<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 000-21629
THE O'GARA COMPANY
(Exact name of registrant as specified in its charter)
Ohio 31-1470817
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
9113 LeSaint Drive
Fairfield, Ohio 45014
(513) 874-2112
(Address, including zip code, and telephone number, including area code
of registrant's principal executive offices)
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
--- ---
The number of shares of common stock outstanding on August 10, 1997 was
7,279,310
<PAGE> 2
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited) as of June 30, 1997
and December 31, 1996............................................................................ 1
Consolidated Statements of Operations (unaudited) for the Three and Six Months
Ended June 30, 1997 and 1996..................................................................... 3
Consolidated Statements of Cash Flows (unaudited) for the Six Months
Ended June 30, 1997 and 1996..................................................................... 4
Notes to Consolidated Unaudited Financial Statements................................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings ...................................................................................16
Item 2. Changes in Securities ...............................................................................16
Item 6. Exhibits and Reports on Form 8-K ....................................................................16
Signatures.........................................................................................................17
</TABLE>
<PAGE> 3
Item 1. Financial Statements
<TABLE>
THE O'GARA COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
(unaudited)
(dollars in thousands)
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 7,874 $ 1,454
Marketable securities 3,011 -
Trade accounts receivable, net of allowance for
doubtful accounts of $467 and $211 at June 30,
1997 and December 31, 1996, respectively 20,064 7,736
Other receivables
Advances to shareholders 69 249
Affiliates 398 250
Advances to vendors 505 664
Costs and estimated earnings in excess of
billings on uncompleted contracts 12,616 15,327
Inventories 15,211 8,734
Prepaid expenses 1,590 678
------- -------
Total current assets 61,338 35,092
PROPERTY, PLANT, AND EQUIPMENT, at cost
Land 1,255 901
Buildings and improvements 5,525 3,772
Furniture and fixtures 2,080 1,744
Machinery and equipment 5,074 2,797
------- -------
13,934 9,214
Less: accumulated depreciation (4,851) (4,289)
------- -------
9,083 4,925
------- -------
Costs in excess of assets acquired, net of accumulated
amortization of $215 and $11 at June 30,
1997 and December 31, 1996, respectively 12,949 1,004
Other assets 6,377 2,917
------- -------
19,326 3,921
------- -------
$89,747 $43,938
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
1
<PAGE> 4
<TABLE>
THE O'GARA COMPANY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(unaudited)
(dollars in thousands)
<CAPTION>
June 30, December 31,
1997 1996
--------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Revolving lines of credit $ - $ 9,936
Current portion of long-term debt 2,030 1,836
Accounts payable-
Trade 16,703 11,087
Affiliates 1,014 533
Billings in excess of costs and estimated
earnings on uncompleted contracts 732 1,330
Accrued liabilities 6,917 3,972
Customer deposits 1,610 2,119
-------- --------
Total current liabilities 29,006 30,813
LONG-TERM DEBT, net of current portion 39,944 469
MINORITY INTEREST 45 -
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 100,000 shares
authorized, none issued - -
Common stock, $.01 par value, 25,000,000
shares authorized, 7,279,310, and 6,659,846 shares
issued and outstanding in 1997 and 1996, respectively 73 67
Additional paid-in-capital 23,726 17,592
Retained deficit (2,470) (4,958)
Cumulative foreign currency translation adjustment (577) (45)
-------- --------
Total shareholders' equity 20,752 12,656
-------- --------
$ 89,747 $ 43,938
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE> 5
<TABLE>
THE O'GARA COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET SALES $ 28,036 $ 20,104 $ 51,853 $ 41,521
COST OF SALES 20,171 15,321 37,484 31,383
--------- --------- --------- ---------
Gross profit 7,865 4,783 14,369 10,138
OPERATING EXPENSES:
Selling and marketing 1,926 1,163 3,794 2,159
General and administrative 2,851 2,066 5,121 3,286
--------- --------- --------- ---------
Operating income 3,088 1,554 5,454 4,693
OTHER INCOME (EXPENSE):
Interest expense (885) (364) (1,404) (613)
Other, net 293 (24) 329 (78)
--------- --------- --------- ---------
Income before minority interest,
provision for income taxes and
extraordinary item 2,496 1,166 4,379 4,002
Minority interest 71 - 74 -
--------- --------- --------- ---------
Income before provision for income taxes
and extraordinary item 2,425 1,166 4,305 4,002
Provision for income taxes 970 - 1,623 -
--------- --------- --------- ---------
Income before extraordinary item 1,455 1,166 2,682 4,002
Extraordinary item, cost of early extinguishment
of debt, net of $129 tax benefit 194 - 194 -
--------- --------- --------- ---------
Net income $ 1,261 $ 1,166 $ 2,488 $ 4,002
========= ========= ========= =========
Earnings per share $ 0.17 $ 0.35
========= =========
Weighted average shares outstanding 7,294,600 7,141,389
========= =========
UNAUDITED PRO FORMA INFORMATION:
Gross profit $ 4,783 $ 10,138
Selling and marketing expenses 1,163 2,159
General and administrative expenses 2,101 3,356
--------- ---------
Operating income 1,519 4,623
Interest expense (286) (457)
Other, net (24) (78)
--------- ---------
Income before provision for
income taxes 1,209 4,088
Provision for income taxes 483 1,635
--------- ---------
Net income $ 726 $ 2,453
========= =========
Earnings per share $ 0.12 $ 0.40
========= =========
Weighted average shares outstanding 6,173,728 6,173,728
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
<TABLE>
THE O'GARA COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,488 $ 4,002
Adjustments to reconcile net income to net cash
used in operating activities
Depreciation and amortization 908 317
Minority interest 13 --
Decrease (increase) in receivables (5,546) 602
Decrease in advances to vendors 159 157
Increase (decrease) in costs and estimated earnings in excess
of billings on uncompleted contracts 3,443 (4,452)
Increase in inventories (2,290) (2,345)
Increase in prepaid expenses (844) (137)
Increase in other assets (1,076) (622)
Increase (decrease) in accounts payable (575) 229
Decrease in billings in excess of costs and
estimated earnings on uncompleted contracts (598) (1,236)
Increase (decrease) in accrued liabilities (1,879) 385
Increase (decrease) in customer deposits (509) 1,856
-------- -------
Net cash used in operating activities (6,306) (1,244)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (1,064) (787)
Purchase of Labbe, net of cash acquired (7,229) --
Purchase of ITI, net of cash acquired (377) --
Purchase of marketable securities (3,011)
Investment in shareholder and affiliate notes -- (317)
-------- -------
Net cash used in investing activities (11,681) (1,104)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving lines of credit (9,936) 3,457
Proceeds from long-term debt 34,875 --
Payments of long-term debt -- (80)
Repayment of shareholder notes -- (40)
Distribution to shareholders -- (230)
Foreign currency translation (532) 5
-------- -------
Net cash provided by financing activities 24,407 3,112
-------- -------
NET INCREASE IN CASH AND EQUIVALENTS 6,420 764
-------- -------
CASH AND EQUIVALENTS, beginning of period 1,454 324
-------- -------
CASH AND EQUIVALENTS, end of period $ 7,874 $ 1,088
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 924 $ 565
======== =======
Cash paid for taxes $ 1,510 $ --
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 7
THE O'GARA COMPANY
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
---------------------
The O'Gara Company (the "Company") is an integrated security company
with three business lines: security hardware products, security systems
integration and security services. The Security Hardware Products Group markets
all of the Company's armoring products, including ballistic and blast protected
armoring systems for military and commercial vehicles, aircraft and missile
components, through the Company's various O'Gara-Hess & Eisenhardt Armoring
Company subsidiaries and Labbe, S.A ("Labbe"). The Security Systems Integration
Group offers planning, design and hardware and software integration services
which are customized to meet specific satellite communications or site
protection needs of customers through its O'Gara Satellite Networks ("OSN"),
Next Destination Limited ("Next Destination") and O'Gara Security International,
Inc. subsidiaries. The Security Services Group offers security-related services
such as advanced driver training, background clearances, business intelligence,
country risk assessments, forensic auditing, force protection consulting and
private security agent training through its Palmer Associates division and its
O'Gara Security Associates, Inc. and International Training, Inc. ("ITI")
subsidiaries.
On November 15, 1996, the Company completed an initial public offering
of 2,048,000 shares of common stock at $9 per share, including 48,000 shares
issued through the underwriters' partial exercise of their over-allotment
option. The net proceeds from the offering were used by the Company for
retirement of bank debt, payment of the AAA Notes described below (Note 4),
purchase of a manufacturing facility in Mexico, initial payments in connection
with the acquisition of the net assets of Palmer Associates and transaction
costs associated with the offering.
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 Article 10 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 adjustments) considered necessary for fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1997, are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. The accompanying financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1996.
The accompanying consolidated financial statements consist of several
entities, all of which, until October 28, 1996, were owned or controlled by
substantially the same shareholders. In contemplation of the Company's initial
public offering, these entities and their respective shareholders entered into a
reorganization plan that was executed on October 28, 1996 (the
"Reorganization"). Accordingly, the accompanying consolidated financial
statements present, as a combination of entities under common control as if
using the pooling method of accounting, the financial position and related
results of operations of the Company on a consolidated basis for all periods
presented. All significant balances and transactions between the consolidated
entities have been eliminated in these consolidated statements.
(2) REVENUE RECOGNITION
-------------------
Revenue related to government contracts and most commercial contracts
results principally from long-term fixed price contracts and is recognized on
the percentage of completion method calculated utilizing the cost-to-cost
approach. The percent deemed to be complete is calculated by comparing the costs
incurred to date to estimated total costs for each contract. This method is used
because management
5
<PAGE> 8
considers costs incurred to be the best available measure of progress on these
contracts. However, adjustments to this measurement are made when management
believes that costs incurred materially exceed effort expended. Contract costs
include all direct material and labor costs, along with certain direct overhead
costs related to contract production.
Provisions for any estimated total contract losses on uncompleted
contracts are recorded in the period in which it becomes known that such losses
will occur. Changes in estimated total contract costs will result in revisions
to contract revenue. These revisions are recognized when determined.
Revenue related to telecommunications equipment and services is
recognized as equipment is shipped or as services are provided. Revenue and
related direct costs of brokered satellite time are recorded when payments are
received from customers.
(3) ACQUISITIONS
------------
The Company completed the following acquisitions during the first
quarter of 1997. All three of these acquisitions were accounted for as purchases
and the results of the acquired entities are included in the consolidated
results of the Company from their respective dates of acquisition. The Company
is still awaiting results of certain appraisals and other analysis; therefore
the allocation of purchase price is still preliminary in each case.
(a) Next Destination Acquisition--On February 5, 1997, the Company
acquired all of the shares of Next Destination for $3.5 million,
consisting of $1.75 million in shares of the Company's common
stock (170,234 shares) and $1.75 million in seller-provided
financing in the form of three-year 6% notes. The former managing
director and founder of Next Destination continues to manage the
business and is subject to a three year non-competition
agreement. Costs in excess of assets acquired is expected to be
$3.2 million and will be amortized over 15 years.
(b) Labbe Acquisition--On February 12, 1997, the Company acquired all
of the shares of Labbe for $14,230,000 consisting of $10.7
million in cash, financed through funds advanced under the
Company's credit facility, and 376,597 shares of the Company's
common stock. The former shareholders of Labbe, who were
employed by Labbe prior to the acquisition, continue in their
formerly-held capacities. The former shareholders also are
subject to certain non-competition agreements upon their leaving
the employment of the Company. Costs in excess of assets
acquired is expected to be $7.0 million and will be amortized
over 30 years.
(c) ITI Acquisition-On March 24, 1997, the Company acquired all of
the shares of ITI for $2,540,000, consisting of $0.5 million in
cash, financed through the Company's credit facility, 68,086
shares of the Company's common stock, and $1.2 million in
seller provided financing in the form of 2-year, 10%,
subordinated notes. The former shareholders of ITI, who were
employed by ITI prior to the acquisition, continue in their
formerly-held capacities. The former shareholders are also
subject to certain non-competition agreements upon their leaving
the employment of the Company. Costs in excess of assets
acquired is expected to be $2.0 million and will be amortized
over 15 years.
6
<PAGE> 9
In connection with the acquisitions of Labbe, Next Destination and ITI,
assets were acquired and liabilities were assumed as follows (in thousands):
<TABLE>
<CAPTION>
Next
Destination ITI Labbe
--------------- -------------- --------------
<S> <C> <C> <C>
FAIR VALUE OF ASSETS ACQUIRED INCLUDING:
Cash - $23 $3,501
Accounts receivable $1,830 310 4,690
Inventories 1,276 - 2,911
Costs and estimated earnings in
excess of billings on uncompleted
contracts - - 732
Prepaid expenses - 4 64
Property, plant & equipment 80 213 3,360
Intangible assets - - 802
Other non-current assets - 12 2,357
Goodwill 3,207 2,015 6,961
--------------- -------------- --------------
$6,393 $2,577 $25,378
Less: Cash paid for net assets - (500) (10,730)
Fair value of debt issued (1,575) (1,231) -
Fair value of stock issued (1,851) (810) (3,435)
=============== ============== ==============
$2,967 $36 $11,213
=============== ============== ==============
LIABILITIES ASSUMED INCLUDING:
Liabilities assumed and acquisition
costs $2,967 $19 $9,710
Debt - 17 1,503
=============== ============== ==============
$2,967 $36 $11,213
=============== ============== ==============
</TABLE>
(4) S CORPORATION DISTRIBUTION
--------------------------
From 1988, when O'Gara-Hess & Eisenhardt Armoring Company ("OHE")
elected S Corporation status until October 28, 1996, when that status
terminated, OHE had made distributions from time to time to its shareholders for
the purpose of funding their income tax payments on the income generated by OHE,
which income was taxable to the shareholders whether or not distributed. In
connection with the Reorganization, OHE distributed to its shareholders a
dividend of $9.0 million in the form of long-term notes (the "AAA Notes"), which
represented the undistributed previously taxed income of OHE as an S Corporation
through the effective date of the Reorganization.
(5) PROVISION FOR INCOME TAXES
--------------------------
During the time OHE was treated as an S Corporation under Subchapter S
of the Code and comparable provisions of certain state tax laws, it paid no
federal income tax. On October 28, 1996, OHE terminated its S Corporation status
and, from that date forward, is responsible for federal and state income tax.
(6) INVENTORIES
-----------
Inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method and includes the following (in thousands):
7
<PAGE> 10
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------------ -------------------
(unaudited)
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . $7,671 $4,782
Vehicle costs and work-in-process. . . . . . . 7,540 3,952
------------------- -------------------
$15,211 $8,734
=================== ===================
</TABLE>
(7) PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS ADJUSTMENTS (UNAUDITED)
-----------------------------------------------------------------------
The pro forma consolidated statements of operations information
presents the pro forma effects on the historical consolidated financial
information reflecting certain transactions as if they occurred on January 1,
1996. The following adjustments have been reflected in the pro forma
consolidated statements of operations information (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Amortization of intangible assets resulting from the purchase
of Palmer Associates, S.C ............................................ $ (35) $ (70)
Elimination of interest expense relating to the retirement of
bank debt ............................................................. 78 156
Provision for income taxes at an effective rate of 40% as if
OHE had been a C Corporation and as if the Company had
filed a consolidated U.S. Federal tax return .......................... (483) (1,635)
------------------------------
Total .................................................................. $(440) $(1,549)
==============================
</TABLE>
(8) NEW PRONOUNCEMENTS
------------------
In 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS
128), effective for fiscal years ending after December 15, 1997. The new
standard replaces primary earnings per share ("EPS") with basic EPS, simplifies
EPS calculations and requires restatement of all prior period EPS data. The
Company intends to adopt the provisions of SFAS 128 during the fourth quarter of
1997 with no material impact anticipated.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE
INCOME (SFAS No. 130), which requires comprehensive income and the associated
income tax expense or benefit be reported in a financial statement with the same
prominence as other financial statements with an aggregate amount of
comprehensive income reported in that same financial statement. SFAS No. 130
permits the statement of changes in shareholders equity to be used to meet this
requirement. "Other Comprehensive Income" refers to revenues, expenses, gains
and losses that under GAAP are included in comprehensive income but bypass net
income. The Company intends to adopt SFAS No. 130 in the first quarter of fiscal
1998. The Company anticipates that adoption of SFAS No. 130 will not be
material.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION (SFAS No. 131), which requires disclosure for each segment in which
the chief operating decision maker organizes these segments within a company for
making operating decisions and assessing performance. Reportable
8
<PAGE> 11
segments are based on products and services, geography, legal structure,
management structure and any manner in which management disaggregates a company.
The Company intends to adopt SFAS No. 131 in the first quarter of fiscal 1998.
The Company anticipates that adoption of SFAS No. 131 will not be material.
(9) SUPPLEMENTAL CASH FLOW DISCLOSURE
---------------------------------
Cash and equivalents consist of all operating cash accounts and
investments with an original maturity of three months or less. Marketable
securities consist of available-for-sale commercial paper obligations which
mature or will be available for use in operations in 1997. These securities are
valued at current market value, which approximates cost.
<TABLE>
Non-cash activity (in thousands):
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Fair value of stock issued in connection with
acquisition of ITI.........................................................$810 -
Notes issued in connection with acquisition
of ITI...................................................................$1,231 -
Fair value of stock issued in connection
with acquisition of Next Destination.....................................$1,851 -
Notes issued in connection with acquisition
of Next Destination......................................................$1,575 -
Fair value of stock issued in connection with
acquisition of Labbe.....................................................$3,435 -
Note payable obligation incurred and receivable forgiven in
connection with non-compete agreement................................ - $115
</TABLE>
(10) FUTURES CONTRACT
----------------
The Company on occasion utilizes derivative financial instruments,
primarily futures contracts, to mitigate its exposure to foreign currency rate
fluctuations in transactions denominated in a foreign currency. At June 30,
1997, one such futures contract was outstanding with a bank at a contract amount
in excess of its calculated fair market value. As a result, an adjustment has
been recorded in Cumulative Foreign Currency Translation in the balance sheet.
The contract effectively hedges the Company's exposure to foreign currency
fluctuations associated with a loan to its Labbe subsidiary.
9
<PAGE> 12
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The O'Gara Company is an integrated security company with three
business lines: security hardware products, security systems integration and
security services. The Security Hardware Products Group markets all of the
Company's armoring products, including ballistic and blast protected armoring
systems for military and commercial vehicles, aircraft and missile components,
through the Company's various O'Gara-Hess & Eisenhardt Armoring Company
subsidiaries and Labbe, S.A. The Security Systems Integration Group offers
planning, design and hardware and software integration services which are
customized to meet specific satellite communications or site protection needs of
customers through its O'Gara Satellite Networks, Next Destination Limited and
O'Gara Security International, Inc. subsidiaries. The Security Services Group
offers security-related services such as advanced driver training, background
clearances, business intelligence, country risk assessments, forensic auditing,
force protection consulting and private security agent training through its
Palmer Associates division and its O'Gara Security Associates, Inc. and
International Training, Inc. subsidiaries.
The Company's net sales of commercial armoring products for the six
months ended June 30, 1997, were $23.7 million, an increase of $16.1 million, or
210%, compared to $7.6 million for the six months ended June 30, 1996. Overall,
the Company's net sales in the first half of 1997 increased to $51.9 million,
compared to $41.5 million for the first half of 1996, an increase of 25%. The
increase in revenue, both in commercial armoring and overall, was due primarily
to the inclusion of operating results from acquisitions made by the Company in
the first quarter of 1997 ( the "Acquisitions"), along with continued growth in
the Company's start-up operations, especially in Brazil and Mexico, partially
offset by a decrease in net sales of military products due to a return to more
normal levels of military production (see "Results of Operations" below). The
Company made the following acquisitions in the first quarter of 1997 and the
results of the acquired entities are included from the dates of their respective
acquisitions:
1) On February 5, 1997, the Company completed the acquisition of all of
the shares of Next Destination of Salisbury, UK, a distributor of high
technology products for the global positioning satellite and satellite
communication markets. Next Destination was the primary source for the
increase in net revenue reported by the Security Systems Integration
Group in 1997 compared to 1996.
2) On February 12, 1997, the Company completed the acquisition of all
of the shares of Labbe, a leading armorer of commercial and private
vehicles headquartered in Lamballe, France. The acquisition of Labbe
had a substantial positive effect on the level of reported commercial
revenue generated by the Security Hardware Products Group.
3) On March 24, 1997, the Company completed the acquisition of all of
the shares of ITI, a provider of advanced security training
headquartered near Washington, D.C. ITI reports revenue through the
Company's Security Services Group.
10
<PAGE> 13
On August 7, 1997, The O'Gara Company announced it had reached an
agreement to merge with Kroll Associates ("Kroll"), a provider of business
intelligence, investigative and risk management services worldwide. The
shareholders of Kroll will be issued 6,750,000 shares of Company common stock in
exchange for all of the outstanding stock and options of Kroll. The transaction
is expected to qualify as a pooling of interests, and should be completed during
the fourth quarter of 1997. The agreement is subject to various conditions,
including shareholder approval of both companies. The combined entity will be
called The Kroll-O'Gara Company.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the items noted
as a percentage of net sales:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Security hardware products:
Military 35.3% 84.7% 37.3% 72.4%
Commercial 44.1 3.8 45.6 18.4
Security systems integration 18.0 11.5 15.1 9.2
Security services 2.6 - 2.0 -
------------ ------------ ------------ ------------
Total net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.9 76.2 72.3 75.6
------------ ------------ ------------ ------------
Gross profit 28.1 23.8 27.7 24.4
Operating expenses:
Selling and marketing 6.9 5.8 7.3 5.2
General and administrative 10.2 10.3 9.9 7.9
------------ ------------ ------------ ------------
Operating income 11.0 7.7 10.5 11.3
Other income (expense):
Interest expense (3.2) (1.8) (2.6) (1.5)
Other, net 1.0 (0.1) 0.5 (0.2)
------------ ------------ ------------ ------------
Income before minority interest,
provision for income taxes
and extraordinary item 8.9 5.8 8.4 9.6
Minority interest 0.3 - 0.1 -
------------ ------------ ------------ ------------
Income before provision for
income taxes and extraordinary item
8.6 5.8 8.3 9.6
Provision for income taxes 3.4 - 3.1 -
------------ ------------ ------------ ------------
Income before extraordinary item
5.2 5.8 5.2 9.6
Extraordinary item 0.7 - 0.4 -
============ ============ ============ ============
Net income 4.5% 5.8% 4.8% 9.6%
============ ============ ============ ============
</TABLE>
Net Sales. Net sales for the Security Hardware Products Group for the three
and six months ended June 30, 1997 were $22.3 million and $43.0 million,
respectively. This represented an increase of $4.5 million, or 25% , over the
three month period ended June 30, 1996 and an increase of $5.3 million, or 14%,
over the six month period ended June 30, 1996. This includes net sales of
commercial armoring products, which increased $11.6 million from $0.8 million in
the second quarter of 1996 to $12.4 million in 1997, and net sales of military
armoring products, which decreased $7.1 million, or 42%, from $17.0 million in
the second quarter of 1996 to $9.9 million in 1997. For the six months ended
June 30, 1997, net sales of commercial armoring products increased $16.1
million, or 210%, from $7.6 million to $23.7 million over
11
<PAGE> 14
the same period in 1996, and net sales of military products decreased $10.7
million, or 36%, from $30.0 million to $19.3 million. The 1996 net sales of
military products were favorably affected by a request by the U.S. Government to
accelerate the armoring of High Mobility Multi-Purpose Wheeled Vehicles
("HMMWVs") and the manufacture of HMMWV armor kits. HMMWV armoring by the
Company returned to a non-accelerated level in 1997.
In order to complete the military production schedule dictated by the
acceleration of the HMMWV contract, certain of the Company's workforce was
diverted from producing commercial products to producing the HMMWV. This
resulted in abnormally low levels of revenue in commercial armoring in the three
and six months ended June 30, 1996. Commercial armoring at the affected
subsidiaries returned to more normal levels during the first half of 1997. The
reduction in commercial revenue due to the HMMWV contract acceleration and the
subsequent return of normal commercial revenue levels along with the growth in
1997 from the Acquisitions and start-up operations previously discussed, combine
to explain the large variation in commercial revenue between the two years.
Net sales for the Security Integration Group were $5.0 million in the three
months ended June 30, 1997, an increase of $2.7 million or 117%, from $2.3
million in the same period in 1996. For the six months ended June 30, 1997, net
sales for the Security Integration Group were $7.8 million, an increase of $4.0
million or 104%, from $3.8 million for the same period in 1996. This increase is
due to the acquisition of Next Destination in the first quarter of 1997 along
with the continued development of security integration operations put in place
in 1996.
Net sales for the Security Services Group were $0.7 million and $1.0
million for the three and six months ended June 30, 1997, respectively. There
were no net sales for the Security Services Group in the first half of 1996.
Revenue for 1997 is attributable to the acquisitions of Palmer Associates in the
fourth quarter of 1996 and ITI in the first quarter of 1997, and revenue booked
by the Company's O'Gara Security Associates, Inc. subsidiary.
Cost of Sales. Cost of sales for the three months ended June 30, 1997
increased $4.9 million, or 32%, to $20.2 million from $15.3 million in the same
period in 1996. For the six months ended June 30, 1997, cost of sales increased
$6.1 million, or 19%, from $31.4 million to $37.5 million. In both instances,
the increase in cost of sales was due to increased activity resulting from the
Acquisitions.
Gross profit as a percentage of net sales was 28.1% and 27.7% for the three
and six months ended June 30, 1997, respectively, as compared to 23.8% and 24.4%
for the same periods in 1996. As contracts are completed under percentage of
completion accounting, actual cost and gross profit may be revised from
previously estimated amounts as a result of the Company's performance in
completing the requirements of each contract. Gross profit was favorably
affected in the three and six months ended June 30, 1997 by adjustments
resulting from contracts completed.
The Company continues to expect that future margin percentages will be
higher than experienced in 1995 and 1996 due to the effect of increased sales
from foreign subsidiaries and a more favorable mix of commercial revenue in
comparison with military revenue; however, it does not, in future periods,
expect to maintain the level of gross margin percent reached in the first half
of 1997.
Operating expenses. Operating expenses for the three months ended June 30,
1997 increased $1.6 million, or 48%, to $4.8 million, compared to $3.2 million
in the same period in 1996. In the six months ended June 30, 1997, operating
expenses increased from $5.4 million to $8.9 million, an increase of $3.5
million, or 64%. The dollar increase was primarily attributable to an increased
level of overhead expenses included in the Company's operations resulting from
the Acquisitions. Additionally, the Company experienced an increase, from 13.1%
in the first half of 1996 to 17.2% in the first half of 1997, in the percentage
of operating expenses compared to net sales. This increase was primarily
attributable to
12
<PAGE> 15
overhead put in place throughout the organization to ensure the growth in
commercial revenue seen in 1997, including investments made in its the foreign
subsidiaries. In addition, corporate overhead requirements contributed to the
increase. While total operating expenses will show an increase in 1997 in
comparison to 1996, the Company currently expects a reduction in the percentage
of operating expenses to net sales in 1997 compared to 1996, as a result of an
increased level of business activity.
Interest expense. Interest expense for the three months ended June 30, 1997
increased $0.5 million, or 143%, to $0.9 million, compared to $0.4 million in
the same period in 1996. For the six months ended June 30, 1997 interest expense
increased $0.8 million, or 129%, to $1.4 million from $0.6 million for the same
period in 1996. In both instances, the increase was a result of the financing to
fund the Acquisitions along with an increased amount of outstanding borrowings
as a result of the sale of Senior Notes (see Liquidity and Capital Resources).
The Company expects interest expense will continue to be significantly higher in
1997 compared to 1996.
Other, net. Other, net income (expense) for the six months ended June
30, 1997 was $0.3 million, an increase of $0.3 million from the same period in
1996. For the three months ended June 30, 1997, Other, net was $0.3 million, an
increase of $0.4 million, from ($0.1) million for the same period in 1996. In
both the three and six months ended June 30, 1997, Other, net includes the
effect of an agreement reached by the Company with International Electronics
Engineering ("IEE") to sell the Company's exclusive rights to distribute IEE's
Passenger Presence Detection sensors in the North American automotive market.
These distribution rights, which sold for $0.4 million, gave the Company the
exclusive right to seek additional customers and receive commissions based on
sales of sensors designed to prevent automotive airbags from inflating when an
infant is in the front seat.
Income before provision for income taxes and extraordinary item. Income
before provision for income taxes and extraordinary item for the three months
ended June 30, 1997 increased to $2.4 million, a change of 108%, compared to
$1.2 million for same period in 1996. For the six months ended June 30, 1997,
income before provision for income taxes and extraordinary item increased $0.4
million, or 8%, to $4.4 million from $4.0 million. The increase in net income is
the result of the inclusion of the operating results of the Acquisitions in
1997. The positive effect of the Acquisitions was partially offset by the
completion of the HMMWV acceleration contract in 1996 and subsequent return to a
more normal level of military production in 1997.
As a percent of net sales, income before provision for income taxes and
extraordinary item decreased from 10% to 8% for the six months ended June 30,
1997. This decrease was a result of operations put in place by the Company
necessary to attain the growth in commercial revenue which required the support
of a more overhead intensive structure, including requirements in
personnel and facilities.
Provision for income taxes. The provision for income taxes was $1.0 million
and $1.6 million for the three and six months ended June 30, 1997, respectively.
There was no provision for income taxes recorded for the three and six month
periods ending June 30, 1996 due to the Company's S Corporation status which was
terminated on October 28, 1996 in conjunction with the Reorganization.
Extraordinary item. As a result of new working capital arrangements put in
place by the Company (see Liquidity and Capital Resources), all prepaid fees
associated with the previous financing arrangements recorded by the Company were
charged against earnings as an extraordinary item in the second quarter of 1997.
The amount charged is shown net of an applicable tax benefit of $0.1 million.
13
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
General. The Company historically has met its operating cash needs by
utilizing borrowings under its credit arrangements to supplement cash provided
by net income and depreciation and amortization.
Credit Facility. On May 30, 1997 the Company issued and sold $35.0 million
worth of Senior Notes due May 30, 2004 (the "Senior Notes"), to certain
institutional investors. The Senior Notes bear interest at a rate of 9.56%,
subject to a step down of the associated interest rate if the Company meets
certain defined requirements. The Senior Notes impose covenant restrictions
on the Company's operations, including limitations on dividends and priority
debt, and constraints on specific investments, as well as requirements relating
to the Company's reported net worth, fixed charges coverage and limitations on
outstanding debt. Of the $35.0 million in proceeds from the sale of the Senior
Notes, $26.2 million was used to pay off the term loan and revolver from the
Company's previous credit agreement. The payoff also resulted in the recognition
of an extraordinary charge against earnings for the bank fees associated with
the previous agreement.
On May 30, 1997, the Company entered into a new credit agreement with
KeyBank National Association. The new agreement provides for a revolving line of
credit of $4.5 million and a letter of credit facility of approximately $5.7
million. The revolving credit facility bears interest at the prime rate less
.5%, or, at the Company's option, the LIBOR rate plus 2%. The credit agreement
imposes requirements on the Company's reported fixed charge coverage ratio,
net worth and debt capitalization, along with certain restrictions on
investments, acquisitions and capital expenditures.
The new credit agreement replaces a previous arrangement the Company
entered into on February 11, 1997, with The Fifth Third Bank and LaSalle
National Bank. The previous arrangement provided for (i) a one-year revolving
line of credit of up to $12.0 million, (ii) a five-year term loan in the amount
of $16.0 million, and (iii) a $5.5 million letter of credit facility.
On July 31, 1997, there were no borrowings under the new revolving credit
agreement. The Company believes that proceeds from the sale of the Senior Notes
and borrowings from the new credit facility, along with cash provided by net
income and depreciation and amortization, will be sufficient to fund the
Company's cash requirements through 1997 and into 1998, without taking into
account the effect of the combination with Kroll. Management will reassess the
working capital requirements of the combined entity as it sees fit, and will
continue to review strategic opportunities and other sources of working capital.
Cash flows from operating activities. Net cash used in operating activities
was $6.3 million and $1.2 million for the six months ended June 30, 1997 and
1996, respectively. This change was primarily due to increases in accounts
receivable as a result of the growth in business activity and a reduction in
accrued liabilities resulting from the close-out of certain contracts with the
U.S. Government.
Capital expenditures. Historically, the Company has limited its capital
expenditure requirements by leasing certain facilities and equipment. Capital
expenditures totaled $1.1 million for the six months ended June 30, 1997, and
$0.8 million for the same period in 1996. The credit facility currently in place
contains a requirement that the Company may not exceed $1.5 million in capital
expenditures in any fiscal year.
In addition to capital expenditures, the Company also used $7.7 million in
net cash in connection with the acquisition of Labbe and ITI in the first
quarter of 1997.
Cash flows from financing activities. Net cash provided by financing
activities was $24.4 million and $3.1 million for the six months ended June 30,
1997 and 1996, respectively. The increase in 1997 was due primarily to issuance
of the Senior Notes executed in the second quarter of 1997.
14
<PAGE> 17
Foreign operations. The Company attempts to mitigate the risks of doing
business in foreign developing countries by separately incorporating its
operations in such countries; entering into contracts providing for payment in
U.S. dollars instead of the local currency in certain instances; maintaining
reserves for credit losses; and maintaining insurance on equipment to protect
against losses related to political risks and terrorism. In addition, the
Company will, from time to time, attempt to mitigate the risk of doing business
in a foreign currency by utilizing futures contracts and other derivative
financial instruments.
Quarterly fluctuations. The Company's operations are not seasonal, but may
fluctuate on a quarterly basis as a result of the timing of contract costs. The
incurrence of contract costs and related production scheduling must be
responsive to specific customer delivery requirements, which may involve the
acceleration of deliveries under a contract at a customer's request, such as
occurred with the HMMWV contract in 1996. The Company's liquidity may be
affected by the payment terms of its Department of Defense and certain foreign
government contracts.
15
<PAGE> 18
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 1, 1997 the Company settled the lawsuit filed against it,
O'Gara-Hess & Eisenhardt Armoring Company and Thomas M. O'Gara by O'Gara
Protective Services, Inc. ("OPS"). The settlement involved payment of $75,000
together with the Company's agreement not to compete against OPS with certain
limited specified parties.
Other than as set forth above, the Company is not involved in any
litigation or legal proceedings at this time and is not aware of any material
litigation or proceeding threatened against it.
ITEM 2. CHANGES IN SECURITIES
No changes to securities for the three months ended June 30, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Supplemental Agreement Modification to acquire
360 additional armored HMMWV's between
United States Army Tank Automotive Command
and O'Gara-Hess and Eisenhardt Armoring
Company dated March 31, 1997
11 Computation of Earnings Per Common Share and
Pro Forma Earnings Per Common Share
27 Financial Data Schedule (Edgar version only)
99 Press release dated August 7, 1997
announcing the proposed merger of The
O'Gara Company and Kroll Associates.
(b) Reports on Form 8-K.
During the quarter ended June 30, 1997, the Company
filed the following current reports on Form 8-K:
-Date of Report: April 30, 1997; Items 5
and 7(c), reporting The O'Gara Company
first quarter earnings.
-Date of Report: May 30, 1997; Items 5 and
7(c), reporting the closing of financing
arrangements on the Private Placement of
Senior Notes and a new credit arrangement.
16
<PAGE> 19
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 as of the 12th day of August, 1997.
THE O'GARA COMPANY
By /s/ Nicholas P. Carpinello
-----------------------------
Nicholas P. Carpinello
Executive Vice President, and
Chief Financial Officer
17
<PAGE> 1
<TABLE>
<S> <C>
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT 1. CONTRACT ID CODE PAGE OF PAGES
J 1
- -----------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT/MODIFICATION NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REG NO 5. PROJECT NO (if applicable)
P00036 31 MAR 1997 See Schedule ACN
- ------------------------------------------------------------------------------------------------------------------------------------
6. BY CODE W56HZV 7. ADMINISTERED BY (if other than item 6) CODE S3605A
.ACOM --------------------- DCNC DAYTON ----------------------
AMSTA-AQ-MDD /N5 WPN SYS: N5 BUILDING 30,
PAUL MUELLER /810-574-8822 1725 VAN PATTON AVENUE
WARREN, MICHIGAN 48397-3000 WRIGHT PATTERSON AFB, OH 45433
SCD FAS ADF FT
A NONE SC1010
- ------------------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State and ZIP Code) [X] 9A. AMENDMENT OF SOLICITATION NO.
O CARA-HESS & EISENHARDT ARMORING ---
CO J --------------------------------------------
9113 LE SAINT RD 9B. DATED (SEE ITEM 11)
FAIRFIELD OH 45014
--------------------------------------------------
10A. MODIFICATION OF CONTRACT/ORDER NO
X DLLEO794C0406
---------------------------------------------
10B. DATED (SEE ITEM 13)
- --------------------------------------------------------------------------------
CODE 6W128 FACILITY CODE 94MAY13
- ------------------------------------------------------------------------------------------------------------------------------------
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] The above numbered solicitation is amended as set forth in item 14. The hour and date specified for receipt of Offers
[ ] is extended, [ ] is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended by
one of the following methods:
(a) By completing items 8 and 16, and returning ____ copies of the amendments: (b) By acknowledging receipt of this amendment
on each copy of the offer submitted: or (c) By separate letter of telegram which includes a reference to the solicitation
and amendment members. FAILURE OF YOUR ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR
TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an
offer directly submitted, such changes may be made by telegram or letter, provided each telegram or letter makes reference to
the solicitation and this amendment, and is received prior to the opening hour and date specified.
- ------------------------------------------------------------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (if required)
ACRN AZ: NET INCREASE $26,280,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
C 13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS.
IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED ON ITEM 14.
- ------------------------------------------------------------------------------------------------------------------------------------
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN
THE CONTRACT/ORDER NO. IN ITEM 10A.
- ------------------------------------------------------------------------------------------------------------------------------------
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office,
appropriation data etc.) SET FORTH IN ITEM 14. PURSUANT TO THE AUTHORITY OF FAR 43.103(D).
- ------------------------------------------------------------------------------------------------------------------------------------
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
FAR6.302-1
X
- ------------------------------------------------------------------------------------------------------------------------------------
D. OTHER (Specify type of modification and authority)
- -----------------------------------------------------------------------------------------------------------------------------------
E. IMPORTANT: Contractor [ ] is not. [X] is required to sign this document and return copies to the issuing office.
- ------------------------------------------------------------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCP section headings including solicitation/contract subject matter where
applicable.)
See second page for description.
Accept as provided herein, all terms and conditions of the document referenced in item 9A or 10A as heretofore changed, remains
unchanged and in full force and effect.
- ------------------------------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print) 16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
RM 3/31/97 For Michael J. Lennon DANNY R. LEADINGHAM
President OHEAC Contracting Officer
- ------------------------------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR 15C. DATE SIGNED 16B. UNITED STATES OF AMERICA 16C. DATE SIGNED
/S/ GW Allen VP Operations BY: /s/ Danny Leadingham 31 MAR 1997
--------------------------------- -------------------------
(Signature of person authorized 3/31/97 (Signature of Contracting Officer)
to sign)
- -----------------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-162-8070 30-106-02 STANDARD FORM 30 (REV. 10-83)
PREVIOUS EDITIONS UNUSABLE Protected by GSA FAR (46 CFR)
5223
</TABLE>
<PAGE> 2
DAAE07-94-C-0406
P00036
Page 2
PROGRAM: UP ARMOR HMMW ECV XM1114
CONTRACT: DAAE07-94-C-0406
MODIFICATION: P00036
PREVIOUS CONTRACT AMOUNT: $67,707,495.00
AMOUNT OF THIS ACTION: 26,280,000.00
TOTAL CONTRACT AMOUNT: $93,987,495.00
1. The purpose of this Supplemental Agreement Modification P00036 is to acquire
360 each XM1114 vehicles with a 100% option to acquire an additional quantity of
360 each.
a. CLIN 0016AA is established for the basic quantity of 360 vehicles at
the firm fixed price of $73,000.00 each, total amount $26,280,000. Delivery is
scheduled for Aug 1997 through Aug 1998.
b. For the option quantity of 360 vehicles, the unit price(s) and terms
of the option shall be established in Clause H.22, Option to Increase Vehicle
Quantities (For Modification P00036) within 30 days of the date of this
Modification P00036.
2. With respect to this Modification P00036, the Government and the Contractor
agree to modify the contract as described below:
a. SECTION B
CLIN 0016AA is established as follows:
CLIN DESCRIPTION QTY UNIT PRICE AMOUNT
- ---- ----------- --- ---------- ------
0016AA XM1114 with High 360 $73,000.00 $26,280,000.00
Capacity ECS
b. SECTION F
Clause F.5, Required Delivery Schedule, is revised to establish
delivery of the 360 vehicles in Aug 1997 through Aug 1998.
<PAGE> 3
DAAE07-94-C-0406
P00036
Page 3
c. SECTION G
The Accounting and Appropriation Data applicable to CLIN 0016AA is
incorporated into the contract.
d. SECTION H
Clause H.22, Option to Increase Vehicle Quantities (For Modification
P00036) is incorporated into the contract.
e. All other contract clauses remain unchanged.
3. The contract is modified by replacing or adding the following
pages:
a. Page 17a is deleted and replaced with the attached, revised page
17a.
b. New contract pages 2y, 2z, 18v, and 26e are added to contract.
4. As a result of this Modification P00036, the contract amount is increased by
$26,280,000.00 from $67,707,495.00 to $93,987,495.00.
5. All other terms and conditions remain unchanged.
<PAGE> 4
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
No. of Document Being Continued Page P.8
CONTINUATION SHEET DAAEO7-94-C-0406 MOD. No.: P00036 2y
- -------------------------------------------------------------------------------------------------------------------------
Name of Offeror or Contractor
O GARA-HESS & EISENHARDT ARMORING
- -------------------------------------------------------------------------------------------------------------------------
ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
016AA PRODUCTION QUANTITY 360 EA $ 73,000.00000 $ 26,280,000.00
PRON: JZ72M985JZ ACRN: AZ -------------- ---------------
AMS CD: 51103446
SECTION B - Supplies or Services and Prices/Costs
HSN: 2320-01-413-3739
MOUN: HMMWV-M114 UP-ARMOR
FSCM: 19207
PART NR: 8710015
SECURITY CLASS: UNCLASSIFIED
SECTION C - Description/Specs./Work Statement
Up armor Expanded Capacity Vehicle (UA-ECV) HMMWV,
with High Capacity ECS as further described in
Section C.4.
(End of narrative C001)
SECTION D - Packaging and Marking
Best Commercial Packaging
(End of narrative D001)
SECTION E - Inspection and Acceptance
INSPECTION: ORIGIN ACCEPTANCE: ORIGIN
SECTION F - Deliveries of Performance
DOC SUPPL
REL CD MILSTRIP ADDR SIG CD MARK FOR TP CP
------ -------- ---- ------ -------- ------
001 W56HZW7052S103 Y00000 M 3
PROJ CD BRK BLK PT
------- ----------
IBB
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
001 26 97AUG31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
002 30 97SEP30
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
003 30 97OCT31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
004 30 97NOV30
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
005 30 97DEC31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
006 30 98JAN31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
007 30 98FEB28
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
008 30 98MAR31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
009 30 98APR30
</TABLE>
Page added by P00036.
- --------------------------------------------------------------------------------
NSN 7540-01-152-8067 50336-101 OPTIONAL FORM 336(4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 5
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
No. of Document Being Continued Page P.9
CONTINUATION SHEET DAAEO7-94-C-0406 MOD. No.: P00036 2Z
- -------------------------------------------------------------------------------------------------------------------------
Name of Offeror or Contractor O GARA-HESS & EISENHARDT ARMORING
- -------------------------------------------------------------------------------------------------------------------------
ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
010 30 98MAY31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
011 30 98JUN30
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
012 30 98JUL31
DEL REL CD QUANTITY DEL DATE
---------- -------- --------
013 4 98AUG31
FOB POINT: ORIGIN
*** CLIN 0016AA ***
SHIP TO: PARCEL POST ADDRESS
-------------------
(Y00000) SHIPPING INSTRUCTIONS FOR CONSIGNEE
(SHIP-TO) WILL BE FURNISHED PRIOR
TO THE SCHEDULED DELIVERY DATE FOR
ITEMS REQUIRED UNDER THIS
REQUISITION
</TABLE>
Page added by P00036.
- --------------------------------------------------------------------------------
NSN 7540-01-152-8067 50336-101 OPTIONAL FORM 336(4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
<PAGE> 6
F.5 Required Delivery Schedule
<TABLE>
<CAPTION>
ACCELERATED DELIVERY SCHEDULE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31JAN96 29FEB96 31MAR96 30APR96 31MAY96 30JUN96 31JUL96 31AUG96 30SEP96 31OCT96 30NOV96 31DEC96 31JAN97
XM1114 UA HMMWV
Monthly Deliveries 19 23 28 45 65 70 70 70 36
Total Deliveries 19 42 70 115 180 250 320 390 426
NORMAL DELIVERY SCHEDULE
XM1114 UA HMMWV
Monthly Deliveries 31 24 23 23
Total Deliveries 31 55 78 101
NORMAL DELIVERY SCHEDULE CONT'D.
<CAPTION>
28FEB97 31MAR97 30APR97 31MAY97 30JUN97 31JUL97 31AUG97 30SEP97 31OCT97 30NOV97 31DEC97 31JAN98 28FEB98 *
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
XM1114 UA HMMWV
Monthly Deliveries
Cont'd. 23 23 23 23 23 23 30 30 30 30 30 30 30 *
Total Deliveries
Cont'd. 124 147 170 193 216 239 269 299 329 359 389 419 449 *
<CAPTION>
NORMAL DELIVERY SCHEDULE CONT'D. *
31MAR98 30APR98 31MAY98 30JUN98 31JUL98 31AUG98 30SEP98 31OCT98 30NOV98 31DEC98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
XM1114 UA HMMWV *
Monthly Deliveries
Cont'd. 30 30 30 30 30 4 *
Total Deliveries 479 509 539 569 599 603 *
Cont'd.
*Page changed by P00036. Previous change by P00030.
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
No. of Document Being Continued Page P.11
CONTINUATION SHEET DAAEO7-94-C-0406 MOD. No.: P00036 18v
- -------------------------------------------------------------------------------------------------------------------------
Name of Offeror or Contractor
O GARA-HESS & EISENHARDT ARMORING
- -------------------------------------------------------------------------------------------------------------------------
SECTION G - CONTRACT AADMINISTRATION DATA
Accounting & Appropriation Data
<S> <C> <C> <C> <C> <C> <C>
PRON/ OBLG STAT/ INCREASE/DECREASE CUMULATIVE
LINE ITEM AMS CD ACRN JOB ORD NO PRIOR AMOUNT AMOUNT AMOUNT
- --------- ------ ---- ---------- ------------ ----------------- ----------------
0016AA JZ72M985JZ AZ 1 $ 0.00 $ 26,280,000.00 $ 26,280,000.00
51103446
----------------
NET CHANGE $ 26,280,000.00
NET CHANGE BY ACCOUNTING INCREASE/DECREASE
ACRN ACCOUNTING CLASSIFICATION STATION AMOUNT
- ---- ------------------------- ---------- -----------------
AZ 21 72035 75J5J01P5110 25CZ S2011372M985 W56HZV $ 26,280,000.00
----------------
NET CHANGE $ 26,280,000.00
PRIOR AMOUNT INCREASE/DECREASE CUMULATIVE
NET CHANGE FOR AWARD OF AWARD AMOUNT OBLIGATED AMOUNT
- -------------------- ------------ ----------------- ----------------
$67,707,495.00 $ 26,280,000.00 $ 93,987,495.00
</TABLE>
Page added by POOO36.
<PAGE> 8
DAAE307-94-C-0406
Page 26e
H.22 OPTION TO INCREASE VEHICLE QUANTITIES (FOR MODIFICATION P00036)
a. Option quantity. The Government reserves the right to increase the
basic quantity of XM1114 vehicles under P00036 by an additional quantity of
XM1114 vehicles not to exceed 100% of the total basic quantity of XM1114s under
P00036, or 360.
b. Option period. To be established within 30 days after date of
Modification P00036.
c. Option unit price(s). To be established within 30 days after date
of Modification P00036.
d. Delivery. Delivery of vehicles added by exercise of option shall
immediately follow delivery of the last scheduled production vehicle as shown
in Clause F.5, REQUIRED DELIVERY SCHEDULE, unless otherwise agreed to by the
parties.
Page added by P00036.
<PAGE> 1
Exhibit 11
<TABLE>
THE O'GARA COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE AND
PRO FORMA EARNINGS PER COMMON SHARE
For the Three and Six Months Ended June 30, 1997
(unaudited)
(dollars in thousands, except per share data)
<CAPTION>
Weighted Average
Number of Common Earnings per
Shares Outstanding Net Income Common Share
------------------ ---------- ------------
<S> <C> <C> <C>
Three Months Ended June 30, 1997:
Shares outstanding March 31, 1997 7,279,310 $- $-
Dilutive stock options outstanding 15,290 - -
Net income before extraordinary item - 1,455 0.20
Extraordinary item - 194 0.03
Net income - 1,261 0.17
--------- ------ -----
7,294,600 $1,261 $0.17
========= ====== =====
Six Months Ended June 30, 1997:
Shares outstanding December 31, 1996 6,659,846 $- $-
Weighted average shares issued in conjunction
with the acquisitions (614,917 shares issued) 463,766 - -
Weighted average shares resulting from stock
issued compensation 2,487
Dilutive stock options outstanding 15,290 - -
Net income before extraordinary item - 2,682 0.38
Extraordinary item - 194 0.03
Net income - 2,488 0.35
--------- ------ -----
7,141,389 $2,488 $0.35
========= ====== =====
</TABLE>
<PAGE> 2
Exhibit 11 (concluded)
<TABLE>
THE O'GARA COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE AND
PRO FORMA EARNINGS PER COMMON SHARE
For the Three and Six Months Ended June 30, 1997
(unaudited)
(dollars in thousands, except per share data)
<CAPTION>
Weighted Average Pro Forma
Number of Common Pro Forma Earnings per
Shares Outstanding Net Income Common Share
------------------ ---------- ------------
<S> <C> <C> <C>
Three Months Ended June 30, 1996:
Shares outstanding March 31,1996 .................... 6,173,728 $ - $ -
Pro forma net income ................................ - 726 0.12
---------- ------ -----
6,173,728 $ 726 $0.12
========== ====== =====
Six Months Ended June 30, 1996:
Shares outstanding December 31, 1995 ................ 4,490,383 $ - $ -
Dilutive stock options outstanding
prior to exercise ............................ 121,463 - -
Newly issued shares necessary to fund payment
of certain indebtedness and AAA distributions
(1,809,015 shares at $7.29 per share estimated
net proceeds to fund $13,181,658) ............ 1,561,882 - -
Pro forma net income ................................ - 2,453 0.40
---------- ------ -----
6,173,728 $2,453 $0.40
========== ====== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENTS OF OPERATIONS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR
THE PERIOD ENDING JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,874
<SECURITIES> 3,011
<RECEIVABLES> 34,119
<ALLOWANCES> 467
<INVENTORY> 15,211
<CURRENT-ASSETS> 61,338
<PP&E> 13,934
<DEPRECIATION> 4,851
<TOTAL-ASSETS> 89,747
<CURRENT-LIABILITIES> 29,006
<BONDS> 0
<COMMON> 73
0
0
<OTHER-SE> 20,679
<TOTAL-LIABILITY-AND-EQUITY> 89,747
<SALES> 51,853
<TOTAL-REVENUES> 51,853
<CGS> 37,484
<TOTAL-COSTS> 37,484
<OTHER-EXPENSES> 8,915
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,404
<INCOME-PRETAX> 4,305
<INCOME-TAX> 1,623
<INCOME-CONTINUING> 2,682
<DISCONTINUED> 0
<EXTRAORDINARY> 194
<CHANGES> 0
<NET-INCOME> 2,488
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.00
</TABLE>
<PAGE> 1
Exhibit 99
The O'Gara Company and Kroll Associates Agree to Merge
FAIRFIELD, Ohio, Aug. 7/PRNNewsiwre/--The O'Gara Company (Nasdaq-NNM: OGAR)
today announced that it has reached an agreement to merge with Kroll Associates,
under which the shareholders of Kroll Associates will receive 6,750,000 shares
of The O'Gara Company's common stock, in exchange for all of the outstanding
common stock and outstanding options of Kroll Associates. The transaction, if
completed, is expected to qualify for "pooling of interests" accounting
principles. On a "pooling of interest" basis, the combined companies would have
reported pro forma revenues of approximately $188 million for the fiscal year
ended December 31, 1996. The proposed agreement is subject to, among other
things, execution of definitive agreements and various consents and approvals,
including shareholder approval of both companies. The combined company will be
called The Kroll-O'Gara Company.
The Kroll-O'Gara Company will bring together Kroll Associates'
worldwide business intelligence, investigative, and risk management services and
The O'Gara Company's global security services, security hardware products, and
security systems integration activities. The combined company will have over 900
employees at 39 offices and facilities in 16 countries.
Kroll Associates, headquartered in New York City, is the leading
provider of risk management and corporate intelligence consulting services to
corporations, governments, law firms, and individuals throughout the world.
Established in 1972, Kroll Associates through its 23 offices in major business
and financial centers in the Americas, Europe, and Asia has assembled a highly
trained group of individuals with backgrounds in law, finance, business, law
enforcement, academia, computer science, security, and crisis management.
Specialized areas of activity include corporate investigations, crisis
management services, financial fraud investigations, business intelligence,
litigation support, monitoring services, vendor integrity programs,
environmental services, disaster recovery planning, and kidnap prevention and
response services.
In connection with the contemplated merger, Jules B. Kroll will become
Chairman and Chief Executive Officer of The Kroll-O'Gara Company. Thomas M.
O'Gara will become Vice Chairman and Bill T. O'Gara will become President and
Chief Operating Officer.
Commenting on the proposed business combination, Bill O'Gara said, "The
agreement between Kroll Associates and O'Gara is a continuation of our stated
business strategy to expand our global position in the security industry, to
grow our Security Services businesses and to continue to pursue strategic
acquisitions in the rapidly consolidating security industry. In a single stroke,
the Kroll Associates merger will give us offices in seven new countries,
increase our revenues from security integration and security services to 48% of
1996 pro forma sales (up from 16% before the merger), and reduce the percentage
of military-related sales to 29% of our total 1996 pro forma sales."
The O'Gara Company is an integrated security company with three
business lines: security services, security hardware products, and security
systems integration. The Security Services Group offers security-related
services such as advanced driver training, background clearances, business
intelligence, country-risk assessments, forensic auditing, force protection
consulting and private security agent training. The Security Hardware Products
Group markets all of the Company's armoring products, including ballistic and
blast protected armoring systems for military and commercial vehicles, aircraft
and missile components. The Security Systems Integration Group offers planning,
design, and hardware and software integration services which are customized to
meet specific satellite communications or site protection needs of customers.
<PAGE> 2
With headquarters in Fairfield, Ohio, USA, near Cincinnati, The O'Gara Company
has manufacturing facilities in Fairfield, Ohio; Sao Paulo, Brazil; Lamballe,
France; Torino, Italy; Mexico City, Mexico; Subic Bay, The Philippines; and St.
Petersburg, Russia. The Company has additional offices in Los Angeles,
California; Washington, D.C.; Salisbury, England; Paris, France; Nairobi, Kenya;
Deer Park, New York, Moscow, Russia; and Geneva, Switzerland.
A conference call to discuss the transaction will be held tomorrow
morning, Friday, August 8, 1997, at 10:00 a.m. The telephone number is
800-834-3606 and the confirmation number is 224820.
CONTACT: Bill T. O'Gara, Chief Executive Officer of The O'Gara Company
513-874-2112
