Looking forward for 2009, Hanger Orthopedic Group reaffirms its 2009 guidance of revenues between $750 million and $760 million, resulting in growth of 6.7% to 8.1% against 2008 and diluted EPS in the range of $0.96 to $0.98.
The 7.3% sales increase was primarily the result of a $5.6 million, or 4.1%, increase in same-center sales in our patient care centers, a $2 million, or 10.4%, increase in sales of the company’s distribution segment and a $4.1 million increase related to acquired entities.
Cost of materials increased $4.3 million, or 9.3%, to $51 million in the first quarter of 2009 against the same quarter last year principally due to the sales increase. Cost of materials as a percentage of sales was 30.2% for the first quarter of 2009 against 29.6% for the first quarter of 2008. The increase in cost of materials as a percentage of sales resulted from a change in the sales mix of businesses and products.
Personnel costs increased $3.7 million, or 6.2%, in the first quarter of 2009 against the first quarter of 2008. Contributing to this increase were personnel costs of $1.9 million from acquisitions, benefits costs of $1.2 million and merit increases of $0.9 million, offset by lower temporary labor costs of $0.2 million.
Other operating costs up $2.2 million, or 7.0%, in the first quarter of 2009 over the same quarter in the prior year due to additional variable compensation accruals of $1.9 million, higher occupancy costs of $0.8 million, acquisitions of $0.7 million, offset by lower advertising costs of $0.7 million and $0.5 million of reductions in other overhead costs.
Interest expense for the first quarter of 2009 was $0.7 million less than last year due to lower variable interest rates.
Net cash used in operations improved by $3.8 million in the first quarter of 2009. The company reported a use of $3.7 million, against a use of $7.5 million in 2008. The improvement in cash used for the first quarter of 2009 was primarily the result of improved operating results and a $1.4 million decrease in working capital. Days sales outstanding improved to 48 days as of March 31, 2009 from 51 days as of March 31, 2008.
As of March 31, 2009, $88.3 million, or 20.9%, of the company’s total debt of $422.9 million was subject to variable interest rates. The company had total liquidity of $89.8 million, comprised of $51.9 million of cash and $37.9 million available under its revolving credit facility at March 31, 2009. The company believes that it has sufficient liquidity to conduct its normal operations and fund its acquisition plan in 2009.
We are very pleased with these results as they represent continued solid financial performance, especially when considering the challenges in the overall economy and some adverse weather conditions in certain parts of our country, commented Thomas F. Kirk, president and chief executive officer of Hanger. Kirk added, Our patient care centers turned in a solid first quarter by growing same center sales by 4.1% in spite of this year’s quarter having one less business day. We will continue to monitor the current economic climate and its impact on our business, while we execute on our growth initiatives for the year.
