- The Washington Times - Monday, March 18, 2002

Shares of Hanger Orthopedic Group Inc. hit a 52-week high last week, after a quarterly earnings report showed the company lost significantly less money than the like quarter a year ago.
Hanger, based in Bethesda, is the nation's largest maker of artificial limbs and related patient care services, with 597 centers nationwide. It lost $5.5 million, or 29 cents per share in the fourth quarter of 2001, compared to $18.7 million, or 99 cents per share in the like quarter of 2000. Shares of the company closed at $9.20 on the New York Stock Exchange Friday, after hitting a 52-week high of $9.33 last Wednesday.
Analysts say Hanger is finally showing some signs of rebounding following a yearlong restructuring plan. The company has been on a mission to cut costs and streamline operations since its $445 million acquisition of the NovaCare Orthotics and Prosthetics Division in 1999.
"Hanger has seen, and will continue to see, the benefits of the restructuring initiatives begun in the first quarter of 2001," says Ivan Sabel, the company's chairman and chief executive officer. "This has been a comprehensive effort that has touched all facets of our business processes and is helping us provide higher levels of service to our patients and improve operating results."
Hanger's net sales increased to $128.7 million in the fourth quarter of 2001 from $120 million in the fourth quarter of 2000. That increase in sales came despite the Hanger's sale of Seattle Orthopedic Group Inc. Same-store sales rose about 11 percent, a figure that encouraged analysts. Inventory levels and costs of labor and materials also decreased.
"In all these areas, you're seeing improvement and that's why you're seeing the stock moving," says Michael Petusky, an analyst with Branch Cabel and Co. in Richmond.
Hanger's stock price had been as low as $1.08 in May, as the company struggled to work on the integration of NovaCare. Many observers and company executives say Hanger had bitten off more than it could chew with the acquisition, which was larger than anything the company had ever attempted to buy and forced the company to carry a heavy debt load. Even now, Hanger has $400 million in debt from that acquisition and many smaller ones.
But analysts say they are encouraged overall with the way Hanger has been able to improve sales figures and regain some investor confidence. The restructuring plan, they say, has been working so far.
"It has gone largely at or above expectations, and that's been reflected in the stock price," Mr. Petusky says. "I think the company has clearly turned the corner."
Hanger appointed a new president and chief operating officer, Thomas Kirk, in January. Though conventional investing wisdom often recommends holding off buying shares in a company undergoing a management shift, analysts say Hanger is a relatively safe buy because of Mr. Kirk's previous knowledge of the company. Before joining Hanger, Mr. Kirk was a principal with Jay Alix & Associates, the company assigned to help with Hanger's reorganization.
"At this point the stock has gotten several times less risky than a year ago," Mr. Petusky says.


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