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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-Q
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(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
COMMISSION FILE NUMBER: 0-21773
FIREARMS TRAINING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 57-0777018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7340 MCGINNIS FERRY ROAD
SUWANEE, GEORGIA 30024
(Address of principal executive offices)
TELEPHONE NUMBER (770) 813-0180
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 10, 1999, there were (1) 19,072,059 shares of the
Registrant's Class A Common Stock and (2) 1,694,569 shares of the Registrant's
Class B nonvoting Common Stock outstanding.
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FIREARMS TRAINING SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <S> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Statements of Income
Three and six months ended September 30, 1999 and 1998 ...................... 3
Condensed Consolidated Balance Sheets
September 30, 1999 and March 31, 1999 ....................................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 1999 and 1998 ................................ 5
Notes to Condensed Consolidated Financial Statements ........................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ................................................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ........................................................... 15
ITEM 2. CHANGES IN AMENDMENT OF CERTIFICATE OF INCORPORATION.........................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................... 16
ITEM 5. OTHER INFORMATION............................................................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................ 17
SIGNATURES .................................................................. 18
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 8,328 $ 12,111 $ 23,524 $ 24,376
Cost of revenues 6,817 8,061 16,562 15,612
----------- ----------- ----------- -----------
Gross profit 1,511 4,050 6,962 8,764
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative expenses 3,570 2,128 6,149 5,303
Research and development expenses 1,032 838 1,526 2,372
Depreciation and amortization 566 507 1,120 984
Non-recurring restructuring charge -- -- -- 870
----------- ----------- ----------- -----------
Total operating expenses 5,168 3,473 8,795 9,529
----------- ----------- ----------- -----------
Operating income (loss) (3,657) 577 (1,833) (765)
----------- ----------- ----------- -----------
Other expense income, net:
Interest expense, net (1,937) (1,782) (3,720) (3,393)
Other expense income, net (104) (172) (347) (276)
----------- ----------- ----------- -----------
Total other expense, net (2,041) (1,954) (4,067) (3,669)
----------- ----------- ----------- -----------
Loss before income taxes (5,698) (1,377) (5,900) (4,434)
Benefit for income taxes (1,949) (551) (2,018) (1,590)
----------- ----------- ----------- -----------
Net loss (3,749) $ (826) $ (3,882) $ (2,844)
=========== =========== =========== ===========
Accretion of Preferred Stock Dividend (63) -- (125) --
----------- ----------- ----------- -----------
Net Loss Applicable to common shareholders $ (3,812) $ (826) $ (4,007) $ (2,844)
=========== =========== =========== ===========
Basic loss per common share $ (0.18) $ (0.04) $ (0.19) $ (0.14)
=========== =========== =========== ===========
Diluted loss per common share $ (0.18) $ (0.04) $ (0.19) $ (0.14)
=========== =========== =========== ===========
Weighted average common shares outstanding - basic 20,758 20,673 20,746 20,668
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding - diluted 20,758 20,673 20,746 20,668
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
3
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FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
SEPT. 30, March 31,
1999 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,219 $ 2,805
Accounts receivable, net 9,035 19,116
Unbilled Receivables 9,969 4,744
Inventories 17,470 17,854
Prepaid expenses and other current assets 607 702
Deferred income taxes, net 4,363 2,107
----------- -----------
Total current assets $ 42,663 $ 47,328
Property and equipment, net 5,300 5,306
Goodwill, net 4,260 4,496
Deferred financing costs, net 2,630 2,795
Deferred income taxes 238 225
----------- -----------
$ 55,091 $ 60,150
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,055 $ 5,384
Accrued liabilities 6,046 7,500
Income taxes payable, net 2,232 345
Deferred revenue 865 1,089
Current maturities of long-term debt 7,500 6,000
----------- -----------
Total current liabilities $ 19,698 20,318
----------- -----------
Long-term debt, less current maturities 64,782 66,200
----------- -----------
Other noncurrent liabilities 698 172
----------- -----------
Mandatory Redeemable Preferred Stock 3,218 3,093
Stockholders' equity:
Class A common stock -- --
Class B common stock -- --
Additional paid-in-capital 114,369 114,324
Accumulated (deficit) earnings (147,683) (143,676)
Cumulative foreign currency translation adjustment 9 (281)
----------- -----------
Total stockholders' (deficit) equity (33,305) (29,633)
----------- -----------
$ 55,091 $ 60,150
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
4
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FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30,
--------------------------------
1999 1998
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,007) $ (2,844)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,573 1,322
Deferred income taxes (2,256) 2,358
Non-cash compensation expense 125 71
Employee stock compensation plan 44 64
Changes in assets and liabilities:
Accounts receivable, net 10,146 1,070
Deferred Financing costs (294)
Inventories 391 974
Income taxes receivable 1,880 (2,170)
Prepaid expenses and other current assets 798 (119)
Escrow and other deposits 19
Accounts payable (2,356) (698)
Accrued liabilities (1,489) (3,458)
Income taxes payable -- (390)
Deferred revenue (224) (3,302)
Noncurrent liabilities 526 (118)
----------- -----------
Total adjustments 3,333 (4,377)
----------- -----------
Net cash (used in) provided by operating activities (674) (7,221)
----------- -----------
Cash flows from investing activities:
Additions to property and equipment, net (805) (803)
Payments for business acquisitions, net of cash acquired -- (394)
Sale of business -- 200
----------- -----------
Net cash used in investing activities (805) (997)
----------- -----------
Cash flows from financing activities:
Borrowings of long-term debt 10,000
Repayments of long-term debt 1,582 (2,399)
Retirement of common stock (1,500) (75)
Deferred financing costs (294) --
----------- -----------
Net cash provided by financing activities (212) 7,526
----------- -----------
Effect of changes in foreign exchange rates 105 (143)
----------- -----------
Net (decrease) increase in cash (1,586) (835)
Cash, beginning of period 2,805 3,395
----------- -----------
Cash, end of period $ 1,219 $ 2,560
=========== ===========
Supplemental disclosures of cash paid for:
Interest 3,398 $ 2,916
=========== ===========
Income taxes 0 $ (1,322)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
5
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FIREARMS TRAINING SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and 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 a fair presentation have been
included. Operating results for the three and six months ended September
30, 1999 are not necessarily indicative of the results that may be
expected for the year ended March 31, 2000. For further information, refer
to the company's consolidated financial statements and footnotes thereto
for the year ended March 31, 1999.
2. INVENTORY.
Inventories consist primarily of simulators, computer hardware,
projectors, and component parts. Inventories are valued at the lower of
cost (on a moving weighted average) or market. Cost includes materials,
labor, and manufacturing overhead. Market is defined as net realizable
value.
3. COMPREHENSIVE LOSS.
Comprehensive loss for the Company consists of net loss and foreign
currency translation adjustments. Total comprehensive loss (in thousands of
dollars) was $3,663 and $930 for the three months ended September 30, 1999
and 1998, respectively. Total comprehensive loss (in thousands of dollars)
was $3,717 and $2,987 for the six months ended September 30, 1999 and 1998.
4. TERMINATION AGREEMENT.
In September 1996, the Company entered into an employment agreement with
its president and chief executive officer. In September 1999, the officer
was terminated and in accordance with the terms of the amended agreement
will receive severance payments totaling approximately $900,000 through
March 2002. The amount has been accrued and is included in accrued
liabilities and other long-term liabilities on the accompanying
consolidated balance sheet. Also, the terms of all vested options held by
the officer as of his termination date were amended to extend the exercise
period until December 29, 2001. However, due to the fact that the market
value of the Company's stock was below the exercise prices of the options
as of the amendment date, no compensation expense has been recognized by
the Company.
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, March 31,
1999 1999
------------- ----------
<S> <C> <C>
Raw materials $ 6,978 $ 8,810
Work in progress 9,090 7,226
Finished Goods 1,403 1,818
--------- ---------
$ 17,470 $ 17,854
========= =========
</TABLE>
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's most recently filed Form 10-K.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 and 1998
Revenues. Revenues decreased $3.8 million, or 31.2%, to $8.3 million for the
three months ended September 30, 1999 as compared to $12.1 million for the
three months ended September 30, 1998. Sales to U.S. military customers for the
three months ended September 30, 1999, decreased by $0.8 million, or 44.2%, to
$1.0 million, primarily due to decreased sales to the U.S. Marine Corps as the
Company has substantially completed deliveries under its contract with this
customer. Sales to U.S. law enforcement customers for the three months ended
September 30, 1999 decreased by $1.7 million, or 54.5%, to $1.4 million
primarily attributable to a reduction of purchases by a major federal law
enforcement agency. Sales to International customers for the three months ended
September 30, 1999 decreased by $1.1 million, or 16.3%, to $5.4 million. Sales
to U.S. Hunter/Sports customers for the three months ended September 30, 1999
decreased $177,000, or 28.9%, to $435,000 primarily attributable to a softness
in sales of Dart systems.
Cost of Revenues. Cost of revenues decreased $1.2 million, or 15.4%, to $6.8
million for the three months ended September 30, 1999 as compared to $8.1
million for the three months ended September 30, 1998. As a percentage of
revenues, cost of revenues increased to 81.9% for the three months ended
September 30, 1999 as compared to 66.6% for the three months ended September
30, 1998. The increase in cost of revenues as a percentage of revenues is
attributable to the lower volume of revenues to cover the fixed portion of cost
of goods sold.
Gross Profit. As a result of the foregoing, gross profit decreased $2.6
million, or 62.7%, to $1.5 million, or 18.1% of revenues, for the three months
ended September 30, 1999 as compared to $4.1 million, or 33.4% of revenues, for
the three months ended September 30, 1998.
Total Operating Expenses. Total operating expenses increased $1.7 million, or
48.8%, to $5.2 million for the three months ended September 30, 1999 as
compared to $3.5 million for the three months ended September 30, 1998. Total
operating expenses as a percentage of revenues increased to 62.1% for the three
months ended September 30, 1999 from 28.7% for the three months ended September
30, 1998. Selling, General & Administrative ("S, G & A") expenses increased
$1.5 million, or 46.2%, to $4.1 million for the three months ended September
30, 1999 as compared to $2.6 million for the three months ended September 30,
1998, primarily due to a one time charge for deferred compensation associated
with the amended employment agreement (see footnote 4, Termination
Agreement), for the former President & CEO and an increase in legal fees
related to patent and trademarks.
Operating Income/( Loss). As a result of the foregoing, operating income
decreased $4.3 million, or 733.8%, to an operating loss of $3.7 million, or
43.9% of revenues, for the three months ended September 30, 1999 as compared to
$0.6 million, or 4.8% of revenues, for the three months ended September 30,
1998.
Other (Expense) Income, net. Net interest expense totaled $1.9 million, or
23.3% of revenues for the three months ended September 30, 1999 as compared to
$1.8 million, or
7
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14.7% for the three months ended September 30, 1998. The increase in net
interest expense is primarily the result of the Company's increased borrowings
as compared to the prior period as a result of its working capital needs. The
increase is also attributable to the increase in interest rates incurred as a
result of the amendment in its Credit Agreement on April 30, 1999. Other
expenses, net totaled $104,000, or 1.2 % of revenues for the three months ended
September 30, 1999 as compared to other income, net of $172,000, or 1.4% for
the three months ended September 30, 1998. The decrease in other expenses, net
is primarily the result of foreign currency gains incurred due to recent
fluctuations in currency exchange rates.
Provision (Benefit) for Income Taxes. The effective tax rate decreased to 34.2%
of income before income taxes for the three months ended September 30, 1999 as
compared to 40.0% of income before taxes for the three months ended September
30, 1998. The overall effective tax rate for the six months ended September 30,
1999 decreased to 34.2% of income before income taxes as compared to 35.9% of
income before taxes for the six months ended September 30, 1998.
Net Income (Loss). As a result of the foregoing, the net (loss) as reported
increased $2.9 million to a net loss of $3.7 million ($0.18 per diluted share),
or 44.4% of revenues for the three months ended September 30, 1999 as compared
to $0.8 million ($0.04 per diluted share), or 6.8% of revenues for the three
months ended September 30, 1998.
Accretion of Preferred Stock. The expense for the accretion of the preferred
stock issued in November 1998 was a total of $63,000 for the three months ended
September 30, 1999.
Net Loss applicable to common shareholders. The loss applicable to common
shareholders increased $3.0 million or 361.5% to $3.8 million ($0.18) or
(45.8)% of revenue. This compares to the three months ended September 30, 1998
of a loss of $0.8 million ($0.04 per share) or (6.8%) of revenue.
Six Months Ended September 30, 1999 and 1998
Revenues. Revenues decreased $0.9 million, or 3.5%, to $23.5 million for the six
months ended September 30, 1999 as compared to $24.4 million for the six months
ended September 30, 1998. Sales to U.S. military customers for the six months
ended September 30, 1999, decreased by $1.7 million, or 37.7%, to $2.8 million,
primarily due to decreased sales to the U.S. Marine Corps and the U.S. Army.
Sales to U.S. law enforcement customers for the six months ended September 30,
1999 decreased by $1.7 million, or 37.1%, to $2.9 million primarily attributable
to reduced sales to an important federal law enforcement agency customer. Sales
to International customers for the six months ended September 30, 1999 increased
by $3.0 million, or 21.6%, to $16.9 million primarily as a result of additional
deliveries to Canada and Australia customers. Sales to U.S. Hunter/Sports
customers for the six months ended September 30, 1999 decreased $0.5 million, or
32.2%, to $1.0 million primarily attributable to reduced sales by Dart brought
on by delays in introduction of the new DVD format systems.
Cost of Revenues. Cost of revenues increased $1.0 million, or 6.1%, to $16.6
million for the six months ended September 30, 1999 as compared to $15.6
million for the six months ended September 30, 1998. As a percentage of
revenues, cost of revenues increased to 70.4% for the six months ended
September 30, 1999 as compared to 64.0% for the six months ended September 30,
1998. The increase in cost of revenues as a percentage of revenues is primarily
attributable to product mix and higher price competition.
Gross Profit. As a result of the foregoing, gross profit decreased $1.8
million, or 20.6% to $7.0 million, or 29.6% of revenues, for the six months
ended September 30, 1999 as compared to $8.8 million, or 36.0% of the revenues,
for the six months ended September 30, 1998.
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Total Operating Expenses. Total operating expenses decreased $0.7 million, or
7.7% to $8.8 million for the six months ended September 30, 1999 as compared to
$9.5 million for the six months ended September 30, 1998. Total operating
expenses as a percentage of revenues decreased to 37.4% for the six months ended
September 30, 1999 from 39.1% for the six months ended September 30, 1998. S, G
& A expenses increased $0.8 million, or 16.0%, as compared to the 3.5% decrease
in revenue. The increase in S, G & A expenses is primarily due to the expenses
related to the termination agreement of the former President and CEO of
approximately $900,000 which are included in these totals (see Note No. 4) in
Notes to Condensed Consolidated Financial Statements.
Operating (Loss) Income. As a result of the foregoing, operating income
decreased $1.1 million, to an operating loss of $1.8 million, or 7.8% of
revenues, for the six months ended September 30, 1999 as compared to an
operating loss of $0.8 million, or 3.1% of revenues, for the six months ended
September 30, 1998.
Other Expense net. Net interest expense totaled $3.7 million, or 15.8% of
revenues for the six months ended September 30, 1999 as compared to $3.4
million, or 13.9% of revenues for the six months ended September 30, 1998. The
increase in net interest expense is primarily the result of the Company's
amendments to the Bank of America Credit Agreement dated as of April 30 and
September 30, 1999 which called for higher interest rate levels on the company's
outstanding debt. Other expenses, net totaled $347,000, or 1.5% of revenues for
the six months ended September 30, 1999 as compared to $276,000, or 1.1% for the
six months ended September 30, 1998. The increase in other expenses, net is
primarily the result of foreign currency losses incurred due to fluctuations in
currency exchange rates.
Provision for Income Taxes. The effective tax rate decreased to 34.2% of income
before income taxes for the six months ended September 30, 1999 as compared to
35.9% of income before taxes for the six months ended September 30, 1998.
Net Loss. As a result of the foregoing, the net loss as reported increased $1.1
million to a net loss $3.9 million ($0.19 per diluted share), or (16.5%) of
revenues for the six months ended September 30, 1999 as compared to a net loss
of $2.8 million ($0.14 per diluted share), or (11.7%) of revenues for the six
months ended September 30, 1998.
Accretion of Preferred Stock. The expense for the accretion of the preferred
stock issued in November 1998 was a total of $125,000 for the six months ended
September 30, 1999.
Net Loss applicable to common shareholders. The loss applicable to common
shareholders increased $1.2 million or 40.9% to $4.0 million ($0.19 per diluted
share) or (17.0)% of revenue. This compares to the six months ended September
30, 1998 of a loss of $2.8 million ($0.14 per diluted share) or (11.7%) of
revenue.
9
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BACKLOG
Backlog represents customer orders that have been contracted for future
delivery. Accordingly, these orders have not yet been recognized as revenue, but
represent potential revenue. As of September 30, 1999, the Company had a backlog
of approximately $19.7 million, comprised of $16.3 million from FATS
international customers, $1.1 from Simtran's Canadian customers, $1.0 million
from U.S. Law Enforcement and $1.3 million from FATS U.S. military customers.
Approximately $13.9 million of the contracted orders are scheduled for delivery
during fiscal year 2000.
U.S. ARMY EST PROCUREMENT PROCESS
The Army Engagement Skills Trainer ("EST") program contract was awarded to ECC
International during fiscal year 1999. The Company was then awarded a contract
by ECC International to be the exclusive supplier of all weapons simulators for
the EST program. The Company has begun performing under this multi-year
contract, which will not have a material effect on revenues for the fiscal year
ending March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity and capital needs currently and for the near
future are to fund working capital, debt service, and capital expenditures
necessary to support its business.
The Company's primary sources of liquidity and capital resources are cash
generated from operating activities, the senior bank debt and a revolving line
of credit in the amount of $3,000,000 (the "Subsidiary Line"). Net working
capital was $23.0 million at September 30, 1999 and $27.0 million at March 31,
1999. As of November 11, 1999 the Company has no borrowing capacity under the
senior bank revolving line of credit or the Subsidiary Line.
The Company is subject to several business and market risks. The risks are (1)
the Company has not generated significant revenue or cash flow from its current
operation, and the expectation of future revenues or cash flow cannot be
assumed; and (2) the Company must receive new contracts for product to be
delivered in the current fiscal year in order to achieve its revenue projection
since the Company has entered the new fiscal year with a significantly smaller
backlog than in the previous two fiscal years.
Management's plans in response to the above risks are (1) the Company continues
to take steps to further reduce cost and reinforce cost control measures related
to assure operations are conducted at the lowest cost possible; (2) the Company
remains focused on revenue maximization and has determined to place greater
emphasis on the domestic and international law enforcement business through
release of new products in this market sector; (3) the Company has begun
aggressively pursuing third party relationships in order to develop additional
new revenue and cash generating opportunities; and (4) continue negotiation with
the senior bank syndicate to reduce the level of debt maturities.
The Company believes that this business strategy may achieve positive operating
margins over time, provided the Company achieves the new business revenue
targets needed to finance working capital needs. There can be no assurances
that this strategy will be successful or that the new business revenue targets
can be met in order to meet working capital needs.
On September 30, 1999, the Company and the Lenders amended the NationsBank
Credit Agreement (the "fifth" amendment) to provide among other things for
postponement of the
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installment payment on Tranche A until November 30, 1999, increased interest
rate levels and the forbearance of the Lenders from exercising rights and
remedies during the period of time until November 30, 1999 while the Company
negotiates further amendments of the financial covenants. At this time the
Company anticipates a sixth amendment to the Credit Agreement which will address
the installment payments and the postponement until March 31, 2000 of the
installment payments due September 30 and December 31, 1999 and new financial
covenant levels to be completed before November 30, 1999.
As of November 11, 1999, the Company has borrowings of $20.5 million and had
outstanding letters of credit of approximately $1.5 million under the $22.0
million NationsBank revolving credit facility. The Company currently has
borrowings of $3.0 million under the $3.0 million Subsidiary Line. As a result
the Company has no additional borrowing capability. The Company believes that
the cash flow from operations will be sufficient to meet the Company's presently
anticipated working capital, capital expenditure and debt service needs until
the end of the current fiscal year provided that the Company is able to
successfully restructure its current principal and interest payment schedule for
the remainder of the fiscal year.
The Company's operating activities used cash of $0.7 million in the six months
ended September 30, 1999 and used cash of $7.2 million in the six months ended
September 30, 1998. The $6.5 million decrease in net cash provided by
operations was primarily due to receipt of payment of a significant
international receivable as compared to the six months ended September 30,
1998. The decrease in net cash provided by operations was also due to the $2.4
million decrease in accounts payable primarily attributable to the payment to
vendors of outstanding invoices as compared to the six months ended September
30, 1998.
The Company's investing activities used cash of $0.8 million for the six months
ended September 30, 1999 and $1.0 million for the six months ended September
30, 1998. The Company's primary investing activity for the six months ended
September 30, 1999 was capital expenditures that were for equipment used in
manufacturing, R&D, and marketing activities.
The Company's financing activities used cash of $0.2 million for the six months
ended September 30, 1999. The Company's primary financing activity in the six
month period ended September 30, 1999, was the net borrowing of $1.6 million
from its Subsidiary Line to finance the working capital needs of the Company's
operations offset by the paydown of its long term debt.
The Company's indebtedness and the related covenants will have several important
effects on its future operations, including, but not limited to, the following:
(i) a portion of the Company's cash flow from operations must be dedicated to
the payment of interest on and principal of its indebtedness and will not be
available for other purposes; (ii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, R&D,
acquisitions, general corporate purposes or other purposes is likely to be
limited; and (iii) the Company's level of indebtedness could limit its
flexibility in reacting to business developments and changes in its industry and
economic conditions generally.
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Concentration of Credit Risk
At September 30, 1999, approximately $4.4 million in accounts receivable was
due from nine international customers, of which approximately $0.6 million was
secured by performance letters of credit.
YEAR 2000
The Year 2000 issue, which is common to most businesses, concerns the inability
of information systems, primarily computer software programs, to properly
recognize and process date-sensitive information on and beyond January 1, 2000.
The Company believes that it has modified or replaced its affected systems. A
complete evaluation has been made on all internal systems, including items such
as voice mail, automated badge entry, email, payroll, accounting and
manufacturing. There are no known problems at this time. The Company has
completed the modifications to all of its information systems. All network
servers have been assessed and tested as Year 2000 compliant. In addition, the
Company has an ongoing policy of upgrading and testing for Year 2000
compliance, as new software packages become available. The Company is satisfied
that its customer base is aware of the Year 2000 issue and is proactively
working to ensure that there are no problems associated with Year 2000. The
Company expects that its systems will be fully operational and will not cause
any material disruptions because of Year 2000 issues. Because of the
uncertainties associated with assessing preparedness of suppliers and
customers, there is a risk of a material adverse effect on the Company's future
results of operations if these groups are not capable of correcting their Year
2000 issues, if any. The Company expects that its systems will be fully
operational and will not cause any material disruption because of Year
2000 issues. The Company has an ongoing process to continue evaluation of all
critical systems, products, suppliers and customers from now until the Year
2000 and beyond. The Company does not expect to incur any additional costs for
the Year 2000 issue. The Year 2000 issue resolution includes a final
re-verification test of all systems and a contingency plan (manual backup) to
be implemented and validated by the fourth quarter of calendar year 1999. The
Company does not expect that the Year 2000 issue will have a material impact on
the results of operations, liquidity or consolidated financial position of the
Company.
CERTAIN FORWARD LOOKING STATEMENTS
The foregoing forward-looking statements are subject to a number of factors
which could cause actual results to differ as described above and under Item 5
"Other Information". No assurance can be given that actual revenues, operating
income or net income will not be materially different than those anticipated
above.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 3, 1997, Dart, a Company subsidiary, was sued by Advanced
Interactive Systems, Inc. ("AIS") for alleged infringement of a patent owned by
AIS, U.S. Patent No. 5,649,706 (the "706 Patent"). Dart filed its answer on
December 2, 1997, denying all material allegations, asserting numerous
affirmative defenses, and counterclaiming for a judicial declaration of
noninfringement, patent invalidity, patent unenforceability, and for damages
for unjust enrichment. The parties recently settled the case and are currently
in the process of finalizing confidential settlement documentation. Upon
completion of that process, the action will be dismissed with prejudice. In
the opinion of the Company's management, this proceeding will not have a
material adverse effect on the Company's financial position, liquidity, or
results of operations.
On January 27, 1999, FATS, Inc. ("FATS"), a Company subsidiary, was again sued
by AIS for alleged infringement of a patent owned by AIS< U.S. Patent No.
5,823,779 (the "779Patent"). FATS filed its answer on May 21, 1999 denying
infringement and counter claimed seeking declaratory judgement that the 779
Patent is invalid , among other claims. Discovery has not yet begun on this
case. In the opinion of the Company's management, this proceeding will not have
a material adverse effect on the Company's financial position, or results of
operations.
The Company is involved in legal proceedings from time to time in the ordinary
course of its business which, in the opinion of management, will not have a
materially adverse effect on the Company's financial position, liquidity, or
results of operation.
ITEM 2. INCREASE IN AUTHORIZED CLASS B COMMON SHARES
The annual meeting of shareholders held on Friday September 24, 1999 approved
an amendment to the Certificate of Incorporation to increase the number of
authorized shares of Class B Non-Voting Common Stock from 2,200,000 to
6,200,000.
13
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Share Owners was held on Friday, September 24, 1999, in
Norcross, Georgia, at which the following matters were submitted to a vote of
the share owners:
(a) Votes regarding the election of three Directors for a term expiring in
2002 were as follows:
<TABLE>
<CAPTION>
FOR ABSTAIN
--------- ---------
<S> <C> <C>
Gilbert Decker 9,804,056 2,457,091
Craig I. Fields 9,804,056 2,457,091
Paul J. Zepf 9,804,056 2,457,091
</TABLE>
(b) Votes regarding the approval of an amendment to the Certificate of
Incorporation to increase the number of authorized shares of Class B
Non-Voting Common Stock from 2,200,000 to 6,200,000 were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
<S> <C> <C>
9,801,120 2,458,853 1,174
</TABLE>
(c) Votes, in the proxies' discretion, upon such other business as may
properly come before the meeting or any postponement or adjournment
thereof were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
<S> <C> <C>
9,770,857 2,488,921 1,368
</TABLE>
ITEM 5. OTHER INFORMATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
Certain statements in this filing, and elsewhere (such as in other filings by
the Company with the Commission, press releases, presentations by the Company
or its management and oral statements) constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among other things, (i) those described above
including the timing and size of, and the Company's success in competing for,
new contracts awarded by military and other government customers; (ii)
significant variability in the Company's quarterly revenues and results of
operations as a result of variations in the number and size of the Company's
shipments in a particular quarter while a significant percentage of its
operating expenses are fixed in advance; (iii) concentrations of revenues from
a few large customers who vary from one period to the next; (iv) the high
percentage of sales to military and law enforcement authorities whose orders
are subject to extensive government regulations, termination for a variety of
factors and budgetary constraints; (v) a significant proportion of
international sales which may be subject to political, monetary and economic
risks; (vi) the relatively undeveloped nature of the market for small and
supporting arms training simulators and the need for continued adoption of
simulation training systems if the
14
<PAGE> 15
market is to expand; (vii) the potential for increased competition; (viii) the
Company's ability to attract and retain key personnel and adapt to changing
technologies; and (ix) other factors described in the Company's Form 10-K for
the fiscal year ended March 31, 1999 under the caption Part I and in the
Company's Prospectus under the caption "Risk Factors".
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following documents are filed with this report as exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.28 Fifth Amendment to the Amended and Restated Credit Agreement, dated
September 30, 1999, among the Company, Bank of America, N.A. and the
other Lenders named therein.
10.29 Amendment to Employment agreement for Peter A. Marino dated September
30, 1999.
11.01 Statement regarding computation of net income per common share.
27.01 Financial Data Schedule (For SEC use only).
</TABLE>
(b) The following report on Form 8-K was filed during the quarter ended
September 30, 1999.
September 21, 1999 - Retirement of the President and CEO.
16
<PAGE> 17
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.
DATED: November 15, 1999
FIREARMS TRAINING SYSTEMS, INC.
(Registrant)
/s/ Robert F. Mecredy
---------------------------------------------
Robert F. Mecredy
President and Chief Executive Officer
/s/ John A. Morelli
---------------------------------------------
John A. Morelli
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
17
<PAGE> 1
EXHIBIT 10.28
EXECUTION COPY
FIFTH AMENDMENT dated as of
September 30, 1999 (this "Fifth Amendment"),
to the Amended and Restated Credit Agreement
dated as of October 15, 1997, (as amended by
the First Amendment dated as of June 26,
1998, the Second Amendment dated as of
November 13, 1998, the Third Amendment dated
as of March 31, 1999 and the Fourth
Amendment dated as of April 30, 1999 and the
Amended and Restated Credit Agreement as so
amended being referred to herein as the
"Credit Agreement"), among Firearms Training
Systems, Inc., as Parent (the "Parent"),
FATS, Inc., as Borrower (the "Borrower"),
the lenders listed on the signature pages
thereto (the "Lenders"), Bank of America,
N.A., as Agent, (in such capacity, the
"Agent"), Swingline Lender and Issuing Bank.
The parties hereto have agreed, subject to the terms and conditions
hereof, to further amend the Credit Agreement as provided herein.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement (the Credit Agreement,
as amended by, and together with, this Fifth Amendment, and as hereinafter
amended, modified, extended or restated from time to time, being called the
"Amended Agreement").
Accordingly, the parties hereto hereby agree as follows:
SECTION 1.01. Amendment to Section 1.01. Subsection (b) of the
definition of "Applicable Eurodollar Margin" is hereby amended by deleting the
following:
", (ii) for any day during the period commencing the Second
Amendment Effective Date, and ending September 30, 1999, 4.00%
and (iii) on any other day, 3.25%."
and inserting the following in lieu thereof:
"and (ii) on any other day, 4.00%."
SECTION 1.02 Amendment to Section 2.12 (a). Section 2.12(a) of the
Credit Agreement is hereby amended by (a) inserting the following after the
phrase "consisting of 18
1
<PAGE> 2
consecutive quarterly installments due on the last day of March, June, September
and December of each year," in Section 2.12(a)(i):
"except with respect to the installment due at the
end of the third quarter, 1999, which shall be due as
set forth below in Section 2.12(a)(ii),"
(b) The chart in Section 2.12(a)(ii) is hereby amended by
deleting "September 30, 1999" and inserting "November 30, 1999" in lieu thereof.
SECTION 1.03. Forebearance. The Lenders have agreed to forebear
exercising their rights and remedies, which rights and remedies may arise as a
result of an Event of Default under the provisions of Section 7(c) of the Credit
Agreement with respect to Section 6.15 of the Credit Agreement (the "Financial
Covenants") (any such prospective Event of Default, a "Financial Covenants
Default"), against assets of the Borrower and its Subsidiaries that, pursuant to
the terms of the Loan Documents, secure the Obligations of the Borrower to the
Agent and the Lenders under the Credit Agreement and the other Loan Documents
until November 30, 1999 (the period from the Fifth Amendment Effective Date (as
defined below) to November 30, 1999 is hereafter referred to as the "Forbearance
Period") in order to give the Borrower the opportunity to negotiate in good
faith with the Lenders to achieve a modification of the Financial Covenants or a
waiver of any Financial Covenants Default or other arrangement, in any case
satisfactory to the Lenders in their sole discretion. It is understood that no
Letters of Credit shall be issued under the Credit Agreement during the
Forbearance Period. Nothing in this Section 1.03 shall imply any waiver or
release by the Agent or the Lenders of any rights or remedies to which they are
entitled under the Credit Agreement or other Loan Documents, or of the benefit
of any other terms and conditions of the Credit Agreement or other Loan
Documents other than as expressly set forth in this Section 1.03 during the
Forbearance Period. If as of November 30, 1999, each Financial Covenants
Default, if any, has not been waived in accordance with the Credit Agreement or
the Financial Covenants have not been modified to the satisfaction of Lenders in
their sole discretion, the Forbearance Period shall terminate, and the Lenders
may exercise all of their rights and remedies under the Credit Agreement and
other Loan Documents.
SECTION 1.04. Representations and Warranties. The Borrower hereby
represents and warrants to the Agents and the Lenders, as follows:
(a) The representations and warranties set forth in Article
III of the Amended Agreement, and in each other Loan Document,
including any Schedules thereto, are true and correct in all material
respects on and as of the date hereof and on and as of the Fifth
Amendment Effective Date (as defined below) with the same effect as if
made on and as of the date hereof or the Fifth Amendment Effective
Date, as the case may be, except to the extent such representations and
warranties expressly relate solely to an earlier date.
(b) Each of the Borrower and the other Loan Parties is in
compliance with all the terms and conditions of the Amended Agreement
and the other Loan Documents on its part to be observed or performed
including, without limitation, the obligation to pay all principal and
interest due on and prior to the date hereof and no Default or Event of
Default has occurred or is continuing under the Amended Agreement,
other than the Defaults or Events of Default described in Section 1.03
hereof.
<PAGE> 3
(c) The execution, delivery and performance by the Borrower of
this Fifth Amendment have been duly authorized by the Borrower.
(d) This Fifth Amendment constitutes the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance, voidable preference or similar laws and the application of
equitable principles generally.
(e) The execution, delivery and performance by the Borrower of
this Fifth Amendment (i) does not conflict with or violate (A) any
provision of law, statute, rule or regulation, or of the articles of
incorporation or by-laws of the Borrower, (B) any order of any
Governmental Authority or (C) any provision of any indenture, agreement
or other instrument to which the Borrower is a party or by which it or
any of its property may be bound and (ii) does not require any consents
under, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default or give rise to increased, additional,
accelerated or guaranteed rights of any person under any such
indenture, agreement or instrument.
SECTION 1.05. Effectiveness. This Fifth Amendment shall become
effective only upon satisfaction of the following conditions precedent (the
first date upon which each such condition has been satisfied being herein called
the "Fifth Amendment Effective Date"):
(a) The Agent shall have received duly executed counterparts
of this Fifth Amendment which, when taken together, bear the authorized
signatures of the Parent, the Borrower and all the Lenders.
(b) The Lenders shall be satisfied that the representations
and warranties set forth in Section 1.04 hereof are true and correct on
and as of the Fifth Amendment Effective Date.
(c) There shall not be any action pending or any judgment,
order or decree in effect which, in the judgment of the Lenders or
their counsel, is likely to restrain, prevent or impose materially
adverse conditions upon performance by the Borrower or any other Loan
Party of its obligations under the Loan Documents.
(d) The Lenders shall have received such other documents,
legal opinions, instruments and certificates as they shall reasonably
request and such other documents, legal opinions, instruments and
certificates shall be satisfactory in form and substance to the Lenders
and their counsel. All corporate and other proceedings taken or to be
taken in connection with this Fifth Amendment and all documents
incidental thereto, whether or not referred to herein, shall be
satisfactory in form and substance to the Lenders and their counsel.
(e) The Agent shall have received payment of and all fees and
expenses set forth in Section 1.07.
<PAGE> 4
SECTION 1.06. APPLICABLE LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT
TO THE EXTENT THAT THE FEDERAL LAWS OF THE UNITED STATES OF AMERICA MAY APPLY.
SECTION 1.07. Fees and Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Agent and the Lenders in connection with
the preparation, negotiation, execution, delivery and enforcement of this Fifth
Amendment, including, but not limited to, the reasonable fees and disbursements
of counsel.
SECTION 1.08. Reporting Requirements. The Borrower will provide the
Agent, for distribution to the Lenders, with a written bi-weekly status report
on its efforts to sell the company, including a list of potential acquirers,
offers made to date, pending offers and scheduled meetings relating to such
sale, except that to the extent that the Borrower has entered into
confidentiality agreements prohibiting it from disclosing to the Lenders the
name of the potential acquirer such name may be withheld from the Lenders. Any
such confidential information supplied to the Agent and Lenders will be held in
confidence by the Agent and the Lenders, except to the extent that the Agent or
any Lender is required by any law, regulation, legal process, legal duty or
regulatory authority to disclose such confidential information. Nothing in this
Section 1.08 shall imply any waiver or consent to sale of the Borrower or that
Lenders will consent to such sale.
SECTION 1.09. Counterparts. This Fifth Amendment may be executed in any
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement. Delivery by
facsimile by any of the parties hereto of an executed counterpart of this Fifth
Amendment shall be as effective as an original executed counterpart hereof and
shall be deemed a representation that an original executed counterpart hereof
will be delivered, but the failure to deliver a manually executed counterpart
shall not affect the validity, enforceability or binding effect of this Fifth
Amendment.
SECTION 1.10. Credit Agreement. Except as expressly set forth herein,
the amendments provided herein shall not by implication or otherwise limit,
constitute a waiver of, or otherwise affect the rights and remedies of the
Lenders, the Agent or the other Secured Parties under the Amended Agreement or
any other Loan Document, nor shall they constitute a waiver of any Default or
Event of Default, nor shall they alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the
Amended Agreement or any other Loan Document. Each of the amendments provided
herein shall apply and be effective only with respect to the provisions of the
Amended Agreement specifically referred to by such amendment. Except as
expressly amended herein, the Amended Agreement shall continue in full force and
effect in accordance with the provisions thereof. As used in the Amended
Agreement, the terms "Agreement", "herein", "hereinafter", "hereunder", "hereto"
and words of similar import shall mean, from and after the date hereof, the
Amended Agreement.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment
to be duly executed by their duly authorized officers, all as of the date first
above written.
FIREARMS TRAINING SYSTEMS, INC.
as Parent
By:
-----------------------------------------
Name:
Title:
FATS, INC.
as Borrower
By:
-----------------------------------------
Name:
Title:
BANK OF AMERICA, N.A., as Agent, Swingline
Lender and Issuing Bank and individually as
a Lender
By:
-----------------------------------------
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION
By:
-----------------------------------------
Name:
Title:
FIRST SOURCE FINANCIAL LLP, by First Source
Financial, Inc., as Agent/Manager
By:
-----------------------------------------
Name:
Title:
<PAGE> 6
BHF (USA) CAPITAL CORPORATION
By:
-----------------------------------------
Name:
Title
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC. (FKA
CREDITANSTALT CORPORATE
FINANCE, INC.)
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
AGREED and CONSENTED,
as of the date first above written:
DART INTERNATIONAL, INC.
By:
-------------------------------
Name:
Title:
FIREARMS TRAINING SYSTEMS, INC.
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.29
AMENDMENT TO EMPLOYMENT AGREEMENT
Amendment dated as of September 15, 1999 to the Employment Agreement
dated as of September 18, 1996 between Firearms Training Systems, Inc. (the
"Company") and Peter A. Marino (the "Executive"), the benefits of which have
previously been assigned by the Company to its wholly-owned subsidiary, FATS,
INC. ("FATS").
WHEREAS, the Company, FATS and the Executive have mutually agreed that
the Executive's employment with the Company, FATS and any related entity will
terminate as of September 30, 1999, and desire that such termination shall be
treated as a "Termination without Cause" within the meaning of Section 4(d) of
his Employment Agreement and to make certain other provisions in connection
therewith;
NOW, THEREFORE, in consideration of the mutual promises and agreements contained
herein, the adequacy and sufficiency of which are hereby acknowledged, Employee,
the Company and FATS agree as follows:
1. Termination Without Cause. Termination of Employee's employment shall occur
on September 30, 1999 (the "Severance Date") and be a Termination Without Cause
having the effects of and as described in Section 4(d) of the Employment
Agreement, provided, that the date of "October 15, 1999" in the last sentence of
such section is hereby amended to be "September 30, 1999". Except as otherwise
provided herein, the provisions of the Employment Agreement, including the
obligations of the parties thereunder, shall continue as and to the extent
provided in Section 4(d) thereof in the event of a Termination without Cause.
2. Resignations. Effective as of the Severance Date, Employee shall resign from
his position as an officer or a director, as the case may be, of the Company,
FATS and all related entities including (i) FATS Canada Holdings, Inc., (ii)
Simtran Technologies, Inc., (iii) Dart International, Inc., (iv) Firearms
Training Systems Netherlands, B.V. and (v) FSS, Inc.
3. Stock Options. The Series A, Series B and Series D stock option agreements
(the "Stock Option Agreements") currently held by Employee shall be amended so
that all options held by Employee, to the extent exercisable by the Employee on
the Severance Date, shall be exercisable by Employee or his Legal Representative
at any time on or before December 29, 2001. Any unvested options shall be
terminated as the Severance Date.
1
<PAGE> 2
Employee's termination shall be considered to be a termination by the Company
other than for "Cause" (as defined in the Stock Option Agreements) nor pursuant
to reasons described in subsection (b),(c) or (d) of Section 2.2 of such Stock
Options.
4. Release
a. The Employee, on his own behalf and on behalf of anyone claiming through him,
hereby agrees and promises not to sue, file an administrative charge, or
otherwise initiate any legal proceeding against, and further agrees to release
and discharge the Company, FATS and their respective stockholders, divisions,
subsidiaries, partnerships, affiliates and/or other related entities, including
the entities described in the Prospectus for Firearms Training Systems, Inc.
dated November 26, 1996 as the "Centre Entities," and each of these entities'
past, present, and future trustees, fiduciaries, shareholders, administrators,
directors, officers, agents, partners, members, employees, attorneys, and the
predecessors, successors, and assigns of each of them (hereinafter collectively
referred to as the "Released Parties") with respect to any and all claims,
rights, or causes of action that the Employee now has, has ever had, or may ever
have, whether currently known or unknown, against any of the Released Parties
arising from any act or omission of any nature or kind from the beginning of
time through the date the Employee executes this Agreement including, but not
limited to, claims, rights, or causes of action related in any way to the
Employee's employment, hiring, conditions of employment, or termination from
employment in accordance with the terms of this Agreement, and including, but
not limited to, any claims, rights, or causes of action arising under any
federal, state, or local law, regulation, or ordinance or the common law
including, but not limited to, Title VII of the Civil Rights Act of 1964 as
amended, the Civil Rights Act of 1991, the Americans with Disabilities Act,
ERISA, and the Family and Medical Leave Act of 1993.
b. Notwithstanding the provisions of Section 4(a) of this Agreement, nothing
herein is intended to release, discharge, or extinguish any rights that the
Employee may have under the Firearms Training Systems, Inc. 401(k) Profit
Sharing Plan, in accordance with the terms of such plan.
c. Nothing in this Agreement is intended to or shall be construed as an
admission by the Company or FATS or any of the other Released Parties that it
has violated any law, interfered with any right, breached any obligation, or
otherwise engaged in any improper or illegal conduct with respect to the
Employee or
2
<PAGE> 3
otherwise, and the Released Parties expressly deny any such illegal or wrongful
conduct.
5. Entire Agreement. This Amendment and the Employment Agreement and the
agreements referenced herein and therein embody the entire agreement and
understanding of the parties hereto with regard to the matters described herein.
6. Binding Effect. This Amendment shall inure to the benefit of the Company,
FATS and its successors and assignees, and shall be binding upon the Employee
and the Employee's heirs, administrators, executors, and personal
representatives.
7. Counterparts. This Amendment may be executed in two counterparts, each of
which shall be deemed an original and both of which together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first written above.
FIREARMS TRAINING SYSTEMS, INC.
By:
------------------------------
( )
FATS, INC.
By:
------------------------------
( )
------------------------------
Peter A. Marino
3
<PAGE> 1
EXHIBIT 11.01
FIREARMS TRAINING SYSTEMS, INC.
STATEMENT REGARDING COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Basic Earnings Per Share(1) Diluted Earnings Per Share(1)
Six Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 20,746 20,668 20,746 20,668
Shares issued upon assumed exercise of
outstanding options -- -- -- --
Weighted average common and common -------- -------- --------- --------
equivalent shares outstanding 20,746 20,668 20,746 20,668
======== ======== ========= ========
Net income $ (4,007) $ (2,844) $ (4,007) $ (2,844)
======== ======== ========= ========
Earnings per share $ (0.19) $ (0.14) $ (0.19) $ (0.14)
======== ======== ========= ========
</TABLE>
- ---------------
(1) Shares reflect a 100,000-for-one stock split in July 1996 in connection
with the recapitalization and a split of 1,66-for-one in October 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE FIREARMS TRAINING SYSTEMS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,219
<SECURITIES> 0
<RECEIVABLES> 19,214
<ALLOWANCES> 210
<INVENTORY> 17,470
<CURRENT-ASSETS> 42,663
<PP&E> 9,326
<DEPRECIATION> 4,027
<TOTAL-ASSETS> 55,091
<CURRENT-LIABILITIES> 19,699
<BONDS> 65,480
3,218
0
<COMMON> 114,369
<OTHER-SE> (147,674)
<TOTAL-LIABILITY-AND-EQUITY> 55,091
<SALES> 23,524
<TOTAL-REVENUES> 23,524
<CGS> 16,562
<TOTAL-COSTS> 16,562
<OTHER-EXPENSES> 8,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,720
<INCOME-PRETAX> (5,900)
<INCOME-TAX> (2,018)
<INCOME-CONTINUING> (3,882)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,007)
<EPS-BASIC> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
