(Source: PRNewswire-FirstCall)BETHESDA, Md., July 28 /PRNewswire-FirstCall/ -- Hanger Orthopedic Group, Inc. announced net sales of $193.5 million for the quarter ended June 30, 2009, an increase of $12.3 million, or 6.8%, from $181.2 million in the prior year. Net income increased $2.0 million, or 25.4%, to $10.0 million in the second quarter of 2009 from $8.0 million last year. Earnings per share for the second quarter of 2009 were $0.31 per diluted share compared to pro forma earnings per share for the same period in 2008 of $0.25 per diluted share, a 24.0% increase.

The pro forma diluted EPS for the second quarter 2008 assume that a one-time, in-kind preferred stock dividend occurred and the preferred stock was converted to common stock at the beginning of the period. The preferred stock dividend and conversion are explained in greater detail later in this press release. Earnings per share for the quarter ended June 30, 2008 on a GAAP basis was $0.11 per diluted share.

The $12.3 million, or 6.8%, sales growth for the quarter ended June 30, 2009 was primarily the result of a $6.9 million, or 4.4%, increase in same-center sales in our patient care centers, a $0.9 million, or 4.2%, increase in sales of the Company's distribution segment and a $4.3 million increase related to sales from acquired entities.

Cost of materials increased $3.6 million, or 6.5%, to $58.8 million in the second quarter of 2009 compared to the same quarter last year principally due to the sales increase. Cost of materials as a percentage of sales decreased to 30.4% for the second quarter of 2009 compared to 30.5% for the second quarter of 2008.

Personnel costs increased $4.2 million, or 6.8%, in the second quarter of 2009 compared to the second quarter of 2008. Contributing to this increase were personnel costs of $1.7 million from acquisitions, additional stock and severance compensation of $1.3 million and other increases of $1.2 million.

Other operating costs increased $2.3 million, or 5.9%, in the second quarter of 2009 over the same quarter in the prior year due to additional variable compensation accruals of $2.0 million, higher occupancy costs of $0.3 million, other operating costs of acquisitions of $0.4 million and additional bad debt expense of $0.9 million, offset by lower professional fees of $0.9 million and $0.4 million of reductions in other overhead costs. As a percentage of sales other operating costs decreased by 20 basis points compared to the second quarter of last year.

Interest expense for the second quarter of 2009 was $0.5 million less than the same period of last year due to lower variable interest rates.

Net sales for the six months ended June 30, 2009 increased by $23.9 million, or 7.0%, to $362.7 million from $338.8 million in the same period last year. The sales growth was principally the result of a $13.1 million, or 4.4%, increase in same-center sales in our patient care centers, a $2.9 million, or 7.1%, increase in sales of the Company's distribution segment and a $7.9 million increase related to sales from acquired entities.

Cost of materials increased $7.9 million, or 7.7%, to $109.9 million in the six months ended June 30, 2009 compared to the same quarter last year principally due to the sales increase. Cost of materials as a percentage of sales increased by 20 basis points to 30.3% for the first half of 2009 compared to 30.1% for the first half of 2008.

Personnel costs increased by $7.9 million, or 6.5%, for the first half of 2009 compared to the same period in 2008. Contributing to this increase were personnel costs of $3.2 million related to acquisitions, additional stock and severance compensation of $1.8 million and other increases of $2.9 million. As a percentage of sales, personnel costs decreased by 20 basis points compared to the comparable half of the prior year.

Other operating costs increased $4.5 million, or 6.4%, in the first six months of the 2009 over the same period in the prior year due to additional variable compensation accruals of $4.0 million, higher occupancy costs of $1.2 million, other operating costs of acquisitions of $1.0 million and additional bad debt expense of $1.0 million, offset by lower advertising costs of $1.2 million and $1.5 million of reductions in other overhead costs. As a percentage of sales, other operating costs decreased by 10 basis points compared to last year's second quarter.

Interest expense for the six months ended June 30, 2009 was $1.1 million less than the same period of last year due to lower variable interest rates.

Net income applicable to common stock for the six months ended June 30, 2009 increased by 25.8% to $14.6 million, or $0.46 per diluted share, compared to pro forma net income applicable to common stock of $11.6 million, or $0.37 per diluted share, in the prior year. The pro forma results for the six months ended June 30, 2008 assume that the previously described one-time, in-kind preferred stock dividend occurred and the preferred stock was converted to common stock at the beginning of the period. Net income applicable to common stock for the six months ended June 30, 2008 on a GAAP basis was $5.9 million, or $0.24 per diluted share.

Cash from operations increased by $4.5 million, or 22.2%, to $24.5 million in the second quarter of 2009, compared to the same quarter in 2008.