UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
OR
| ¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
COMMISSION FILE NUMBER: 333-13105
FIREARMS TRAINING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 57-0777018 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
7340 MCGINNIS FERRY ROAD
SUWANEE, GEORGIA 30024
(Address of principal executive offices)
TELEPHONE NUMBER (770) 813-0180
(Registrant’s telephone number, including area code)
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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of November 8, 2004, there were 70,516,401 shares of the Registrant’s Class A Common Stock outstanding.
FIREARMS TRAINING SYSTEMS, INC.
INDEX
2
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIREARMS TRAINING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except for per share amounts)
| Three Months Ended September 30, |
Six Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue | $ | 20,130 | $ | 12,931 | $ | 38,142 | $ | 28,549 | ||||||||
| Cost of revenue |
13,764 | 9,028 | 25,630 | 20,375 | ||||||||||||
| Gross margin |
6,366 | 3,903 | 12,512 | 8,174 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
3,686 | 3,011 | 7,024 | 5,908 | ||||||||||||
| Research and development |
724 | 723 | 1,742 | 1,246 | ||||||||||||
| Depreciation and amortization |
119 | 108 | 231 | 233 | ||||||||||||
| Total operating expenses |
4,529 | 3,842 | 8,997 | 7,387 | ||||||||||||
| Operating income | 1,837 | 61 | 3,515 | 787 | ||||||||||||
| Other income (expense), net |
||||||||||||||||
| Interest expense, net |
||||||||||||||||
| Debt, net |
(1,611 | ) | (1,351 | ) | (3,010 | ) | (2,421 | ) | ||||||||
| Dividends on mandatorily redeemable preferred stock |
(781 | ) | (707 | ) | (1,543 | ) | (1,398 | ) | ||||||||
| Other, net |
(312 | ) | (58 | ) | (403 | ) | (16 | ) | ||||||||
| Total other expense |
(2,704 | ) | (2,116 | ) | (4,956 | ) | (3,835 | ) | ||||||||
| Loss before benefit for income taxes | (867 | ) | (2,055 | ) | (1,441 | ) | (3,048 | ) | ||||||||
| Benefit for income taxes |
(53 | ) | (458 | ) | (13 | ) | (561 | ) | ||||||||
| Net loss | $ | (814 | ) | $ | (1,597 | ) | $ | (1,428 | ) | $ | (2,487 | ) | ||||
| Loss per share Basic and diluted loss per share |
$ | (.01 | ) | $ | (.02 | ) | $ | (0.02 | ) | $ | (0.04 | ) | ||||
| Weighted average common shares outstanding – basic |
70,265 | 70,153 | 70,265 | 70,153 | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated statements.
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIREARMS TRAINING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for shares authorized, issued and outstanding)
| September 30, 2004 |
March 31 2004 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,405 | $ | 2,367 | ||||
| Restricted cash |
2,582 | 2,502 | ||||||
| Accounts receivable, net of allowance of $350 |
14,697 | 23,317 | ||||||
| Income taxes receivable |
207 | 104 | ||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
3,969 | 4,268 | ||||||
| Unbilled receivables |
1,248 | 62 | ||||||
| Inventories, net |
11,805 | 12,221 | ||||||
| Deferred income taxes |
770 | 770 | ||||||
| Prepaid expenses and other current assets |
1,635 | 1,020 | ||||||
| Total current assets |
40,318 | 46,631 | ||||||
| Property and equipment, net |
2,187 | 2,398 | ||||||
| Other noncurrent assets: |
||||||||
| Deferred income taxes |
1,999 | 2,004 | ||||||
| Deferred financing costs, net |
1,484 | 187 | ||||||
| Total assets |
$ | 45,988 | $ | 51,220 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities |
||||||||
| Long-term debt due within one year |
$ | 2,181 | $ | 2,953 | ||||
| Accounts payable |
3,789 | 3,679 | ||||||
| Accrued liabilities |
4,571 | 7,002 | ||||||
| Accrued interest |
— | 949 | ||||||
| Income taxes payable |
223 | 214 | ||||||
| Billings in excess of cost and estimated earnings on uncompleted contracts |
1,390 | 1,428 | ||||||
| Deferred revenue |
3,431 | 1,239 | ||||||
| Warranty and contract cost provision reserve – current |
617 | 1,074 | ||||||
| Total current liabilities |
16,202 | 18,538 | ||||||
| Long-term debt |
35,062 | 38,168 | ||||||
| Warranty and contract cost provision reserve – noncurrent |
215 | 356 | ||||||
| Other noncurrent liabilities |
633 | 587 | ||||||
| Manditorily redeemable preferred stock |
— | 30,485 | ||||||
| Total liabilities |
52,112 | 88,134 | ||||||
| Commitments and contingencies |
||||||||
| Preferred stock, 3,500 shares authorized; 3,203 shares issued and outstanding; liquidation value of $10,000 per share |
32,028 | — | ||||||
| Stockholders’ deficit Class A common stock, $0.0000006 par value; 100 million shares authorized, 70,508,801 and 70,153,139 shares issued and outstanding |
— | — | ||||||
| Additional paid-in capital |
123,407 | 123,215 | ||||||
| Stock warrants |
613 | 613 | ||||||
| Accumulated deficit |
(162,609 | ) | (161,181 | ) | ||||
| Accumulated other comprehensive income |
437 | 439 | ||||||
| Total stockholders’ deficit |
(38,152 | ) | (36,914 | ) | ||||
| Total liabilities and stockholders’ deficit |
$ | 45,988 | $ | 51,220 | ||||
The accompanying notes are an integral part of these condensed consolidated statements.
4
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FIREARMS TRAINING SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
| Six Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: | ||||||||
| Net loss |
$ | (1,428 | ) | $ | (2,487 | ) | ||
| Adjustments for non-cash items |
||||||||
| Non-cash interest and financing costs |
2,463 | 1,860 | ||||||
| Depreciation and amortization |
485 | 553 | ||||||
| Change in inventory reserve |
28 | (451 | ) | |||||
| Change in warranty and contract cost provision reserve |
(598 | ) | (206 | ) | ||||
| Loss on sale of assets |
8 | — | ||||||
| Deferred income taxes |
38 | — | ||||||
| Changes in assets and liabilities |
||||||||
| Accounts receivable, net |
8,620 | 10,344 | ||||||
| Income taxes receivable |
(103 | ) | (223 | ) | ||||
| Costs and estimated earnings in excess of billings on uncompleted contracts |
299 | (3,081 | ) | |||||
| Unbilled receivables |
(1,186 | ) | 78 | |||||
| Inventories |
388 | (919 | ) | |||||
| Prepaid expenses and other current assets |
(615 | ) | 304 | |||||
| Accounts payable |
110 | (2,829 | ) | |||||
| Accrued liabilities |
(3,380 | ) | (902 | ) | ||||
| Income taxes payable |
9 | — | ||||||
| Billings in excess of costs and estimated earnings on uncompleted contracts |
(38 | ) | (59 | ) | ||||
| Deferred revenue |
2,192 | (1,037 | ) | |||||
| Noncurrent liabilities |
47 | 157 | ||||||
| Total adjustments |
8,767 | 3,589 | ||||||
| Net cash provided by operating activity |
7,339 | 1,102 | ||||||
| Cash flows from investing activities | ||||||||
| Change in restricted cash |
(80 | ) | (560 | ) | ||||
| P | ||||||||