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Hanger Orthopedic Group Inc. Q1 2010 Earnings Call Transcript

Our comp rate of 30.1% is comparable to the prior quarter, and the rate for the full year after the fiscal inventory adjustment, so we are in good shape there. We continue to do an incredible job of managing our expenses, personnel and other operating costs, are in-line are below our budgeted expectations. Operating expenses only increased $900,000 in Q1 of 2009 in fact, and that’s including cost associated with some acquisitions that were made late in the year.

As discussed in our year-end call, we are in the process of moving the corporate headquarters from the Bethesda, Maryland to Austin, Texas. In this quarter we incurred $2.1 million of employee termination and other relocation related expenses. These expenses are non-recurring and are shown on a separate line in our income statement. I’ll talk more about the move in a couple of minutes.

D&A and interest was about $200,000 below last year. Our tax rate was consistent with prior periods at 40%. All the factors I’ve just discussed led to a 14% increase in pro-forma EPS for the quarter, so we are happy with our results.

Moving on to the balance sheet; our AR decreased $6.2 million from year-end and our DSO’s dropped to 46 days, a four-day improvement compared to year-end; that’s the lowest we’ve ever reported. The quality of our receivables is excellent and we are comfortable with our reserve for doubtful accounts. Our collections remained strong.

Our inventory increased by $1.8 million to $93.1 million, from $91.3 million at the end of last year. Inventory turns improved slightly to 4.3 times from 4.2 times a year ago. Our sales backlog remains strong at quarter end, and our inventor is at appropriate levels to serve our patients.

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