SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 May 31, 1997
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.
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(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
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(Address of principal executive offices) (Zip Code)
(516) 667-1200
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(Registrant's telephone number, including area code)
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 -- 2,584,281 shares as of July 7, 1997.
<PAGE>
INDEX
THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- May 31, 1997
and February 28, 1997 3
Condensed Consolidated Statements of
Operations -- Three Months ended May 31,
1997 and May 25, 1996 4
Condensed Consolidated Statements of Cash Flows --
Three Months ended May 31, 1997 and May 25, 1996 5
Notes to Condensed Consolidated Financial
Statements -- Three Months ended May 31, 1997 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
<PAGE>
PART I. FINANCIAL INFORMATION
THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets May 31, 1997 Feb. 28, 1997
-------------- ---------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,314,675 $1,125,589
Accounts receivable, net of allowance
for doubtful accounts of $20,000 and $21,000 1,401,075 1,431,567
Inventories, net (Note 2) 1,003,698 922,346
Other current assets 286,840 279,558
-------------- ---------------
Total current assets 4,006,288 3,759,060
Property and equipment, net 561,717 507,195
Other assets 177,571 178,771
-------------- ---------------
Total Assets $4,745,576 $4,445,026
============== ===============
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of notes payable -- $ 301
Accounts payable $ 349,890 341,078
Account liabilities:
Accrued payroll and related payroll taxes 357,508 299,519
Other current liabilities 846,261 677,669
Unearned revenue 388,690 390,727
-------------- ---------------
Total current liabilities 1,942,349 1,709,294
Accrued pension expense 314,615 287,315
Unearned revenue 147,913 151,732
Deferred income taxes 5,412 5,376
-------------- ---------------
Total liabilities 2,410,289 2,153,717
-------------- ---------------
Stockholders' Equity:
Common stock, $.02 par value. Authorized 10,000,000
shares; outstanding 2,584,281 shares. 51,686 51,686
Additional paid-in capital 6,276,782 6,276,782
Accumulated deficit (3,697,789) (3,740,402)
Aggregate adjustment resulting from translation of
financial statement into U.S. dollars (47,144) (48,509)
Minimum pension liability adjustment (248,248) (248,248)
-------------- ---------------
Total stockholders' equity 2,335,287 2,291,309
-------------- ---------------
Total Liabilities and Stockholders' Equity $4,745,576 $4,445,026
============== ===============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended:
May 31, 1997 May 25, 1996
------------ ------------
Net sales (Note 3) $2,515,285 $2,512,567
Cost of sales 1,507,780 1,471,300
---------- ----------
Gross profit 1,007,505 1,041,267
Selling expense 385,551 448,928
General and administrative expense 598,969 580,713
Research and development expense -- --
---------- ----------
Income from operations 22,985 11,626
Other income, principally interest 24,369 18,050
---------- ----------
47,354 29,676
Other expense, principally interest 3,445 2,319
---------- ----------
Income before income taxes 43,909 27,357
Provision for income taxes (Note 1) 1,296 3,419
---------- ----------
Net income $ 42,613 $ 23,938
========== ==========
Weighted average number of common and common
common equivalent shares used in computation
of net income per share:
Primary 2,660,038 2,651,519
Fully Diluted 2,663,329 2,656,064
Net income per common and common equivalent share:
Primary $ .02 $ .01
========== ==========
Fully Diluted $ .02 $ .01
========== ==========
See notes to consolidated financial statements.
4
<PAGE>
THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended:
May 31, 1997 May 25, 1996
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 42,613 $ 23,938
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 48,511 42,314
Loss on disposal of fixed assets -- 5,300
Changes in operating assets and liabilities:
Accounts receivable 30,492 (287,117)
Inventories (81,352) 62,109
Prepaid expenses and other assets (6,082) 26,820
Net pension liability 27,300 12,300
Accounts payable and accrued liabilities 231,741 94,606
Unearned revenue (5,856) (13,466)
----------- ---------
Net cash provided by operating activities 287,367 (33,196)
----------- ---------
Cash Flows from Investing Activities:
Capital expenditures (97,980) (5,210)
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Net cash used in investing activities (97,980) (5,210)
----------- ---------
Cash Flows from Financing Activities:
Notes payable (301) (817)
----------- ---------
Net cash used in financing activities (301) (817)
----------- ---------
Net increase (decrease) in cash and cash equivalents 189,086 (39,223)
Cash and cash equivalents at beginning of year 1,125,589 739,460
----------- ---------
Cash and cash equivalents at end of period $ 1,314,675 $ 700,237
=========== =========
Supplemental Disclosures of Cash Flow and Non-cash Flow Information:
Cash paid for interest $ 3,445 $ 2,319
=========== =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997
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.
Operating results for the period ended May 31, 1997 are not necessarily
indicative of the results that may be expected for the year ending February 28,
1998. For further information, refer to the consolidated statements and
footnotes thereto in the Company's Annual Report on Form 10-K for the fiscal
year ended February 28, 1997.
B) Income Per Share
Net income per common share and common share equivalent is computed based on the
weighted average number of common shares outstanding during the periods
presented. Per share amounts include the effect of common stock equivalents
comprised of stock options granted under the Company's qualified and
non-qualified stock plans and warrants, except where the effect would be
anti-dilutive.
C) Provision for Income Taxes
The provision for income taxes, on domestic operations, for periods ended May
31, 1997 and May 25, 1996 were calculated at an effective annual tax rate of
4.5% and 9%, respectively, reflecting the utilization of available net operating
loss carryforwards and also taking into account the "Alternative Minimum Tax".
Provision for income taxes on foreign operations were estimated at 25%.
6
<PAGE>
THE LANGER BIOMECHANICS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (continued)
NOTE 2 - INVENTORIES
The Company did not take a physical inventory as of May 31, 1997. Inventories
and cost of sales for the interim period were based on the Company's perpetual
inventory records.
May 31, 1997 February 28, 1997
------------ -----------------
(unaudited)
Inventories consist of:
Raw materials $ 739,734 $706,184
Work-in-process 216,578 156,421
Finished goods 106,998 119,353
---------- --------
Total Inventories 1,063,310 981,958
Less: Allowance for
obsolescence 59,612 59,612
---------- --------
Net Inventories $1,003,698 $922,346
========== ========
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.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Three months ended May 31,1997, as compared with three months ended May 25,
1996.
Revenues
Sales of $2,515,285 for the first quarter ended May 31, 1997 were $2,718 or 0.1%
above prior-year's sales of $2,512,567. The effect of the approximately 3.5%
price increase in the quarter ended May 31, 1997 was partially offset by a
continuing product mix change primarily to a lower price, lower feature orthotic
product when compared with the quarter ended May 25, 1996.
Gross Profit
Gross profit for the current-year's first quarter was $1,007,505 (40.1% of
sales), as compared to the prior-year's first quarter gross profit of $1,041,267
(41.4% of sales). The decrease was due primarily to lower volumes of higher
priced, broader featured orthotic products and the effect of the product mix
change referred to above.
Selling, General and Administrative Expenses
For the three months ended May 31, 1997, selling, general and administrative
expenses decreased $45,121 or 4.4% to $984,520, from the prior-year's comparable
quarter of $1,029,641. Decreased promotion expenses and other direct selling
expenses associated with special product offerings versus the prior comparable
period more than offset increases in salaries and consulting expenses in the
quarter ended May 31, 1997.
Research and Development Expense
The Company incurred no research and development costs for the three months
ended May 31, 1997 and May 25, 1996.
Other Income and Expense
Other income consists primarily of income generated from investments and service
charge income generated from the Company's accounts receivable. Net other income
was $20,924 for the first quarter of the current fiscal year as compared with
$15,731 in the comparable prior-year's quarter, representing a 33.0% increase.
Most of the increase was due to interest earned on increased cash balances.
Net Income
The Company earned $42,613 or $.02 per share for the recently-concluded quarter
as compared to a net income of $23,938 or $.01 per share generated in the
prior-year's first quarter. The favorable results were primarily due to lower
operating expenses and increased interest income, more than offsetting lower
gross profit versus the comparable prior fiscal period.
8
<PAGE>
Liquidity and Capital Resources
Working capital, as of May 31, 1997, was $2,063,939 versus $2,049,766 at
February 28, 1997, an increase of $14,173. While cash, inventory and other
assets increased $189,086, $81,352 and $7,282, respectively, receivables
decreased $30,492 and current liabilities increased $233,055.
Cash balances at May 31, 1997 of $1,314,675 were $189,086 above the February 28,
1997 balance of $1,125,589. The Company's accounts receivable decreased $30,492.
Increasing this cash inflow were net income of $42,613, an increase in accounts
payable and accrued liabilities of $231,741 and depreciation and amortization of
$48,511.
The Company believes its capital position is adequate to meet anticipated cash
needs for the next twelve months and beyond.
9
<PAGE>
Part II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11. Statement Re: Computation of Per Share Earnings
(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: July 7, 1997
By: /s/ GARY L GRAHN
---------------------------------------
Gary L. Grahn
President and Chief Executive Officer
By: /s/ THOMAS F. BELLEAU
---------------------------------------
Thomas F. Belleau
Vice President - Finance and
Chief Financial Officer
(Principal Financial Officer)
10
THE LANGER BIOMECHANICS GROUP, INC.
AND SUBSIDIARIES
COMPUTATION OF PER SHARE AMOUNTS
EXHIBIT 11
For the three months ended May 31, 1997 and May 25, 1996
May 31, 1997 May 25, 1996
------------ ------------
Primary:
Net income $ 42,613 $ 23,938
---------- ----------
Weighted average number of common shares 2,584,281 2,581,281
Assumed number of shares issued
from common share equivalents 75,757 70,238
---------- ----------
Weighted average number of common
and common equivalent shares 2,660,038 2,651,519
---------- ----------
Net income per share:
Primary $ 0.02 $ 0.01
========== ==========
Fully Diluted:
Net income $ 42,613 $ 23,938
---------- ----------
Weighted average number of common shares 2,584,281 2,581,281
Assumed number of shares issued
from common share equivalents 79,048 74,783
---------- ----------
Weighted average number of common
and common equivalent shares 2,663,329 2,656,064
---------- ----------
Net income per share:
Fully Diluted $ 0.02 $ 0.01
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1997
<CASH> 1,314,675
<SECURITIES> 0
<RECEIVABLES> 1,401,075
<ALLOWANCES> 20,000
<INVENTORY> 1,003,698
<CURRENT-ASSETS> 4,006,288
<PP&E> 2,759,148
<DEPRECIATION> 2,197,431
<TOTAL-ASSETS> 4,745,576
<CURRENT-LIABILITIES> 1,942,349
<BONDS> 0
0
0
<COMMON> 51,686
<OTHER-SE> 2,283,601
<TOTAL-LIABILITY-AND-EQUITY> 4,745,576
<SALES> 2,515,285
<TOTAL-REVENUES> 2,515,285
<CGS> 1,507,780
<TOTAL-COSTS> 1,507,780
<OTHER-EXPENSES> 984,520
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,445
<INCOME-PRETAX> 43,909
<INCOME-TAX> 1,296
<INCOME-CONTINUING> 42,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,613
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
