Langer Reports 2005 4Q Results

Langer Inc., Deer Park, New York (NASDAQ:GAIT), on March 21 reported a net loss for the year ended December 31, 2005, of approximately $(4,557,000), or approximately $(.63) per share on a fully diluted basis, compared with net income for the year ended December 31, 2004, of approximately $375,000, or $.08 per fully diluted share. For the three months ended December 31, 2005, net loss was approximately $(4,980,000), or $(.51) per fully diluted share, compared with net income of approximately $473,000, or $.10 per fully diluted share for the three months ended December 31, 2004.

The principal reasons for the net loss for the year ended December 1, 2005, compared with net income for the year ended December 31, 2004, according to Langer, were (a) the non-cash stock award and stock option compensation expense recorded in 2005 of approximately $3,045,000 including approximately $1,313,000 relating to the acceleration of vesting of certain stock options and stock awards in the fourth quarter of 2005), compared with approximately $23,000 in 2004, (b) the provision for impairment of $2,102,000 with respect to certain identifiable intangible assets recorded in 2005, and (c) the increase in interest expense to approximately $2,692,000 recorded in 2005, compared with approximately $1,219,000 in 2004. The net loss for 2005 was partially offset by the non-cash gain on the expiration of a put option of $1,750,000 recorded in the year ended December 31, 2005, compared with the non-cash gain on the change in the fair value of the put option of $605,000 recorded in the year ended December 31, 2004.

The three-month period ended December 31, 2005, was impacted by the non-cash stock award and stock option compensation expense totaling $2,398,000, the provision for impairment of certain identifiable intangible assets of $2,102,000, and a reduction in net sales of approximately 20.5 percent, compared with the three months ended December 31, 2004. Additionally, included in the results for the three months ended December 31, 2004, was the non-cash gain on the change in the fair value of the put option of $605,000.

Net sales for the year ended December 31, 2005, were approximately $40,141,000, an increase of approximately 33.2 percent over net sales of approximately $30,127,000 for the year ended December 31, 2004. The principal reason for the increase for the year ended December 31, 2005, was the net sales of approximately $17,505,000 in 2005 generated by Silipos, compared to $5,558,000 generated by Silipos in 2004 (which Langer acquired on September 30, 2004), partially offset by a decline in net sales of approximately $1,933,000 in Langer's historic business, the company reported. However, net sales for the three months ended December 31, 2005, were approximately $9,162,000, compared with approximately $11,530,000 for the three months ended December 31, 2004, a decrease of approximately 20.5 percent, attributable to the decline in net sales in both Langer's historic business and Silipos, the Langer report added.

Gray Hudkins, Langer president and CEO, said, "Our results for 2005 reflect two significant charges: one for the non-cash stock option and stock award compensation and another for the loss on impairment of certain identifiable intangible assets.

"While sales in both of our business segments lagged as compared to plan, we have recently seen some positive signs in the market place and are optimistic about our sales and marketing initiatives," the report stated. "During the fourth quarter of 2005, our sales were negatively impacted by the loss of two significant orthopedic customers for whom we had produced goods that were sold into various retail channels, and we have been working to replace that business through the first quarter of 2006. In addition, we saw continued weakness in our legacy custom orthotics business but we have taken steps that we believe will stem those declines. However, our skincare business did perform as expected and met plan in the fourth quarter of 2005."

Cost of sales was 55.4 percent of net sales for the year ended December 31, 2005, compared with 59.8 percent of net sales for the year ended December 31, 2004, resulting in gross profit as a percentage of net sales of 44.6 percent in 2005, compared with 40.2 percent for the year ended December 31, 2004. Costs of sales were 59.8 percent and 52.6 percent of net sales for the three months ended December 31, 2005 and 2004, respectively. Gross profit as a percentage of net sales decreased to 40.2 percent for the three months ended December 31, 2005, compared with 47.4 percent for the three months ended December 31, 2004, principally due to fixed overhead expenses incurred, combined with lower net sales in the three months ended December 31, 2005. "However, the increase in the gross profit for the year ended December 31, 2005, compared with the year ended December 31, 2004, was attributable to the full year effect of Silipos' products, which generated a higher gross profit, and more than offset the fourth quarter decline in net sales," Langer stated.

For more information, visit www.langerinc.com/investors/2005_FinalEarningsReleaseQ4.pdf

Langer Reports 2005 4Q Results

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Langer Reports 2005 4Q Results

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