<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM 10-Q/A-1
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1999 , or
[ ] 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
-------
ARMOR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-3392443
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 MARSH LANDING PARKWAY
SUITE 112
JACKSONVILLE, FLORIDA 32250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (904) 741-5400
----------------
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 __
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No__
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the registrant's Common Stock as of August
12, 1999 is 23,871,772.
<PAGE>
This Amendment No. 1 to Form 10-Q for the three and six month periods
ended June 30, 1999 is being filed to restate Armor Holdings, Inc.'s (the
"Company") financial statements to reflect the acquisitions of Alarm Systems
Holdings Company and Fire Alarm Service Corporation (the "Acquisitions") as
purchases and to make certain other adjustments. The Company had previously
accounted for these Acquisitions as a pooling of interests in its Form 10-Q for
the three and six month periods ended June 30, 1999, as originally filed August
16, 1999.
The restatement is being made as a result of a recent change in the
advice of the Company's independent auditors. The auditors initially advised the
Company, prior to closing the Acquisitions, that pooling treatment was available
for the acquisitions.
Only amended items are filed herewith.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 1999 AND JUNE 30, 1998
- -----------------------------------------------------------------
The accompanying unaudited condensed consolidated financial statements of Armor
Holdings, Inc. (the "Company") and its direct and indirect wholly owned
subsidiaries include all adjustments (consisting only of normal recurring
accruals and the elimination of all intercompany items and transactions) which
management considers necessary for a fair presentation of operating results as
of June 30, 1999 and for the three and six month periods ended June 30, 1999 and
June 30, 1998.
These unaudited condensed consolidated financial statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
3
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------------ -----------------------
(UNAUDITED) *
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,143 $ 6,789
Accounts receivable (net of allowance for
doubtful accounts of $1,544 and $1,380) 32,089 21,363
Inventories 14,133 9,103
Prepaid expenses and other current assets 9,587 5,910
----------------- ---------------------
Total current assets 78,952 43,165
PROPERTY, PLANT AND EQUIPMENT (net
of accumulated depreciation of $4,704 and
$4,172) 15,946 12,173
GOODWILL (net of accumulated amortization
of $2,322 and $1,577) 77,695 25,820
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS (net of accumulated
Amortization of $2,688 and $2,513) 1,387 1,562
PATENTS AND TRADEMARKS (net of
Accumulated amortization of $919 and $728) 6,755 7,180
OTHER ASSETS
5,972 4,453
------------------ --------------------
TOTAL ASSETS $ 186,707 $94,353
================= ===================
</TABLE>
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
4
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------------- ------------------
(UNAUDITED) *
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 290 $ 5,041
Current portion of long-term debt and capitalized
lease obligations 868 433
Accounts payable, accrued expenses and other
current liabilities 22,981 13,325
-------------------- -----------------
Total current liabilities 24,139 18,799
MINORITY INTEREST 118 108
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS, less current portion 2,800 344
------------------- ------------------
Total liabilities 27,057 19,251
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; 0 shares issued and outstanding - -
Common stock, $.01 par value; 50,000,000 shares
authorized; 24,142,500 and 16,497,808 issued and
23,871,772 and 16,227,080 outstanding 244 165
Additional paid-in capital 145,186 65,408
Cumulative comprehensive income excluded from
net income, net of tax (1,458) (574)
Retained earnings 18,994 13,419
Treasury stock (3,316) (3,316)
------------------- ------------------
Total stockholders' equity 159,650 75,102
------------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $186,707 $94,353
=================== ==================
</TABLE>
* Condensed from audited financial statements.
See notes to condensed consolidated financial statements.
5
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Services $ 12,847 $ 11,905 $ 25,662 $ 23,705
Products 26,064 10,928 40,089 18,763
-------- -------- -------- --------
Total Revenues $ 38,911 $ 22,833 $ 65,751 $ 42,468
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 23,195 15,826 39,485 29,427
Operating expenses 10,176 3,935 16,669 7,238
Amortization 656 482 1,035 861
Equity in earnings of investees (26) (169) (166) (324)
Integration and other non-recurring charges 646 - 646 -
Interest (income) expense, net (6) (198) (50) (440)
-------- -------- -------- --------
OPERATING INCOME 4,270 2,957 8,132 5,706
Other income 303 - 816 -
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 4,573 2,957 8,948 5,706
PROVISION FOR INCOME TAXES 1,738 1,122 3,373 2,097
-------- -------- -------- --------
NET INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ 2,835 $ 1,835 $ 5,575 $ 3,609
======== ======== ======== ========
BASIC EARNINGS PER SHARE $ 0.14 $ 0.11 $ 0.31 $ 0.22
======== ======== ======== ========
DILUTED EARNINGS PER SHARE $ 0.14 $ 0.11 $ 0.29 $ 0.21
======== ======== ======== ========
WEIGHTED AVERAGE SHARES - BASIC 20,082 16,144 18,205 16,089
======== ======== ======== ========
WEIGHTED AVERAGE SHARES -
DILUTED 20,839 17,034 19,087 16,949
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 30, JUNE 30,
1999 1998
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,575 $ 3,609
Adjustments to reconcile net income to cash
Provided by operating activities:
Depreciation and amortization 1,936 1,035
Deferred income taxes (245) (550)
Earnings from investees (166) (324)
Increase in accounts receivable (1,016) (534)
Increase in inventories (1,004) (1,210)
Decrease (increase) in prepaid expenses and other assets 422 (1,255)
Decrease in accounts payable, accrued liabilities
and other current liabilities (5,839) (2,935)
Increase (decrease) in minority interest 10 (114)
--------- --------
Net cash (used in) operating activities (327) (2,278)
INVESTING ACTIVITIES:
Purchase of property and equipment (1,513) (1,223)
Purchase of businesses (33,192) (3,562)
Dividends received from associated companies 146 116
--------- -------
Net cash used in investing activities (34,559) (4,669)
--------- --------
FINANCING ACTIVITIES:
Proceeds from the exercise of stock options 803 172
Proceeds from the issuance of common stock 61,018 -
Net repayments under line of credit (5,041) -
Net repayments of long-term debt (4,656) (780)
Repurchase of treasury stock - (685)
--------- --------
Net cash provided by (used in) financing activities 52,124 (1,293)
--------- --------
Net effect of translation of foreign currencies (884) (5)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,354 (8,245)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,789 19,300
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,143 $ 11,055
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
7
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Armor
Holdings, Inc. ("AHI" or the "Company") includes its direct and indirect wholly
owned subsidiaries. These financial statements have been prepared in accordance
with the instructions to Form 10-Q, and 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,
these financial statements include all adjustments (consisting only of normal
recurring accruals and the elimination of all significant intercompany items and
transactions) necessary to present fairly the financial position and results of
operations for the periods indicated.
These condensed consolidated financial statements should be read in
conjunction with the financial statements, and notes thereto, included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
Operating results for the quarter are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999.
2. RESTATEMENT
The Company is restating its financial results to reflect the
acquisitions of Alarm Systems Holding Company and Fire Alarm Service Corporation
as purchases. On June 30, 1999, the Company completed these acquisitions as
pooling of interests and reported them as such in its Form 10Q for that period.
The effect of this restatement on the Company's balance sheet as of
June 30, 1999 was to increase assets by $11.9 million due to the goodwill
recorded as a result of accounting for these acquisitions as purchases and to
increase stockholders' equity by $13.2 million.
The effect of this restatement on the Company's statement of operations
was to increase the net income reported for the three months ended June 30, 1999
by $55,000, or $.01 per diluted share, and decrease the net income reported for
the six months ended June 30, 1999 by $177,000, with no effect on earnings per
diluted share. The restatement decreased total revenues by $3.0 million and $6.0
million for the three and six months ended June 30, 1999, respectively.
3. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income."
8
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
3. COMPREHENSIVE INCOME (CONTINUED)
Comprehensive income includes net income and several other items that
current accounting standards require to be recognized outside of net income.
SFAS No. 130 is effective for fiscal years beginning after December 15, 1997,
and the Company has adopted the standard for its fiscal year beginning December
28, 1997. During the three months ended June 30, 1999 and June 30, 1998,
comprehensive income was approximately $2,672,000 and $1,936,000 respectively,
consisting of unrealized gains or losses on the Company's foreign currency
translation adjustments, which prior to adoption were reported separately in
shareholders' equity. During the six months ended June 30, 1999 and June 30,
1998, comprehensive income was $4,691,000 and $3,604,000 respectively,
consisting of net income plus or minus, as applicable, unrealized gains or
losses on the Company's foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity.
4. SIGNIFICANT DEVELOPMENTS
Public Offering - On May 7, 1999, the Company completed a public
offering of 6,125,000 shares of common stock at a price of $11.00 per share. The
net proceeds to the Company from the offering were approximately $61.6 million,
after all fees and expenses, and were used to pay down indebtedness on the
Company's credit facilities and for working capital. Excess proceeds will be
used to finance future acquisitions.
Safariland Ltd., Inc. - On April 12, 1999, the Company acquired all of
the outstanding stock of Safariland Ltd., Inc., a leading U.S. manufacturer of
law enforcement and military equipment based in Ontario, California. The
purchase price was approximately $45.0 million, subject to certain adjustments,
consisting of approximately $35.6 million in cash, $4 million (300,752 shares)
of the Company's common stock and repayment of approximately $5.1 million of
Safariland's indebtedness. The transaction was financed with borrowings of
approximately $39.2 million. This transaction was accounted for as a purchase.
The Parvus Company - On May 4, 1999, the Company acquired all of the
outstanding capital stock of The Parvus Company, a Washington, D.C. based
consulting firm specializing in international investigations, corporate
intelligence and security services. The purchase price was approximately $1.3
million, subject to adjustments, consisting of approximately $754,000 (64,876
shares) of the Company's common stock, the repayment of approximately $297,389
of Parvus' indebtedness and approximately $150,000 in cash. Up to an aggregate
of 54,449 additional shares may be issued to the seller in the event certain
revenue targets of Parvus are achieved. This transaction was accounted for as a
purchase.
9
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
ASH and FAS - On June 30, 1999, the Company acquired all of the outstanding
capital stock of two affiliated security systems integrators, Alarm Systems
Holding Company of Lyndhurst, New Jersey ("ASH") and Fire Alarm Service
Corporation of Tampa, Florida ("FAS"). Each of ASH and FAS design, install and
service commercial and industrial security systems, including access control
systems, burglar and fire alarm systems, closed circuit television and other
engineered low voltage systems in New Jersey, Florida, and South Carolina.The
purchase price was approximately $12.7 million consisting of 1,226,021 shares of
the Company's common stock. Of these shares, 299,568 are unallocated and held by
the Company. These transactions were accounted for as purchases.
The unaudited consolidated results of operations of the Company on a
pro forma basis as if the Company had consummated each of the above
acquisitions, as well as each of its 1998 acquisitions including Low Voltage
Systems Technology, Inc., Asmara Limited, Pro-Tech Armored Products of
Massachusetts, Inc., CDR International Ltd., Law Enforcement Division of MACE
Security International, Inc. and the Alarm Protection Services, Inc as discussed
in the Company's December 31, 1998 filing on Form 10-K for its fiscal year ended
December 31, 1998 at the beginning of each period shown are as follows:
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
------------- --------------
Revenues $82,881 $81,358
Net income $ 5,171 $ 3,700
Diluted earnings per share $ 0.26 $ 0.20
Weighted average shares - diluted 20,138 18,371
5. INFORMATION CONCERNING BUSINESS SEGMENTS AND GEOGRAPHICAL SALES
The Company is a leading global provider of security risk management
services to multi-national corporations and governmental agencies and products
to law enforcement personnel through two operating divisions - ArmorGroup
Services and Armor Holdings Products. The ArmorGroup Services division provides
sophisticated security planning and risk management, electronic security systems
integration, consulting and training services, as well as intellectual property
asset protection, business intelligence and investigative services. The Armor
Holdings Products division manufactures and sells a broad range of high quality
branded equipment including body armor, less than lethal munitions, duty gear
and anti-riot equipment to law enforcement and military personnel.
10
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
The Company has invested substantial resources outside of the United States and
plans to continue to do so in the future. Substantially all of the operations of
the services segment are conducted in emerging markets in South America, CIS
(former Soviet Union), Africa and Asia. These operations are subject to the risk
of new and different legal and regulatory requirements in local jurisdictions,
tariffs and trade barriers, potential difficulties in staffing and managing
local operations, potential imposition of restrictions on investments,
potentially adverse tax consequences, including imposition or increase of
withholding and other taxes on remittances and other payments by subsidiaries,
and local economic, political and social conditions. Governments of many
developing countries have exercised and continue to exercise substantial
influence over many aspects of the private sector.
Government actions in the future could have a material adverse effect
on the Company and its operating companies. The Company does not have political
risk insurance in the countries in which it currently conducts business.
Moreover, applicable agreements relating to the Company's interests in its
operating companies are frequently governed by foreign law. As a result, in the
event of a dispute, it may be difficult for the Company to enforce its rights.
Accordingly, the Company may have little or no recourse upon the occurrence of
any of these developments.
Revenues, income from operations (before amortization, equity in
earnings, integration and other non-recurring expenses and interest expense
(income), net) and total assets for each of the Company's segments for the six
months ended June 30, 1999 and June 30, 1998 were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 JUNE 30, 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Services $ 25,662 $ 23,705
Products 40,089 18,763
-------- --------
Total revenues $ 65,751 $ 42,468
Income from operations:
Services $ 2,619 $ 2,908
Products 8,116 3,755
Corporate expenses (1,138) (860)
-------- --------
Total income from operations $ 9,597 $ 5,803
Total assets:
Services $ 62,851 $ 40,321
Products 100,406 33,137
Corporate 23,450 10,994
-------- --------
Total assets $186,707 $ 84,452
</TABLE>
11
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
Revenues from unaffiliated customers by geographic area consist of the
following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 JUNE 30, 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Sales to unaffiliated customers:
North America $ 34,947 $ 14,322
South America 8,162 9,036
Africa 8,893 8,810
Europe/Asia 13,749 10,300
-------- --------
Total revenues $ 65,751 $ 42,468
Income from operations:
North America $ 5,350 $ 1,999
South America 1,435 1,393
Africa 1,400 1,084
Europe/Asia 1,375 1,327
Other 37 -
-------- --------
Total income from operations $ 9,597 $ 5,803
Total assets:
North America $145,731 $ 44,876
South America 6,993 4,530
Africa 2,405 334
Europe/Asia 31,578 34,712
-------- --------
Total assets $186,707 $ 84,452
</TABLE>
12
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
6. EARNINGS PER SHARE
The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations
for net income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
--------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income $ 2,835 $ 1,835 $ 5,575 $ 3,609
======== ======== ======== ========
Denominator for basic earnings per share
Weighted average shares: 20,082 16,144 18,205 16,089
Effect of shares issuable under stock option
and stock grant plans, based on the
treasury stock method 757 890 882 860
-------- -------- -------- --------
Denominator for diluted earnings per share-
Adjusted weighted average shares 20,839 17,034 19,087 16,949
-------- -------- -------- --------
Basic earnings per share $ 0.14 $ 0.11 $ 0.31 $ 0.22
======== ======== ======== ========
Diluted earnings per share $ 0.14 $ 0.11 $ 0.29 $ 0.21
======== ======== ======== ========
</TABLE>
13
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the Company's results of operations
and analysis of financial condition for the three and six months ended June 30,
1999. The results of operations for the business combinations accounted for as
purchase transactions are included since their effective acquisition dates. The
following discussion may be understood more fully by reference to the financial
statements, notes to the financial statements, and management's discussion and
analysis contained in the our Annual Report on Form 10-K for the year ended
December 31, 1998, as filed with the Securities and Exchange Commission.
Revenue Recognition. The Company records product revenues at gross
amounts to be received, including amounts to be paid to agents as commissions,
at the time the product is shipped to the distributor. Although product returns
are permitted in certain circumstances within 30 days from the date of purchase,
these returns are minimal and usually consist of minor modifications to the
ordered product. The Company records service revenue as the service is provided
on a contract by contract basis.
Foreign Currency Translation. In accordance with Statement of Financial
Accounting Standard No. 52, "Foreign Currency Translation," assets and
liabilities denominated in a foreign currency are translated into U.S. dollars
at the current rate of exchange as of the balance sheet date and revenues and
expenses are translated at the average monthly exchange rates. The cumulative
translation adjustment, which represents the effect of translating assets and
liabilities of the Company's foreign operations, was a loss of approximately
$1.5 million as of June 30, 1999 and $574,000 as of December 31, 1998 resulting
primarily from the decline in value of the British Pound.
14
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Service Revenues. Service revenues increased by $942,000, or 7.9%, to
$12.8 million in the three months ended June 30, 1999 compared to $11.9 million
in the three months ended June 30, 1998. This increase was primarily due to the
integration of the acquisitions of CDR and APS acquired on June 11, 1998 and
July 15, 1998 respectively. These acquisitions were accounted for as purchases
and the results of their operations are recorded only for the period the Company
owned them.
Product Revenues. Product revenues increased by $15.1 million, or 139%,
to $26.1 million in the three months ended June 30, 1999 compared to $10.9
million in the three months ended June 30, 1998. This increase was primarily due
to acquisitions of Safariland and Fed Labs whose results are included in the
three months ended June 30, 1999 but not in the three months ended June 30,
1998. In addition to the increased revenues from these two acquisitions,
products sales grew internally by 15% in the second quarter of 1999 compared to
the second quarter of 1998.
Cost of sales. Cost of sales increased by $7.4 million, or 46.6%, to
$23.2 million in the three months ended June 30, 1999 compared to $15.8 million
in the three months ended June 30, 1998. This increase was primarily due to the
acquisition of Safariland and increased revenues for the three months ended June
30, 1999 compared to the three months ended June 30, 1998 net of a
reclassification to operating expenses in 1999 of $1.6 million related to the
field operations of the ArmorGroup Services division. As a percentage of total
revenues, cost of sales decreased to 59.6% of total revenues for the three
months ended June 30, 1999 from 69.3% for the three months ended June 30, 1998
reflecting a greater proportion of total revenues generated by our Armor
Holdings Products division in the period ended June 30, 1999, improvement in the
gross margin of the ArmorGroup Services Division and the reclassification
previously mentioned.
Operating expenses. Operating expenses increased by $6.2 million, or
158.6%, to $10.2 million (26.2% of total revenues) in the three months ended
June 30, 1999 compared to $3.9 million (17.2% of total revenues) in the three
months ended June 30, 1998. This increase was primarily due to the acquisition
of Safariland and the reclassification from cost of sales mentioned previously
which are reflected in the three month period ended June 30, 1999 but not in the
three month period ended June 30, 1998.
15
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
Amortization. Amortization expense increased by $174,000, or 36.1%, to
$656,000 in the three months ended June 30, 1999 compared to $482,000 in the
three months ended June 30, 1998. This increase was primarily due to additional
amortization of intangible assets acquired as a result of the Safariland and
Parvus acquisitions during the three months ended June 30, 1999, in addition to
the acquisitions of the Law Enforcement Division of MACE Security International,
Inc, Alarm Protection Services, Inc and CDR International, Inc. which would not
have been reflected in the three months ended June 30, 1998.
Equity in earnings of investees. Equity in earnings of investees
decreased by $143,000 or 84.6%, to $26,000 in the three months ended June 30,
1999 compared to $169,000 in the three months ended June 30, 1998. The equity in
earnings relates to the Company's 20% investment in Jardine Securicor Gurkha
Services Limited ("JSGS").
Integration and other non-recurring charges. The Company incurred
$646,000 in fees, expenses and costs associated with the integration of the
Company's recent acquisitions in the three months ended June 30, 1999. The
Company did not incur such fees in the three months ended June 30, 1998. The
Company expects to incur additional integration related expenses as a result of
the recently completed acquisitions.
Interest expense (income). The company had net interest income of
$6,000 for the three months ended June 30, 1999 compared to net interest income
of $198,000 for the three months ended June 30, 1998. This decrease in net
interest income of $192,000 for the three months ended June 30, 1999 is
primarily the result of the Safariland acquisition that was financed with
borrowings under the Company's line of credit. The Company had no such borrowing
in the three months ended June 30, 1998.
Operating Income. Operating income increased by $1.3 million, or 44.4%
to $4.3 million in the three months ended June 30, 1999 compared to $3.0 million
in the three months ended June 30, 1998 primarily due to factors discussed
above.
Other income. Other income increased to $303,000 for the three months
ended June 30, 1999. There was no such income for the three months ended June
30, 1998. The other income results from the gain on sale of stock in MACE
Security International acquired through warrants received as part of the
acquisition of certain assets of the Law Enforcement Division of MACE Security
International in July of 1998.
Income before provision for income taxes. Income before provision for
income taxes increased by $1.6 million, or 54.6%, to $4.6 million in the three
months ended June 30, 1999 compared to $3.0 million in the three months ended
June 30, 1998 primarily due to factors discussed above.
Provision for income taxes. Provision for income taxes totaled $1.7
million in the three months ended June 30, 1999, as compared to $1.1 million in
the three months ended June 30,
16
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
1998. The increase in the Company's effective tax rate is a result of the
increased amortization of the goodwill generated by the Safariland acquisition
that is not tax deductible. The provision was based on the Company's U.S.
federal and state statutory income tax rates of approximately 39% for its
U.S.-based companies and a 37% blended effective tax rate for foreign operations
of the Company. The effective tax rate for the Company's foreign operations is
not necessarily indicative of continued tax rates due to continually changing
concentration of income in each country in which the Company operates.
Net income. Net income increased $1.0 million, or 54.5 %, to $2.8
million in the three months ended June 30, 1999 compared to $1.8 million for the
three months ended June 30, 1998. The increase is primarily due to a combination
of acquisitions made during the period being successfully integrated, coupled
with strong internal growth in the Products Division.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
- -------------------------------------------------------------------------
Service Revenues. Service revenues increased by $2.0 million or 8.3%,
to $25.7 million in the six months ended June 30, 1999 compared to $23.7 million
in the six months ended June 30, 1998. This increase was primarily due to the
integration of the Parvus, CDR and APS acquired on May 4, 1999, June 11, 1998
and July 15, 1998 respectively. These acquisitions were accounted for as
purchases and the results of their operations are recorded only for the period
the Company owned them.
Product Revenues. Product revenues increased by $21.3 million, or
113.7%, to $40.1 million in the six months ended June 30, 1999 compared to $18.8
million in the six months ended June 30, 1998. This increase was primarily due
to the integration of the Safariland, Fed Labs and Pro-Tech acquisitions on
April 12, 1999, July 15, 1998 and April 1, 1998 respectively. These acquisitions
were accounted for as purchases and the results of their operations are recorded
only for the period the Company owned them.
Cost of sales. Cost of sales increased by $10.1 million, or 34.2%, to
$39.5 million in the six months ended June 30, 1999 compared to $29.4 million in
the six months ended June 30, 1998. This increase was primarily due to increased
revenues for the six months ended June 30, 1999 compared to the six months ended
June 30, 1998 net of a reclassification to operating expenses in 1999 of $3.2
million related to the field operations of the ArmorGroup Services division. As
a percentage of total revenues, cost of sales decreased to 60.1% of total
revenues for the six months ended June 30, 1999 from 69.3% for the six months
ended June 30, 1998 reflecting a greater proportion of total revenues generated
by our Armor Holdings Products division in the period ended June 30, 1999,
improvement in the gross margin of the ArmorGroup Services Division and the
reclassification previously mentioned.
17
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
Operating expenses. Operating expenses increased by $9.4 million, or
130.3%, to $16.7 million (25.4% of total revenues) in the six months ended June
30, 1999 compared to $7.2 million (17.0% of total revenues) in the six months
ended June 30, 1998. This increase was primarily due to the acquisitions
mentioned above and to higher selling expenses associated with the greater
proportion of total revenues generated by our Armor Holdings Products division
in the period ended June 30, 1999 compared to June 30, 1998 as well as the
reclassification in 1999 of certain operating expenses related to the field
operations of ArmorGroup Services division mentioned previously.
Amortization. Amortization expense increased by $174,000, or 20.2%, to
$1.0 million in the six months ended June 30, 1999 compared to $861,000 in the
six months ended June 30, 1998. This increase was primarily due to additional
amortization of intangible assets acquired as a result of the acquisitions of
Safariland and Parvus during the six month period ending June 30, 1999 which
would not have been reflected in the six month period ended June 30, 1998.
Equity in earnings of investees. Equity in earnings of investees
decreased by $158,000 or 48.8%, to $166,000 in the six months ended June 30,
1999 compared to $324,000 in the six months ended June 30, 1998. The equity in
earnings relates to the Company's 20% investment in Jardine Securicor Gurkha
Services Limited ("JSGS").
Integration and other non-recurring charges. The Company incurred
$646,000 in fees, expenses and costs associated with the integration of the
Company's recent acquisitions in the six months ended June 30, 1999. The Company
did not incur such fees in the six months ended June 30, 1998. The Company
expects to incur additional integration related expenses as a result of the
recently completed acquisitions.
Interest expense (income). Interest income, net decreased by $390,000,
or 88.6%, to $50,000 for the six months ended June 30, 1999 compared to $440,000
for the six months ended June 30, 1998. This decrease was primarily due to the
acquisition of Safariland during the six months ended June 30, 1999. This
acquisition was financed with borrowings under the Company's line of credit. The
Company had no such borrowings during the six months ended June 30, 1998.
Operating Income. Operating income increased by $2.4 million, or 42.5%,
to $8.1 million in the six months ended June 30, 1999 compared to $5.7 million
in the six months ended June 30, 1998 primarily due to factors discussed above.
Other income. Other income increased to $816,000 for the six months
ended June 30, 1999. There was no such income for the three months ended March
31, 1998. The other income results primarily from the gain on sale of stock in
MACE Security
18
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
International acquired through warrants received as part of the acquisition of
certain assets of the Law Enforcement Division of MACE Security International in
July of 1998.
Income before provision for income taxes. Income before provision for
income for taxes increased by $3.2 million, or 56.8%, to $8.9 million in the six
months ended June 30, 1999 compared to $5.7 million in the six months ended June
30, 1998 primarily due to factors discussed above.
Provision for income taxes. Provision for income taxes totaled $3.4
million in the six months ended June 30, 1999, as compared to $2.1 million in
the six months ended June 30, 1998. The increase in the Company's effective tax
rate is a result of the increased amortization of the goodwill generated by the
Safariland acquisition that is not tax deductible. The provision was based on
the Company's U.S. federal and state statutory income tax rates of approximately
39% for its U.S.-based companies and a 37% blended effective tax rate for
foreign operations of the its U.S.-based companies and a 37% blended effective
tax rate for foreign operations of the Company. The effective tax rate for the
Company's foreign operations is not necessarily indicative of continued tax
rates due to continually changing concentration of income in each country in
which the Company operates.
Net income. Net income increased $2.0 million, or 54.5 %, to $5.6
million in the six months ended June 30, 1999 compared to $3.6 million for the
six months ended June 30, 1998. The increase is primarily due to a combination
of acquisitions made during the period being successfully integrated, coupled
with internal growth.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that cash generated from operations, borrowings
under the Company's credit facility and the net proceeds of its recently
completed public offering will enable the Company to meet its liquidity, working
capital and capital expenditure requirements during the next 12 months. The
Company, however, may require additional financing to pursue its strategy of
growth through acquisitions. If such financing is required, there are no
assurances that it will be available, or if available, that it can be obtained
on terms favorable to the Company or on a basis that is not dilutive to
stockholders.
The Company's spending for its fiscal 1999 capital expenditures will be
approximately $2.4 million, of which the Company has already spent approximately
$779,000.
As of June 30, 1999 and December 31, 1998, the Company had working
capital of $53.0 million and $24.3 million, respectively.
19
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
YEAR 2000 COMPUTER READINESS
- ----------------------------
Many older computer software programs refer to years in terms of their
final two digits only. Such programs may interpret the year 2000 to mean the
year 1900 instead. If not corrected, those programs could cause date-related
transaction failures.
The Company developed a Y2K Initiative to address this concern. A
project team has performed a detailed assessment of all internal computer
systems and, as discussed below, is developing and implementing plans to correct
the problems. The Company expects these projects to be successfully completed
during 1999.
Year 2000 readiness could affect many of the Company's research and
development, production, financial, administrative and communication operations.
Systems critical to the Company's business which have been identified as
non-Year 2000 compliant are either being replaced or corrected through
programming modifications. In addition, a separate team is looking at Year 2000
readiness from other aspects of the Company's business, including customer
order-taking, manufacturing, raw materials supply and plant process equipment.
The Company's goal to have the remedied and replaced systems operational by the
second quarter of 1999 was substantially met. In addition to the Company's
in-house efforts, the Company is asking vendors, major customers, suppliers,
communications providers and banks whose systems failures potentially could have
a significant impact on the Company's operations to verify their Year 2000
readiness. The Company is testing such systems where appropriate and possible.
As part of the Y2K Initiative, the Company is developing Business
Continuity Plans for those areas that are critical to the Company's business.
These Business Continuity Plans will be designed to mitigate serious disruptions
to the Company's business flow beyond the end of 1999, and will operate
independent of the external providers' Year 2000 compliance. The major drive for
contingency planning will be in the last half of 1999, with the expectation that
the Company's business groups will have plans in place by the end of the third
quarter of 1999. Based on the Company's current plans and efforts to date, the
Company does not anticipate that Year 2000 problems will have a material effect
on the Company's results of operations or financial condition.
External and internal costs specifically associated with modifying
internal use software for Year 2000 compliance are expensed as incurred. The
total costs expected to be incurred to fix the Year 2000 problems are estimated
at approximately $50,000. Such costs do not include normal system upgrades and
replacements. The Company does not expect the costs relating to Year 2000 remedy
to have a material effect on the results of operations or financial condition.
20
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
The above expectations are subject to uncertainties. For example, if
the Company is unsuccessful in identifying or fixing all Year 2000 problems in
critical operations, or if the Company is affected by the inability of suppliers
or major customers to continue operations due to such a problem, results of
operations or financial condition could be materially impacted.
The total costs that the Company incurs in connection with Year 2000
problems will be influenced by the ability to successfully identify Year 2000
system flaws, the nature and amount of programming required to fix the affected
programs, the related labor and/or consulting costs for such remediation, and
the ability of third parties with whom the Company has business relationships to
successfully address their own Year 2000 concerns. These and other unforeseen
factors could have a material adverse effect on the Company's results of
operations or financial condition.
FORWARD-LOOKING INFORMATION
Certain statements in this Form 10-Q and elsewhere (such as in other
filings by the Company with the Securities and Exchange Commission, press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
include those relating to future opportunities, the outlook of the Company's
clients and customers, the reception of new products and services, the success
of new initiatives and acquisitions and the likelihood of incremental revenues
offsetting expenses related to such new initiatives and acquisitions. In
addition, 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 expressed or implied by such forward-looking statements. Such factors
include: (i) the inherent volatility of currency fluctuations; (ii) demand for
the Company's products and services; (iii) the actions of current and potential
new competitors; (iv) rapid changes in technology; (v) the ability to realize
cost reductions, operating efficiencies and successfully integrate acquired
companies; (vi) overall economic conditions; (vii) political risks in the
countries in which the Company operates; and (viii) other risks detailed from
time to time in the Company's periodic earnings releases and reports filed with
the Securities and Exchange Commission, as well as the risks and uncertainties
discussed in this Form 10-Q.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company does business in numerous countries, including emerging
markets in Africa, Asia and South America. The Company has invested substantial
resources outside of the United States and plans to continue to do so in the
future. The Company's international operations are
21
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
(CONTINUED)
subject to the risk of new and different legal and regulatory requirements in
local jurisdictions, tariffs and trade barriers, potential difficulties in
staffing and managing local operations, potential imposition of restrictions on
investments, potentially adverse tax consequences, including imposition or
increase of withholding and other taxes on remittances and other payments by
subsidiaries, and local economic, political and social conditions. Governments
of many developing countries have exercised and continue to exercise substantial
influence over many aspects of the private sector. Government actions in the
future could have a significant adverse effect on economic conditions in a
developing country or may otherwise have a material adverse effect on the
Company and its operating companies. The Company does not have political risk
insurance in the countries in which it conducts business. Moreover, applicable
agreements relating to the Company's interests in its operating companies are
frequently governed by foreign law. As a result, in the event of a dispute, it
may be difficult for the Company to enforce its rights. Accordingly, the Company
may have little or no recourse upon the occurrence of any of these developments.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, as a result of its global operating and financial
activities, is exposed to changes in raw material prices, interest rates and
foreign currency exchange rates which may adversely affect its results of
operations and financial position. In seeking to minimize the risks and/or costs
associated with such activities, the Company manages exposures to changes in raw
material prices, interest rates and foreign currency exchange rates through its
regular operating and financing activities. The Company does not utilize
financial instruments for trading or other speculative purposes, nor does it
utilize leveraged financial instruments.
The Company is exposed to interest rate risk primarily through its
investments in short-term investments as the Company currently has no short- or
long-term borrowings outstanding. There is inherent roll-over risk for
marketable securities as they mature and are renewed at current market rates.
The extent of this risk is not quantifiable or predictable because of the
variability of future interest rates and business financing requirements.
However, there is no risk of loss of principal, only a risk related to potential
reduction in future interest income. Derivative instruments are not presently
used to adjust the Company's interest rate risk profile.
The majority of the Company's business is denominated in U.S. dollars.
There are costs related to the London headquarters which are denominated in the
British currency. Several other currencies are used by the Company for various
transactions, but their effect on the total business is minimal. The Company
maintains a hedge against the costs paid out in the British currency as there
are several customers who pay in to the Company in that same currency.
Therefore, any sterling payments made are paid out of a sterling bank account
thus eliminating any foreign currency exchange gains or losses.
22
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a). Exhibits
The following exhibits are hereby filed as part of this Quarterly
Report on Form 10-Q.
EXHIBIT NO. DESCRIPTION
----------- -----------
27.1 Financial Data Schedule.
99.1 Press release dated October 18, 1999.
(b). Reports on Form 8-K
The following Current Reports on Form 8-K were filed during the quarter
for which this Quarterly Report on Form 10-Q is filed:
(i) Current Report on Form 8-K, dated April 26, 1999, reporting the
Company's acquisition of Safariland Ltd., Inc. on Item 2 thereof. Included in
such filing was the unaudited pro-forma consolidated statement of operations for
the year ended December 31, 1998 and the unaudited pro-forma consolidated
balance sheet as of December 31, 1998. Safariland Ltd., Inc.'s audited
consolidated financial statements as of September 30, 1998 and September 30,
1997 and for the years then ended were incorporated by reference to the
Company's Form S-3 in this Current Report on Form 8-K.
(ii) Current Report on Form 8-K, dated May 3, 1999, reporting the
Company's earnings for the quarter ended March 31, 1999 on Item 5 thereof.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ARMOR HOLDINGS, INC.
/s/ Jonathan M. Spiller
----------------------------------
Jonathan M. Spiller
President, Chief Executive Officer
and Director
Dated: October __, 1999
/s/ Nicholas B. Winiewicz
-------------------------------------
Nicholas B. Winiewicz
Chief Financial Officer
Dated: October __, 1999
24
<PAGE>
EXHIBIT INDEX
The following Exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
----------- -----------
27.1 Financial Data Schedule
99.1 Press Release on Restatement
25
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the six month period ended June 30, 1999, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000845752
<NAME> ARMOR HOLDINGS, INC.
<CURRENCY> USD
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 23,143
<SECURITIES> 0
<RECEIVABLES> 32,089
<ALLOWANCES> 1,544
<INVENTORY> 14,133
<CURRENT-ASSETS> 78,952
<PP&E> 15,946
<DEPRECIATION> 4,704
<TOTAL-ASSETS> 186,707
<CURRENT-LIABILITIES> 24,139
<BONDS> 0
0
0
<COMMON> 244
<OTHER-SE> 159,406
<TOTAL-LIABILITY-AND-EQUITY> 186,707
<SALES> 65,751
<TOTAL-REVENUES> 65,751
<CGS> 39,485
<TOTAL-COSTS> 39,485
<OTHER-EXPENSES> 18,134
<LOSS-PROVISION> 106
<INTEREST-EXPENSE> (6)
<INCOME-PRETAX> 8,948
<INCOME-TAX> 3,373
<INCOME-CONTINUING> 4,270
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,575
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.29
</TABLE>
<PAGE>
[ARMOR HOLDINGS, INC. LOGO]
FOR IMMEDIATE RELEASE
- --------------------------------------------------------------------------------
COMPANY CONTACT: INVESTOR RELATIONS CONTACT:
Jonathan M. Spiller Rich Schineller/Victor Shalom
President and Chief Executive Officer Morgen-Walke Associates, Inc.
Armor Holdings, Inc. [email protected]
904.741.5400 212.850.5600
www.armorholdings.com
PRESS CONTACT:
Jennifer Gery
Morgen-Walke Associates, Inc.
[email protected]
212.850.5600
ARMOR HOLDINGS TO RESTATE ITS FINANCIAL STATEMENTS
FOR THE 6 MONTH PERIOD ENDED JUNE 30, 1999 WITH NO EFFECT
ON EARNINGS PER SHARE - ACCOUNTING TREATMENT OF MOST
RECENT ACQUISITION CHANGED FROM POOLING TO PURCHASE
COMPANY EXPECTS TO MEET THIRD QUARTER OBJECTIVES
JACKSONVILLE, FL - OCTOBER 18, 1999 - ARMOR HOLDINGS, INC. (NYSE: AH) announced
today that it is restating its financial results for the first and second
quarters of 1999 to reflect the acquisitions of Alarm Systems Holding Company
and Fire Alarm Service Corporation as purchases. On June 30, 1999, the Company
completed these acquisitions as poolings of interests and reported them as such
in its Form 10Q for that period. The Company's earnings per share for the first
and second quarters of 1999 will not be affected by this change.
As is customary in connection with acquisitions of this nature and consistent
with the Company's past practice in pooling transactions, the Company requested
and obtained advice in advance of closing from its independent auditors that the
proposed transactions qualified for pooling treatment. Subsequent to the closing
of the transactions, it was determined that the transactions may not qualify for
pooling treatment because the Company had not formally and publicly rescinded
the authorization previously given by its Board of Directors to repurchase up to
$10,000,000 of the Company's common stock. No shares of the Company's stock were
ever repurchased under such repurchase program. As a result, the Company is
restating its financial statements to record these two acquisitions as
purchases.
Jonathan M. Spiller, President and Chief Executive Officer of Armor Holdings,
Inc., said, "The pooling rules are very complex, and subject to interpretation.
Had we known that the pooling rules required the stock repurchase program to be
formally and publicly rescinded, we would have taken that simple step prior to
the closing of the transactions."
"That said, however, the adjustments are all of a non-cash nature and will not
have an adverse impact on our performance. While our revenue for the six month
period ended June 30, 1999 decreases by approximately $6.0 million, our forward
revenue run rate is unaffected. The Company still expects to meet its third
quarter objectives," Mr. Spiller continued, "and we continue to pursue strategic
acquisitions."
- MORE -
<PAGE>
Restated earnings per share on a diluted basis for the six month period ended
June 30, 1999, before the non-recurring gain from the sale of the Company's
equity in Mace Security International and merger-related and integration
expenses are $0.29 per share, unchanged from the $0.29 per share prior to the
restatement. Reported earnings per share on a diluted basis after the
non-recurring gain and the merger-related and integration expenses are $0.29
after the restatement, unchanged from the $0.29 as previously reported. Reported
revenues are $65,751,000 for the six month period after the restatement,
compared to $71,711,000 as previously reported
Restated earnings per share on a diluted basis for the three month period ended
June 30, 1999 before merger-related expenses and other income are $0.15 per
share, unchanged from the $0.15 per share reported prior to the restatement.
Reported earnings per share on a diluted basis after the non-recurring gain and
the merger-related and integration expenses are $0.14 after the restatement,
compared to $0.13 as previously reported. Reported revenues are $38,911,000 for
the period after the restatement compared to $41,916,000 as previously reported.
Restated earnings per share on a diluted basis for the three month period ended
March 31, 1999 are $0.14 per share, unchanged from the $0.14 per share prior to
the restatement, both of which are before the non-recurring gain from the sale
of the Company's equity in Mace Security International. Reported earnings per
share on a diluted basis, after the non-recurring gain, are $0.16 after the
restatement, unchanged from the $0.16 previously reported on Form 10Q for the
first quarter. Reported revenues are $26,840,000 after the restatement,
unchanged from the $26,840,000 as previously reported in Form 10Q for the period
ended March 31, 1999.
As a result of these changes, the Company's Shareholders' Equity increased from
$146.5 million to $159.7 million, with an increase in goodwill of $13.4 million
ABOUT ARMOR HOLDINGS
Armor Holdings, included in FORTUNE magazine's list of "America's 100 Fastest
Growing Companies" in 1999, is a leading global provider of security risk
management services to multi-national corporations and governmental agencies
through its ArmorGroup Services division. Armor Holdings is also a leading
manufacturer of security products for law enforcement personnel around the world
through its Armor Holdings Products division. ArmorGroup Services provides
sophisticated security planning and risk management, electronic security systems
integration, consulting and training services, as well as intellectual property
asset protection, business intelligence and investigative services. Armor
Holdings Products manufactures and sells a broad range of high quality branded
law enforcement equipment. Such products include ballistic resistant vests and
tactical armor, less-than-lethal munitions, anti-riot products and narcotic
identification kits.
This press release contains forward-looking statements that involve risks and
uncertainties, including those relating to financial performance, the execution
of acquisition strategies, the expansion of product lines and the increase of
distribution networks and product sales. Armor Holdings, Inc.'s actual results
could differ materially from those discussed in such forward-looking statements
based on a variety of factors including, but not limited to, the actions of
current and potential new competitors, changes in technology, adoption of new
laws and regulations, the nature and amount of the Company's revenues and
expenses and overall economic conditions. Other risks are reflected in the
Company's filings with the Securities and Exchange Commission.
- 2-
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
(UNAUDITED) *
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents 23,143 6,789
Accounts receivable (net of allowance for
doubtful accounts of $1,544 and $1,380) 32,089 21,363
Inventories 14,133 9,103
Prepaid expenses and other current assets 9,587 5,910
--------- ---------
Total current assets 78,952 43,165
PROPERTY, PLANT AND EQUIPMENT (net
of accumulated depreciation of $4,704 and
$4,172) 15,946 12,173
GOODWILL (net of accumulated amortization
of $2,322 and $1,577) 77,695 25,820
REORGANIZATION VALUE IN EXCESS
OF AMOUNTS ALLOCABLE TO
IDENTIFIABLE ASSETS (net of accumulated
Amortization of $2,688 and $2,513) 1,387 1,562
PATENTS AND TRADEMARKS (net of
Accumulated amortization of $919 and $728) 6,755 7,180
OTHER ASSETS 5,972 4,453
--------- ---------
TOTAL ASSETS $ 186,707 $ 94,353
========= =========
</TABLE>
- 3 -
<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
(UNAUDITED) *
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 290 $ 5,041
Current portion of long-term debt and capitalized
lease obligations 868 433
Accounts payable, accrued expenses and other
current liabilities 22,981 13,325
-------- --------
Total current liabilities 24,139 18,799
MINORITY INTEREST 118 108
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS, less current portion 2,800 344
-------- --------
Total liabilities 27,057 19,251
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized; 0 shares issued and outstanding - -
Common stock, $.01 par value; 50,000,000 shares
authorized; 24,142,500 and 16,497,808 issued and
23,871,772 and 16,227,080 outstanding 244 165
Additional paid-in capital 145,186 65,408
Cumulative comprehensive income excluded from
net income, net of tax (1,458) (574)
Retained earnings 18,994 13,419
Treasury stock (3,316) (3,316)
-------- --------
Total stockholders' equity 159,650 75,102
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $186,707 $ 94,353
======== ========
</TABLE>
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<PAGE>
ARMOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Services $12,847 $11,905 $25,662 $23,705
Products 26,064 10,928 40,089 18,763
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Total Revenues $38,911 $22,833 $65,751 $42,468
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COSTS AND EXPENSES:
Cost of sales 23,195 15,826 39,485 29,427
Operating expenses 10,176 3,935 16,669 7,238
Amortization 656 482 1,035 861
Equity in earnings of investees (26) (169) (166) (324)
Integration and other non-recurring charges 646 -- 646 --
Interest (income) expense, net (6) (198) (50) (440)
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OPERATING INCOME 4,270 2,957 8,132 5,706
Other income 303 -- 816 --
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INCOME BEFORE PROVISION
FOR INCOME TAXES 4,573 2,957 8,948 5,706
PROVISION FOR INCOME TAXES 1,738 1,122 3,373 2,097
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NET INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ 2,835 $ 1,835 $ 5,575 $ 3,609
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BASIC EARNINGS PER SHARE $ 0.14 $ 0.11 $ 0.31 $ 0.22
======= ======= ======= =======
DILUTED EARNINGS PER SHARE $ 0.14 $ 0.11 $ 0.29 $ 0.21
======= ======= ======= =======
WEIGHTED AVERAGE SHARES - BASIC 20,082 16,144 18,205 16,089
======= ======= ======= =======
WEIGHTED AVERAGE SHARES - DILUTED 20,839 17,034 19,087 16,949
======= ======= ======= =======
</TABLE>
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