10-Q 1 form10q.txt FORM 10-Q DATED 09-30-01 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED September 30, 2001 Commission File No. 0-22429 DHB INDUSTRIES, INC (Exact name of Registrant as specified in its charter) DELAWARE 11-3129361 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 555 WESTBURY AVENUE, CARLE PLACE, NEW YORK 11514 (Address of principal executive offices) Registrant's telephone number: (516) 997-1155 Indicate by check whether the registrant (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of November 13, 2001, there were 31,396,497 shares of Common Stock, $.001 par value outstanding. =============================================================================== CONTENTS PAGE ---- PART I Financial Information Item 1. Financial Statements Consolidated Balance Sheet as of September 30, 2001 and December 31, 2000 3 Unaudited Consolidated Statements of Income and Accumulated Deficit For The Three Months Ended September 30, 2001 and 2000 4 Unaudited Consolidated Statements of Operations and Accumulated Deficit For The Nine Months Ended September 30, 2001 and 2000 5 Unaudited Consolidated Statements of Cash Flows For The Nine Months Ended September 30, 2001 and 2000 6 Unaudited Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 7-9 PART II Other Information 9 Signatures 10
DHB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Unaudited September 30, December 31, ASSETS 2001 2000 ------ ------------- ------------ CURRENT ASSETS Cash and cash equivalents $ 191,869 $ 566,887 Marketable securities - 368,996 Accounts receivable, less allowance for doubtful accounts of $719,705 and $653,384 9,926,917 8,121,188 Inventories 21,518,141 14,297,059 Prepaid expenses and other current assets 1,583,345 1,091,952 ----------- ----------- Total Current Assets 33,220,272 24,446,082 ----------- ----------- PROPERTY AND EQUIPMENT, net 1,902,395 1,940,326 ----------- ----------- OTHER ASSETS Investments in non-marketable securities 941,750 941,750 Deferred tax assets 409,300 429,300 Deposits and other assets 297,809 298,813 ----------- ----------- Total Other Assets 1,648,859 1,669,863 ----------- ----------- TOTAL ASSETS $36,771,526 $28,056,271 =========== =========== CURRENT LIABILITIES Accounts payable $13,684,746 $11,257,987 Accrued expenses and other current liabilities 2,310,528 5,547,759 Current maturities of long term debt 881,260 143,748 ----------- ----------- Total Current Liabilities 16,876,534 16,949,494 ----------- ----------- LONG TERM LIABILITIES Revolving credit agreement - financial institution 8,206,363 - Long term debt, net of current maturities 1,051,196 15,356 Note Payable - stockholder 10,000,000 16,046,469 ----------- ----------- Total Long Term Debt 19,257,559 16,061,825 ----------- ----------- Total Liabilities 36,134,093 33,011,319 STOCKHOLDERS' EQUTY (DEFICIENCY) Common stock $.001 par value, 100,000,000 shares authorized, 31,396,947 issued and outstanding 31,397 31,674 Additional paid in capital 23,769,036 24,535,500 Accumulated deficit (23,097,295) (29,215,460) Other comprehensive income (65,705) (306,762) ----------- ----------- STOCKHOLDERS' EQUITY (DEFICIENCY) 637,433 (4,955,048) ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS EQUITY $36,771,526 $28,056,271 =========== =========== (DEFICIENCY) See accompanying notes to financial statements.
3 DHB INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 2000 ------------ ------------ Net sales $ 24,009,436 $ 18,591,351 Cost of sales 17,280,550 13,033,727 ----------- ------------ Gross Profit 6,728,886 5,557,624 Selling, general and administrative expenses 3,281,775 3,062,033 ----------- ------------ Income before other expense 3,447,111 2,495,591 Other Income (expenses) Interest expense (657,486) (642,371) Other income 30,892 250,920 ----------- ------------ Total other expenses (626,594) (391,451) ----------- ------------ Income from Continuing Operations 2,820,517 2,104,140 Discontinued operations Loss from discontinued operations - - ----------- ------------ Income before income taxes 2,820,517 2,104,140 Income taxes 27,473 93,408 ----------- ------------ Net income 2,793,044 2,010,732 Accumulated Deficit Beginning (25,890,339) (33,589,102) ----------- ------------ Accumulated Deficit Ending $(23,097,295) $(31,578,370) ============ ============ Earnings per common share Continuing Operations Basic shares .09 .065 ============ ============ Diluted shares .08 .064 ============ ============ Discontinued Operations Basic shares - - - - ============ ============ Diluted shares - - - - ============ ============ Weighted shares outstanding Basic shares 31,411,180 32,237,463 Warrants 4,255,716 513,960 ------------ ------------ Diluted shares 35,666,896 32,751,423 ============ ============ See accompanying notes to financial statements. 4
DHB INDUSTRIES GROUP, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 2000 ------------ ------------ Net sales $ 67,698,191 $ 48,295,372 Cost of sales 49,812,539 34,144,439 ------------ ------------ Gross profit 17,885,652 14,150,933 Selling, general and administrative expenses 9,705,628 8,763,522 ------------ ------------ Income before other expenses 8,180,024 5,387,411 Other Income (expenses) Interest expense (1,897,382) (2,209,251) Other income 3,096 269,768 ------------ ------------ Total other expenses (1,894,286) (1,939,483) ------------ ------------ Income from continuing operations 6,285,738 3,447,928 ------------ ------------ Discontinued operations Loss from discontinued operations (517,288) Gain on disposal of discontinued operations - 857,860 ------------ ------------ Total income (loss) from discontinued operations - 340,572 ------------ ------------ Income before income taxes 6,285,738 3,788,500 Income taxes 167,573 144,059 ------------ ------------ Net income 6,118,165 3,644,441 Accumulated deficit beginning (29,215,460) (35,222,811) ------------- ------------ Accumulated deficit ending $(23,097,295) $(31,578,370) ============ ============ Earnings (loss) per common share Continuing Operations: Basic shares .20 .042 ============ ============ Diluted shares .17 .042 ============ ============ Discontinued Operations: Basic shares - - .011 ============ ============ Diluted shares - - .011 ============ ============ Weighted shares outstanding Basic shares 31,541,536 32,313,478 Warrants 4,478,044 135,870 ------------ ------------ Diluted shares 36,019,580 32,449,348 ============ ============ See accompanying notes to financial statements.
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DHB INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 2000 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 6,118,165 $ 3,644,441 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 390,995 322,891 Stock issued in settlement of a lawsuit 23,000 Stock issued for services 464,918 35,850 Changes in assets and liabilities (Increase) Decrease in: Accounts receivable (1,805,729) (2,489,340) Marketable securities (368,996) (638,808) Inventories (7,221,082) (2,872,433) Prepaid expenses and other current assets (491,393) (464,625) Deferred taxes 20,000 14,700 Deposits and other assets 192 46,415 Increase (decrease) in: Accounts payable 2,426,759 163,069 Accrued expenses and other current liabilities (3,237,231) 3,561,193 ----------- ----------- Net cash provided (used) by operating activities (2,965,412) 1,346,353 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Payments for purchase of assets of subsidiary, net of cash acquired -- 3,933,980 Sale of property and equipment 422,241 Payments made for property and equipment (352,252) (427,723) ----------- ----------- Net Cash provided (used) by investing activities (352,252) 3,928,498 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds (repayments) of bank borrowings 10,000,000 (5,000,000) Repayment of shareholder loans (6,046,469) -- Repayments on long-term debt 20,285 (214,602) Other comprehensive income (241,057) (103,218) Purchase of treasury stock (1,737,909) (286,402) Proceeds from stock warrant exercised -- -- Net proceeds from sale of common stock 506,252 691,125 ----------- ----------- Net cash (used) provided by financing activities 2,942,646 (4,913,097) NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (375,018) 361,754 CASH AND CASH EQUIVALENTS - BEGINNING 566,887 473,441 ----------- ----------- CASH AND CASH EQUIVALENTS - END $ 191,869 $ 835,195 =========== =========== Supplemental cash flow information Cash paid for: Interest $ 99,948 Taxes $ 29,131 See accompanying notes to financial statements.
6 DHB CAPITAL GROUP INC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001, 2000 AND 1999 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS: The consolidated balance sheet at the end of the preceding year has been derived from the audited consolidated balance sheet contained in the Company's form 10-K and is presented for comparative purposes. All other financial statements are unaudited. All unaudited amounts are subject to year-end adjustments and audit, but the Company believes all adjustments, consisting only of normal and recurring adjustments, necessary to present fairly the financial condition, results of operations and changes in cash flows for all interim periods have been made. The results of operations for interim periods are not necessarily indicative of the operating results for the full year. Footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with published rules and regulations of the Securities and Exchange Commission. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's form 10-K for the most recent fiscal year. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2001, COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2000. Consolidated net sales increased 29% to approximately $24.0 million for the three months ended September 30, 2000 as compared to approximately $18.6 million for the three months ended September 30, 2000. This increase is primarily attributable to the increase volumes from Military customers for the Company's ballistic apparel, but also reflects modest growth in sales of the Company's other products. Operating income rose to $3.4 million for the third quarter of 2001 versus $2.5 million for the third quarter of 2000. Net income was approximately $2.8 million for the three months ended September 30, 2001 as compared to approximately $2.0 million for the three months ended September 30, 2000. The Company's tax expense remains minor due to the continued utilization of net operating loss carryforwards. NINE MONTHS ENDED SEPTEMBER 30, 2001, COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000. Revenues for the first nine months vaulted to $67.7 million or 40% above the $48.3 million posted during the nine-month period last year due to increased volumes from military customers for the Company's ballistic apparel, but also reflects modest growth in sales of the Company's other products. Gross profit increased $3.7 million to $17.9 million for the first nine 7 months of 2001, but declined as a percentage of net sales to 26.4% from 29.3% for the first nine months of 2000 as a result of the relocation of the PACA operations to a larger facility in the beginning of 2001. For the nine months ending September 30, 2001 operating income rose nearly $2.8 million to $8.2 million from $5.4 million for the comparable period in the prior year. Net income was approximately $6.1 million for the nine months ended September 30, 2001 as compared to $3.6 million for the nine months ended September 30, 2000, a 69% improvement. The gross profit and income increases are a direct result of the manufacturing operating efficiencies resulting from higher sales volumes, volume discounts from our vendors as a result of the increases in our purchasing volumes, and management's control of expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirements over the next twelve months are to assist PACA, Point Blank, NDL, and Point Blank International in financing their working capital requirements. In late September 2001, the Company entered into an $18.8 million credit facility from LaSalle Business Credit Inc. According to the terms of the agreement, DHB will use these funds to meet increased demands for working capital generated during a period of rapid growth. A portion of the loan proceeds were used pay down $6 million of shareholder debt. Working capital is needed to finance the receivables, manufacturing process and inventory. Working capital at September 30, 2001 was approximately $16.3 million as compared $7.5 million at December 31, 2000. The current ratio at September 30, 2001 was 1.96 as compared 1.44 as of the calendar year-end as a result credit facility funding the $7.2 million increase in inventories, a $1.8 million increase in receivables, and a decrease of $3.2 million in accrued expenses and other current liabilities, which was partially offset by a $2.4 million increase in payables. The Company's cash flow statement showed net cash provided by financing activities for the nine months ended September 30, 2001 of approximately $2.9 million, which was utilized in operations to fund the increase noted above. During the nine months ended September 30, 2001, the Company repurchased and retired 678,063 shares in the open market for an aggregate price of approximately $1.7 million. During the first half of 2000, the company generated cash of $3.9 million from the sale of its Electronics Group, the proceeds, together with funds generated from operations were used to retire $5 million in bank indebtedness. EFFECT OF INFLATION AND CHANGING PRICES. The Company did not experience significant increases in raw material prices during the nine months ended September 30, 2001and 2000. The Company believes it will be able to increase prices on its products to meet future price increases in raw materials, should they occur. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this document, the words "anticipate," "believe," "estimate", "expect", "going forward", and the 8 similar expressions, as they relate to the Company or Company management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) The Company's annual meeting of stockholders was held on July 20, 2001. (b) At the annual meeting, the Company's stockholders elected David H. Brooks, Dawn M. Schlegel, Morton A. Cohen, Jerome Krantz and Gary Nadelman as Directors for a one-year term, which expires at the annual meeting of stockholders in 2002. The following tabulation represents voting for the Directors: FOR AGAINST David H. Brooks 26,327,768 0 Dawn M. Schlegel 26,327,768 0 Morton A. Cohen 26,327,768 0 Jerome Krantz 26,327,768 0 Gary Nadelman 26,327,768 0 (c) At the annual meeting, the Company's stockholders ratified the appointment of Paritz & Company PA as auditors of the Company for 2001. The holders of 26,310,268 shares of Common Stock voted to ratify the appointment of the holders of 3,500 shares voted against the ratification, and the holders of 14,500 shares abstained. The stockholders also approved an amendment to the Certificate of Incorporation changing the Company's name] to DHB Industries, Inc. The holders of 26,322,758 shares voted for the amendment, 510 shares were voted against the amendment, and 5,000 shares abstained. ITEM 6. EXHIBITS AND REPORTS [Exhibit 4.1] Loan and Security Agreement dated September 24, 2001 from LaSalle Business Credit Inc. 9 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 by the undersigned, thereunto duly authorized. Dated November 13, 2001 DHB INDUSTRIES, INC. By: /s/ DAVID H. BROOKS ----------------------- David H. Brooks Chairman of the Board, and Director By: /s/ DAWN M. SCHLEGEL ----------------------- Dawn M. Schlegel Chief Financial Officer 10