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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 MARCH 31, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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)
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Florida 59-2044869
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer ID #)
191 Nassau Place Road, Yulee, Florida 32097
(Address of principal executive offices) (Zip Code)
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(904) 261-4035
(Issuer's telephone number)
85 Nassau Place, Yulee, Florida 32097
(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 classes of common
equity, as of May 10, 1996: $.03 par value Common Stock - 6,825,835
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PART I
Item 1. Financial Statements
AMERICAN BODY ARMOR & EQUIPMENT, INC.
Three Months Ended March 31, 1996 and 1995
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 March 31, 1996 and for the three month periods
ended March 31, 1996 and March 31, 1995.
Moreover, these condensed financial statements should be read in conjunction
with the financial statements included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995.
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AMERICAN BODY ARMOR & EQUIPMENT, INC.
BALANCE SHEET (UNAUDITED)
March 31,
ASSETS 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 41,649
Accounts receivable, net of allowance for
doubtful accounts of $98,463 1,910,348
Inventories 1,198,565
Prepaid expenses and other current assets 500,473
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Total current assets 3,651,035
PROPERTY, PLANT AND EQUIPMENT, net 457,582
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS, net 3,541,574
OTHER ASSETS 72,770
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TOTAL ASSETS $7,722,961
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings and current portion
of long-term debt $1,733,287
Accounts payable, accrued expenses
and other current liabilities 967,999
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Total current liabilities 2,701,286
LONG-TERM DEBT AND CAPITALIZED
LEASE OBLIGATION, less current portion 25,723
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Total liabilities 2,727,009
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $1 stated value,
1,700,000 shares authorized, 0 issued
and outstanding 0
Common stock, $.03 par value, 15,000,000
shares authorized; 6,825,835 shares issued
and outstanding 204,775
Additional paid-in capital 3,755,012
Retained earnings 1,036,165
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Total stockholders' equity 4,995,952
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,722,961
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See notes to condensed financial statements
2
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AMERICAN BODY ARMOR & EQUIPMENT, INC.
INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
March 31, March 31,
1996 1995
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(unaudited) (unaudited)
NET SALES $3,267,328 $2,537,152
COST AND EXPENSES:
Cost of sales 2,110,413 1,586,335
Selling, general and administrative expenses 968,417 707,308
Interest expense, net 72,011 59,983
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INCOME BEFORE INCOME TAXES 116,487 183,526
INCOME TAXES 45,000 72,000
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NET INCOME $ 71,487 $ 111,526
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EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARES $ .01 $ .02
WEIGHTED AVERAGE COMMON SHARES AND
COMMON EQUIVALENT SHARES 7,575,936 6,557,020
See notes to condensed financial statements
3
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AMERICAN BODY ARMOR & EQUIPMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
March 31, March 31,
1996 1995
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(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 71,487 $ 111,526
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation 39,473 29,798
Deferred income taxes 45,000 72,000
Decrease in accounts receivable 409,406 46,886
Increase in inventories (96,630) (5,227)
Decrease (increase) in prepaid expenses
and other assets (168,376) 1,830
Decrease in accounts payable, accrued
liabilities and other current liabilities (135,894) (46,411)
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Net cash provided by operating activities 164,466 210,402
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (22,696) (47,826)
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Net cash used in investing activities (22,696) (47,826)
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred Stock dividends (22,155) --
Net decrease in Bank line of credit &
payments of long-term debt (350,938) (381,953)
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Net cash used in financing activities (373,093) (381,953)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (231,323) (219,377)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 272,972 315,231
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 41,649 $ 95,854
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See notes to condensed financial statements
4
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AMERICAN BODY ARMOR & EQUIPMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1996
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 March
31, 1996 and for the three month periods ended March 31, 1996 and March 31,
1995. Moreover, these condensed financial statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995.
5
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Item 2. Management's Discussion and Analysis or Plan of Operation
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 or plan of operation included in the
Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 1995.
Results of Operations
Three Months Ended March 31,1996 Compared to Three Months Ended March 31,
1995
Sales for the three months ended March 31, 1996, were $3,267,328, representing
an increase of $730,176 compared to the same period in 1995. Domestic law
enforcement sales increased by 43% and U.S. Government agency sales increased by
25%. The increase in domestic law enforcement sales results from the Company's
efforts to continue to expand its domestic distribution network.
Gross profit on sales for the three month period ended March 31, 1996 increased
by $206,098 compared to the same period in the prior year, primarily due to the
increased gross sales in the first quarter, compared to the prior year. The
gross profit margin (sales less manufacturing costs for materials, labor and
overhead as a percent of total sales) decreased to 35% for the 1996 period from
37% in the comparable period for 1995. The decrease in margin was primarily due
to the impact of price increases incurred on the Company's main raw material.
The effect of this price increase on the Company's gross margin is expected to
yield an approximate 1% decrease in margin percentage for the full year of 1996,
as compared to 1995.
Selling, General and Administrative Expenses for the three month period ended
March 31, 1996 were $968,417 (29.6% of sales) compared to $707,308 (27.9% of
sales) during the comparable period in 1995. The increase in the actual dollar
amount of selling, general and administrative expenses between the periods,
amounted to $261,109 and consisted primarily of increased salaries and
commissions in the sales area due to the increase in domestic sales.
Interest expense of $72,011 for the three month period ended March 31, 1996 is
approximately $12,000 higher than the comparable period in the prior year. The
increase resulted primarily from higher borrowings under the Company's financing
agreement with LaSalle Business Credit, Inc. ("LaSalle"). Income tax expense for
the three month period ended March 31, 1996 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
6
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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 first quarter of 1996, pre-tax income and net income amounted
to $116,487 and $71,487, respectively, compared to $183,526 and $111,526 for the
comparable period in 1995. This change reflects the increase in gross profit
margin between the periods, as discussed above, as well as the decrease in
selling, general and administrative expenses in relation to sales and higher
interest costs.
Liquidity and Capital Resources
The Company's backlog of orders consists of orders received but not yet
manufactured. As of May 5, 1996, the Company had a backlog of orders of
approximately $1,102,576. Management believes that a backlog of approximately
four weeks production provides reasonable production scheduling.
As of March 31, 1996, the interest rate on the Company's outstanding loans with
LaSalle was LaSalle's Reference Rate plus 2.0% (10.25%). The financing agreement
with LaSalle expires on June 30, 1996. As of March 31, 1996, the Company was
indebted to LaSalle in the aggregate amount of $1,520,863, and had additional
availability from which to borrow in the amount of $764,108 compared to
$1,997,060 and $230,000, respectively, at December 31, 1995. As collateral for
this loan, LaSalle holds a security interest in substantially all of the assets
of the Company.
As of March 31, 1996, the Company had working capital of $949,749 which reflects
continued improvement of $154,379 from the December 31, 1995 working capital
amounts. This improvement reflects the Company's continued profitability.
The Company anticipates that continuing operations will enable the Company to
meet its liquidity, working capital requirements, and capital expenditure
requirements during the next year.
7
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PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
On January 19, 1996, the Board of Directors of the Company elected to require
the remaining holders of the Company's 3% Convertible, $1.00 stated value
Preferred Stock (the "Preferred Stock") to convert such shares to shares of the
Company's Common Stock at 110% of the aggregate stated value of the Preferred
Stock, at a conversion price of $.77 per share (fair market value, as determined
by an independent valuation firm), as required by the Company's Amended and
Restated Articles of Incorporation. All shares of the Company's Preferred Stock
were deemed to have been converted upon such election by the Board of Directors.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits & Reports on Form 8-K
a. Exhibits
The following Exhibits are hereby filed as part of this
Quarterly Report on Form 10-QSB:
EXHIBIT NO. DESCRIPTION
11.1 Earnings Per Share Computations
27.1 Financial Data Schedule
b. The Company filed a report on Form 8-K during the quarter
ended March 31, 1996 in connection with the acquisition by
Kanders Florida Holdings, Inc., of all the shares of capital
stock of the Company owned by Clark Schwebel, Inc. and Hexcel
Corporation, which transaction resulted in a change in control
of the Company. Also, in the second quarter of 1996, a report
on Form 8-K was filed by the Company in connection with the
Company's private placement of $11,500,000 aggregate principal
amount of the Company's 5% Convertible Subordinated Notes due
2001, which are convertible into shares of the Company's
Common Stock at a conversion price of $5.00 per share,
subject to adjustment as therein provided.
8
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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.
/s/ Jonathan M. Spiller
Jonathan M. Spiller
President and Chief Executive Officer
Dated May 15, 1996
/s/ Carol T. Burke
Carol T. Burke
Vice President of Finance
Dated May 15, 1996
9
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EXHIBIT INDEX
The following Exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
11.1 Earnings Per Share Computations
27.1 Financial Data Schedule
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EARNINGS PER SHARE COMPUTATIONS
Three Month Period Ended
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March 31, March 31,
1996 1995
PRIMARY EARNINGS PER SHARE:
Net Income $ 71,487 $ 111,526
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Shares:
Weighted average common shares outstanding 6,463,644 4,697,255
Effect of shares issuable under stock option
and stock grant plans, based on the treasury
stock method 750,101 256,908
Effect of shares issuable under conversion of
preferred stock - if converted method (for
1996 the "if converted" method is applied
from the beginning of the period to the
actual conversion date of the preferred stock
of January 19, 1996) 362,191 1,602,857
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Adjusted common shares and equivalents 7,575,936 6,557,020
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Earnings per share - primary $ 0.01 $ 0.02
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FULLY DILUTED EARNINGS PER SHARE:
Net Income $ 71,487 111,526
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Shares:
Weighted Average common shares outstanding 6,463,644 4,697,255
Effect of shares issuable under stock option
and stock grants plans, based on the treasury
stock method 784,913 360,951
Effect of shares issuable under conversion of
preferred stock - if converted method (for 1996
the "if converted" method is applied from the
beginning of the period to the actual conversion
date of the preferred stock of January 19, 1996) 362,191 1,602,857
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Adjusted common shares and equivalents 7,610,748 6,661,063
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Earnings per share - fully diluted $ 0.01 $ 0.02
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<LEGEND>
The schedule contains summary financial information extracted from the Company's
financial statements for the quarterly period ended March 31, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 41,649
<SECURITIES> 0
<RECEIVABLES> 2,008,811
<ALLOWANCES> 98,463
<INVENTORY> 1,198,565
<CURRENT-ASSETS> 3,651,035
<PP&E> 767,504
<DEPRECIATION> 309,922
<TOTAL-ASSETS> 7,722,961
<CURRENT-LIABILITIES> 2,701,286
<BONDS> 25,723
0
0
<COMMON> 204,775
<OTHER-SE> 4,791,177
<TOTAL-LIABILITY-AND-EQUITY> 4,995,952
<SALES> 3,267,328
<TOTAL-REVENUES> 3,267,328
<CGS> 2,110,413
<TOTAL-COSTS> 599,706
<OTHER-EXPENSES> 368,711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,011
<INCOME-PRETAX> 116,487
<INCOME-TAX> 45,000
<INCOME-CONTINUING> 71,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,487
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
