U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended July 1, 1995
/_/ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 0-18863
American Body Armor & Equipment, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-2044869
(State or Other Jurisdiction of (I.R.S. Employer ID #)
Incorporation or Organization)
85 Nassau Place, Yulee, Florida 32097
(Address of Principal Executive Offices)
(904) 261-4035
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date: $.03 par value Common
Stock - 4,697,255 / $1.00 stated value Preferred Stock - 1,457,143
<PAGE>
PART I
Item 1. Financial Statements
AMERICAN BODY ARMOR & EQUIPMENT, INC.
Three and Six Month Periods Ended July 1, 1995 and June 30, 1994
The accompanying condensed financial statements of the Company are
unaudited for the interim periods, but include all adjustments (consisting
only of normal recurring accruals) which management considers necessary
for the fair presentation of results as of July 1, 1995 and for the three
and six month periods ended July 1, 1995 and June 30, 1994.
Moreover, these condensed financial statements do not purport to contain
complete disclosure in conformity with generally accepted accounting
principles and should be read in conjunction with the financial statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994.
The results reflected for the three and six month periods ended July 1,
1995 are not necessarily indicative of the results for the entire year to
end on December 31, 1995.
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
BALANCE SHEET (UNAUDITED)
July 1,
ASSETS 1995
CURRENT ASSETS:
Cash and cash equivalents $ 94,604
Accounts receivable, net of allowance for
doubtful accounts of $96,239 1,710,534
Inventories 1,149,699
Prepaid expenses and other current assets 164,585
---------
Total current assets 3,119,422
PROPERTY, PLANT AND EQUIPMENT, net 488,645
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, net 3,732,574
OTHER ASSETS 70,989
---------
TOTAL ASSETS $7,411,630
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings and current portion
of long-term debt $1,508,071
Accounts payable, accrued expenses
and other current liabilities 1,212,403
---------
Total current liabilities 2,720,474
LONG-TERM DEBT AND CAPITALIZED
LEASE OBLIGATION, less current portion 46,620
---------
Total liabilities 2,767,094
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $1
stated value, 1,700,000 shares
authorized, 1,457,143 issued
and outstanding 1,457,143
Common stock, $.03 par value,
15,000,000 shares authorized;
4,697,255 shares issued and
outstanding 140,918
Additional paid-in capital 2,318,890
Retained earnings 727,585
----------
Total stockholders' equity 4,644,536
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,411,630
=========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
July 1, 1995 June 30, 1994
(unaudited) (unaudited)
NET SALES $2,938,982 $3,229,859
COST AND EXPENSES:
Cost of sales 1,850,087 2,287,300
Selling, general and administrative
expenses 809,483 706,595
Interest expense, net 69,694 52,433
-------- --------
INCOME BEFORE INCOME TAXES 209,718 183,531
INCOME TAXES 82,000 70,000
-------- --------
NET INCOME $ 127,718 $ 113,531
======== ========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
INCOME STATEMENTS
FOR THE SIX MONTHS ENDED
July 1, 1995 June 30, 1994
(unaudited) (unaudited)
NET SALES $5,476,134 $5,869,838
COST AND EXPENSES:
Cost of sales 3,436,422 4,071,610
Selling, general and
administrative expenses 1,516,791 1,360,597
Interest expense, net 129,677 97,651
--------- ----------
INCOME BEFORE INCOME TAXES 393,244 339,980
INCOME TAXES 154,000 131,000
--------- ---------
NET INCOME $ 239,244 $ 208,980
======== ========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
July 1, June 30,
1995 1994
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $239,244 $ 208,980
Adjustments to reconcile net
income to cash provided by
(used in) operating activities:
Depreciation 65,909 54,798
Deferred income taxes 154,000 131,000
Increase in accounts receivable (135,544) (1,080,552)
Increase in inventories (107,294) (283,765)
Increase in prepaid expenses
and other assets (87,210) (19,169)
(Decrease) increase in accounts
payable, accrued liabilities
and other current liabilities (88,805) 562,953
--------- ---------
Net cash provided by (used in)
operating activities 40,300 (425,755)
-------- ---------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (51,619) (32,704)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Preferred stock dividends (21,662) ---
Net (decrease) increase in
Bank line of credit &
payments of long-term debt (187,646) 446,794
--------- ---------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (220,627) (11,665)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 315,231 20,093
---------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 94,604 $ 8,428
========== ==========
See notes to condensed financial statements
<PAGE>
AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 1, 1995
Basis of Presentation
The accompanying condensed financial statements are unaudited for the
periods, but include all adjustments (consisting only of normal recurring
accruals) which management considers necessary for the fair presentation
of results as of July 1, 1995 and for the three and six month periods
ended July 1, 1995 and June 30, 1994. Moreover, these condensed financial
statements do not purport to contain complete disclosure in conformity
with generally accepted accounting principles and should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994.
The results reflected for the three and six month periods ended July 1,
1995 are not necessarily indicative of the results for the entire year to
end on December 31, 1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the financial
statements and notes thereto included herein and the financial statements
and management's discussion and analysis of financial condition and
results of operations included in the Company's annual report on Form 10-
KSB for the year ended December 31, 1994.
Results of Operations
Three Months Ended July 1,1995 Compared to Three Months Ended June 30,
1994
Sales for the three months ended July 1, 1995, were $2,938,982,
representing a decrease of $290,877 compared to the same period in 1994.
Domestic law enforcement sales increased by 116% while International law
enforcement and military sales decreased by over 70%. While it is quite
usual for the mix of Domestic versus International sales to change from
quarter to quarter, the primary cause for the decrease in International
sales relates to two large orders realized last year. The increase in
Domestic law enforcement sales results from the Company's efforts to
continue to expand its Domestic distribution network coupled with the fact
that the Company expended its efforts more on International business
during the second quarter of 1994 than in 1995. U.S. Government agency
sales continue to be negatively impacted by reduced sales on a multi year
supply contract for a large government agency, however, these sales
increased over 100% in the second quarter of 1995. The Company expects
the U.S. Government agency sales to continue to increase in the third
quarter.
Gross profit on sales for 1995 increased by $146,335 compared to the prior
year, primarily due to a decrease in the cost of sales in the second
quarter, compared to the prior year, of $437,213. The gross profit margin
(sales less manufacturing costs for materials, labor and overhead as a
percent of total sales) increased to 37% for the 1995 period from 29.2% in
1994. This large increase in gross profit margin reflects a change in the
mix of sales between the periods (two large International orders last year
at below normal gross margins) and positive manufacturing variances
(better utilization of labor and materials). For the full year of 1994,
the gross profit margin was 31.8%.
Selling, General and Administrative Expenses for the 1995 period were
$809,483 compared to $706,595 in the 1994 period. The increase in actual
dollar amount of selling, general and administrative expenses between the
periods, amounted to $102,888 or 15%. This increase is equally the result
of three main activities: 1) increased research and development expenses,
2) increased commissions due to increased domestic sales and 3) accruals
for employee stock grants recorded this quarter.
Interest expense of $69,694 for the 1995 period is almost $17,000 higher
than the prior year period. The increase is primarily a result of higher
interest rates and payments related to the confirmation of the Company's
Bankruptcy reorganization.
Income tax expense for the three month period ended July 1, 1995
represents a deferred tax expense amounting to 39% of pre-tax income.
This tax rate reflects the statutory rate plus state taxes. The Company's
operating loss carry forward, amounting to approximately $5 million,
results in no taxes being currently payable. The entire amount of income
tax expense for the period reduces the Company's deferred tax asset and
related valuation reserve resulting in a reduction in the intangible asset
"Reorganization Value in Excess of Amounts Allocable to Identifiable
Assets".
For the second quarter of 1995, pre tax income and net income amounted to
$209,718 and $127,718, respectively, compared to $183,531 and $113,531 for
the 1994 period. This change reflects the increase in gross profit margin
between the periods, as discussed above, being partially offset by the
increase in selling, general and administrative expenses and interest
expense.
Six Months Ended July 1, 1995 Compared to Six Months Ended June 30, 1994
Sales for the six months ended July 1, 1995 were $5,476,134 representing a
decrease of $393,704 compared to the same period in 1994. The decrease
results primarily from the decrease in International sales as discussed
previously. Domestic law enforcement sales are up 58% over last year
while Government and International sales are down 62% and 53%,
respectively.
Although the Company had a decrease in sales volume between the periods,
gross profit increased by $241,484. The gross profit margin (sales less
manufacturing costs for materials, labor and overhead as a percent of
total sales) increased to 37.2% for the 1995 period from 30.6% in 1994.
This increase in gross profit margin reflects a change in the mix of sales
between the periods. As discussed previously, the large International
sales reflected in the second quarter of 1994 were at lower profit
margins.
Selling, General and Administrative Expenses for the first six months of
1995 were $1,516,791 (27.7% of sales) compared to $1,360,597 (23.2% of
sales) in the 1994 period. Increases in research and development costs
accounted for 58% of the overall dollar increase between the periods.
Employee stock grant awards amounted to over $30,000 during the 1995
period while there were no grants awarded in 1994. Selling general and
administrative expenses as a percentage of sales increased by 4.5% of
sales. This percentage increase results from the lower sales volume.
Interest expense of $129,677 for the 1995 period was $32,000 higher than
the prior year. Payments made related to the confirmation of the
Company's Bankruptcy reorganization as well as increased interest rates
and loan fees are the reason for the increase.
Income tax expense for the six month period ended 1995 represents a
deferred tax expense amounting to 39% of pre-tax income. The Company's
operating loss carry forward, amounting to approximately $5 million,
results in no taxes being currently payable. The entire amount of the
income tax expense for the period reduces the Company's deferred tax asset
and related valuation reserve, resulting in a reduction in the intangible
asset "Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets".
For the first six months of 1995, pre-tax income and net income increased
to $393,244 and $239,244, respectively, from $339,980 and $208,980 for the
1994 period. The 15% increase is the result of higher profit margins in
the first half of 1995.
Financial Condition
The Company's backlog of open orders amounted to approximately $1,034,000
at August 4, 1995 compared to $1,205,000 at December 31, 1994 and
$1,489,000 at August 5, 1994. Management believes that a backlog of
approximately four weeks production provides reasonable production
scheduling without causing unacceptable delivery delays for customers.
As of July 1, 1995, the interest rate on the outstanding loans was the
Banks Reference Rate plus 2.0% (11%). The Financing Agreement expires on
June 30, 1996. As of July 1, 1995, the Company was indebted to LaSalle
Business Credit, Inc. ("LaSalle") in the aggregate amount of $1,493,403,
and had additional availability from which to borrow in the amount of
$415,968 compared to $1,668,061 and $295,377, respectively, at December
31, 1994. As collateral for this loan, LaSalle holds a security interest
in virtually all of the assets of the Company.
As of July 1, 1995, the Company had working capital of $398,948 which
reflects continued improvement from the March 31, 1995 and December 31,
1994 working capital amounts $199,426 and $40,332, respectively. This
improvement reflects the Company's continued profitability and the impact
of regaining vendor credit for material purchases.
The Company anticipates that continuing profitable operations and
utilization of its line of credit borrowing capacity and vendor credit
will enable the Company to meet its liquidity and working capital
requirements during the next year. Such requirements include generating
sufficient cash to make payments required under the Plan of Reorganization
and to pay dividends on and meet the intended redemption schedule on the
outstanding Preferred Stock.
In September 1995, 242,857 shares of the Company's $1 stated value
Preferred Stock are scheduled for redemption. Under the terms of the
Preferred Stock, the Company may elect to redeem such stock in a cash
redemption at the stated value of the Preferred Stock or by converting
such shares into the Company's $.03 par value Common Stock having a
current market value equal to 110% of the stated value of the Preferred
Stock.
In August 1995, the Company received a cash payment amounting to $250,000.
This non-recurring and non-operating income was received in lieu of
enforcing a non-compete agreement between the Company and a competitor.
This income will be reflected as non-operating income in the third quarter
of 1995.
PART II
Item 1. Legal Proceedings
No reportable events during the quarter. Reference is provided to the
information contained in Item 3 of the Company's Annual Report on Form 10-
KSB for the period ended December 31, 1994.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On June 9, 1995, the Company held its Annual Meeting of Stockholders.
4,890,195 shares (80%) of the Company's Common and Preferred Stock were
represented at the meeting. Matters submitted for a vote of stockholders
at the meeting were as follows:
Election of Directors - Jonathan M. Spiller, Gardner F. Davis, John
Innes, Julius Lasnick and Robert Sullivan were elected to serve as
the Company's Board of Directors until the next annual meeting. No
nominee received less than 4,888,006 votes for election and each
person nominated was elected.
Appointment of Auditors - Deloitte & Touche LLP, Certified Public
Accountants. There were approximately 4,866,622 votes cast for the
proposal, 6,523 votes against and 17,050 abstentions. The proposal
was approved.
For a further description of the matters discussed above, please refer to
the Proxy Statement filed by the Company in connection with the Company's
Annual Meeting.
Item 5. Other Items
None
<PAGE>
Item 6. Exhibits & Reports on Form 8-K
a. Exhibits
Exhibit 2.1 - Order confirming Debtor's Third Amended and
Restated Plan of Reorganization with the Third
Amended and Restated Plan of Reorganization
attached thereto (Exhibit 2 to Form 8-K, Current
Report of the Company, dated October 1, 993)
Exhibit 3.1 - Articles of Restatement of Articles of
Incorporation of American Body Armor & Equipment,
Inc. (with the Amended and Restated Articles of
Incorporation of American Body Armor & Equipment,
Inc. attached thereto) (Exhibit 3 to Form 8-K,
Current Report of the Company, dated October 1,
1993)
Exhibit 3.2 - Amended and Restated By Laws of American Body
Armor & Equipment, Inc. (Exhibit 4 to Form 8-K,
Current Report of the Company, dated October 1,
1993)
Exhibit 10.1 - Loan and Security Agreement between American Body
Armor & Equipment, Inc. and StanChart Business
Credit dated September 21, 1993 (Exhibit to Form
10-KSB for the fiscal year ended December 31,
1993)
Exhibit 10.2 - Revolving Loan Note dated October 27, 1993
effective as of September 20, 1993 between
American Body Armor & Equipment, Inc. and
StanChart Business Credit (Exhibit to Form 10-KSB
for the fiscal year ended December 31, 1993)
Exhibit 10.3 - Amendment #1 to Loan and Security Agreement
between American Body Armor & Equipment, Inc. and
LaSalle Business Credit, Inc. dated September 20,
1993 (Exhibit to Form 10-QSB for the quarterly
period ended June 30, 1994)
Exhibit 10.4 - Form of Indemnification Agreement for Directors
of the Registrant, dated September 21, 1993
(Exhibit to Form 10-KSB for the fiscal year ended
December 31, 1993)
Exhibit 10.5 - Form of Indemnification Agreement for Officers of
the Registrant, dated February 8, 1994 (Exhibit
to Form 10-KSB for the fiscal year ended December
31, 1993)
Exhibit 10.6 - Employment Agreement between Jonathan M. Spiller
and American Body Armor & Equipment, Inc.,
effective January 1, 1994 (Exhibit 10-QSB for the
quarterly period ended June 30, 1994)
Exhibit 10.7 - Employment Agreement between J. Michael Elliott
and American Body Armor & Equipment, Inc.,
effective January 1, 1994 (Exhibit to Form 10-QSB
for the quarterly period ended June 30, 1994)
Exhibit 10.8 - American Body Armor & Equipment, Inc. 1994
Incentive Stock Plan (from Form S-8 filed on
October 10, 1994 Reg. No. 33-018863)
Exhibit 10.9 - American Body Armor & Equipment, Inc. 1994
Directors Stock Plan (from Form S-8 filed on
October 31, 1994 Reg. No. 33-018863)
Exhibit 27 - Financial Data Schedule
b. The Company filed no reports on Form 8-K during the quarter
ended July 1, 1995.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
August 14, 1995
/s/ Jonathan M. Spiller
Jonathan M. Spiller
President and Chief Executive Officer
/s/ Carol T. Burke
Carol T. Burke
Controller
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Page No.
2.1 Order confirming Debtor's Third Amended and
Restated Plan of Reorganization with the
Third Amended and Restated Plan of
Reorganization attached thereto (Exhibit 2
to Form 8-K, Current Report of the Company,
dated October 1, 993)
3.1 Articles of Restatement of Articles of
Incorporation of American Body Armor &
Equipment, Inc. (with the Amended and
Restated Articles of Incorporation of
American Body Armor & Equipment, Inc.
attached thereto) (Exhibit 3 to Form 8-K,
Current Report of the Company, dated
October 1, 1993)
3.2 Amended and Restated By Laws of American
Body Armor & Equipment, Inc. (Exhibit 4 to
Form 8-K, Current Report of the Company,
dated October 1, 1993)
10.1 Loan and Security Agreement between
American Body Armor & Equipment, Inc. and
StanChart Business Credit dated September
21, 1993 (Exhibit to Form 10-KSB for the
fiscal year ended December 31, 1993)
10.2 Revolving Loan Note dated October 27, 1993
effective as of September 20, 1993 between
American Body Armor & Equipment, Inc. and
StanChart Business Credit (Exhibit to Form
10-KSB for the fiscal year ended December
31, 1993)
10.3 Amendment #1 to Loan and Security Agreement
between American Body Armor & Equipment,
Inc. and LaSalle Business Credit, Inc.
dated September 20, 1993 (Exhibit to Form
10-QSB for the quarterly period ended June
30, 1994)
10.4 Form of Indemnification Agreement for
Directors of the Registrant, dated
September 21, 1993 (Exhibit to Form 10-KSB
for the fiscal year ended December 31,
1993)
10.5 Form of Indemnification Agreement for
Officers of the Registrant, dated February
8, 1994 (Exhibit to Form 10-KSB for the
fiscal year ended December 31, 1993)
10.6 Employment Agreement between Jonathan M.
Spiller and American Body Armor &
Equipment, Inc., effective January 1, 1994
(Exhibit 10-QSB for the quarterly period
ended June 30, 1994)
10.7 Employment Agreement between J. Michael
Elliott and American Body Armor &
Equipment, Inc., effective January 1, 1994
(Exhibit to Form 10-QSB for the quarterly
period ended June 30, 1994)
10.8 American Body Armor & Equipment, Inc. 1994
Incentive Stock Plan (from Form S-8 filed
on October 10, 1994 Reg. No. 33-018863)
10.9 American Body Armor & Equipment, Inc. 1994
Directors Stock Plan (from Form S-8 filed
on October 31, 1994 Reg. No. 33-018863)
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AMERICAN
BODY ARMOR & EQUIPMENT, INC.'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
JULY 1, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUL-01-1995
<CASH> 94,604
<SECURITIES> 0
<RECEIVABLES> 1,806,773
<ALLOWANCES> 96,239
<INVENTORY> 1,149,699
<CURRENT-ASSETS> 3,119,422
<PP&E> 677,648
<DEPRECIATION> 189,003
<TOTAL-ASSETS> 7,411,630
<CURRENT-LIABILITIES> 2,720,474
<BONDS> 46,620
<COMMON> 140,918
0
1,457,143
<OTHER-SE> 3,046,475
<TOTAL-LIABILITY-AND-EQUITY> 7,411,630
<SALES> 2,938,982
<TOTAL-REVENUES> 2,938,982
<CGS> 1,850,087
<TOTAL-COSTS> 436,793
<OTHER-EXPENSES> 372,690
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,694
<INCOME-PRETAX> 209,718
<INCOME-TAX> 82,000
<INCOME-CONTINUING> 127,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127,718
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
