SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 1-10670
---------------
HANGER ORTHOPEDIC GROUP, INC.
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0904275
---------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7700 Old Georgetown Road, Bethesda, MD 20814
---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 986-0701
----------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of August 11,
1996, 8,310,619 shares of common stock, $.01 par value per share.
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996
(unaudited) and December 31, 1995 1
Consolidated Statements of Operations for the six
months ended June 30, 1996 and 1995 (unaudited) 3
Consolidated Statements of Operations for the three
months ended June 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securityholders 13
Item 5. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 527,476 $ 1,456,305
Accounts receivable less allowances for
doubtful accounts of $1,217,000 and $1,144,000
in 1996 and 1995 13,640,590 13,324,991
Inventories 10,355,866 10,312,289
Prepaid expenses and other assets 1,263,210 1,040,914
Deferred income taxes 804,499 804,499
------------ ------------
Total current assets 26,591,641 26,938,998
------------ ------------
PROPERTY, PLANT AND EQUIPMENT
Land 2,991,245 2,991,245
Buildings 2,605,981 2,592,214
Machinery and equipment 3,942,753 3,654,780
Furniture and fixtures 1,609,250 1,575,493
Leasehold improvements 1,235,122 1,184,782
------------ ------------
12,384,351 11,998,514
Less accumulated depreciation and amortization 4,809,235 4,232,858
------------ ------------
7,575,116 7,765,656
------------ ------------
INTANGIBLE ASSETS
Excess of cost over net assets acquired 27,236,124 27,133,528
Non-compete agreements 4,786,371 4,786,371
Other intangible assets 3,839,281 3,825,240
------------ ------------
35,861,776 35,745,139
Less accumulated amortization 9,749,877 9,035,394
------------ ------------
26,111,899 26,709,745
------------ ------------
OTHER ASSETS
Other 401,074 385,662
------------ ------------
TOTAL ASSETS $60,679,730 $61,800,061
============ ============
</TABLE>
The accompany notes are an integral part of the consolidated financial
statements.
1
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 2,035,853 $ 1,828,953
Accounts payable 1,448,274 1,612,401
Accrued expenses 622,704 710,510
Customer deposits 450,736 489,758
Accrued wages and payroll taxes 1,362,807 1,495,013
Deferred revenue 269,005 180,587
------------ ------------
Total current liabilities 6,189,379 6,317,222
------------ ------------
Long-term debt 21,086,315 22,925,124
Deferred income taxes 709,863 706,965
Other liabilities 260,432 305,499
Mandatorily redeemable preferred stock, class C,
liquidation preference of $500 per share 265,527 253,886
Mandatorily redeemable preferred stock, class F,
liquidation preference of $500 per share
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 25,000,000 shares
authorized, 8,436,764 and 8,424,039 shares issued,
and 8,303,269 and 8,290,544 shares outstanding in
1996 and 1995 84,368 84,241
Additional paid-in capital 33,562,289 33,574,058
Accumulated deficit (822,881) (1,711,372)
------------ ------------
32,823,776 31,946,927
------------ ------------
Treasury stock - (133,495 shares) (655,562) (655,562)
------------ ------------
32,168,214 31,291,365
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $60,679,730 $61,800,061
============ ============
</TABLE>
The accompany notes are an integral part of the consolidated financial
statements.
2
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Sales $26,249,672 $25,560,895
Cost of products and services sold 12,238,843 11,929,638
------------ ------------
Gross profit 14,010,829 13,631,257
Selling, general & administrative 10,222,239 9,604,603
Depreciation and amortization 955,685 1,045,961
Amortization of excess cost over net assets acquired 339,674 346,124
------------ ------------
Income from operations 2,493,231 2,634,569
Other income expense:
Interest expense, net (861,539) (1,017,024)
Other income (expense) (73,502) (63,203)
------------ ------------
Income from operations before income taxes 1,558,190 1,554,342
Provision for income taxes 669,700 652,822
------------ ------------
Net income $ 888,490 $ 901,520
============ ============
Earnings Per Share:
Net income per share $ .11 $.11
============ ============
Weighted average number of common shares
outstanding 8,351,436 8,290,544
</TABLE>
The accompany notes are an integral part of the consolidated financial
statements.
3
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net Sales $14,020,643 $13,349,857
Cost of products and services sold 6,354,119 6,062,436
------------ ------------
Gross profit 7,666,524 7,287,421
Selling, general & administrative 5,225,161 4,876,900
Depreciation and amortization 479,530 506,991
Amortization of excess cost over net assets acquired
170,059 173,182
------------ ------------
Income from operations 1,791,774 1,730,348
Other expense:
Interest expense, net (468,303) (550,267)
Other (27,990) (46,685)
------------ ------------
Income from operations before income taxes 1,295,481 1,133,396
Provision for income taxes 557,000 476,076
------------ ------------
Net income $ 738,481 $ 657,320
============ ============
Earnings Per Share:
Net income per share $ .09 $ .08
============ ============
Weighted average number of common shares
outstanding 8,354,424 8,290,544
</TABLE>
The accompany notes are an integral part of the consolidated financial
statements.
4
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 888,490 $ 901,520
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for bad debt 507,182 352,749
Depreciation and amortization 955,685 1,045,961
Amortization of excess cost over net
assets acquired 339,674 346,124
Changes in assets and liabilities, net
of effect from acquired companies:
Increase in accounts receivable (822,781) (310,230)
Increase in inventory (43,577) (638,554)
Increase in prepaid and other assets (222,296) (140,046)
(Increase) decrease in other assets (15,408) 143,985
Decrease in accounts payable (164,127) (2,444)
Increase (decrease) in accrued expenses 250,851 (285,376)
Decrease in accrued wages and payroll taxes (132,206) (176,592)
Decrease in customer deposits (39,022) (79,179)
Increase in deferred revenue 88,418 3,232
Increase (decrease) in taxes payable (335,759) 652,822
Decrease in other liabilities (45,067) (13,771)
------------ ------------
Total adjustments 321,567 898,681
------------ ------------
Net cash provided by operating activities 1,210,057 1,800,201
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets, net (390,336) (600,985)
Purchase of patents (13,065) (38,255)
Acquisitions, net of cash (95,000) (264,294)
Purchase of non-compete agreements (35,000)
Other intangibles (7,596) (5,871)
------------ ------------
Net cash used in investing activities (505,997) (944,405)
------------ ------------
</TABLE>
Continued
The accompany notes are an integral part of the consolidated financial
statements.
5
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net borrowings under revolving credit facility $ (800,000) $ 350,000
Repayment of long-term debt (831,913) (973,165)
Increase in financing costs (976) 70,619
------------ ------------
Net cash (used in) provided by financing activities (1,632,889) (552,546)
------------ ------------
Net change in cash and cash equivalents for the period (928,829) 303,250
Cash and cash equivalents at beginning of period 1,456,305 1,048,381
------------ ------------
Cash and cash equivalents at end of period $ 527,476 $ 1,351,631
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 887,529 $ 1,096,072
============ ============
Taxes $ 786,980
============
Non-cash financing and investing activities:
Issuance of notes in connection with acquisitions $ 175,000
============
Dividends declared preferred stock $ 11,641 $ 10,643
============ ============
</TABLE>
The accompany notes are an integral part of the consolidated financial
statements.
6
<PAGE>
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X. They do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting of a normal recurring nature, considered necessary for
a fair presentation have been included.
These financial statements should be read in conjunction with the
financial statements of Hanger Orthopedic Group, Inc. (the "Company"), as of
December 31, 1995, and notes thereto included in the Annual Report on Form
10-K filed by the Company with the Securities and Exchange Commission.
NOTE B -- INVENTORY
Inventories at June 30, 1996 and December 31, 1995 were comprised of the
following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $ 8,210,459 $ 8,526,760
Work-in-process 1,254,685 1,107,289
Finished goods 890,722 678,240
----------- -----------
$10,355,866 $10,312,289
=========== ===========
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain items of
the Company's statements of operations and their percentage of the Company's
net sales:
<TABLE>
<CAPTION>
For the Six For the Three
Months Ended Months Ended
June 30, June 30,
------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products and services sold 46.6 46.7 45.3 45.4
Gross profit 53.4 53.3 54.7 54.6
Selling, general & administrative
expenses 38.9 37.6 37.3 36.5
Depreciation and amortization 3.6 4.1 3.4 3.8
Amortization of excess cost over net
assets acquired 1.3 1.4 1.2 1.3
Income from operations 9.5 10.3 12.8 13.0
Interest expense 3.3 4.0 3.3 4.1
Provision for income taxes 2.6 2.6 4.0 3.6
Net income 3.4 3.5 5.3 4.9
</TABLE>
FOR THE SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SIX MONTHS ENDED JUNE
30, 1995
NET SALES
Net sales for the six months ended June 30, 1996 amounted to
approximately $26,250,000, an increase of approximately $689,000, or 2.7%,
over net sales of approximately $25,561,000 for the six months ended June 30,
1995. Of this $689,000 increase, $600,000 was a result of patient care centers
and facilities that were in operation during the both periods ("Internal Base
Net Sales"). Contributing to the $600,000 increase in Internal Base Net Sales
was a $544,000, or 2.8%, increase attributable to patient care centers, a
$263,000, or 6.0%, decrease from manufacturing and a $319,000, or 25.3%,
increase from distribution.
GROSS PROFIT
Gross profit for the first six months of 1996 increased by approximately
$380,000, or 2.8%, over the prior year's comparable period. Gross profit as a
percent of net sales increased from 53.3% in the six months ended June 30,
1995 to 53.4% in the six months ended June 30, 1996.
8
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the first six months
ended June 30, 1996 increased by approximately $618,000, or 6.4%, compared to
the first six months of 1995. In addition to increasing in dollar amount,
selling, general and administrative expenses as a percent of net sales
increased to 38.9% for the six months ended June 30, 1996 from 37.6% of net
sales for the six months ended June 30, 1995. The increase in selling, general
and administrative expenses was primarily attributable to the Company's new
OPNET program which generated insignificant revenues during the period. It is
expected that OPNET revenues will exceed expenses relating to that program in
the third quarter.
INCOME FROM OPERATIONS
Principally as a result of the above, income from operations in the first
six months ended June 30, 1996 amounted to approximately $2,493,000, a
decrease of $141,000, or 5.4%, from the prior year's comparable period. In
addition to decreasing in dollar amount, income from operations as a percent
of net sales decreased from 10.3% in the six months ended June 30, 1995 to
9.5% in the six months ended June 30, 1996.
INTEREST EXPENSE
Interest expense for the first six months of 1996 amounted to
approximately $862,000, a decrease of approximately $155,000, or 15.3%, from
the $1,017,000 of interest expense incurred in the six months of 1995. In
addition, interest expense as a percent of net sales decreased from 4.0% for
the six months ended June 30, 1995 to 3.3% for the six months ended June 30,
1996. The decrease in interest was primarily a result of a decrease in
outstanding borrowings of approximately $2,900,000.
INCOME TAXES
The provision for income taxes for the six months ended June 30, 1996
amounted to approximately $670,000 as compared to a $653,000 for the six
months ended June 30, 1995.
NET INCOME
As a result of the above, the Company recorded net income of $889,000, or
$.11 per share, in the first six months of 1996, compared to net income of
$902,000, or $.11 per share, in the first six months of 1995.
9
<PAGE>
FOR THE THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1995
NET SALES
Net sales for the three months ended June 30, 1996, amounted to
approximately $14,020,000, an increase of approximately $671,000, or 5.0%,
over net sales of approximately $13,350,000 for the three months ended June
30, 1995. Of this $671,000 increase, $635,000 was a result of patient care
centers and facilities that were in operation during both periods ("Internal
Base Net Sales"). Of the $635,000 increase in Internal Base Net Sales,
$406,000, or 3.9%, was attributable to patient care centers, $36,000, or 1.7%,
was attributable to manufacturing and $192,000, or 28.2%, was attributable to
distribution.
GROSS PROFIT
Gross profit in the three months ended June 30, 1996 increased by
approximately $379,000, or 5.2%, over the prior year's comparable quarter.
Gross profit as a percent of net sales increased from 54.6% to 54.7% for the
comparable periods.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses in the three months ended
June 30, 1996 increased by approximately $348,000, or 7.1%, compared to the
three months ended June 30, 1995. Selling, general and administrative expenses
as a percent of net sales increased to 37.3% in the three months ended June
30, 1996 from 36.5% for the last year's comparable period. The increase in
selling, general and administrative expenses was primarily attributable to the
Company's OPNET program.
INCOME FROM OPERATIONS
Principally as a result of the above, income from operations in the three
months ended June 30, 1996 amounted to approximately $1,792,000, an increase
of $61,000, or 3.5%, over the prior year's comparable quarter. Income from
operations as a percent of net sales, decreased to 12.8% in the second quarter
of 1996 from 13.0% for the prior year's comparable period.
INTEREST EXPENSE
Interest expense in the second quarter of 1996 amounted to approximately
$468,000, a decrease of approximately $82,000, or 14.9%, from the $550,000 of
interest expense incurred in the second quarter of 1995. Interest expense as a
percent of net sales also decreased to 3.3% from 4.1% for the same period a
year ago. The decrease in interest was primarily a result of a decrease in
outstanding borrowings of approximately $2,900,000.
10
<PAGE>
INCOME TAXES
The provision for income taxes for the quarter ended June 30, 1996 was
$557,000 compared to $476,000 for the quarter ended June 30, 1995.
NET INCOME
As a result of the above, the Company recorded net income of $739,000, or
$.09 per share, in the quarter ended June 30, 1996, compared to net income of
$657,000, or $.08 per share, in the quarter ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated working capital at June 30, 1996 was
approximately $20.6 million. Cash available at that date was approximately
$527,000. Net cash provided by operations for the six months ended June 30,
1996 was $1,210,000. The Company's cash resources available during the first
six months of 1996 were satisfactory to meet its obligations.
The Company's total long-term debt at June 30, 1996, including a current
portion of approximately $2.0 million, was approximately $23.1 million. Such
indebtedness included: (i) $4.0 million principal amount of an 8.5%
Convertible Note; (ii) $1.0 million principal amount of an 8.25% Convertible
Note; (iii) $11.9 million borrowed under the Company's revolving credit
facility with NationsBank, N.A. (the "Bank"); (iv) $4.2 million in term loans
borrowed from the Bank and (v) approximately $2.0 million of other
indebtedness.
Under the terms of the Financing and Security Agreement, as amended,
between the Bank and the Company (the "Financing Agreement"), the Bank
currently provides a $13.0 million revolving credit facility (the "Revolving
Credit Facility"). The Revolving Credit Facility bears interest, at the
Company's option, at either a fluctuating rate equal to the Bank's prime
lending rate plus .25% or a fixed rate equal to the three-month London
InterBank Offered Rate ("LIBOR") plus 2.5%.
The Revolving Credit Facility is collateralized by substantially all the
assets of the Company and contains covenants restricting, among other things,
the payment of dividends and the making of acquisitions and other
transactions, and imposes net worth, debt service coverage and other financial
maintenance requirements.
The Company plans to finance future acquisitions through internally
generated funds or borrowings under the Revolving Credit Facility, the
issuance of notes or shares of common stock of the Company, or through a
combination thereof.
11
<PAGE>
The Company is actively engaged in ongoing discussions with prospective
acquisition candidates. The Company plans to continue to expand its operations
through acquisitions, although at a slower rate than in prior years, with a
view towards increasing efficiency and profitability of its existing
facilities.
On July 29, 1996, Hanger announced that it had entered into an Agreement
and Plan of Merger, dated as of July 29, 1996, among Hanger, JEH Acquisition
Corporation ("Acquisition") and J.E. Hanger, Inc. of Georgia ("JEH"). The
Agreement provides for the proposed merger of Acquisition which is a
wholly-owned subsidiary of Hanger, with and into JEH, which is a privately
held corporation as a result of which JEH will become a wholly-owned
subsidiary of Hanger. Pursuant to the Agreement, it is proposed that Hanger
will acquire all of JEH's outstanding shares in exchange for cash in the
amount of $44 million and one million shares of Hanger common stock. The
proposed cash payment is subject to adjustment based on certain financial and
tax liability matters at the time of the closing, which is expected to occur
in the fall of 1996. Consummation of the proposed merger is subject to
numerous conditions, including the satisfactory completion of due diligence
activities and the financing arrangements by Hanger, as well as approval by
JEH's shareholders and other conditions customary in merger transactions.
OTHER
Inflation has not had a significant effect on the Company's operations,
as increased costs to the Company generally have been offset by increased
prices of products and services sold.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company's Annual Meeting of Shareholders was held on June 18, 1996.
The following eight directors were reelected by the following votes to
serve as members of the Board of Directors for one year or until their
successors are elected and qualified:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
---- --------- --------------
<S> <C> <C>
Ivan R. Sabel 5,902,936 43,404
Mitchell J. Blutt, M.D. 5,834,995 111,345
Edmond E. Charrette, M.D. 5,899,556 46,784
Thomas P. Cooper, M.D. 5,837,565 108,775
Robert J. Glaser, M.D. 5,898,974 47,366
James G. Hellmuth 5,834,953 111,387
William L. McCulloch 5,901,894 44,446
Walter J. McNerney 5,839,065 107,275
</TABLE>
Shareholders ratified the selection of Coopers & Lybrand as the
independent accountants for the Company for the current fiscal year. Such
proposal was approved by a vote of 5,899,284 shares for and 32,187 shares
against, with 12,619 shares abstaining.
ITEM 5. EXHIBIT AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibit is filed herewith:
11 Computation of net Income Per Share
(b) REPORTS ON FORM 8-K
On July 29, 1996, the Company filed a Form 8-K (Item 5)
regarding its proposed acquisition of J.E. Hanger, Inc. of
Georgia.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANGER ORTHOPEDIC GROUP, INC.
Date: August 12, 1996 /s/IVAN R. SABEL
-----------------------
Ivan R. Sabel
Chief Executive Officer
Date: August 12, 1996 /s/RICHARD A. STEIN
-----------------------
Richard A. Stein
Vice President - Finance
Principal Financial and
Accounting Officer
HANGER ORTHOPEDIC GROUP, INC.
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
FOR THE THREE MONTHS ENDED June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income $ 738,481 $ 657,320
Less:
Dividends declared (5,886) (5,381)
------------ ------------
Total $ 732,595 $ 651,939
Divided by:
Weighted average number of shares
outstanding 8,354,424 8,290,544
------------ ------------
Net income (loss) per share $ .09 $ .08
============ ============
</TABLE>
FOR THE SIX MONTHS ENDED June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net income $ 888,490 $ 901,520
Less:
Dividends declared (11,641) (10,643)
------------ ------------
Total $ 876,849 $ 890,877
Divided by:
Weighted average number of shares
outstanding 8,351,436 8,290,544
------------ ------------
Net income per share $ .11 $ .11
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000722723
<NAME> HANGER ORTHOPEDIC GROUP INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 527,476
<SECURITIES> 0
<RECEIVABLES> 14,857,590
<ALLOWANCES> 1,217,000
<INVENTORY> 10,355,866
<CURRENT-ASSETS> 26,591,641
<PP&E> 12,384,351
<DEPRECIATION> 4,809,235
<TOTAL-ASSETS> 60,679,730
<CURRENT-LIABILITIES> 6,189,379
<BONDS> 21,086,315
265,527
0
<COMMON> 84,368
<OTHER-SE> 32,083,846
<TOTAL-LIABILITY-AND-EQUITY> 60,679,730
<SALES> 26,249,672
<TOTAL-REVENUES> 26,249,672
<CGS> 12,238,843
<TOTAL-COSTS> 12,238,843
<OTHER-EXPENSES> 11,517,598
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 861,539
<INCOME-PRETAX> 1,558,190
<INCOME-TAX> 669,700
<INCOME-CONTINUING> 888,490
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 888,490
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
