SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A No. 1
(For Year Ended 12/31/97)
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
HANGER ORTHOPEDIC GROUP, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 1-10670 84-0904275
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
7700 Old Georgetown Road
Bethesda, Maryland 20814
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (301) 986-0701
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998, as set forth in the pages attached
hereto:
Part I - Item 1 Financial Statements - Note E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
HANGER ORTHOPEDIC GROUP, INC.
By:/s/RICHARD A. STEIN
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Richard A. Stein
Vice President - Finance
Date: June 23, 1998
1
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
AMENDMENT NO. 1 TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
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The purpose of this Amendment No. 1 to the Hanger Orthopedic Group, Inc.
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (the "Form
10-Q") is to reverse the order of presentation of the first three line items
of the two columns set forth in the table in Note E to the financial
statements set forth under Item 1 of Part I on page 8 of the Form 10-Q. The
amounts previously set forth in the first three line items under the heading
1998 have been relocated to appear as the first three line items under the
heading 1997, and the amounts previously set forth in the first three line
items under the heading 1997 have been relocated to appear as the first three
line items under the heading 1998. The revised table in Note E is set forth on
page 9 of this Amendment.
2
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,652,746 $ 6,557,409
Accounts receivable less allowances for
doubtful accounts of $6,266,000 and
$4,871,000 in 1998 and 1997 respectively 31,655,712 31,145,327
Inventories 17,633,551 17,445,476
Prepaid expenses and other assets 4,028,619 4,260,656
Deferred income taxes 2,127,185 2,127,185
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Total current assets 61,097,813 61,536,053
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PROPERTY, PLANT AND EQUIPMENT
Land 4,267,045 4,269,045
Buildings 8,342,849 8,326,732
Machinery and equipment 8,295,019 7,591,821
Furniture and fixtures 2,465,199 2,378,808
Leasehold improvements 3,495,718 3,142,244
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26,865,830 25,708,650
Less accumulated depreciation and amortization 8,134,225 7,538,385
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18,731,605 18,170,265
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INTANGIBLE ASSETS
Excess of cost over net assets acquired 92,853,728 81,150,328
Non-compete agreements 2,295,265 2,236,979
Other intangible assets 3,230,052 3,221,912
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98,379,045 86,609,219
Less accumulated amortization 9,765,256 9,101,531
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88,613,789 77,507,688
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OTHER ASSETS
Other 964,205 768,604
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TOTAL ASSETS $ 169,407,412 $ 157,982,610
============== ==============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 10,310,984 $ 5,747,865
Accounts payable 3,712,060 3,827,338
Accrued expenses 4,465,388 3,597,104
Customer deposits 1,130,483 1,145,001
Accrued wages and payroll taxes 5,313,447 8,037,805
Deferred revenue 309,801 150,418
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Total current liabilities 25,242,163 22,505,531
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Long-term debt 29,286,054 23,237,321
Deferred income taxes 3,405,833 3,405,833
Other liabilities and accrued dividends 2,236,007 2,210,445
Mandatorily redeemable preferred stock, class C, 300
shares authorized, liquidation preference of $500 per 310,588 303,753
share
Mandatorily redeemable preferred stock, class F,
100,000 shares authorized, liquidation preference of
$500 per share
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 25,000,000 shares
authorized, 15,778,996 and 15,670,100 shares
issued and 15,645,501 and 15,536,605 shares
outstanding in 1998 and 1997, respectively 157,791 156,702
Additional paid-in capital 103,496,362 102,585,837
Retained earnings 5,928,176 4,232,750
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109,582,329 106,975,289
Treasury stock - (133,495 shares) (655,562) (655,562)
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108,926,767 106,319,727
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 169,407,412 $ 157,982,610
============== ==============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENT IF CASH FLOWS
FOR THE THREE MONTHS ENDED March 31, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Net Sales $ 40,750,018 $ 30,949,614
Cost of products and services sold 21,303,131 16,229,929
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Gross profit 19,446,887 14,719,685
Selling, general & administrative 14,729,001 10,924,635
Depreciation and amortization 709,022 749,305
Amortization of excess cost over net assets acquired 550,961 409,512
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Income from operations 3,457,903 2,636,233
Other expense:
Interest expense, net (614,822) (1,527,269)
Other 30,345 (43,749)
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Income from operations before income taxes 2,873,426 1,065,215
Provision for income taxes 1,178,000 447,300
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Net income $ 1,695,426 $ 617,915
============== ==============
BASIC PER COMMON SHARE DATA:
Net income $ .11 $ .07
============== ==============
Shares used to compute basic per common share
amounts 15,576,030 9,358,529
============== ==============
DILUTED PER COMMON SHARE DATA:
Net income $ .10 $ .06
============== ==============
Shares used to compute diluted per common share
amounts 17,081,983 9,940,659
============== ==============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENT IF CASH FLOWS
FOR THE THREE MONTHS ENDED March 31, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,695,426 $ 617,915
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for bad debt 1,702,241 999,208
Depreciation and amortization 709,022 749,305
Amortization of excess cost over net
assets acquired 550,961 409,512
Amortization of Debt Discount 318,515
Changes in assets and liabilities, net
of effect from acquired companies:
Accounts receivable (272,575) (1,145,684)
Inventory 236,234 274,166
Prepaid and other assets 362,852 (1,161,495)
Other assets (203,723) (49,638)
Accounts payable (624,949) (1,314,988)
Accrued expenses 848,880 1,407,612
Accrued wages and payroll taxes (3,221,776) (3,433,979)
Customer deposits (14,294) 127,954
Deferred revenue (38,507) (20,486)
Other liabilities 25,562 72,577
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Total adjustments (2,902,296) (2,767,421)
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Net cash provided by (used in) operating activities 1,755,354 (2,149,506)
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Cash flows from investing activities:
Purchase of fixed assets, net (605,905) (495,970)
Acquisition, net of cash (10,713,583) (2,301,618)
Purchase of patents (8,140) (40,009)
Purchase of non-compete agreements (58,286) (50,000)
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Net cash used in investing activities (11,385,914) (2,887,597)
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</TABLE>
Continued
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
HANGER ORTHOPEDIC GROUP, INC.
CONSOLIDATED STATEMENT IF CASH FLOWS
FOR THE THREE MONTHS ENDED March 31, 1998 and 1997
(unaudited)
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Cash flows from financing activities:
Net borrowings under revolving credit facility $ 4,000,000 $ 500,000
Proceeds from long-term debt 5,000,000 5,500,000
Repayment of long-term debt (1,192,552) (900,678)
Proceeds from the sale of common stock 918,449 85,400
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Net cash provided by financing activities 8,725,897 5,184,722
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Net change in cash and cash equivalents for the period (904,663) 147,619
Cash and cash equivalents at beginning of period 6,557,409 6,572,402
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Cash and cash equivalents at end of period $ 5,652,746 $ 6,720,021
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 483,646 $ 641,926
============== ==============
Taxes $ 325,400 $ 99,240
============== ==============
Non-cash financing and investing activities:
Issuance of notes in connection with acquisitions $ 2,755,000 $ 250,000
============== ==============
Dividends declared - preferred stock $ 6,835 $ 6,295
============== ==============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
7
<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, 1997 and notes thereto included in the Annual Report on Form 10-K
for the year December 31, 1997, filed by the Company with the Securities and
Exchange Commission.
NOTE B - NEW ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards (SFAS)
128, "Earnings per Share," effective January 1, 1997. As a result, earnings
per share for the first quarter ended March 31, 1997 have been restated to
conform to the provisions of this statement. In addition, the Company adopted
SFAS 130, "Reporting Comprehensive Income, " effective January 1, 1998. Total
comprehensive income and net income are identical for the period ended March
31, 1998.
The Company will adopt the provisions of SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information" effective with the
financial statements for the year ended December 31, 1998. SFAS 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. Financial statement disclosures for
prior periods are required to be restated. The Company is in the process of
evaluating the disclosure requirements. The adoption of SFAS 131 will not have
a material impact on the Company's consolidated results of operations,
financial position or cash flows.
8
<PAGE>
NOTE C -- INVENTORY
Inventories at March 31, 1998 and December 31, 1997 were comprised of
the following:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $ 7,858,656 $ 7,685,134
Work-in-process 1,467,133 1,437,946
Finished goods 8,307,762 8,322,396
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$ 17,633,551 $ 17,445,476
============= =============
</TABLE>
NOTE D - ACQUISITIONS
During the first three months ended March 31, 1998, the Company acquired
three orthotic and prosthetic companies. The aggregate purchase price was
$13,230,000, comprised of $10,475,000 in cash and $2,755,000 in promissory
notes.
NOTE E - NET INCOME PER COMMON SHARE
The following is a reconciliation of the numerators and denominators of
the basic and diluted income per common share amounts for the three months
ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
------------- -------------
<S> <C> <C>
Net income $ 1,695,426 $ 617,915
Less preferred stock dividends declared (6,835) (6,295)
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Income available to common stockholders $ 1,688,591 $ 611,620
============= =============
Average shares of common stock
outstanding used to compute basic per
common share amounts 15,576,030 9,358,529
Effect of dilutive options 1,049,473 193,849
Effect of dilutive warrants 456,480 388,281
Shares used to compute dilutive per
------------- -------------
common share amounts 17,081,983 9,940,659
============= =============
Basic income per common share $ .11 $ .07
Diluted income per common share $ .10 $ .06
</TABLE>
Options to purchase 2,389 shares of common stock were outstanding at
March 31, 1998 but were not included in the computation of diluted income per
common share because the options' exercise price was greater than the average
market price of the common shares. 60072
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