter at Hanger Orthopedic

24 cents a share beats the estimates

August 10, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

Growing quickly by acquisition, Bethesda-based Hanger Orthopedic Group Inc. yesterday posted record earnings and sales for the quarter ended June 30.

Earnings were $4.9 million, up 34.7 percent over $3.6 million in the second quarter of 1998. Per-share earnings of 24 cents topped the consensus analysts' estimate by 2 cents and beat the 21 cents per share posted in the year-earlier quarter. Revenue was $56.4 million, up 20.3 percent from $46.9 million a year earlier.

Hanger shares yesterday rose $1.3125, or 11.7 percent, to $12.50.

Aside from the "real strong number" on earnings, investors were encouraged by indications of "strong early success" for Hanger in integrating its largest-ever acquisition and by "a reimbursement environment that's very positive," said Michael Petusky, an analyst for Branch, Cabell and Co. in Richmond, Va. Hanger owns and operates practices in which patients are fitted for braces and artificial limbs. It also manufactures and distributes braces and limbs.

According to Hanger, sales at patient care centers it operated both this year and last grew 5.5 percent. In addition, the growth was fueled by an increase in the number of centers, from 244 with 283 practitioners to 258 with 327 practitioners.

That growth is sure to continue. On July 1 -- too late to show up in second-quarter figures -- Hanger closed on the $455 million purchase of NovaCare Orthotics & Prosthetics Inc., which doubled the size of Hanger, bringing the number of centers operated to 649.

Indications of smooth integration of the NovaCare centers were "particularly encouraging," Petusky said. He said Hanger management had reported $4.8 million in "synergies" already, resulting from consolidating nearby centers, reducing staff and gaining increased volume discounts on supplies. Management expects total savings of up to $11 million this year and a similar amount next year, he said.

He also noted a shift toward more private-pay patients and a lessening of fear of declines in revenue from government payers. In February, Petusky said, President Clinton proposed cuts in Medicare spending, causing Hanger stock to "fall off a cliff." From $26 a share on Feb. 4, Hanger stock slid to $14.9375 on Feb. 24.

The Clinton proposal is now "dead," Petusky said.

Pub Date: 8/10/99

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