Hanger Orthopedic Group, Inc. (HGR) yesterday reported financial results for the third quarter of fiscal 2009 after market close. Earnings per share were 30 cents, beating the Zacks Consensus Estimate of 27 cents and the year-ago earnings of 23 cents.

Sales

Net sales for the quarter increased 7.6% year over year to $192.3 million. Growth can be primarily attributed to higher same-center sales of patient care centers, higher demand for the company’s distribution segment and acquisitions. Patient-care services contributed approximately 88% to total sales while the remaining came from the distribution segment.

Margins

Gross margin declined 70 basis points (bps) year over year to 69.4% in the reported quarter due to higher cost of raw materials. However, strong sales and the company’s expense management initiatives helped it to increase operating and net margins. Both operating and net margins increased 100 bps year over year to 12.4% and 5.1%, respectively.

Balance Sheet & Cash Flow

Hanger ended the quarter with cash and cash equivalents of approximately $78.4 million, an increase of roughly 34% in the first nine months of the year. Total outstanding debt at the end of the quarter was $409.7 million. Cash flow from operations was $25.4 million at the end of the quarter.

Guidance

Hanger has reaffirmed its full year 2009 sales guidance of $750 to $760 million. Earnings per share are estimated between $1.05 and $1.07, compared to the prior guidance of $1.02 to $1.04.

Hanger Orthopedic Group, Inc. is the global premier provider of orthotic and prosthetic patient care services. Hanger competes with Orthofix International NV (OFIX), Conmed Corporation (CNMD), Exactech Inc. (EXAC) and Owens & Minor Inc. (OMI) in the orthotic and prosthetic space.

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