<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission file number 0-22716
BOLLINGER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2502577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
602 FOUNTAIN PARKWAY
GRAND PRAIRIE TEXAS 75050
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 343-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 par value
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on June 16, 1997, was $1,439,328.
The number of shares of common stock of the registrant outstanding on June 16,
1997, was 4,000,210.
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The undersigned Registrant hereby amends the Annual Report for the fiscal
year ended March 31, 1997 filed with the Securities and Exchange Commission on
June 30, 1997 as set forth below:
1. Item 6 is amended to change the earnings (loss) per share from continuing
operations from $(2,04) to $(1.98) for the fiscal year ended March 31,
1997.
2. Item 7 is amended to change the earnings (loss) per share from continuing
operations from $(2.04) to $(1.98) for the fiscal year ended March 31,
1997, and to reflect related changes under "Results of Operations" and
"Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31,
1996", and to change the earnings (loss) from continuing operations from
$(4,308,000) to $(4,062,000) for the three months ended March 31, 1997,
and additionally to change the earnings (loss) per share from $(1.08) to
$(1.02) for the three months ended March 31, 1997, and to reflect related
changes.
3. Item 8: the Financial Statements are amended to change the earnings (loss)
per share from continuing operations from $(2.04) to $(1.98) for the
fiscal year ended March 31, 1997, and to reflect related changes. Schedule
II valuation and qualifying accounts has been amended to include Returns
and allowance reserve for the Year ended March 31, 1997.
4. Exhibit 11.1 is amended to change the earnings (loss) from continuing
operations from $(8,164,071) to $(7,918,362), change the loss from
discontinued operations from $722,676 to $476,967 for the fiscal year
ended March 31, 1997 and to change the earnings (loss) per share from
continuing operations from $(2.04) to $(1.98) for the fiscal year ended
March 31, 1997.
5. Exhibit 27.1 Financial Data Schedule is amended to change the
income-continuing operations from $(8,164,071) to $(7,918,362).
The amendments occurred due to a reclassification of the income tax expense of
$245,709 applicable to the disposal of the Healthcare Division and the
inclusion of Returns and allowance reserve for the year ended March 31, 1997 in
Schedule II.
<PAGE> 3
PART II
ITEM 6. SELECTED FINANCIAL DATA.
The selected historical financial data presented below is derived from the
consolidated financial statements of the Company. The consolidated financial
data of the Company for the years ended March 31, 1993 and 1994, is derived
from the historical consolidated financial statements of the Company, which
have been audited by Grant Thornton, L.L.P., independent certified public
accountants. (The Company's historical consolidated financial statements for
the years ended March 31, 1993, and 1994 are not included in this Report.) The
consolidated financial data for the years ended March 31, 1995, 1996 and 1997,
are derived from the historical consolidated financial statements of the
Company, which have been audited by King Griffin & Adamson P.C (successor to
King Burns & Company P.C.). The selected financial data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and with the Company's consolidated financial
statements and related notes included elsewhere in this Report.
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<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS (3)
Net Sales............................................. $82,599 $80,300 $67,894 $38,746 $27,586
Cost of goods sold.................................... 69,723 62,197 50,546 26,982 20,060
------- ------- ------- ------- -------
Gross profit...................................... 12,876 18,103 17,348 11,764 7,526
Selling expenses...................................... 6,879 7,877 6,862 4,070 2,282
Distribution, general and administrative expenses..... 11,506 12,115 8,422 4,224 3,331
Restructuring of operations........................... - 3,960 - - -
------- ------- ------- ------- -------
18,385 23,952 15,284 8,294 5,613
------- ------- ------- ------- -------
Operating profit (loss)........................... (5,509) (5,849) 2,064 3,470 1,913
Other expense (income)
Interest expense.................................... 2,552 2,252 1,167 667 320
Other............................................... (50) (105) (47) (65) (47)
------- ------- ------- ------- -------
2,502 2,147 1,120 602 273
------- ------- ------- ------- -------
Earnings (loss) from continuing operations
before income tax expense (benefit)............. (8,011) (7,996) 944 2,868 1,640
Income tax expense (benefit).......................... (92) (1,135) 350 1,042 685
------- ------- ------- ------- -------
Earnings (loss) from continuing operations (1)...... (7,919) (6,861) 594 1,826 955
Discontinued operations...............................
Earnings (loss) from operations net of income
tax benefit..................................... - (592) (525) 550 235
Gain (loss) on disposal, net of income tax
benefit including a $1,199,118 and $325,380
provision for operating losses during phase
out period in 1996 and 1994..................... 478 (770) - (573) -
------- ------- ------- ------- -------
Earnings (loss) from discontinued operations(2)....... 478 (1,362) (525) (23) 235
------- ------- ------- ------- -------
Net earnings (loss)................................... $(7,441) $(8,223) $ 69 $ 1,803 $ 1,190
======= ======= ======= ======= =======
Per share data:
Earnings (loss) from continuing operations * ....... $ (1.98) $ (1.85) $ 0.15 $ 0.59 $ 0.36
======= ======= ======= ======= =======
Net earnings (loss)................................. $ (1.86) $ (2.22) $ 0.02 $ 0.59 $ 0.45
======= ======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding.................................. 4,000 3,710 3,967 3,079 2,650
======= ======= ======= ======= =======
</TABLE>
* Indicates Restated Amounts.
9
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<TABLE>
<CAPTION>
MARCH 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital........ $15,994 $ 8,322 $15,725 $18,038 $ 3,484
Total assets........... 38,389 58,381 55,422 27,632 20,663
Total long term debt... 15,642 577 223 500 690
Total debt............. 18,483 23,260 26,810 4,977 9,701
Stockholders' equity... 5,021 12,463 20,467 19,398 4,369
</TABLE>
(1) The Company sold substantially all of the assets of its C. G. Products
subsidiary effective September 13, 1993. The Company sold substantially
all of the assets of the Healthcare Division during September 1996.
Earnings from continuing operations does not reflect the results of
operations for C. G. Products and the Healthcare Division. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note C of "Notes to Consolidated Financial Statements."
(2) Represents results of discontinued operations of C. G. Products and the
Healthcare Division. See Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note C of "Notes to
Consolidated Financial Statements."
(3) The Statements of Operations for fiscal 1995, 1994, and 1993 have been
reclassified to reflect the discontinuance of the Healthcare operation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto appearing elsewhere
in this Report.
GENERAL
Bollinger Industries, Inc. designs, manufactures, imports, and distributes
a variety of fitness equipment and accessories.
During the fourth quarter of fiscal 1996, management undertook a
comprehensive review of the Company's marketing strategy, profitability and
liquidity. This strategy necessitated a three point plan (refer to Form 10-K
for fiscal 1996).
The components of the plan comprised: providing a restructuring charge to
cover disposal of certain inventory and phase out of certain celebrity endorsed
products: disposal of the Company's Sports Medicine and Safety Products
business ("Healthcare Division"), and revision of certain operating policies
and procedures.
RESTRUCTURING OF OPERATIONS
The significant elements of the Restructuring Plan were to substantially
reduce inventory levels, which had been excessive in prior years, and to
de-emphasize celebrity endorsed products. The Company expected to reduce
interest costs, generate much needed capital, reduce warehousing and related
costs, reduce royalty expense, improve gross profit, and increase net earnings
per share.
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Inventory levels have decreased substantially from $30.1 million in 1996
to $16.2 million in 1997 and inventory originally targeted for expedient
disposal has been reduced from approximately $12.0 million in 1996 to
approximately $4.0 million in 1997. This reduction in inventory has allowed
the Company to consolidate operations, relocate its Corporate Offices, and
reduce both short term and long term debt.
The Company did not experience the improved gross profit and related
increase in net earnings per share from this restructuring due to a decline in
the overall sales level of fitness accessory products and to a change in
product mix from higher margined light equipment items to lower margined
backyard trampolines.
DISCONTINUED OPERATIONS-HEALTHCARE DIVISION
Management of the Company determined in January of fiscal 1996 that it
would be in the best interest of the Company to dispose of its Sports Medicine
and Safety Products business, known as Bollinger Healthcare. The largest
portion of this division was sold in September, 1996 with the remainder
disposed of or abandoned in January 1997. The Company recorded a one time gain
in relation to this sale of $477,000 net of income tax expense of $246,000.
PROFITABILITY
The Company has experienced several areas of improvement, due to the
implementation of the Restructuring Plan, but there are many areas that need
to be addressed in fiscal 1998 for the Company to return to profitability.
NET SALES: The Company has suffered with Customer returns and allowances
over the last 2 1/2 years but is beginning to see an improvement in the number
and dollar amount of these returns and deductions. The controls surrounding the
prompt handling of returns has been improved and the response time and tracking
of these returns and related deductions has improved substantially. Customer
deductions from payments improved approximately $3.0 million dollars from
fiscal 1996 to 1997 but the Company believes even more progress can be made in
this area, the effect of which is a higher net sales dollar and improved gross
margin.
COST OF SALES: During the year, as inventory was sold and warehouses
consolidated, the Company saw improvements in the fixed costs associated with
warehousing and storing goods, but these improvements were not enough to
counteract the deteriorating margins due to freight demurrage charges,
scrapping of many of the returns from previous periods that were not cost
effective to repair, and the cost of contract labor to handle the start up of
trampoline production in the Grand Prairie facility.
The Company is currently in the process of examining the need to maintain
domestic production of several line items. Due to the highly competitive
nature of the overseas market it has become cost advantageous to source more
items from overseas. Additionally, there are potential savings to be
negotiated with steamship lines, freight forwarders and U.S. Customs as well as
major reductions in product costs previously referred to Part I, Item 1, of
this form 10-K.
GROSS MARGIN: The Company experienced a down turn in sales of the Fitness
Accessory line (excluding trampolines) in fiscal 1997, primarily due to the
ebbing popularity of the light equipment items such as Trimriders(TM) and
Powerriders(TM), many of which were celebrity endorsed. These items
traditionally carried a higher margin than the majority of the Fitness
Accessory line because they were sold through the televised shopping clubs.
Additionally, $5.0 million dollars of sales on the targeted inventory were at a
9% gross margin, causing an overall erosion of margin of one half of a
percentage point for the year. Historically
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there has been an 11% deferential between the gross margin on Fitness items and
trampolines. The Company experienced a sales shift of $12.8 million from
accessories to trampolines. This had a negative gross margin effect, on a
consolidated basis, of two percentage points for the year.
The Company believes that sourcing their products from the lowest cost,
high quality provider, in addition to strengthening the controls and response
time surrounding customer deductions, will enable it to substantially improve
gross margins in fiscal 1998.
WAREHOUSING EXPENSES: The Company plans to continue to consolidate
warehouse facilities in fiscal 1998 thereby lowering fixed costs. The Company
is also exploring the use of freight expediters on the west coast to receive the
product from the orient, unload and inspect it, and repack it for shipment to
the customer. Using the west coast facilities, as opposed to the Grand Prairie
operation, should save additional manpower and freight. Other improvements
include establishing more rigid quality standards for our imported products to
pass back to the supplier the cost of repackaging items with incorrect or faulty
labeling, resorting items grouped by the wrong size or color, etc. The Company
has, in the past, absorbed these costs as part of its operating expenses.
SELLING, GENERAL AND ADMINISTRATIVE: Selling, General and Administrative
expenses have continued to decline as Company management is constantly
challenged to find innovative ways to produce results with limited funds.
Staffing levels are monitored closely and expenses continue to be scrutinized.
FINANCING: The Company experienced an increase in the cost of financing
from fiscal 1996 to 1997 of $300,000 primarily due to higher interest paid in
the first two quarters.
ACQUISITIONS
Effective May 24, 1994, the Company, through a newly formed and wholly
owned subsidiary, NBF, Inc., a Georgia Corporation, acquired substantially all
the assets, liabilities and business of NBF, Inc., a Florida Corporation, in
exchange for 138,000 shares of the Company's restricted Common Stock. The
purchase price was approximately $2.8 million, including the assumption of
certain liabilities. Additionally, the Company acquired from an individual all
of the intellectual property rights to the products manufactured by NBF, Inc.,
a Florida Corporation, for $150,000 in cash. NBF, Inc. is a manufacturer of
trampolines and other outdoor playground equipment. The acquisition was
accounted for as a purchase and accordingly, results of operations have been
included in the Consolidated Statement of Earnings since the acquisition date.
SALE OF ASSETS
In September of 1996, the Company sold substantially all of the assets of
its Healthcare Division. The Healthcare division supplied sports medicine and
safety products to the medical markets. The Company realized a net gain from
the sale of this division of $477,000 net of income tax expense of $246,000.
The results of operations of the Healthcare Division are reflected in the
Company's consolidated financial statements as discontinued operations.
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<PAGE> 8
RESULTS OF OPERATIONS
The following table presents for the periods indicated, certain items
derived from the Company's consolidated statements of operations expressed as a
percentage of net sales. The trends in sales or earnings illustrated in the
following table may not be indicative of future results.
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
PERCENTAGE OF NET SALES (DECREASE)
------------------------------ ------------------------
FISCAL YEAR ENDED MARCH 31, FISCAL FISCAL
1997 1996
OVER FISCAL
1997 1996 1995 1996 1995
-------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales...................... 100.0 100.0 100.0 3 18
Cost of goods sold............. 84.4 77.5 74.4 12 23
------- ------- -------
Gross profit................. 15.6 22.5 25.6 (29) (4)
Selling expenses............... 8.4 9.8 10.1 (13) (15)
Distribution, general and
administrative expenses...... 13.9 15.1 12.4 (5) 44
Restructuring of operations.... 0.0 4.9 0.0 (100) 0
------- ------- -------
22.3 29.8 22.5 (23) 57
------- ------- -------
Operating profit (loss)...... (6.7) (7.3) 3.0 (6) (383)
Interest expense............... 3.1 2.8 1.7 13 93
Other expense (income) - net... (0.1) (0.1) (0.1) (52) (78)
------- ------- -------
3.0 2.7 1.6 16 92
Earnings (loss) from
continuing operations
before income taxes.......... (9.7) (10.0) 1.4 0 (947)
Income tax expense (benefit)... 0.0 (1.4) .5 114 (424)
------- ------- -------
Earnings (loss) from
continuing operations........ (9.7) (8.5) .9 (19) (1,255)
======= ======= =======
</TABLE>
(1) The percentages for 1995 have been recalculated to reflect the
discontinuance of the Healthcare Division. See Management's Discussion of
Financial Condition and Results of Operations and Note C to "Notes to
Consolidated Financial Statements."
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996
The Company's fitness accessory products (Fitness Accessory Products)
consist of two major product categories - trampoline products (Trampoline
Products) and other fitness accessory products (Other Fitness Accessory
Products).
Net sales of Fitness Accessory Products in fiscal 1997 increased by
approximately $2.3 million from fiscal 1996, an increase of 2.9%.
Approximately $12.8 million of this growth is attributable to net sales of
Trampoline Products which increased 62.2%. The reduction of approximately
$10.5 million is attributable to net sales of Other Fitness Accessory
products, which decreased 17.6%. The Company introduced Trampoline Products to
its Fitness Accessory Product line during May 1994. Since that time net sales
of Trampoline Products has increased rapidly due to placement of trampolines at
several of the Company's high volume mass merchant customers. The Company
expects net sales of Trampoline Products will continue to grow at a high rate.
However, it is unlikely that the prior year percentage increase in net sales
can be maintained. The decrease in net sales of Other Fitness Accessory
Products resulted from a continuing trend of a slow down of purchases of the
Company's light equipment items.
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In fiscal 1995 and 1996 the Company had experienced a high rate of product
returns and customer chargebacks. The Company's method for recording and
analyzing chargebacks, including returned merchandise deductions, has improved
substantially over the last 2 1/2 years. The Company has developed internal
procedures for receiving and reworking product returns as they arrive in the
warehouse, increased the number and talent of the accounts receivable staff, and
included a full review of customer deductions and payment practices in the
management review process.
Returns and deductions from customers was reduced in fiscal 1997 from a
high of approximately 11% of sales in the first quarter to approximately 6% by
year end.
Gross profit for Fitness Accessory Products in fiscal 1997 decreased by
approximately $5.2 million over fiscal 1996, and decreased as a percentage of
net sales from 22.5% in 1996 to 15.6% in fiscal 1997. This is due, in part,
to trampoline products earning a lower gross margin than other Fitness Products
and comprising a higher proportion of sales in 1997. Gross margins of the
other Fitness Accessory Products were lower in 1997 than 1996 due primarily to
the sales of $5 million of targeted inventory at a gross margin of 9% and the
loss of the light equipment sales which carry higher gross margin percentage
that other fitness accessories. Management expects the impact of selling
targeted inventory will be less in fiscal 1998.
Selling expenses for Fitness Accessory Products in fiscal 1997 decreased
by approximately $1.0 million compared to fiscal 1996 and decreased as a
percentage of net sales of Fitness Accessory Products from 9.8% in fiscal 1996
to 8.3% in fiscal 1997. The dollar decrease and percentage decrease in selling
expenses is attributed to the decrease in celebrity commissions, sales
commissions and royalties, as a result of discontinuing celebrity endorsements,
which will continue in fiscal 1998.
Distribution, general and administrative expenses for Fitness Accessory
Products decreased by $600,000 compared to fiscal 1996 and decreased as a
percentage of net sales of Fitness Accessory Products from 15.1% in fiscal 1996
to 13.9% in fiscal 1997. The decrease in distribution, general and
administrative expenses in dollars is attributed to the reduction of excess
warehouse rent and labor costs. In addition, distribution, general and
administrative expenses were lower than previous year due to a decrease in the
use of temporary employees in the office, and better cost controls.
Operating loss from continuing operations in fiscal 1997 as compared to
fiscal 1996 decreased by $300,000. As a percentage of net sales, operating
losses decreased from a 7.3% operating loss in 1996 to a 6.7% operating loss in
fiscal 1997.
Interest expense for continuing operations in fiscal 1997 increased
approximately $300,000 from fiscal 1996 primarily due to fees associated with
obtaining alternative financing. The average loan balance was lower in fiscal
1997 due to substantially lower inventory levels and decreases in accounts
payable. Interest rates improved from 11.75% to 10.0% in fiscal 1997.
FISCAL YEAR ENDED MARCH 31 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31,1995
Net sales of Fitness Accessory Products in fiscal 1996 increased by
approximately $12.4 million from fiscal 1995, an increase of 18.3%
Approximately $11.5 million of this growth is attributable to net sales of
Trampoline Products which increased 127.9%. The balance of approximately
$900,000 is attributable to net sales of Other Fitness Accessory products,
which increased 1.4%. The relatively flat net
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sales of Other Fitness Accessory Products resulted from weak demand and a high
level of product returns. The high returns were a result of both defective
product and accommodations to certain of the Company's larger customers.
Returns and other customer deductions were particularly high in the fourth
quarter of fiscal 1996.
Gross profit for Fitness Accessory Products in fiscal 1996 increased by
approximately $800,000 over fiscal 1995, but decreased as a percentage of net
sales from 25.6% in 1995 to 22.5% in fiscal 1996. This is due to the fact that
trampoline products earn a lower gross margin than other Fitness Products and
were a higher proportion of sales in 1996. Gross margins of the other Fitness
Accessory Products were lower in 1996 than 1995 due primarily to a higher level
of customer returns and chargebacks.
Selling expenses for Fitness Accessory Products in fiscal 1996 increased
by approximately $1.0 million compared to fiscal 1995 and decreased as a
percentage of net sales of Fitness Accessory Products from 10.1% in fiscal 1995
to 9.8% in fiscal 1996. The dollar increase in selling expenses is attributed
to the overall increase in net sales of Fitness Accessory Products. The
decrease in selling expenses as a percentage of net sales of Fitness Accessory
Products is attributable to increased sales volume.
Distribution, general and administrative expenses for Fitness Accessory
Products increased by $3.7 million compared to fiscal 1995 and increased as a
percentage of net sales of Fitness Accessory Products from 12.4% in fiscal 1995
to 15.1% in fiscal 1996. The increase in distribution, general and
administrative expenses in dollars is attributed to the increase in net sales;
excessive warehouse rent and labor costs associated with product returns. In
addition, distribution, general and administrative expenses were higher than
anticipated due to increased consulting and temporary employee expenses to
address problems with the Company's computer system; increased legal expenses
and audit fees; expenses associated with taking extra physical inventories; and
certain other expenses.
In particular, the fourth quarter of fiscal 1996 was impacted by
significant temporary storage charges associated with in-transit inventory,
legal expenses, and insurance costs associated with product liability.
Operating profit from continuing operations in fiscal 1996 as compared to
fiscal 1995 decreased by $7.9 million including a restructuring charge of $4.0
million. As a percentage of net sales, operating profit decreased from a 3.0%
operating profit to a 7.3% operating loss.
Interest expense for continuing operations in fiscal 1996 increased
approximately $1.0 million from fiscal 1995 primarily due to a higher interest
rate on the Company's borrowings. In addition, the average loan balance was
higher in fiscal 1996 due to increased working capital required to support
increased sales volume partially offset by higher accounts payable.
Due to a loss from continuing operations the Company recorded an income
tax benefit of $1.0 million which is based on an effective tax rate of 14.2%.
The tax benefit was reduced to reflect the amount expected to be realized.
SEASONALITY; QUARTERLY RESULTS
In the past, the Company's net sales and earnings have been higher in the
last six months of the fiscal year compared to the first six months of the
fiscal year. This trend has been mitigated by the seasonality of trampoline
sales which tend to be higher in the spring and Christmas selling seasons. Net
earnings for the Company will generally rise and fall with sales volume
although not directly in proportion to the change in net sales due to certain
of the Company's expenses being relatively fixed while others are variable.
The
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Company's quarterly operating results may also vary depending on such other
factors as the timing of significant customer orders, the mix of products sold,
and the efficiency of operations.
The following table sets forth selected quarterly unaudited information
for the 1997, 1996, and 1995 fiscal years. In the opinion of the Company, such
information reflects all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the information set forth below. The
operating results for any quarter are not necessarily indicative of the results
for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL 1997 FISCAL 1996
---------------------------------------- -----------------------------------------
JUNE 30, SEPT. 29, DEC. 29, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1996 1996 1996 1997 1995 1995 1995 1996
--------- --------- -------- -------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............. $22,434 $19,093 $24,609 $16,463 $12,762 $21,489 $31,648 $14,401
Operating Profit
(loss).............. (124) (440) (1,300) (3,645) (748) 1,434 1,683 (8,218)
Earnings (loss)
from continuing
operations.......... (765) (1,074) (2,017) *(4,062) (703) 694 701 (7,553)
Earnings (loss) per
share from
continuing
operations.......... (0.19) (0.27) (0.50) *(1.02) (0.19) 0.18 0.18 (2.03)
<CAPTION>
FISCAL 1995
-----------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1994 1994 1995
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Sales............. $12,760 $16,245 $23,256 $15,633
Operating Profit
(loss).............. 953 898 1,569 (1,355)
Earnings (loss)
from continuing
operations.......... 572 465 744 (1,187)
Earnings (loss) per
share from
continuing
operations.......... 0.15 0.12 0.19 (0.32)
</TABLE>
The above table for Fiscal 1995 has been reclassified to retroactively
recognize the discontinued Healthcare Division.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of financing in the past several years
have been short-term borrowings from banks, asset based lenders and an IPO.
The Company's cash flow from operations was approximately $5.0 million for
fiscal 1997 and approximately $4.0 million in fiscal 1996. The improvement in
cash flow from operations is due primarily to the sell down of inventory, the
collection of an income tax refund and the collection of receivables offset by
a decrease in trade payables and continuing losses.
In fiscal 1997 the Company successfully secured a revolving credit
facility with a financial institution providing a maximum line of credit of
$25.0 million, subject to certain borrowing base requirements and covenants.
As of March 31, 1997 the outstanding balance was $15.5 million. This facility
matures August 16, 2000. As of March 31, 1997 the Company was in default or
out of compliance with certain of the covenants or other provisions of the
Credit Line. The financial institution has agreed to forebear exercising any
of its rights and remedies regarding these defaults or non compliance items
through year end and has restated the financial covenants for the periods
covering fiscal 1998, 1999, and beyond. The Company is currently in compliance
with the new terms and covenants.
The outstanding balance under the Credit Line is collateralized by
substantially all of the Company's assets including accounts receivable,
inventory and real estate. The Company also has a note payable to a bank of
$1.7 million which is collateralized by a building in Irving, Texas.
From April 1, 1996 to August 16, 1996 the outstanding balances under the
previous credit facility bore interest at the bank's prime interest plus 3% or
approximately 11.75%. The new credit facility, as acquired August 16, 1996,
bore interest at the rate of 10.00% through March 26, 1997, at which time it
increased to 10.25%.
* Indicates Restated Amounts.
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The Company expects to be able to raise funds from operations, the
additional sell down of inventory and the collection of accounts receivable.
Improved liquidity is crucial to the future success and growth of the Company.
There is no guarantee the Company will be successful in raising adequate funds
from any of these sources and the failure to raise adequate funds from any of
these sources and failure to raise adequate alternative and additional funds
will have a materially adverse effect on the Company.
Capital expenditures during fiscal 1997 were approximately $621,000. The
Company has budgeted approximately $250,000 for capital expenditures for fiscal
1998.
INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
To date, inflation and foreign currency fluctuations have not had a
material impact on the Company's operations. There can be no assurance,
however, that future inflation or foreign currency fluctuations will not have a
material adverse effect on the Company, or that the Company will be able to
pass on resulting cost increases without experiencing a reduction in demand for
its products. A substantial portion of the Company's existing indebtedness
bears, and future indebtedness may bear, interest that fluctuates with the
prime rate.
FACTORS THAT COULD AFFECT FUTURE PERFORMANCE
Certain statements contained in this Annual Report on Form 10-K, including
without limitation, statements containing the words "believes", "anticipates",
"intends", "expects", and words of similar import, constitute "forward-looking
statements". Such forward-looking statements involve numerous assumptions
about known and unknown risks, uncertainties and other factors which may
ultimately prove to be inaccurate. Certain of these factors are discussed in
more detail elsewhere in this Annual Report, including without limitation under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and include the Company's ability to reverse the
erosion of gross margin efficiencies, to reduce general and administrative
expenses, including those associated with litigation, and to achieve
profitability. Actual results may differ materially from any future results
expressed or implied by such forward looking statements. The Company disclaims
any obligation to update any forward-looking statements or publicly revise any
of the forward-looking statements contained herein to reflect future events or
developments.
ONGOING OPERATIONAL LOSSES AND LIQUIDITY
The changes mentioned here and elsewhere in this report were implemented
in late fiscal 1997 and the other additional improvements are continuing to be
implemented in fiscal 1998. Management believes that based on fully
implementing these plans in fiscal 1998, and realizing the benefit of these
improvements in fiscal 1998 and 1999, the Company's operating losses will be
reversed and its liquidity improved.
17
<PAGE> 13
LEGAL PROCEEDINGS
The Company and certain officers and directors are defendants in two
separate lawsuits that purport to be class actions and allege certain
misrepresentations and fraudulent actions by the defendants. While the Company
believes both actions are without merit, a negative outcome would have a
material adverse effect upon the Company's business, operating results and
financial condition. See Item 3. Legal Proceedings.
The Company is involved in several other legal issues, particularly with
Denise Austin, a former celebrity endorsement representative, that may be
difficult to resolve and may continue to absorb Company management time and
resources.
PRODUCTS AND MARKETS
The Company believes there will continue to be a strong market for its
products and product lines but a substantial change in consumer preference away
from a particular product, particularly trampolines, could seriously effect the
Company's ability to produce sales at the same level as is currently enjoyed.
The Company's customer base is highly concentrated with a few key mass
merchandisers. Insolvency, or a slow down in payments or a change in buying
habits, of any of these customers would have a material adverse impact on the
Company.
VENDOR PRICING
The Company plans to continue to negotiate better prices from its vendors
in fiscal 1998. The Company has had initial success and plans to explore all
avenues of product sourcing. However, there are no guarantees that it will
have additional success in this regard. Failure to negotiate lower prices
would have a material adverse on the Company's future earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The consolidated financial statements and schedules of the Company as of
March 31, 1997, and 1996, and for each of the years in the three-year period
ended March 31, 1997, are included as part of this Report beginning on page F-1
hereof.
18
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report on
Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 18th day of July, 1997.
BOLLINGER INDUSTRIES, INC.
By: /S/ Glenn D. Bollinger
------------------------------------
Glenn D. Bollinger
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amended report on Form 10-K/A has been signed below by the following persons on
behalf of the registrant and in the capacities indicated as of the 18th day of
July, 1997.
<TABLE>
<S> <C>
/S/ Glenn D. Bollinger Chairman of the Board, President, and Chief
- - ---------------------- Executive Officer (principal executive officer)
Glenn D. Bollinger
/S/ Bobby D. Bollinger Vice Chairman of the Board and President
- - ----------------------
Bobby D. Bollinger
/S/ Rose Turner Senior Vice President - Finance, Chief Financial
- - ---------------------- Officer, Treasurer, and Secretary
Rose Turner (principal financial officer)
/S/ Floyd DePauw Controller and Chief Accounting Officer (principal
- - ---------------------- accounting officer)
Floyd DePauw
/S/ John L. Maguire Director
- - ----------------------
John L. Maguire
/S/ Stephen L. Parr Director
- - ----------------------
Stephen L. Parr
/S/ Richard J. Tucker Director
- - ----------------------
Richard J. Tucker
</TABLE>
S-1
<PAGE> 15
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
F-1
<PAGE> 16
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<S> <C>
Page
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheets as of March 31, 1997 and 1996 F-4
Consolidated Statements of Operations for each of the three
years ended March 31, 1997 F-6
Consolidated Statements of Changes in Stockholders' Equity
for each of the three years ended March 31, 1997 F-7
Consolidated Statements of Cash Flows for each of the three
years ended March 31, 1997 F-8
Notes to Consolidated Financial Statements F-9
Report of Independent Certified Public Accountants on Schedule F-24
Schedule II F-25
</TABLE>
F-2
<PAGE> 17
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS AND STOCKHOLDERS
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of Bollinger
Industries, Inc. and Subsidiaries as of March 31, 1997, and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bollinger
Industries, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
ended March 31, 1997, in conformity with generally accepted accounting
principles.
KING GRIFFIN & ADAMSON, PC
Dallas, Texas
June 16, 1997
F-3
<PAGE> 18
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
<TABLE>
ASSETS 1997 1996
----------- ---------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 3,481 $ 408,871
Accounts receivable
Trade, net of allowance for doubtful
accounts of $844,312 and $457,829 16,804,959 18,344,827
Other 177,208 229,735
Income tax refund - 2,307,235
Inventories 16,201,780 30,112,934
Current assets of discontinued
operations - net - 1,601,954
Prepaid expenses 533,215 525,272
Deferred income taxes - 66,309
----------- ---------------
Total current assets 33,720,643 53,597,137
PROPERTY, PLANT AND EQUIPMENT - NET 2,083,402 2,015,282
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS - 161,999
OTHER ASSETS
Goodwill, net of accumulated amortization of
$213,346 and $157,884 1,138,654 1,233,482
Notes receivable and other 951,085 1,373,003
Deferred financing fees, net of accumulated
amortization of $140,385 495,568 -
----------- ---------------
Total other assets 2,585,307 2,606,485
----------- ---------------
TOTAL ASSETS $38,389,352 $58,380,903
=========== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 19
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
<TABLE>
<CAPTION>
MARCH 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------ -----------
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt and other debt
(including $100,000 note payable to officer and
shareholder in 1997) $ 2,841,645 $22,683,575
Accounts payable - trade 11,620,367 16,913,821
Federal income tax payable - 43,847
Other current liabilities 1,104,318 1,674,046
Provision for restructuring of operations 2,160,169 3,960,000
------------ -----------
Total current liabilities 17,726,499 45,275,289
LONG-TERM LIABILITIES
Long-term debt, net of current portion (including $180,000
and $280,000 notes payable to officers and shareholders in
1997 and 1996) 15,641,720 576,777
Deferred income taxes - 66,309
------------ -----------
Total long-term liabilities 15,641,720 643,086
------------ -----------
Total liabilities 33,368,219 45,918,375
------------ -----------
COMMITMENTS AND CONTINGENCIES (Notes B, E and N)
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value;
1,000,000 shares authorized; none issued - -
Common stock - $.01 par value; 8,000,000 shares authorized;
4,000,210 shares issued and outstanding 40,002 40,002
Capital in excess of par 15,323,058 15,323,058
Accumulated deficit (10,341,927) (2,900,532)
------------ -----------
Total stockholders' equity 5,021,133 12,462,528
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,389,352 $58,380,903
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 20
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $82,598,593 $80,300,431 $67,894,489
Cost of goods sold 69,723,015 62,197,227 50,546,515
----------- ----------- -----------
Gross profit 12,875,578 18,103,204 17,347,974
Selling expenses 6,878,803 7,876,538 6,861,621
Distribution, general and
administrative expenses (including $75,000
and $56,250 in 1997 and 1996 to a Director) 11,505,641 12,115,284 8,421,762
Restructuring of operations - 3,960,000 -
----------- ----------- -----------
18,384,444 23,951,822 15,283,383
----------- ----------- -----------
Operating profit (loss) (5,508,866) (5,848,618) 2,064,591
Other expense (income)
Interest expense 2,551,703 2,251,807 1,166,794
Other (50,243) (103,921) (46,795)
----------- ----------- -----------
2,501,460 2,147,886 1,119,999
----------- ----------- -----------
Earnings (loss) from continuing operations
before income tax expense (benefit) (8,010,326) (7,996,504) 944,592
Income tax expense (benefit) (91,964) (1,135,098) 350,416
----------- ----------- -----------
Earnings (loss) from continuing operations (7,918,362) (6,861,406) 594,176
Discontinued operations
Gain (loss) from operations, net of income
tax benefit - (591,886) (524,914)
Gain (loss) on disposal, net of income tax
expense (benefit) including a $1,199,118
provision for operating losses during the
phase-out period in 1996. 476,967 (770,068) -
----------- ----------- -----------
Earnings (loss) from discontinued operations 476,967 (1,361,954) (524,914)
----------- ----------- -----------
Net earnings (loss) $(7,441,395) $(8,223,360) $ 69,262
=========== =========== ===========
Per Share Data:
Earnings (loss) from continuing operations * $ (1.98) $ (1.85) $ .15
=========== =========== ===========
Net earnings (loss) $ (1.86) $ (2.22) $ .02
=========== =========== ===========
Weighted average common and common
equivalent shares outstanding 4,000,210 3,710,484 3,966,631
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
* Indicates Restated Amounts.
F-6
<PAGE> 21
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK CAPITAL IN EARNINGS
---------------------- EXCESS OF (ACCUMULATED
SHARES AMOUNT PAR DEFICIT) TOTAL
--------- ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1994 3,592,551 $35,926 $14,108,142 $ 5,253,566 $19,397,634
Shares issued in
connection with
acquisition 138,000 1,380 999,120 - 1,000,500
Shares retired (22,461) (225) 225 - -
Net earnings - - - 69,262 69,262
--------- ------- ----------- ------------ ----------
Balance at March 31, 1995 3,708,090 37,081 15,107,487 5,322,828 20,467,396
Shares issued on
exercise of stock
options 292,120 2,921 215,571 - 218,492
Net loss - - - (8,223,360) (8,223,360)
--------- ------- ----------- ------------ ----------
Balance at March 31, 1996 4,000,210 40,002 15,323,058 (2,900,532) 12,462,528
--------- ------- ----------- ------------ ----------
Net loss - - - (7,441,395) (7,441,395)
--------- ------- ----------- ------------ ----------
Balance at March 31, 1997 4,000,210 $40,002 $15,323,058 $(10,341,927) $5,021,133
========= ======= =========== ============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 22
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss) $(7,441,395) $(8,223,360) $ 69,262
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities
(Gain) loss on disposal of assets (476,967) - (5,341)
Deferred income tax benefit (245,709) 1,148,050 (655,005)
Depreciation and amortization 891,417 651,500 442,926
Provision for restructuring of operations - 3,960,000 -
Other - - 74,000
Provision for doubtful accounts 236,483 (311,514) 793,931
Provision for obsolete inventory 325,991 365,795 852,204
Changes in operating assets and liabilities
Trade accounts receivable 1,153,385 (1,513,464) (5,175,131)
Other receivables 52,527 81,476 (159,247)
Inventories 12,880,151 581,275 (18,906,836)
Income tax refund 2,307,235 (2,307,235) -
Prepaid expenses 58,366 658,348 (393,078)
Notes receivable, deposits and other 405,611 (44,161) (599,000)
Current assets of discontinued operations 1,601,954 (1,601,954) -
Accounts payable (5,309,916) 10,274,464 3,944,881
Federal income tax payable (43,847) (389,849) (160,166)
Other current liabilities 233,323 660,813 284,644
Provision for restructuring operation (1,799,831) - -
Non-Current assets from discontinued
operations 161,999 - -
----------- ----------- -----------
Net cash provided by (used in) operating
activities 4,990,777 3,990,184 (19,591,956)
Cash flows from investing activities
Purchases of property and equipment (621,146) (425,041) (1,268,970)
Payments made on notes receivable 187,097 - -
Proceeds from sale of assets 1,418,129 58,329 36,205
----------- ----------- -----------
Net cash provided by (used in) investing
activities 984,080 (366,712) (1,232,765)
Cash flows from financing activities
Proceeds from long-term debt 287,774 395,449 21,298
Payments made on long term debt (1,030,116) (445,018) (687,223)
Net change in lines of credit (5,001,951) (3,500,000) 21,580,607
Net advance from (payments to) officers - - -
Proceeds from issuance of common stock - 218,492 -
Deferred financing fees (635,954) - -
----------- ----------- -----------
Net cash provided by (used in) financing
activities (6,380,247) (3,331,077) 20,914,682
----------- ----------- -----------
Net increase (decrease) in cash (405,390) 292,395 89,961
Cash at beginning of year 408,871 116,476 26,515
----------- ----------- -----------
Cash at end of year $ 3,481 $ 408,871 $ 116,476
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 23
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BUSINESS ACTIVITY
The Company is a supplier of consumer fitness equipment and accessories.
(See Note C for a discussion of discontinued operations.)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Bollinger
Industries, Inc. (Bollinger) which was reincorporated in Delaware in
September 1993, its wholly-owned subsidiaries and Bollinger Industries,
L.P., a partnership wholly-owned by Bollinger's subsidiaries (collectively
"the Company"). All significant intercompany accounts and transactions have
been eliminated.
INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market (determined product by product on management
knowledge of current market conditions and existing stock levels).
The provision for obsolete and slow moving inventory is adjusted based on
current inventory levels, historical and expected future sales levels.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed using straight-line
and accelerated methods for financial reporting purposes over the following
useful lives:
<TABLE>
<S> <C>
Buildings and improvements 5-20 years
Equipment 3-7 years
Automobiles 3 years
Furniture and fixtures 3-5 years
</TABLE>
Maintenance and repairs are expensed as incurred. Major renewals and
improvements are capitalized.
ADVERTISING COSTS
Advertising and promotional costs are expensed as incurred. The advertising
expense amounted to $1,627,464, $1,558,397, and $1,790,521 in fiscal 1997,
1996 and 1995, respectively.
FAIR VALUE
The Company believes that the carrying amounts of its current assets and
current liabilities approximate the fair value of such items due to their
short-term nature. The carrying amount of long-term debt approximates its
fair value because interest rates approximate market.
F-9
<PAGE> 24
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Continued
INCOME TAXES
Deferred income taxes are determined using the asset and liability method,
under which deferred tax assets and liabilities are calculated based on
differences between financial accounting and tax basis of assets and
liabilities. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense or benefit is the payable or refund for the period plus or minus the
change during the period in deferred tax assets and liabilities.
EARNINGS (LOSS) PER COMMON SHARE
Net earnings (loss) per common share is based on the net earnings (loss)
applicable to the weighted average number of common shares and common stock
equivalents outstanding. Common stock equivalents include the dilutive
effect of all stock options outstanding (except in the case of a net loss, in
which case they would be anti-dilutive), as though they had been outstanding
for all periods presented.
GOODWILL AND COVENANT NOT TO COMPETE
The excess of the purchase price of acquired companies over the fair value
of net identifiable assets at the date of acquisition has been recorded as
goodwill and is being amortized on a straight line basis over a twenty year
period. The Company periodically evaluates the net balance of goodwill
based on the projected operating income of the respective businesses on an
undiscounted cash flow basis. If necessary, the goodwill would be written
down to fair market value.
A covenant not to compete in the amount of $206,633 net of accumulated
amortization of $146,367 is included in "Notes receivable and other" and is
being amortized on a straight-line basis over its duration of 41 months.
USE OF ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were used. In particular, the provision for chargebacks and
buybacks is subject to estimation. The actual chargebacks and buybacks
could vary from the estimate.
REVENUE RECOGNITION AND PROVISIONS FOR CHARGEBACKS AND BUYBACKS
The Company recognizes sales revenue at the time the products are shipped to
its customer. Provision is made currently for estimated product returns and
deductions which may occur. These returns are generally for products that
are salable with minor reworking of packaging or replacement of missing
components. The provision for returns is estimated based on current trends
and historical experience of returns. Additionally, provision is made for
chargebacks from the customer for marketing programs, volume discounts and
other items.
F-10
<PAGE> 25
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Continued
In certain circumstances, the Company has followed a "buyback" policy
whereby the Company purchases competitors' product from a new customer in
order to obtain shelf space for the Company's product lines. The cost of
such "buybacks" is amortized over the life of the program, which typically
has been two to three years.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1997
presentation and to retroactively recognize the discontinued Healthcare
Division.
STOCK OPTIONS
Prior to April 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On April 1, 1996, the Company adopted SFAS No.
123, "Accounting for Stock-Based Compensation", which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of the grant. Alternatively, SFAS No. 123
also allows entities to continue to apply the provisions of APB Opinion No.
25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock options grants made in 1996 and future years
as if the fair value based method defined in SFAS No. 123 had been applied.
The Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123
commencing in its March 31, 1997 financial statements. The effect of
applying the requirements of SFAS No. 123 is not considered to be material
to the financial statements.
ADOPTION OF NEW ACCOUNTING STANDARDS
The Company intends to adopt SFAS No. 128, "Earnings per Share" ("SFAS 128")
effective December 15, 1997. This statement requires the replacement of
primary earnings per share with basic earnings per share and fully diluted
earnings per share with diluted earnings per share. Management of the
Company does not expect the adoption of this statement will have a material
impact on the earnings per share computation.
F-11
<PAGE> 26
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - ONGOING OPERATIONAL LOSSES AND LIQUIDITY
As indicated in the accompanying financial statements, the Company has
suffered losses of $7,441,395 and $8,223,360 during the years ended March
31, 1997 and 1996.
Funds provided by operating activities for fiscal 1997 were generated
primarily by the reduction of inventory, the sale of discontinued operations
and the receipt of an income tax refund. These funds were used to fund
operating losses and to decrease outstanding accounts payable and long term
debt. Management intends to further decrease inventory levels in fiscal 1998
but does not expect the impact of those reductions to be as significant.
Funds provided by operating activities for fiscal 1996 were generated
primarily by an increase in accounts payable.
In fiscal 1998, management intends to substantially improve operating gross
margins on all product lines. Due to the highly competitive nature of the
overseas market it has become cost advantageous to source more items from
overseas. There are potential savings to be negotiated with steamship lines,
freight forwarders and U.S. Customs as well as major reductions in product
costs. The Company has actively pursued and negotiated directly with
overseas suppliers and factories. Additionally, the domestic manufacturing
operations have been analyzed and will be maintained only where it is cost
advantageous to do so. The Company believes that sourcing their product from
the lowest cost, high quality provider, in addition to strengthening the
controls and response time surrounding customer deductions, which have been
a drain on gross margin in fiscal 1995 and 1996, will enable it to
substantially improve gross margin in 1998.
The Company plans to continue to consolidate warehouse facilities in fiscal
1998 thereby lowering fixed costs. The Company is also exploring the use of
freight expediters on the west coast, to receive product from the orient,
unload and inspect, and repack for shipment to the customer. The Company
intends to reduce warehouse space, outside facilities, staffing levels and
related overhead expenses.
Some of these changes were implemented in late fiscal 1997 and the other
additional improvements are continuing to be implemented in fiscal 1998.
Management believes that based on fully implementing these plans in fiscal
1998, and realizing the benefit of these improvements in fiscal 1998 and
1999, the Company's operating losses will be reversed and its liquidity
improved.
NOTE C - ACQUISITION, DISCONTINUED OPERATIONS, AND RESTRUCTURING OF OPERATIONS
ACQUISITION
On May 24, 1994, in exchange for 138,000 shares of its restricted common
shares, the Company acquired substantially all of the assets and liabilities
of NBF, Inc. (a Florida Corporation) which manufactures trampolines and
other outdoor playground equipment. The total consideration for the assets
and liabilities acquired including liabilities assumed was approximately
$2,762,472. Additionally, for cash of $150,000, the Company acquired from
an individual, all of the intellectual property rights to the products
manufactured. If the acquisition had occurred as of April 1, 1994,
consolidated results would not have been materially effected. The
acquisition was accounted for as a purchase and accordingly the consolidated
financial statements include the results of operations from the acquisition
date.
DISCONTINUED OPERATIONS
The Company determined during January 1996 to dispose of its Healthcare
Division which manufactured a line of sports medicine and safety products.
The Company sold the largest portion of the Healthcare Division in September
1996 with the balance sold or disposed of through January 1997. A gain on
the sale of $476,967, net of taxes was recorded, in fiscal 1997. Result of
-----------------------------------
operations in prior years have been restated to reclassify the Healthcare
Division as discontinued operations.
Interest expense has been allocated to discontinued operations based on the
proportion of average net assets of the discontinued Healthcare operations
as compared to consolidated average net assets of the Company.
Following is a summary of the discontinued operations:
Note: Underlined items have been restated or changed.
F-12
<PAGE> 27
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1997 1996 1995
---------- ------------ ----------
<S> <C> <C> <C>
NET SALES OF DISCONTINUED OPERATIONS:
Healthcare Division $1,398,400 (1) $3,327,893 (2) $5,170,521
---------- ------------ ----------
Total net sales of discontinued operations $1,398,400 $3,327,893 $5,170,521
-
========== ========== ==========
LOSS (GAIN) FROM DISCONTINUED OPERATIONS (PRIOR TO THE
MEASUREMENT DATE):
Healthcare Division $ 689,784 (2) $ 795,324
Less: Tax (expense) benefit 97,898 270,410
---------- ----------
Net loss (gain) from discontinued operations - Healthcare
Division $ 591,886 $ 524,914
========== ==========
</TABLE>
(1) April 1, 1996, to December 31, 1996 (final disposition)
(2) April 1, 1995, to December 31, 1995
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
LOSSES ON DISPOSAL, INCLUDING PROVISION FOR OPERATING
LOSSES DURING PHASE-OUT PERIOD:
Healthcare Division $ - $ 897,574
Less: Tax benefit - 127,506
---------- ----------
Net loss on disposal - Healthcare Division $ - $ 770,068
========== ==========
OPERATING LOSSES DURING PHASE-OUT PERIOD (AFTER
MEASUREMENT DATE) APRIL 1, 1996 TO SEPTEMBER 1996:
Healthcare Division - January 1, 1996 to December 31, 1996 $ - $1,397,574
Less: Tax benefit - 198,456
---------- ----------
Total operating losses during phase-out period included
above $ - $1,199,118
========== ==========
NET LOSS FROM DISCONTINUED OPERATIONS (AFTER MEASUREMENT
DATE) APRIL, 1996 TO DECEMBER 31, 1996 AND JANUARY 1,
1996, TO MARCH 31, 1996:
Operating loss from discontinued operations - Healthcare
Division $ - $ 497,574
Less: Tax benefit - 70,656
---------- ----------
Net loss from discontinued operations January 1, 1996, to
March 31, 1996 $ - $ 426,918
========== ==========
</TABLE>
F-13
<PAGE> 28
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
ESTIMATED NET LOSS ON DISPOSAL OF HEALTHCARE DIVISION: 1996
--------
<S> <C>
Estimated operating loss during phase-out period April 1,
1996 to December 31, 1996 $900,000
Less: Estimated gain on sale of assets 500,000
--------
400,000
Less: Tax Benefit 56,850
--------
Estimated Net loss on disposal of Healthcare Division $343,150
========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
NET GAIN ON DISPOSAL OF HEALTHCARE DIVISION: 1997
--------
<S> <C>
Loss during phase out period net of provision (April 1996 *
to December 1997) $ -
Add: Gain on Sale of assets 722,676
--------
722,676
Less: Tax expense 245,709
--------
Net gain on disposal of Healthcare Division $476,967
========
</TABLE>
Proceeds upon sale of the Healthcare Division were as follows; $1,418,130 in
cash and $293,547 as a note receivable.
* Reformated.
F-14
<PAGE> 29
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - Continued
RESTRUCTURING OF OPERATIONS
During the fourth quarter of 1996, the Company implemented a plan ("the Plan")
to reorganize and restructure its operations. The significant portion of this
Plan has been completed. In accordance with the Plan, management disposed of
its Healthcare Division, and sold a significant portion of the excess inventory
which it used to reduce accounts payable and debt, and fund operations.
The Company also obtained a new credit facility. At March 31, 1997, the
Company still has approximately $4.0 million of inventory which it intends to
sell rapidly. The provisions for restructuring of operations at March 31, 1997
of $2,160,169 is the remaining provision against inventory identified for sale
in connection with the restructuring.
NOTE D - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Interest paid $ 2,470,054 $2,213,613 $1,400,146
Income taxes paid
(refund received) $(2,100,611) $ 200,000 $ 865,507
Noncash financing
and investing
transactions:
Purchase of assets
financed by debt $ 66,381 $ 42,488 -
Purchase of NBF, Inc. $ - $ - $2,762,472
Notes receivable in
connection with sale
of Healthcare
Division $ 293,547 $ - $ -
</TABLE>
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
NOTE E - CREDIT RISK
The Company's assets which are subject to potential credit risk consist of
trade accounts receivable and cash. The Company sells its products primarily
to retailers, including national chains, geographically dispersed throughout
the United States on an unsecured basis. Risks associated with extension of
credit to customers are affected by the economic condition of the retail
industry. The Company performs ongoing credit evaluations of its customers'
financial condition to reduce credit risk. The Company has provided an
allowance for doubtful accounts which reflects its estimate of uncollectible
accounts.
Cash is at risk to the extent that it exceeds Federal Deposit Insurance
Corporation ("FDIC") insured amounts (approximately $575,000 at March 31,
1997). To minimize risk, the Company places its cash with high credit quality
institutions.
F-15
<PAGE> 30
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Raw materials $ 9,013,914 $ 9,858,597
Work-in-process 328,436 305,777
Finished goods 8,419,200 23,117,280
Reserve for Obsolescence (1,559,770) (1,166,766)
----------- -----------
16,201,780 32,114,888
Less: Discontinued operations - net - 2,001,954
----------- -----------
$16,201,780 $30,112,934
=========== ===========
</TABLE>
NOTE G - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Land, buildings and improvements $1,915,305 $1,835,658
Equipment 1,699,103 1,585,146
Automobiles 53,860 53,860
Furniture and fixtures 1,453,910 1,238,752
---------- ----------
5,122,178 4,713,416
Less accumulated depreciation 3,038,776 2,536,135
---------- ----------
2,083,402 2,177,281
Less: Discontinued Operations - Net - 161,999
---------- ----------
$2,083,402 $2,015,282
========== ==========
</TABLE>
Depreciation expense for the years ended March 31, 1997, 1996,
and 1995 was approximately $558,000, $554,000, and $407,000,
respectively.
F-16
<PAGE> 31
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - NOTES PAYABLE AND LONG TERM DEBT
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Note payable under a line of credit for
$2,000,000 ($22,500,000 in 1996) with a bank,
bearing interest at the prime rate (8.50% at
March 31, 1997) plus 3% in 1997 (8.25% at March
31, 1996) plus 3% in 1996; principal and interest
payable monthly; collateralized by land and
building located in Irving, Texas in 1997
(collateralized by receivables and inventory in
1996). (1) $ 1,700,000 $22,500,000
Loan with a financial institution providing a
maximum line of credit of $25,000,000, bearing
interest at the Reference Rate (8.50% at March
31, 1997) plus 1.75% in 1997. Interest payable
monthly; collateralized by receivables and
inventory.(2) 15,498,049 -
Notes to certain officers and shareholders of the
Company bearing interest at 10%, due in March
1998, as extended; collateralized by real estate
note (purchased by officers and shareholders from
an individual in December 1993). 280,000 280,000
Other 1,005,316 480,352
----------- -----------
18,483,365 23,260,352
Less current portion 2,841,645 22,683,575
$15,641,720 $ 576,777
=========== ===========
</TABLE>
(1) The loan agreement with the bank provides that borrowings are reduced
monthly by the amount of required principal payments (approximately $25,000
per month) in terms of an agreement reached in June, 1997. The balance is
payable on the loan expiration date of September 15, 1998.
(2) The loan agreement with the financial institution provides that borrowings
under the line of credit are subject to limitations based on the borrowing
base, as defined in the agreement, with a maximum facility of $25.0 million.
The terms of the agreement require the Company to maintain specific current
ratio levels, levels of debt to net worth, levels of tangible net worth and
other financial covenants as defined in the loan agreement. At December 31,
1996 and March 31, 1997, the Company was not in compliance with all covenants.
The financial institution has waived such defaults through March 31, 1997 and
restated those covenants on a going forward basis. At March 31, 1997 the
Company had $447,000 available in additional borrowing capacity under the loan
agreement. The loan agreement has an extended expiration date of August 16,
2000.
F-17
<PAGE> 32
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - NOTES PAYABLE AND LONG TERM DEBT - Continued
Future maturities of notes payable and long-term debt at March 31, 1997 are as
follows:
<TABLE>
<S> <C>
Year ending March 31, 1998 $ 2,841,645
1999 1,720,255
2000 1,044,099
2001 12,698,020
2002 21,203
Thereafter 158,143
-----------
$18,483,365
===========
</TABLE>
NOTE I - RELATED PARTY TRANSACTIONS
In 1993 certain officers of the Company purchased third party notes payable
of $500,000 with interest payable at 10% per annum (see Note H). The
officers assumed the same terms of the notes which matured on March 31, 1996.
On March 29, 1996 the Company paid each of two shareholders $110,000 on the
notes. The Company extended the maturity of the $100,000 note to March 31,
1998 and remaining notes of $180,000 to August 16, 2000.
The Company retains a director of the Company as a consultant on certain
matters. Consulting fee expense recorded by the Company was $75,000 and
$56,250 for the years ended March 31, 1997 and 1996.
NOTE J - EMPLOYEE STOCK OWNERSHIP PLAN AND 401(K) PLAN
The Company had an employee stock ownership plan which provided for
discretionary contributions by the Company. During 1995, the Company amended
and restated the plan to qualify as a 401(k) employee deferred compensation
plan under the terms of which employees who have been employed for one year
or more are entitled to contribute up to the lesser of $9,500 or 15% of their
annual compensation. The Company may at its discretion contribute to the
401(k) plan. No Company contributions were made under either plan for any of
the three years in the period ended March 31, 1997.
F-18
<PAGE> 33
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
NOTE K - STOCK OPTIONS
1991 PLAN
The 1991 Stock Option Plan provides for options covering a total of 542,820
common shares, all of which were issued to the Chief Executive Officer and the
President of the Company. The exercise price of the options granted must be
at least 110% of the fair value of the common stock at date of grant. The
remaining options were exercised on March 29, 1996. At March 31, 1997, there
were no options outstanding or available for grant.
Following is a summary of option activity under the 1991 Plan:
<TABLE>
<CAPTION>
OPTION PRICE
---------------------
SHARES PER SHARE TOTAL
-------- --------- ---------
<S> <C> <C> <C>
Outstanding at March 31, 1995 292,120 $.74795 $ 218,492
Granted - - -
Canceled - - -
Exercised (292,120) .74795 (218,492)
-------- --------- ---------
Outstanding at March 31, 1996 - - -
Granted - - -
Canceled - - -
Exercised - - -
Outstanding at March 31, 1997 - - -
======== ========= =========
</TABLE>
1993 PLAN
The 1993 Stock Option Plan provides for options covering a total of 500,000
common shares to be issued to key employees and directors other than the Chief
Executive Officer and the President. Under the Plan, incentive stock options
(ISO's) and non-qualified stock options may be granted at prices no less than
100% and 50%, respectively, of the fair value of the Company's common stock.
Options granted expire in ten years and will generally vest in annual
installments. At March 31, 1997, options for 246,501 shares were available
for grant.
F-19
<PAGE> 34
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
Following is a summary of option activity under the 1993 Plan:
<TABLE>
<CAPTION>
OPTION PRICE
----------------------------
SHARES PER SHARE TOTAL
-------- --------------- -----------
<S> <C> <C> <C>
Outstanding at March 31, 1994 262,666 $10.00 - 12.50 $ 2,958,537
Granted 50,000 9.00 - 13.00 560,000
Canceled (46,000) 10.00 - 12.50 (550,000)
-------- --------------- -----------
Outstanding at March 31, 1995 266,666 9.00 - 13.00 2,968,537
Granted 110,999 3.00 - 7.50 424,621
Canceled (109,666) 3.63 - 12.50 (1,148,079)
-------- --------------- -----------
Outstanding at March 31, 1996 267,999 3.00 - 13.00 2,245,079
Granted 110,000 .56 - 6.00 329,439
Canceled (124,500) .56 - 12.50 (644,877)
-------- --------------- -----------
Outstanding at March 31, 1997 253,499 $ .56 - 13.00 $ 1,929,641
======== =============== ===========
</TABLE>
All the options are considered compensatory. The outstanding stock options
expire from November 1999 through January 2003.
The following summarizes information about compensatory options outstanding at
March 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted Avg.
Range of Exercise Remaining Weighted Number Weighted Avg.
Prices Number Outstanding Contractual Life Avg. Exercise Price Exercisable Exercisable Price
- - ----------------- ------------------ ---------------- ------------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$0.56-$13.00 253,499 2.59 Years $7.48 87,715 $10.30
</TABLE>
The options granted in Fiscal 1997, 1996 and 1995 have exercise prices which
approximate fair value and accordingly, no compensation cost has been
recognized for compensatory stock options in the consolidated financial
statements.
F-20
<PAGE> 35
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE L - INCOME TAXES
Income tax expense (benefit) from continuing operations consists of the
following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------------ ----------
<S> <C> <C> <C>
Federal
Current $ 137,331 $ (2,031,628) $ 848,220
Deferred (245,709) 891,354 (497,804)
State 16,414 5,176 -
--------- ------------ ---------
$ (91,964) $ (1,135,098) $ 350,416
========= ============ =========
</TABLE>
The Company's effective income tax rate from continuing operations differed
from the Federal statutory rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate 34.0 % 34.0 % 34.0%
Amortization of goodwill (.3)% (.5)% 1.8%
Meals and entertainment (.1)% (.1)% .9%
Change in prior tax estimates 2.3 % (.7)% -
Valuation allowance (35.4)% (17.6)% -
Other, net (0.4)% (.9)% .4%
----- ----- ------
0.1 % 14.2 % 37.1%
===== ===== ======
</TABLE>
F-21
<PAGE> 36
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
Following are the components of deferred tax assets and deferred tax
liabilities:
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1997 1996
------------ ---------
<C> <C> <C>
Net current deferred tax assets
Inventories $ 463,534 $ 753,188
Allowance for doubtful accounts 179,129 96,110
Inventory reserves 376,171 3,208
Accrued expenses 67,895 42,500
Provision for discontinued operation - 136,000
Less valuation allowance (1,086,729) (964,697)
----------- ---------
$ - $ 66,309
=========== =========
Noncurrent deferred tax assets
Net operating loss $ 3,724,596 $ 725,917
Less valuation allowance (3,677,150) (725,917)
----------- ---------
$ 47,466 $ -
Noncurrent deferred tax liabilities
Accumulated depreciation $ (47,446) $ (66,309)
Net Noncurrent deferred taxes $ - $ (66,309)
=========== =========
</TABLE>
At March 31, 1997, the Company has net operating losses available to offset
future taxable income of approximately $10,950,000 which begin expiring in
2011. The valuation allowance increased by $3,073,265 during the year ended
March 31, 1997.
NOTE M - MAJOR CUSTOMERS
Customers accounting for 10% or more of total net sales from continuing
operations are as follows:
YEAR ENDED MARCH 31,
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
1997
KMart 38%
Wal-Mart 34%
1996
KMart 31%
Wal-Mart 25%
1995
KMart 32%
Wal-Mart 13%
</TABLE>
F-22
<PAGE> 37
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
NOTE N - COMMITMENTS AND CONTINGENCIES
The Company leases certain manufacturing and warehouse space; manufacturing
and computer equipment; and other items. These leases are operating leases
and have future minimum lease payments, excluding sublease income, as follows:
<TABLE>
<CAPTION>
YEAR
- - ----
<S> <C>
1998 $1,125,757
1999 879,809
2000 330,887
2001 65,000
2002 65,000
Thereafter 672,000
----------
$3,138,453
==========
</TABLE>
Total lease expense for the years ended March 31, 1997, 1996, and 1995 was
approximately $1,449,000, $1,552,000 and $793,000, respectively.
The Company, certain of its officers and directors, former officers, former
independent auditor, and the underwriters of the Company's initial IPO are
defendants in certain shareholder lawsuits. The Company believes the lawsuits
are without merit. However, if the plaintiffs prevail, the lawsuits could
have a material adverse effect on the Company. The Company is unable to
estimate the range of loss, if any.
The Company filed a lawsuit against Denise Austin on December 2, 1996 in
the 162nd District Court of Dallas County, Texas and was subsequently removed
to the United States District Court for the Northern District of Texas, Dallas
Division Case Number 3-97-CV-0246-G on February 6, 1997. Subsequently a suit
was filed on December 30, 1996, by Denise Austin in the United States District
Court, Eastern District of Virginia. The suit was filed for payment of
royalties alleged to be due of approximately $655,000. The Company has accrued
all amounts which it believes may be due.
In the normal course of business, the Company is involved in various
litigation. Management believes that the aggregate effect of any liability
arising from such items would not be material to the consolidated statements of
operations or financial position at March 31, 1997.
F-23
<PAGE> 38
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
BOARD OF DIRECTORS AND STOCKHOLDERS
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
In connection with our audit of the consolidated financial statements of
Bollinger Industries, Inc. and Subsidiaries referred to in our report dated
June 16, 1997, we have also audited Schedule II for the years ended March 31,
1997, 1996 and 1995. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
King Griffin & Adamson PC
Dallas, Texas
June 16, 1997
F-24
<PAGE> 39
Schedule II
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION> ADDITIONS
-------------------------------------------
Balance at Charged to Charged
beginning costs and to other Balance at
Description of year expenses accounts Deductions end of year
- - ------------------------------ ----------- ---------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1995
Allowance for doubtful
accounts $ 476,675 $ 793,931 $ - $ (350,391) $ 920,215
Inventory obsolescence reserve 112,217 852,204 - (163,449) 800,972
Year ended March 31, 1996
Allowance for doubtful
accounts $ 920,215 $ (311,514) $ - $ (150,872) $ 457,829
Inventory obsolescence reserve 800,972 365,794 - - 1,166,766
Year ended March 31, 1997
Allowance for doubtful
accounts $ 457,829 $ 464,407 $ - $ (77,924) $ 844,312
Inventory obsolescence reserve 1,166,766 585,900 - (192,896) 1,559,770
*Returns and allowance reserve 2,965,091 5,631,906 - (6,741,997) 1,855,000
</TABLE>
Note - Deductions represent uncollectible accounts or inventories written off.
* Indicates Inserted Item.
F-25
<PAGE> 40
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
11.1 Statement Regarding Computation of Per Share Data
27.1 Financial Data Schedule
<PAGE> 1
EXHIBIT 11.1
STATEMENT REGARDING COMPUTATION OF PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Earnings (loss) from continuing operations * $(7,918,362) $(6,861,406) $ 594,176
Loss from discontinued operations * 476,967 (1,361,954) (524,914)
----------- ----------- ----------
Net earnings (loss) $(7,441,395) $(8,223,360) $ 69,262
=========== ============ ==========
Weighted average number of common shares 4,000,210 3,710,484 3,669,577
Net effect of dilutive stock options
based on the treasury stock method (using
the initial public offering price of
$12.50 per share and assuming that all
options had been outstanding for all
periods prior to the IPO on November 17,
1993) (1) - - 297,054
----------- ----------- ----------
Shares used for computation 4,000,210 3,710,484 3,966,631
=========== =========== ==========
Per Share Data:
Earnings (loss) from continuing operations * $ (1.98) $ (1.85) $ .15
=========== =========== ==========
Net earnings (loss) $ (1.86) $ (2.22) $ .02
=========== =========== ==========
</TABLE>
Note - fully diluted and primary calculations are the same.
(1) Dilutive stock options for the fiscal years ended March 31, 1997 and
March 31, 1996, were not included because of the net loss.
* Indicates Restated Amounts.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheets, Consolidated Statements of Earnings, and
Schedule II Valuation and Qualifying Accounts as of and for the fiscal year
ended March 31, 1997 shown elsewhere in this report and is qualified in it's
entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,481
<SECURITIES> 0
<RECEIVABLES> 16,804,959
<ALLOWANCES> 844,312
<INVENTORY> 16,201,780
<CURRENT-ASSETS> 33,720,643
<PP&E> 4,986,867
<DEPRECIATION> 2,903,465
<TOTAL-ASSETS> 38,389,352
<CURRENT-LIABILITIES> 17,726,499
<BONDS> 0
0
0
<COMMON> 40,002
<OTHER-SE> 4,981,131
<TOTAL-LIABILITY-AND-EQUITY> 38,389,352
<SALES> 82,598,593
<TOTAL-REVENUES> 82,598,593
<CGS> 69,723,015
<TOTAL-COSTS> 6,878,803
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 236,483
<INTEREST-EXPENSE> 2,551,703
<INCOME-PRETAX> (8,010,326)
<INCOME-TAX> (91,964)
<INCOME-CONTINUING> (7,918,362)
<DISCONTINUED> 476,967
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,441,395)
<EPS-PRIMARY> (1.86)
<EPS-DILUTED> (1.86)
</TABLE>
