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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No. 0-12991
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LANGER, INC.
------------
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2239561
- ---------------------------- ----------------------
(State or other jurisdiction (I.R.S. employer iden-
of incorporation or tification number)
organization)
450 COMMACK ROAD, DEER PARK, NEW YORK 11729-4510
---------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (631) 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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
YES NO X
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, Par Value $.02 - 4,444,355 shares as of May 12, 2003.
1
INDEX
LANGER, INC. AND SUBSIDIARIES
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Operations 4
Unaudited Consolidated Statements of Stockholders' Equity 5
Unaudited Consolidated Statement of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7-15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16-19
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,2003 DECEMBER 31, 2002
------------------ -------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 7,698,975 $ 9,411,710
Accounts receivable, net of allowance for doubtful
accounts of $140,200 and $124,935, respectively 3,138,220 2,937,340
Inventories, net 2,603,422 2,353,153
Prepaid expenses and other 757,478 627,154
------------------ -------------------
Total current assets 14,198,095 15,329,357
Property and equipment, net 1,439,026 943,893
Identifiable intangible assets, net 4,150,086 3,313,413
Goodwill 3,702,211 3,186,386
Other assets 991,054 1,037,105
------------------ -------------------
Total assets $ 24,480,472 $ 23,810,154
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,000,000 $ 1,000,000
Accounts payable 1,206,789 1,235,598
Other current liabilities 2,097,426 1,864,344
Unearned revenue 656,887 660,866
------------------ -------------------
Total current liabilities 4,961,102 4,760,808
Long-term debt 15,389,000 15,389,000
Unearned revenue 162,505 162,455
Accrued pension expense 209,539 209,539
Other 483,315 176,138
------------------ -------------------
Total liabilities 21,205,461 20,697,940
------------------ -------------------
Stockholders' Equity
Common stock, $.02 par value; authorized
50,000,000 and 10,000,000 shares issued;
issued 4,444,355 and 4,336,744 respectively 88,887 86,735
Additional paid-in capital 13,192,191 12,825,237
Accumulated deficit (9,411,750) (9,153,669)
Accumulated other comprehensive loss (478,860) (530,632)
------------------ -------------------
3,390,468 3,227,671
Treasury stock at cost, 67,100 shares (115,457) (115,457)
------------------ -------------------
Total stockholders' equity 3,275,011 3,112,214
------------------ -------------------
Total liabilities and stockholders' equity $ 24,480,472 $ 23,810,154
================== ===================
See accompanying notes to unaudited consolidated financial statements.
3
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2003 2002
------------------ ------------------
Net sales $ 5,585,178 $ 3,138,619
Cost of sales 3,789,821 2,023,262
------------------ ------------------
Gross profit 1,795,357 1,115,357
Selling expenses 712,133 521,897
General and administrative expenses 1,069,253 770,395
------------------ ------------------
Operating income (loss) 13,971 (176,935)
------------------ ------------------
Other income (expense):
Interest income 46,295 75,367
Interest expense (214,489) (146,508)
Other (59,258) (44,492)
------------------ ------------------
Other income (expense), net (227,452) (115,633)
------------------ ------------------
Income (loss) before income taxes (213,481) (292,568)
Provision for income taxes 44,600 4,000
------------------ ------------------
Net income (loss) $ (258,081) $ (296,568)
================== ==================
Weighted average number of common shares used
in computation of net income (loss) per share:
Basic 4,362,907 4,200,922
================== ==================
Diluted 4,362,907 4,200,922
================== ==================
Net income (loss) per common share:
Basic $ (.06) $ (.07)
================== ==================
Diluted $ (.06) $ (.07)
================== ==================
See accompanying notes to unaudited consolidated financial statements.
4
LANGER, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2003
(UNAUDITED)
Accumulated Other
Comprehensive Loss
------------------
Common Stock Additional Foreign Minimum Total
------------------- Treasury Paid-in Accumulated Currency Pension Stockholders'
Shares Amount Stock Capital Deficit Translation Liability Equity
-------------------------------------------------------------------------------------------------------
Balance at January 1, 2003 4,336,744 $86,735 $(115,457) $12,825,237 $(9,153,669) $(26,217) $(504,415) $3,112,214
Net loss for three months
ended March 31, 2003 (258,081) (258,081)
Foreign currency adjustment 51,772 51,772
Issuance of stock to
purchase business 107,611 2,152 366,954 369,106
-------------------------------------------------------------------------------------------------------
Balance at March 31, 2003 4,444,355 $88,887 $(115,457) $13,192,191 $(9,411,750) $ 25,555 $(504,415) $3,275,011
=======================================================================================================
See accompanying notes to unaudited consolidated financial statements.
5
LANGER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2003 2002
------------------- ------------------
Cash Flows From Operating Activities:
Net income (loss) $ (258,081) $ (296,568)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 187,253 137,800
Compensation expense for options acceleration - 20,057
Provision for doubtful accounts receivable 18,514 10,165
Deferred income taxes 31,086 109
Changes in operating assets and liabilities:
Accounts receivable 104,839 (46,706)
Inventories (117,096) (145,446)
Prepaid expenses and other assets 68,417 (286,729)
Accounts payable and other current liabilities (154,345) (93,685)
Unearned revenue and other liabilities (194,090) 16,053
------------------- ------------------
Net cash (used in) operating activities (313,503) (684,950)
------------------- ------------------
Cash Flows From Investing Activities:
Purchase of business, net of cash acquired (1,301,663) -
Purchase of fixed assets (97,569) (44,970)
------------------- ------------------
Net cash (used in) investing activities (1,399,232) (44,970)
------------------- ------------------
Cash Flows From Financing Activities - -
Net (decrease) increase in cash and cash equivalents (1,712,735) (729,920)
Cash and cash equivalents at beginning of period 9,411,710 15,796,922
------------------- ------------------
Cash and cash equivalents at end of period $ 7,698,975 $ 15,067,002
=================== ==================
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest $ 214,489 $ 146,508
=================== ==================
Income taxes $ - $ -
=================== ==================
See accompanying notes to unaudited consolidated financial statements.
6
LANGER, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
(a) BASIS OF PRESENTATION
The accompanying unaudited 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. These unaudited consolidated financial statements should be
read in conjunction with the financial statements and footnotes
included in the Company's annual report on Form 10-K for the fiscal
year ended December 31, 2002.
Operating results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2003.
(b) CHANGE IN STATE OF INCORPORATION
At the Company's June 27, 2002 annual meeting, the stockholders
approved the changing of the State of Incorporation of the Company from
New York to Delaware. The new Certificate of Incorporation authorizes
the issuance of 50,000,000 shares of common stock, par value $.02 per
share, and the issuance of 250,000 shares of blank check preferred
stock. No shares of preferred stock are issued or outstanding.
(c) INCOME (LOSS) PER SHARE
Basic earnings (loss) per share are based on the weighted average
number of shares of common stock outstanding during the period. Diluted
earnings (loss) per share are based on the weighted average number of
shares of common stock and common stock equivalents (options, warrants
and convertible subordinated notes) outstanding during the period,
except where the effect would be antidilutive, computed in accordance
with the treasury stock method.
(d) PROVISION FOR INCOME TAXES
For the three months ended March 31, 2003, there was no provision for
income taxes on domestic operations. The provision for income taxes on
foreign operations was estimated at $12,600. The provision for income
taxes on foreign operations for the three months ended March 31, 2002
was estimated at $4,000.
Prior to the adoption of SFAS No. 142, the Company would not have
needed a valuation allowance for the portion of the net operating
losses equal to the amount of tax-deductible goodwill and trade names
amortization expected to occur during the carryforward period of the
net operating losses based on the timing of the reversal of these
taxable temporary differences. As a result of the adoption of SFAS 142,
the reversal will not occur during the carryforward period of the net
operating losses. Therefore, the Company recorded a deferred income tax
expense of approximately $32,000 during the three months ended March
31, 2003 which would not have been required prior to the adoption of
SFAS 142.
7
(e) RECLASSIFICATIONS
Certain amounts have been reclassified in the prior period consolidated
financial statements to present them on a basis consistent with the
current year.
(f) SEASONALITY
A substantial portion of the Company's revenue is derived from the sale
of custom orthotics. North American custom orthotic revenue has
historically been significantly higher in the warmer months of the
year, while custom orthotic revenue of the Company's United Kingdom
subsidiary has historically not evidenced any seasonality.
(g) STOCK OPTIONS
At March 31, 2003, the Company has two stock-based employee
compensation plans. The Company accounts for those plans under the
recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations.
No stock-based employee compensation cost is reflected in net income
(loss), as all options granted under those plans had an exercise price
equal to market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income (loss)
and earnings (loss) per share if the company had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.
Three months ended March 31,
---------------------------------
2003 2002
-------------- --------------
Net income (loss) - as reported $ (258,081) $ (296,568)
Deduct: Total stock-based employee
compensation expense determined
under fair value basis method for
all awards, net of tax (31,733) -
-------------- --------------
Pro forma net income (loss) $ (289,814) $ (296,568)
============== ==============
Earnings (loss) per share:
Basic - as reported $ (.06) $ (.07)
============== ===============
Basic - pro forma $ (.07) $ (.07)
============== ===============
Diluted - as reported $ (.06) $ (.07)
============== ===============
Diluted - pro forma $ (.07) $ (.07)
============== ===============
(H) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 141, "Business Combinations." SFAS No. 141 applies
prospectively to all business combinations initiated after June 30,
2001, and all business combinations accounted using the purchase method
for which the date of acquisition is July 1, 2001, or later. This
statement requires all business combinations to be accounted for using
one method, the purchase method. Under previously existed accounting
rules, business combinations were accounted for using one of two
methods, pooling-of-interests method or the purchase method. As of
January 1, 2002 the Company adopted the provisions of SFAS No. 141.
Accordingly, the Company
8
accounted for it's acquisitions of Benefoot and Bi-Op (see Note 2) under
the purchase method of accounting.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 addresses financial accounting and
reporting for acquired goodwill and other intangible assets. Under SFAS
No. 142, goodwill and some intangible assets will no longer be
amortized, but rather reviewed for impairment on a periodic basis. As of
January 1, 2002 the Company adopted the provisions of SFAS No. 142.
Therefore, goodwill and certain identifiable intangible assets with
indefinite lives have not been amortized and is being reviewed for
impairment on an annual basis.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This standard requires entities to record the
fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially
recorded, the entity capitalizes a cost by increasing the carrying
amount of the related long-lived asset. Over time the liability is
accreted to its present value each period and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement
of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard
is effective for fiscal years beginning after June 15, 2002. The
adoption of SFAS No. 143 as of January 1, 2003 did not have a material
impact on the Company's consolidated financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 replaces SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 144 requires that
long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no
longer be measured at net realizable value or include amounts for
operating losses that have not yet occurred. SFAS No. 144 also broadens
the reporting of discontinued operations to include all components of an
entity with operations that can be distinguished from the rest of the
entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction. The provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning
after December 15, 2001. As of January 1, 2002 the Company adopted the
provisions of SFAS No. 144. The adoption of SFAS No. 144 did not have a
significant impact on the Company's consolidated financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." SFAS No. 145, among other things, rescinds SFAS
No. 4, which required all gains and losses from the extinguishment of
debt to be classified as an extraordinary item and amends SFAS No. 13 to
require that certain lease modifications that have economic effects
similar to sale-leaseback transactions be accounted for in the same
manner as sale-leaseback transactions. The rescission of SFAS No. 4 is
effective for fiscal years beginning after May 15, 2002. The remainder
of the statement is generally effective for transactions occurring after
May 15, 2002 with earlier application encouraged. The adoption of SFAS
No. 145 as of January 1, 2003 did not have a material impact on the
Company's consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities." This statement addresses the recognition,
measurement and reporting of costs that are associated with exit and
disposal activities. This statement includes the restructuring
activities that are currently accounted for pursuant to the guidance set
forth in EITF 94-3, "Liability Recognition for Certain Employee
Termination Benefits and other Costs to exit an Activity (including
Certain Costs Incurred in a Restructuring)," costs related to
terminating a contract that is not a capital lease and one-time benefit
arrangements received by employees who are involuntarily terminated-
nullifying the guidance under EITF 94-3. Under SFAS No. 146 the cost
associated with an exit or disposal activity is recognized in the
periods in which it is incurred rather than at the date the company
committed to the exit plan. This statement is effective for exit or
disposal activities initiated after December 31, 2002 with earlier
application encouraged. The adoption of SFAS No. 146 as of January 1,
2003 did not have a material effect on the Company's consolidated
financial statements.
9
In November 2002, the FASB issued Financial Interpretation ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45
requires that the guarantor recognize, at the inception of certain
guarantees, a liability for the fair value of the obligation undertaken
in issuing such guarantee. FIN 45 also requires additional disclosure
requirements about the guarantor's obligations under certain guarantees
that it has issued. The initial recognition and measurement provisions
of this interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements of this interpretation are effective for financial
statement periods ending after December 15, 2002. The adoption of FIN
45 did not have a material effect on the Company's consolidated
financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock
Based Compensation-Transitions and Disclosure- an amendment of FASB
Statements No. 123." This amendment provides alternative methods of
transition for voluntary change to the fair value based method of
accounting for stock-based employee compensation. Additionally,
prominent disclosures in both annual and interim financial statements
are required for the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
Company will continue to account for it's stock based awards using the
intrinsic value method and has disclosed the required information under
SFAS No. 148 in the notes to the consolidated financial statements.
In 2002, the Company adopted the provision of Emerging Issues Task Force
("ETIF") Consensus No. 00-10 "Accounting for Shipping and Handling Fees
and Costs," which addresses the income statement classification for
shipping and handling fees. In accordance with EITF 00-10, net sales and
cost of sales have been increased by $145,171 for the three months ended
March 31, 2002. Net sales and cost of sales have been restated from
previously issued reports. The change in classification had no impact on
the Company's consolidated results of operations, cash flows or
financial position.
NOTE 2 - ACQUISITIONS
a) BI-OP, INC.
Effective January 1, 2003, the Company, through a wholly owned subsidiary,
acquired all of the issued and outstanding stock of Bi-Op Laboratories, Inc.
("Bi-Op") pursuant to the terms of a Stock Purchase Agreement dated as of
January 13, 2003 (the "Stock Purchase Agreement").
In connection with the acquisition, the Company paid consideration in
Canadian dollars, determined through arms-length negotiation of the parties.
When converted to U.S. dollars the total purchase price approximated $1.6
million of which $1.2 million was paid in cash and $.4 million was paid by
issuing 107,611 shares of the Company's common stock. $250,000 CDN of the
cash portion of the consideration was deposited in escrow until final
determination of the closing date balance sheet of Bi-Op as set forth in the
Stock Purchase Agreement. The purchase price will be reduced dollar for
dollar to the extent that the net assets of Bi-Op as of December 31, 2002
were less than $1,000,000 CDN. Conversely, the purchase price will be
increased dollar for dollar to the extent that the net assets of Bi-Op as of
the closing date exceeded $1,000,000 CDN. We funded the entire cash portion
of the purchase price through working capital.
In connection with the Stock Purchase Agreement, the Company entered into an
employment agreement with Raynald Henry, Bi-Op's principal owner, having a
term of three years and providing for an annual base salary of $75,000 CDN
and benefits, including certain severance payments.
10
The following table sets forth the components of the estimated purchase
price:
Cash consideration $ 1,201,574
Common stock issued 369,106
Transaction costs 294,620
-------------
Total purchase price $ 1,865,300
=============
The following table provides the preliminary allocation of the estimated
purchase price:
Assets: Cash and cash equivalents $ 194,531
Accounts receivables 292,372
Inventories 111,153
Prepaid expenses and other 143,919
Property and equipment 437,478
Goodwill 515,825
Identified intangible assets 900,000
Other assets 41,803
-------------
2,637,081
-------------
Liabilities: Accounts payable 196,323
Accrued liabilities 118,633
Deferred Income Tax 270,000
Long term debt & other liabilities 186,825
-------------
771,781
-------------
Total purchase price $ 1,865,300
=============
b) BENEFOOT, INC. AND BENEFOOT PROFESSIONAL PRODUCTS, INC.
On May 6, 2002 the Company, through a wholly owned subsidiary, acquired
substantially all of the assets and liabilities of each of Benefoot, Inc.
and Benefoot Professional Products, Inc. (jointly, "Benefoot"), pursuant to
the terms of an asset purchase agreement (the "Asset Purchase Agreement").
The assets acquired include machinery and equipment, other fixed assets,
inventory, receivables, contract rights, and intangible assets.
In connection with the acquisition, the Company paid consideration of $6.1
million, of which $3.8 million was paid in cash, $1.8 million was paid
through the issuance of promissory notes (the "Promissory Notes") and
$500,000 was paid by issuing 61,805 shares of common stock (the "Shares"),
together with certain registration rights. $1,000,000 of the Promissory
Notes will be paid on May 6, 2003 and the balance will be paid on May 6,
2004. The Promissory Notes bear interest at 4%. The Company also assumed
certain liabilities of Benefoot, including approximately $300,000 of
long-term indebtedness. The Company also agreed to pay Benefoot up to an
additional $1,000,000 upon satisfaction of certain performance targets on or
prior to May 6, 2004. The Company funded the entire cash portion of the
purchase price through working capital generated principally through the
prior sale of the Company's 4% convertible subordinated notes due August 31,
2006.
In connection with the Asset Purchase Agreement, the Company entered into an
employment agreement with each of two former shareholders of Benefoot, each
having a term of two years and providing for an annual base salary of
$150,000 and benefits, including certain severance arrangements. One of
these shareholders subsequently terminated his employment agreement with the
Company. As a result, the Company accrued $94,000 for termination costs. The
Company also entered into an agreement with Sheldon Langer as a medical
consultant providing for an annual fee of $45,000 and a one-time grant of
3,090 shares of common stock, together with certain registration rights. The
allocation of the purchase
11
price among the assets acquired and liabilities
assumed is based on the Company's valuation of the fair value of the assets
and liabilities of Benefoot.
The following table sets forth the components of the estimated purchase
price:
Cash consideration $ 3,800,351
Benefoot long term debt paid at closing 307,211
-------------
Total cash paid at closing $ 4,107,562
Promissory note issued 1,800,000
Common stock issued 529,512
Transaction costs 821,997
-------------
Total purchase price $ 7,259,071
=============
The following table provides the allocation of the purchase price:
Assets: Cash and cash equivalents $ 225,953
Accounts receivables 806,370
Inventories 660,559
Prepaid expenses and other 76,973
Property and equipment 223,398
Goodwill 3,186,386
Identified intangible assets 3,430,000
Other assets 6,162
-------------
8,615,801
-------------
Liabilities: Accounts payable 647,873
Accrued liabilities 389,400
Unearned revenue 210,355
Long term debt & other liabilitie 109,102
-------------
1,356,730
-------------
Total purchase price $ 7,259,071
=============
In accordance with the provisions of SFAS No. 142, the Company will not
amortize goodwill and intangible assets with indefinite lives (trade names
with an estimated fair value of $1,600,000).
Unaudited pro forma results of operations for the three months ended March
31, 2002, as if the Company acquired Bi-Op and Benefoot at the beginning of
that year, include estimates and assumptions which management believes are
reasonable. However, pro forma results do not include the realization of
cost savings from operating efficiencies, synergies or other effects
resulting from the acquisition, and are not necessarily indicative of the
actual consolidated results of operations had the acquisition occurred on
the date assumed, nor are they necessarily indicative of future consolidated
results of operations.
12
Unaudited Pro forma results for the three months ended March 31, 2002 were:
Net sales $ 5,322,449
Net income (loss) $ (299,176)
Diluted earnings per share $ (.07)
NOTE 3 - INVENTORIES, NET
Inventories consist of:
March 31, 2003 December 31, 2002
-------------- -----------------
(Unaudited)
Raw materials $ 1,505,435 $ 1,224,136
Work-in-process 175,571 180,135
Finished goods 1,175,666 1,169,287
-------------- -----------------
2,856,672 2,573,558
Less: allowance for excess and obsolescence 253,250 220,405
-------------- -----------------
$ 2,603,422 $ 2,353,153
============== =================
NOTE 4 - LONG TERM DEBT
On October 31, 2001, the Company completed the sale of $14,589,000 principal
amount of its 4% convertible subordinated notes due August 31, 2006 (the
"Notes"), in a private placement. The Notes are convertible into shares of
the Company's common stock at a conversion price of $6.00 per share, (equal
to the market value of the Company's stock on October 31, 2001), subject to
anti-dilution protections and are subordinated to existing or future senior
indebtedness of the Company. Among other provisions, the Company may, at its
option, call, prepay, redeem, repurchase, convert or otherwise acquire
(collectively, "Call") the Notes, in whole or in part, (1) after August 31,
2003 or (2) at any time if the closing price of the Company's common stock
equals or exceeds $9.00 per share for at least ten consecutive trading days.
If the Company elects to Call any of the Notes, the holders of the Notes may
elect to convert the Notes for the Company's common stock. Interest is
payable semi-annually on the last day of June and December. Interest expense
on these Notes was $145,890 for each of the three months ended March 31,
2003 and 2002.
The Company received net proceeds of $13,668,067 from the offering of the
Notes. The cost of raising these proceeds was $920,933, which is being
amortized over the life of the Notes. The amortization of these costs for
the three months ended March 31, 2003 and 2002 was $48,443 and $48,043
respectively.
The Company issued $1,800,000 in Promissory Notes in connection with the
acquisition of Benefoot. $1,000,000 of the notes will be paid on May 6, 2003
and the balance will be paid on May 6, 2004. Interest expense for the three
months ended March 31, 2003 was $18,000.
13
NOTE 5 - SEGMENT INFORMATION
In the quarter ended March 31, 2003, the Company operated in two segments
(custom orthotics and distributed products) principally in the design,
development, manufacture and sale of foot and gait-related products.
Intersegment net sales are recorded at cost. Segment information for the
quarter ended March 31, 2003 is summarized as follows:
THREE MONTHS ENDED MARCH 31, 2003 CUSTOM ORTHOTICS DISTRIBUTED PRODUCTS TOTAL
------------------------------------------ --------------------- ---------------------- ----------------
Net Sales $ 4,201,421 $ 1,383,757 $ 5,585,178
Gross Margins 1,437,092 358,265 1,795,357
Operating profit (loss) (168,758) 182,729 13,971
The company operated in one segment (custom orthotics) in the quarter ended
March 31, 2002 since the distributed products segment established in the
year ended December 31, 2002 had not been considered significant. Net sales
for custom orthotics were $2,685,017 and net sales for distributed products
were $453,602 for the quarter ended March 31, 2002. Information regarding
gross margins and operating profit (loss) for the three months ended March
31, 2002 is not available.
Geographical segment information is summarized as follows:
THREE MONTHS ENDED MARCH 31, 2003 NORTH AMERICA UNITED KINGDOM TOTAL
------------------------------------------------------------------------------------------------------------
Net sales from external customers $ 4,919,268 $ 665,910 $ 5,585,178
Intersegment net sales $ 69,001 $ - $ 69,001
Gross margins $ 1,533,142 $ 262,215 $ 1,795,357
Operating (loss) profit $ (100,953) $ 114,924 $ 13,971
THREE MONTHS ENDED MARCH 31, 2002 NORTH AMERICA UNITED KINGDOM TOTAL
------------------------------------------------------------------------------------------------------------
Net sales from external customers $ 2,608,107 $ 530,512 $ 3,138,619
Intersegment net sales $ 102,912 $ - $ 102,912
Gross margins $ 903,149 $ 212,208 $ 1,115,357
Operating (loss) profit $ (271,350) $ 94,415 $ (176,935)
14
NOTE 6 - COMPREHENSIVE INCOME (LOSS)
The Company's comprehensive income (loss) were as follows:
Three Months Ended March 31,
------------------------------
2003 2002
------ ------
Net loss $ (258,081) $ (296,568)
Other comprehensive income (loss), net of tax:
Change in equity resulting from translation
of financial statements into U.S. dollars. 51,772 (2,789)
------------- -------------
Comprehensive loss $ (206,309) $ (299,357)
============= =============
NOTE 7 - INCOME (LOSS) PER SHARE
The following table provides a reconciliation between basic and diluted
earnings per share:
Three months ended March 31,
2003 2002
------------------------------------------- ---------------------------------------
Per Per
Basic loss per common share Income(loss) Shares Share Income(loss) Shares Share
----------------------------- ------------- ----------- ---------- ------------ ---------- --------
Loss available to common
Stockholders $ (258,081) 4,362,907 $ (.06) $ (296,568) 4,200,922 $ (.07)
Stock options - - - - - -
------------- ----------- ---------- ------------ ---------- --------
Diluted loss per common share
-----------------------------
Loss available to common
stockholders plus assumed
exercise of stock options $ (258,081) 4,362,907 $ (.06) $ (296,568) 4,200,922 $ (.07)
============= =========== ========== ============ ========== ========
The diluted earnings (loss) per share computation for the three months ended
March 31, 2003 and 2002 excludes incremental shares of approximately 97,000
and 414,000 respectively; related to employee stock options. These shares
are excluded due to their antidilutive effect as a result of the Company's
loss during the period. In addition, the Company's Debentures were not
included in the computation of diluted earnings (loss) per share for the
three months ended March 31, 2003 and 2002 because the effect of including
them would be antidilutive.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company disclosed its critical accounting policies and estimates on the
December 31, 2002 Form 10-K. There have been no changes to those critical
accounting policies and estimates during the three months ended March 31,
2003.
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 2003 were $5,585,178 or 78%
above net sales of $3,138,619 for the three months ended March 31, 2002. Net
sales of custom orthotics were $4,201,421 and $2,685,017 while net sales of
distributed products were $1,383,757 and $453,602 for the three months ended
March 31, 2003 and 2002 respectively. Net sales in the first quarter of 2003
attributable to acquisitions were $1,901,940.
Net sales for custom orthotics for the three months ended March 31, 2003
were $4,201,421 as compared to $2,685,017 for the three months ended March
31, 2003, an increase of $1,516,404. Net sales of custom orthotics related
to acquisitions were $1,033,354 for the 2003 quarter. Net sales of custom
orthotics exclusive of net sales related to acquisitions increased 18% as a
result of increases in the Company's Canadian and United Kingdom business
and increases in the Company's Langer Ankle Stabilizing Technology (LAST)
business.
Net sales of distributed products for the three months ended March 31, 2003
were $1,383,757 as compared to $453,602 for the three months ended March 31,
2002, an increase of $930,155. Net sales of distributed products
attributable to acquisitions were $868,586 for the quarter. Net sales of
distributed products exclusive of net sales related to acquisitions
increased 14% as a result of increases in unit sales of most of distributed
product line.
Gross profit as a percentage of net sales for the three months ended March
31, 2003 was 32.1%, as compared to 35.5% for the three months ended March
31, 2002. Gross profit as a percentage of net sales declined as a result of
higher material costs and lower sales prices of the acquired Benefoot
business.
Selling expenses for the three months ended March 31, 2003, were $712,133 or
12.8% of net sales as compared to $521,897 or 16.6% of net sales for the
three months ended March 31, 2002. Selling expenses as a percentage of sales
improved primarily as a result of the increased revenues from acquisitions
which spread the fixed costs incurred as we continued to invest in our sales
infrastructure over a larger sales base.
General and administrative expenses for the three months ended March 31,
2003 were $1,069,253 or 19.1% of net sales for the three months ended March
31, 2003 as compared to $770,395 or 24.5% of net sales for the three months
ended March 31, 2002. General and administrative costs improved primarily as
a result of the increased revenues from acquisitions, which spread the fixed
costs over a larger sales base. General and administrative costs increased
in dollars as a result of increased costs incurred as we continue to
strengthen our infrastructure.
Other income (expense), net, was $(227,452) for the three months ended March
31, 2003, as compared to $(115,633) for the three months ended March 31,
2002. The increase in expense is attributable to interest expense, the
amortization of finance costs on the 4% convertible notes and the notes
issued in connection with the Benefoot acquisition, as well as reduced
interest income as cash on hand was expended to complete the acquisition.
16
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of March 31, 2003 was $9,236,993, as compared to
$10,568,549 as of December 31, 2002. Cash balances at March 31, 2003 were
$7,698,975, a decrease of $1,712,735 from the $9,411,710 at December 31,
2002. The reduction in cash is attributable to the cash used to complete the
acquisition of Bi-Op as well as cash used to pay year end bonuses and annual
insurance premiums.
In connection with the acquisition of Benefoot, the Company issued
$1,800,000 of 4% Promissory notes. $1,000,000 of the Promissory notes are
due on May 6, 2003 with the remaining balance due on May 6, 2004. Interest
expense on these notes for the three months ended March 31, 2003 was
$18,000.
The Company's United Kingdom subsidiary maintains a line of credit with a
local bank in the amount of 50,000 British pounds, which is guaranteed by
the Company pursuant to a standby Letter of Credit. If this credit facility,
which has been renewed through February 2004, would not be available, the
Company believes it can readily find a suitable replacement, or the Company
could supply the necessary capital.
Repurchases of the Company's common stock may be made from time to time in
the open market at prevailing prices or in privately negotiated
transactions, subject to available resources. The Company may also finance
acquisitions of other companies or product lines in the future from existing
cash balances, from borrowings from institutional lenders, and/or the public
or private offerings of debt or equity securities. Management believes that
its existing cash balances will be adequate to meet the Company's cash needs
for the next 12 months.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations." SFAS No. 141 applies prospectively to all
business combinations initiated after June 30, 2001, and all business
combinations accounted using the purchase method for which the date of
acquisition is July 1, 2001, or later. This statement requires all business
combinations to be accounted for using one method, the purchase method.
Under previously existed accounting rules, business combinations were
accounted for using one of two methods, pooling-of-interests method or the
purchase method. As of January 1, 2002 the Company adopted the provisions
of SFAS No. 141. Accordingly, the Company accounted for it's acquisitions
of Benefoot and Bi-Op (see Note 2) under the purchase method of accounting.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets. Under SFAS No. 142, goodwill
and some intangible assets will no longer be amortized, but rather reviewed
for impairment on a periodic basis. As of January 1, 2002 the Company
adopted the provisions of SFAS No. 142. Therefore, goodwill and certain
identifiable intangible assets with indefinite lives have not been
amortized and is being reviewed for impairment on an annual basis.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This standard requires entities to record the fair
value of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the related
long-lived asset. Over time the liability is accreted to its present value
each period and the capitalized cost is depreciated over the useful life of
the related asset. Upon settlement of the liability, an entity either
settles the obligation for its recorded amount or incurs a gain or loss
upon settlement. The standard is effective for fiscal years beginning after
June 15, 2002. The adoption of SFAS No. 143 as of January 1, 2003 did not
have a material impact on the Company's consolidated financial statements.
17
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 144 requires that long-lived assets be
measured at the lower of carrying amount or fair value less cost to sell,
whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net
realizable value or include amounts for operating losses that have not yet
occurred. SFAS No. 144 also broadens the reporting of discontinued
operations to include all components of an entity with operations that can
be distinguished from the rest of the entity and that will be eliminated
from the ongoing operations of the entity in a disposal transaction. The
provisions of SFAS No. 144 are effective for financial statements issued for
fiscal years beginning after December 15, 2001. As of January 1, 2002 the
Company adopted the provisions of SFAS No. 144. The adoption of SFAS No. 144
did not have a significant impact on the Company's consolidated financial
statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145, among other things, rescinds SFAS No. 4, which
required all gains and losses from the extinguishment of debt to be
classified as an extraordinary item and amends SFAS No. 13 to require that
certain lease modifications that have economic effects similar to
sale-leaseback transactions be accounted for in the same manner as
sale-leaseback transactions. The rescission of SFAS No. 4 is effective for
fiscal years beginning after May 15, 2002. The remainder of the statement
is generally effective for transactions occurring after May 15, 2002 with
earlier application encouraged. The adoption of SFAS No. 145 as of January
1, 2003 did not have a material impact on the Company's consolidated
financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities." This statement addresses the recognition, measurement
and reporting of costs that are associated with exit and disposal
activities. This statement includes the restructuring activities that are
currently accounted for pursuant to the guidance set forth in EITF 94-3,
"Liability Recognition for Certain Employee Termination Benefits and other
Costs to exit an Activity (including Certain Costs Incurred in a
Restructuring)," costs related to terminating a contract that is not a
capital lease and one-time benefit arrangements received by employees who
are involuntarily terminated- nullifying the guidance under EITF 94-3.
Under SFAS No. 146 the cost associated with an exit or disposal activity is
recognized in the periods in which it is incurred rather than at the date
the company committed to the exit plan. This statement is effective for
exit or disposal activities initiated after December 31, 2002 with earlier
application encouraged. The adoption of SFAS No. 146 as of January 1, 2003
did not have a material effect on the Company's consolidated financial
statements.
In November 2002, the FASB issued Financial Interpretation ("FIN") 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires
that the guarantor recognize, at the inception of certain guarantees, a
liability for the fair value of the obligation undertaken in issuing such
guarantee. FIN 45 also requires additional disclosure requirements about the
guarantor's obligations under certain guarantees that it has issued. The
initial recognition and measurement provisions of this interpretation are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements of this interpretation are
effective for financial statement periods ending after December 15, 2002.
The adoption of FIN 45 did not have a material effect on the Company's
consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation-Transitions and Disclosure- an amendment of FASB Statements
No. 123." This amendment provides alternative methods of transition for
voluntary change to the fair value based method of accounting for
stock-based employee compensation. Additionally, prominent disclosures in
both annual and interim financial statements are required for the method of
accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company will continue to account for
it's stock based awards using the intrinsic value method and has disclosed
the required information under SFAS No. 148 in the notes to the
consolidated financial statements.
18
In 2002, the Company adopted the provision of Emerging Issues Task Force
("ETIF") Consensus No. 00-10 "Accounting for Shipping and Handling Fees and
Costs," which addresses the income statement classification for shipping
and handling fees. In accordance with EITF 00-10, net sales and cost of
sales have been increased by $145,171 for the three months ended March 31,
2002. Net sales and cost of sales have been restated from previously issued
reports. The change in classification had no impact on the Company's
consolidated results of operations, cash flows or financial position.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
Information contained or incorporated by reference in the quarterly report
on Form 10-Q, in other SEC filings by the Company, in press releases, and
in presentations by the Company or its management, 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," "plans,"
"intends," "estimates," "projects," "could," "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. Such forward-looking statements include, but are not limited to,
those relating to the Company's financial and operating prospects, future
opportunities, the Company's acquisition strategy and ability to integrate
acquired companies and assets, outlook of customers, and reception of new
products, technologies, and pricing. In addition, such forward looking
statements involve known and unknown risks, uncertainties, and other
factors including those described from time to time in the Company's
Registration Statement on Form S-3, most recent Form 10-K and 10-Q's and
other Company filings with the Securities and Exchange Commission which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results expressed or implied by such
forward-looking statements. Also, the Company's business could be
materially adversely affected and the trading price of the Company's common
stock could decline if any such risks and uncertainties develop into actual
events. The Company undertakes no obligation to publicly update or revise
forward-looking statements to reflect events or circumstances after the
date of this Form 10-Q or to reflect the occurrence of unanticipated
events.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In general, business enterprises can be exposed to market risks, including
fluctuation in commodity and raw materials prices, foreign currency exchange
rates, and interest rates that can adversely affect the cost and results of
operating, investing, and financing. In seeking to minimize the risks and/or
costs associated with such activities, the Company manages exposure to
changes in commodities and raw material prices, interest rates and foreign
currency exchange rates through its regular operating and financing
activities. The Company does not utilize financial instruments for trading
or other speculative purposes, nor does the Company utilize leveraged
financial instruments or other derivatives. The following discussion about
our market rate risk involves forward-looking statements. Actual results
could differ materially from those projected in the forward-looking
statements.
The Company's exposure to market rate risk for changes in interest rates
relates primarily to the Company's short-term monetary investments. There is
a market rate risk for changes in interest rates earned on short-term money
market instruments. There is inherent rollover risk in the short-term money
market instruments as they mature and are renewed at current market rates.
The extent of this risk is not quantifiable or predictable because of the
variability of future interest rates and business financing requirements.
However, there is no risk of loss of principal in the short-term money
market instruments, only a risk related to a potential reduction in future
interest income. Derivative instruments are not presently used to adjust the
Company's interest rate risk profile.
The majority of the Company's business is denominated in United States
dollars. There are costs associated with the Company's operations in foreign
countries, primarily the United Kingdom and Canada, that require payments in
the local currency and payments received from customers for goods sold in
these countries are typically in the local currency. The Company partially
manages its foreign currency risk related to those payments by maintaining
operating accounts in these foreign countries and by having customers pay
the Company in those same currencies.
20
ITEM 4. CONTROLS AND PROCEDURES
(a) Based on their evaluation of the Company's disclosure controls and
procedures as of a date within 90 days of the filing of this report, the
Company's principal executive officer and chief financial officer have
concluded that such controls and procedures are effective.
(b) There were no significant changes in the Company's internal controls or
in other factors that could significantly affect such controls subsequent to
the date of their evaluation.
21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 - Certification pursuant to 18 U.S.C. 1350.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on January 13, 2003 to
report the acquisition of all of the issued and outstanding stock of
Bi-Op, and filed an amendment of such current report on March 14, 2003,
to provide audited financial statements of the acquired company.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LANGER, INC.
Date: May 15, 2003 By: /s/ Andrew H. Meyers
--------------------------------------------
Andrew H. Meyers
President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Anthony J. Puglisi
--------------------------------------------
Anthony J. Puglisi
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
23
CERTIFICATIONS
I, Andrew H. Meyers, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Langer,
Inc.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 15, 2003
/s/ Andrew H. Meyers
---------------------------
Andrew H. Meyers
President and
Chief Executive Officer
24
CERTIFICATIONS
I, Anthony J. Puglisi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Langer,
Inc.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 15, 2003
/s/ Anthony J. Puglisi
-------------------------
Anthony J. Puglisi
Vice President and
Chief Financial Officer
25