-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Np41VgpDEC/PN7GekLApv96/2gJjArxypTz6YK+kPkT72cL750HXKqXU7lOt1kTk VjrO8TarlouDkuJFK4GPLw== 0001047469-99-000945.txt : 19990113 0001047469-99-000945.hdr.sgml : 19990113 ACCESSION NUMBER: 0001047469-99-000945 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981128 FILED AS OF DATE: 19990112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANGER BIOMECHANICS GROUP INC CENTRAL INDEX KEY: 0000725460 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 112239561 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12991 FILM NUMBER: 99505205 BUSINESS ADDRESS: STREET 1: 450 COMMACK ROAD CITY: DEER PARK STATE: NY ZIP: 11729 BUSINESS PHONE: 5166671200 MAIL ADDRESS: STREET 1: 450 COMMACK ROAD CITY: DEER PARK STATE: NY ZIP: 11729 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended NOVEMBER 28, 1998 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-12991 THE LANGER BIOMECHANICS GROUP, INC. --------------------------------------------------------------- (Exact name of registrant as specified in its charter.) NEW YORK 11-2239561 -------------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization.) Identification No.) 450 COMMACK ROAD, DEER PARK, NY 11729 --------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 667-1200 Indicate by check mark 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 _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.02 Par Value - 2,586,281 shares as of January 4, 1999. INDEX THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - November 28, 1998 and February 28, 1998 3 Condensed Consolidated Statements of Operations -- Three and Nine Months ended November 28, 1998 and November 29, 1997 4 Condensed Consolidated Statements of Cash Flows -- Nine Months ended November 28, 1998 and November 29, 1997 5 Notes to Condensed Consolidated Financial Statements -- Nine Months ended November 28, 1998 6 - 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10
2 PART I. FINANCIAL INFORMATION THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
Assets Nov. 28,1998 Feb. 28,1998 ------------ ----------- (unaudited) Current Assets: Cash and cash equivalents $ 1,707,544 $ 1,189,046 Accounts receivable, net of allowance for doubtful accounts of $15,000 and $23,000 1,567,017 1,360,420 Inventories, net (Note 2) 1,055,330 1,039,718 Other current assets 224,879 311,447 ----------- ----------- Total current assets 4,554,770 3,900,631 Property and equipment, net 799,943 777,991 Other assets 169,142 169,214 ----------- ----------- $ 5,523,855 $ 4,847,836 ----------- ----------- ----------- ----------- Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 405,841 $ 478,590 Accrued payroll and related payroll taxes 251,949 281,961 Other current liabilities 915,832 658,709 Unearned revenue - current 367,157 391,081 ----------- ----------- Total current liabilities 1,940,779 1,810,341 Accrued pension expense 245,368 220,609 Unearned revenue - long-term 149,403 148,733 Deferred income taxes 5,456 5,423 Minority Interest 28,772 -- ----------- ----------- Total liabilities 2,369,778 2,185,106 ----------- ----------- Stockholders' Equity: Common stock, $.02 par value. Authorized 10,000,000 shares; outstanding 2,586,281 and 2,585,281 shares, respectively 51,726 51,706 Additional paid-in capital 6,278,304 6,277,543 Accumulated deficit (2,885,082) (3,375,120) Aggregate adjustment resulting from translation of financial statements into U.S. dollars (49,043) (49,571) Minimum pension liability adjustment (241,828) (241,828) ----------- ----------- Total stockholders' equity 3,154,077 2,662,730 ----------- ----------- $ 5,523,855 $ 4,847,836 ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 3 THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended: Nine Months Ended: Nov. 28, 1998 Nov. 29, 1997 Nov. 28, 1998 Nov. 29, 1997 ------------- ------------- ------------- ------------ Net sales (Note 3) $ 2,668,380 $ 2,586,395 $ 7,882,098 $ 7,652,193 Cost of sales 1,642,158 1,551,096 4,892,296 4,650,279 ----------- ----------- ----------- ----------- Gross profit 1,026,222 1,035,299 2,989,802 3,001,914 Selling expenses 343,695 366,891 1,002,867 1,149,135 General and administrative expenses 605,160 514,349 1,648,185 1,665,619 ----------- ----------- ----------- ----------- Income from operations 77,367 154,059 338,750 187,160 Other income, principally interest 14,181 16,163 65,025 54,596 Gain on legal settlement -- -- 149,498 -- Minority interest (28,772) -- (28,772) -- ----------- ----------- ----------- ----------- 62,776 170,222 524,501 241,756 Other expense, principally interest 0 2,653 -- 9,039 ----------- ----------- ----------- ----------- Income before income taxes 62,776 167,569 524,501 232,717 Provision for income taxes (Note 1) 6,152 9,109 34,463 5,533 ----------- ----------- ----------- ----------- Net income $ 56,624 $ 158,460 $ 490,038 $ 227,184 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average number of common shares used in computation of net income per share: Basic 2,586,281 2,585,281 2,586,170 2,584,614 Diluted 2,604,020 2,662,780 2,612,452 2,666,665 Net income per common share (Note 1): Basic $ 0.02 $ 0.06 $ 0.19 $ 0.09 Diluted $ 0.02 $ 0.06 $ 0.19 $ 0.09
See notes to condensed consolidated financial statements. 4 THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended: Nov. 28,1998 Nov. 29,1997 ------------ ------------ Cash Flows from Operating Activities: Net income $ 490,038 $ 227,184 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 196,955 134,360 Deferred foreign tax provision 33 -- Minority Interest 28,772 -- Changes in operating assets and liabilities: Accounts receivable (206,597) 88,611 Inventories (15,612) (84,117) Prepaid expenses and other assets 86,640 329 Net pension liability 24,759 (42,238) Accounts payable and accrued liabilities 154,890 163,902 Unearned revenue (23,254) 23,022 ----------- ----------- Net cash provided by operating activities 736,624 511,053 ----------- ----------- Cash Flows from Investing Activities- Capital expenditures (218,907) (342,751) ----------- ----------- Net cash used in investing activities (218,907) (342,751) ----------- ----------- Cash Flows from Financing Activities: Common stock options exercised 781 781 Principal payments of note payable -- (301) ----------- ----------- Net cash provided by financing activities 781 480 ----------- ----------- Net increase in cash and cash equivalents 518,498 168,782 Cash and cash equivalents at beginning of year 1,189,046 1,125,589 ----------- ----------- Cash and cash equivalents at end of period $ 1,707,544 $ 1,294,371 ----------- ----------- ----------- ----------- Supplemental Disclosures of Cash Flow Information- Cash paid during the period for: Interest $ 7,603 $ 9,039 ----------- ----------- ----------- ----------- Income Taxes $ 8,673 $ 6,951 ----------- ----------- ----------- -----------
See notes to condensed consolidated financial statements. 5 THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS November 28, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS A) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, 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 normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto for the fiscal year ended February 28, 1998. Operating results for the periods ended November 28, 1998 are not necessarily indicative of the results that may be expected for the year ending February 27, 1999. B) Income per Share In 1998, The Langer Biomechanics Group, Inc. (the "Company") adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" and restated net income per common share for all periods presented. Basic net income per common share was calculated based upon the weighted average number of common shares outstanding during the respective periods. Diluted net income per common share was calculated based upon the weighted average number of common shares outstanding and included the equivalent shares for dilutive options outstanding during the respective periods. The weighted average common shares outstanding for the computation of basic net income per common share for the quarter ended November 28, 1998 and November 29, 1997 were 2,586,281 and 2,585,281, respectively, and for the nine months ended November 28, 1998 and November 29, 1997 were 2,586,170 and 2,584,614, respectively. Additionally, for the diluted calculation, 17,739 and 77,499 of equivalent common shares were included for the quarter ended November 28, 1998 and November 29, 1997, respectively, and 26,282 and 82,051 of equivalent common shares, representing the dilutive effect of the Company's stock options, were included for the nine months ended November 28, 1998 and November 29, 1997, respectively. C) Provision for Income Taxes The provision for income taxes, on domestic operations, for the periods ended November 28, 1998 and November 29, 1997, were calculated at an effective annual tax rate of 4.5%, reflecting the utilization of available net operating loss carryforwards and also taking into account the "Alternative Minimum Tax". The provision for income taxes on foreign operations was estimated at 21%. 6 THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTE 2 The Company did not take a physical inventory as of November 28, 1998. Inventories and cost of sales for the interim period were based on the Company's perpetual inventory records.
NOVEMBER 28, 1998 FEBRUARY 28, 1998 ------------------ ----------------- (unaudited) Inventories consist of: Raw materials $ 898,981 $ 921,065 Work-in-process 64,438 60,231 Finished goods 150,922 117,433 ---------- ---------- Total Inventories 1,114,341 1,098,729 Less allowance for obsolescence 59,011 59,011 ---------- ---------- Net inventories $1,055,330 $1,039,718 ---------- ---------- ---------- ----------
NOTE 3 - SEASONALITY Revenues derived from the Company's sale of orthotic devices, a substantial portion of the Company's operations, have historically been significantly higher in the warmer months of the year. NOTE 4 - COMPREHENSIVE INCOME Effective March 1, 1998, the Company has adopted SFAS No. 130, "Reporting Comprehensive Income," which requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in the consolidated financial statements. Prior periods will be reclassified, as required. The Company's total comprehensive earnings were as follows:
Nine Months Ended November 28, November 29, 1998 1997 Net income $490,038 $227,184 Other comprehensive income (loss), net of tax: Change in equity resulting from translation of financial statements into U.S. dollars 528 4,009 ---------- ----------- Comprehensive income $490,566 $231,193 --------- -------- --------- --------
Note 5 - RECENT ACCOUNTING PRONOUNCEMENTS Recent pronouncements of the Financial Accounting Standards Board, which are not required to be adopted at this date, include SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", and SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". These pronouncements are not expected to have a material impact on the Company's financial Statements. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Three and nine months ended November 28, 1998 as compared with three and nine months ended November 29, 1997. REVENUES Sales of $2,668,380 for the third quarter ended November 28, 1998 were 3.2% higher than the sales of $2,586,395 in the comparable prior-year quarter. Net sales of $7,882,098 for the nine months ended November 28, 1998 were 3.0% higher than the prior-period's sales of $7,652,193. When compared to the prior year, the three and nine months ended November 28, 1998 sales were positively effected by unit volume increases in the Company's core custom orthotic product line, as well as increased sales in the Company's U.K. subsidiary. GROSS PROFIT Gross profit for the current-year's third quarter was $1,026,222 (38.5% of sales) which represents an decrease from the comparable prior-year quarter's gross profit of $1,035,299 (40.0% of sales). Gross profit for the recently concluded nine-month period of $2,989,802 (37.9% of sales) was lower than the comparable prior nine-month period's gross profit of $3,001,914 (39.2% of sales). The gross profit decrease in the current-year's third quarter was due to an increase of production costs at the Company's U.S. and U.K. production facilities. The gross profit decrease for the current-year nine month period was due, primarily, to increased shipping costs incurred to maintain turnaround time during an automation of the order entry process and an increase in the material cost for certain portions of the product mix, both of which occurred during the current-year's first quarter. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses for the recently ended quarter were $948,855 compared to $881,240 in the comparable prior-year period, a 7.67% increase. Selling, general and administrative expenses for the nine months were $2,651,052 compared with $2,814,754 in the prior comparable period, amounting to a 6.2% decrease. The increase in selling, general and administrative expenses, for the three months ended November 28, 1998, includes a charge of approximately $98,000 for severance payments made to one of the Company's former executive officers. The overall decrease in selling, general and administrative expenses, for the nine month period ended November 28, 1998, was primarily the result of reduced salaries and related benefits. This reflects a reduction in personnel, decreased promotional expenses and other direct selling expenses, reduced consulting expenses, and cost savings attributable to the full implementation of the new computer system installed at the beginning of the current fiscal year. OTHER INCOME AND EXPENSES Other income consists primarily of income generated from investments and service charge income generated from the Company's accounts receivable and seminar fees. Net other income was $14,181 for the third quarter of the current fiscal year as compared with $16,163 in the comparable prior year's quarter, representing a 12.3% decrease. For the nine months, net other income was $65,025, compared to $54,596 earned in the prior year, or a 19.10% increase. The nine months ended November 28, 1998 includes a gain on a legal settlement of $149,498, arising from a fire which occurred on January 6, 1993 at the Company's former Deer Park, New York manufacturing facility. PROVISION FOR INCOME TAXES The Company has provided an effective tax rate of 4.5% (U.S. operations) of pre-tax profits after utilizing available net operating loss carryforwards and taking into account the "Alternative Minimum Tax". Taxes for the U.K. operations were estimated at 21% of pre-tax profits. 8 NET INCOME The Company's net income was $56,624 or $0.02 per share for the recently concluded quarter as compared to $158,460 or $.06 per share generated in the prior-year's quarter. The nine month's net income was $490,038 or $.19 per share compared to $227,184 or $.09 per share in the prior-year's comparable period. The nine months ended November 28, 1998 includes a charge of approximately $98,000, or $0.04 per share, as payment of a severance package to a former executive of the Company and a gain on a legal settlement of $149,498 or $0.06 per share. LIQUIDITY Working capital, as of November 28, 1998, was $2,613,991 versus $2,090,290 at February 28, 1998, an increase of $523,701. The increase was due to an increase in cash, accounts receivable and inventories of $518,498, $206,597, and $15,612, respectively, as well as decreases in accounts payable, accrued payroll liabilities, and the current-portion of unearned revenue of $72,749, $30,012, and $23,924, respectively. The increase was partially offset by a decrease in other current assets of $86,568, and an increase in other current liabilities of $257,123. Capital expenditures totaled $218,907 for the nine months ended November 28, 1998. Cash balances at November 28, 1998, of $1,707,544, increased $518,498 above the February 28, 1998 balance of $1,189,046. The Company believes its capital position is adequate to meet anticipated cash needs for the next twelve months and beyond. As of July 31, 1998, the Company renewed the revolving credit line of $1,500,000, for an additional year (August 1, 1998 - July 31, 1999) at an interest rate of prime plus 0.5%, from American National Bank and Trust Company, but to date has not found it necessary to use this credit line. YEAR 2000 COMPLIANCE The inability of computers, software and other equipment utilizing microprocessors to recognize and properly process data fields containing a 2-digit year is commonly referred to as the Year 2000 Compliance issue. As the year 2000 approaches, such systems may be unable to accurately process certain date-based information. The Company is taking steps to ensure that all software used in the Company's internal systems will manage data involving the transition of dates from 1999 to 2000 without functional or data abnormality and without inaccurate results. New computer systems are being implemented that will substantially insure that the Company's operating systems are not subject to Year 2000 transition problems. However, there can be no assurance that problems will not surface that the Company is currently unaware of. In addition, the Company is in the process of communicating with others with whom it does significant business to determine their Year 2000 Compliance readiness and the extent to which the Company is vulnerable to any third party Year 2000 issues. However, there can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Information contained or incorporated by reference in this periodic report on Form 10-Q and in other SEC filings by the Company contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 which can be identified by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof, other variations thereon or comparable terminology, or by discussions of strategy. No assurance can be given that future results covered by the forward-looking statements will be achieved, and other factors could also cause actual results to vary materially from the future results covered in such forward-looking statements. 9 Part II OTHER INFORMATION THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None 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. THE LANGER BIOMECHANICS GROUP, INC. ----------------------- (REGISTRANT) DATE: JANUARY 12, 1999 BY: /S/ DANIEL J. GORNEY ---------------------------- DANIEL J. GORNEY PRESIDENT AND CHIEF EXECUTIVE OFFICER BY: /S/ DANIEL J. GORNEY ---------------------------- DANIEL J. GORNEY PRINCIPAL FINANCIAL OFFICER 10 EX-27 2 FDS
5 9-MOS FEB-27-1999 NOV-28-1998 1,707,544 0 1,582,017 15,000 1,055,330 4,554,770 3,358,973 2,559,030 5,523,855 1,940,779 0 0 0 51,726 3,102,351 5,523,855 7,882,098 7,882,098 4,892,296 4,892,296 2,465,300 0 0 524,501 34,463 490,038 0 0 0 490,038 0.19 0.19
-----END PRIVACY-ENHANCED MESSAGE-----