Hanger Orthopedic Group Inc. on Monday released its first earnings figures since an employee went public with allegations of improper billing in June.

The Bethesda provider of orthotic services and artificial limbs reported a net income of $3.2 million (10 cents a share), down from $9.2 million (34 cents) for the same period a year earlier. For the year to date, the company reported net income of $7.6 million (25 cents) compared with $14.5 million (54 cents) for the same period in 2003.

Hanger was scheduled to release its second-quarter earnings on Aug. 9 but postponed the report by a week.

In the filing yesterday, officials attributed Hanger's lackluster performance to poor sales of prosthetics, falling reimbursement levels and rising costs. They also said that while preparing the second-quarter report, they discovered the company had overstated recorded accounts receivable and understated bad-debt expenses in quarterly and consolidated statements issued over the past three years. The correction increases the company's expenses by $300,000 for the first quarter of 2004, by $1 million for 2003, $1 million for 2002 and $1.5 million for 2001, the company said.

The company said both the accounting restatement and the investigation of alleged billing irregularities contributed to the delay of its report.

Hanger remains the target of several shareholder lawsuits and a subpoena by a U.S. attorney after an employee in a West Hempstead, N.Y., patient care center aired allegations of bill padding and prescription forgery on a New York television newscast. Following the report, shares of the company plummeted, forcing Hanger to suspend trading for several hours. The company then brought in an outside firm to conduct an investigation. On Aug. 9, Hanger reported that the investigation's preliminary findings indicate any improper billing was limited to the West Hempstead office, which was responsible for 0.5 percent of the company's net sales.

In its quarterly filing, however, Hanger noted that "the regulatory agencies have not yet reviewed the records they have requested" and additional inquiries may be possible.