|
UNITED
STATES FORM 10-K |
|X| |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
|
OR |
|_| |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE | ||
| For
the transition period from ________ to ________ BOSS HOLDINGS, INC.
|
Delaware |
58-1972066 |
||||
(State
or Other Jurisdiction of Incorporation or Organization) |
(I.R.S.
Employer Identification No.) |
||||
221
West First Street, Kewanee, Illinois |
61443 |
||||
(Address
of Principal Executive Offices) |
(Zip
Code |
|
Registrant’s telephone number, including area code: (309) 852-2131 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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|
Indicate
by check mark whether the registrant is an accelerated filer (as defined
in Exchange Act Rule 12b-2). Yes |_| No |X|
The
aggregate market value of the voting stock held by non-affiliates as of
March 1, 2003 was approximately $2.9 million.
There
were 1,952,404 shares of the Registrant’s common stock outstanding
as of March 1, 2003.
INCORPORATION BY REFERENCE Specified portions of the registrant’s definitive proxy statement for its 2003 Annual Meeting of Stockholders are incorporated by reference in Part III hereof.
|
|
FORWARD LOOKING STATEMENTS OR INFORMATION Certain statements, other than statements of historical fact, included in this Annual Report, including, without limitation, the statements under “Current Developments”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are, or may be deemed to be, forward-looking statements that involve significant risks and uncertainties, and accordingly, there is no assurance that these expectations will be correct. These expectations are based upon many assumptions that the registrant believes to be reasonable, but such assumptions ultimately may prove to be materially inaccurate or incomplete, in whole or in part and, therefore, undue reliance should not be placed on them. Several factors which could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to: availabil
ity and pricing of goods purchased from international suppliers, unusual weather patterns which could affect domestic demand for the registrant’s products, pricing policies of competitors, investment results on funds invested in marketable securities by management, the ability to attract and retain employees in key positions and uncertainties and changes in general economic conditions. All subsequent forward-looking statements attributable to the registrant or persons acting on its behalf are expressly qualified in their entirety.
PART I Item 1. Business As used in this report, the terms “Boss” and “Company” refer to Boss Holdings, Inc. (the Registrant), a Delaware corporation, and its operating subsidiaries. In October 1994, under prior management, the Company completed an initial public offering under the name Vista 2000, Inc. On December 7, 1998, the Company changed its name from Vista 2000, Inc. to Boss Holdings, Inc. reflecting the trade name of its primary operating subsidiary, Boss Manufacturing Company, a Delaware corporation (“BMC”) originally established in 1893.
During 1996 and 1997, the Company undertook a restructuring which included the sale of a substantial portion of the Company’s operating assets. As a result of this restructuring, Boss now operates primarily in the work gloves and protective wear business segment. In addition, the Company conducts operations in the pet supplies business segment.
Work Gloves and Protective Wear Through BMC, the Company imports, markets and distributes gloves, boots and rainwear products serving two primary markets — consumer and industrial. The consumer market represents slightly more than 60% of BMC sales and consists of retailers ranging from convenience stores to mass merchandisers as well as grocery and hardware stores. The industrial market, which accounts for the balance of sales in this segment, includes various commercial users of gloves and protective wear. These end-users include companies in the agricultural, automotive, energy, lumber and construction industries.
BMC primarily markets its products through distributors and manufacturer representatives. In addition, the Company sells directly through its own sales force to certain major retail customers and industrial consumers. BMC products are sold predominantly to customers in the United States, with certain products also marketed in Canada.
The work gloves and protective wear market is intensely competitive with a high degree of price competition. BMC competes on the basis of price, service, quality and selection. Having participated in this segment for over 100 years, BMC and the Boss trade name are well known in the industry. The market for work gloves and protective wear is highly fragmented and served by a large number of domestic and foreign competitors ranging in size from small sole proprietorships to several companies substantially larger than BMC.
Sales in the work gloves and protective wear segment have historically exhibited seasonal fluctuations. Cold weather months generally provide increased sales while warm weather historically results in reduced sales activity. Because of this seasonality, sales tend to be higher in the Company’s first and fourth quarters and lower during the second and third quarters.
BMC sells to a broad customer base approximating two thousand active accounts. Accordingly, BMC has relatively little dependence on any one customer. At the end of 2002, BMC had an open order backlog of approximately $1,400,000, up about $100,000 from the previous year.
The Company ceased domestic manufacturing operations during 2000 and is now primarily an importer and marketer. Finished goods in this segment are generally widely available from a number of suppliers in various |
|
|
countries. In recent years, pricing has declined due to excess foreign production capacity with supply exceeding demand for many of the Company’s products. However, the Company has occasionally experienced limitations in the supply of certain imported products. Availability of imported goods is further subject to interruptions in shipping as well as import/export documentation and clearing. The Company does not anticipate shortages of purchased goods for resale in 2003. During 2002, the Company entered into a trademark license agreement with Caterpillar, Inc. under which the Company will market work gloves under the CAT trademark. The Company believes that the CAT trademark will provide additional sales opportunities in its consumer market while allowing the Company to introduce new products which are less sensitive to market pricing pressures.
The Boss logo is an important trademark of the Company which it vigorously defends in the market. In addition, BMC has various registered names and trademarks for specific products which the Company believes add substantial value in the sales and marketing efforts associated with this segment. Additional financial information on the work gloves and protective wear segment is included in the “Notes to Consolidated Financial Statements” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Pet Supplies The Warren Pet (“Warren”) division of the Company’s Boss Manufacturing Holdings, Inc. subsidiary imports, markets and distributes a line of pet supplies to various retail outlets. Products in this line include dog and cat toys, collars and leads, chains and rawhide products. Warren markets its product line primarily to hardware retailers utilizing a network of regional distributors. Essentially all sales are within the United States.
The pet supplies industry is extremely competitive. A small group of companies including Hartz Mountain Corporation and Sergeant’s Pet Care Products, Inc. dominate the industry. Warren competes primarily in selected market niches by focusing on customer service and favorable pricing.
Warren generally has multiple sources of supply for substantially all of its product requirements. The finished goods purchased by Warren have generally been readily available in sufficient quantities. However, Warren is subject to the same potential for product interruptions noted in the work gloves and protective wear segment. Because of the nature and size of Warren’s operations, the open order backlog was not material at the end of 2002 or 2001.
During the fourth quarter of 2002, the Company’s new Boss Pet subsidiary purchased certain of the assets of RocCorp, Inc., an Ohio corporation (“RocCorp”), consisting of RocCorp’s pet restraint, pet shampoo and pet chemical business (“Purchased Business”). The purchased assets include furniture and fixtures located at RocCorp’s former manufacturing and distribution plant in Brunswick, Ohio, as well as all inventory, machinery, equipment, trademarks, patents and other tangible and intangible personal property used in the Purchased Business.
RocCorp’s line of pet cables, restraints, shampoo and chemicals generated sales of approximately $2,256,000 during 2001 and roughly $1,486,000 during the first seven months of 2002. The Company intends to devote the assets of the Purchased Business to the same product lines previously operated by RocCorp. Boss Pet has been successful in renewing orders with RocCorp’s primary customers, and management believes that these product lines will complement and expand the Company’s pet supplies segment.
Additional financial information on the pet supplies segment is included in the “Notes to Consolidated Financial Statements” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Environmental Matters The Company is subject to various federal, state and local regulations concerning the environment. Efforts to maintain compliance with such regulations have not required expenditures material to the Company’s overall operating performance or financial condition.
Employees As of December 28, 2002, Boss employed approximately 120 full-time associates, unchanged from the previous year. Of these, about 20 hourly associates located at the BMC distribution facility in Springfield, Illinois were represented by the UNITE labor organization under a collective bargaining agreement. At year-end, approximately 112 associates were located in the United States with 8 located in Canada. |
|
|
The Company believes its employee relations are excellent as evidenced by relatively low turnover rates at most facilities. However, attracting and retaining employees has become more difficult in recent years. The Company’s past success in this area cannot assure attainment of future employment objectives.
Item 2. Properties The following table shows the location, general character, square footage, approximate annual rent and lease expiration date of the principal operating facilities owned or leased by the Company as of December 28, 2002. The principal executive offices are located in Kewanee, Illinois. |
| Location |
City
|
General Character
|
Square Feet |
Annual Rent |
Lease Expiration | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|
Br.
Columbia, Canada |
Vancouver |
Distribution |
5,600 | $ | 9,000 | Month-to- month | |||||
|
Illinois |
Kewanee |
Administrative
Office |
10,200 | $ | 0 |
Owned | |||||
|
Illinois |
Kewanee |
Distribution
& Administration |
147,000 | $ | 0 |
Owned | |||||
|
Illinois |
Springfield |
Distribution |
80,000 | $ | 0 |
Owned | |||||
|
Ontario,
Canada |
Concord |
Distribution
& Administration |
18,400 | $ | 60,000 |
6/30/2003 | |||||
|
Ohio |
Brunswick |
Manufacturing,
Distribution & Admin |
30,000 | $ | 90,000 |
6/30/2004 |
|||||
|
Except for the Brunswick, Ohio location, the above properties are predominantly used in the work gloves and protective wear segment. The Company believes the above listed facilities provide adequate distribution capacity to provide for anticipated demand. Utilization of the various facilities fluctuates significantly during the year based on order and inventory levels. The Company considers its properties to be adequate to carry on the Company’s business.
Item 3. Legal Proceedings The Company is a party to various legal actions incident to the normal operations of its business. These lawsuits primarily involve claims for damages arising out of commercial disputes. The Company has been named as a defendant in several lawsuits alleging past exposure to asbestos contained in gloves manufactured or sold by one of the Company’s predecessors-in-interest, all of which actions are being defended by one or more of the Company’s general liability or products liability insurers. Management believes the ultimate disposition of these matters should not materially impair the Company’s consolidated financial position or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders The Company submitted no matters for security holder voting during the fourth quarter of 2002. |
|
PART II Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters The Company’s common stock (symbol: BSHI) is currently listed on the Over-the-Counter (OTC) Bulletin Board. The Company’s common stock is not listed on any national stock exchange or on NASDAQ. The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last-sale prices and volume information for non-listed (over-the-counter) equity securities. The OTC Bulletin Board is a reporting system for participating market makers, not an issuer listing service, and should not be confused with the NASDAQ Stock Market. Participating market makers in the bulletin board system enter quotes and trade reports on a closed computer network and the information is made publicly available through numerous websites and other locations. The OTC Bulletin Board is distinct from the “pink sheets” published by the National Quotation Bureau which also report on
transactions in non-listed equity securities.
Stockholders of record at February 28, 2003 numbered approximately 2,345. The Company has not paid cash dividends on its Common Stock in the past and currently plans to retain earnings, if any, for business development and expansion. |
| Quarterly
Stock Prices
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First
|
Second
|
Third
|
Fourth
|
||||||||||||
| 2002
— High bid |
$ | 1.90 | $ | 4.55 | $ | 4.20 | $ | 3.90 | |||||||
| 2002
— Low bid |
$ | 1.55 | $ | 1.90 | $ | 3.70 | $ | 3.50 | |||||||
| 2001
— High bid |
$ | 1.88 | $ | 2.25 | $ | 2.15 | $ | 1.70 | |||||||
| 2001
— Low bid |
$ | 1.63 | $ | 1.63 | $ | 1.65 | $ | 1.65 | |||||||
|
Item 6. Selected Financial Data The following table contains selected consolidated financial data for the five year period ended December 28, 2002 as derived from the consolidated financial statements of the Company. This table should be read in conjunction with “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and the Company’s audited Consolidated Financial Statements and Notes thereto appearing elsewhere herein.
Consolidated Balance Sheet Data |
| As
of
| ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/28/02
|
12/29/01
|
12/30/00
|
12/25/99
|
12/26/98
| ||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||
|
Working
capital |
$ | 18,167 | $ | 17,486 | $ | 18,434 | $ | 14,332 | $ | 18,363 | ||||
|
Total
assets |
24,531 | 23,164 | 25,462 | 26,292 | 28,970 | |||||||||
|
Long-term
debt, including current portion |
1,458 | 2,369 | 4,608 | 2,870 | 5,335 | |||||||||
|
Stockholders’
equity |
20,220 | 18,591 | 17,715 | 17,690 | 19,835 | |||||||||
|
Consolidated Statement of Operations Data |
| Year
Ended
|
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/28/02
|
12/29/01
|
12/30/00
|
12/25/99
|
12/26/98
|
|||||||||||
| Net
sales |
$ | 33,488 | $ | 33,737 | $ | 36,429 | $ | 36,024 | $ | 37,543 | |||||
| Cost
of sales |
20,742 | 21,591 | 24,471 | 25,767 | 26,762 | ||||||||||
| Gross
profit |
12,746 | 12,146 | 11,958 | 10,257 | 10,781 | ||||||||||
| Operating
expenses |
11,830 | 11,817 | 11,914 | 12,047 | 10,739 | ||||||||||
| Gain
(Loss) from asset sales/writedowns |
— | — | — | (1,100 | ) | 893 | |||||||||
| Operating
earnings (loss) |
916 | 329 | 44 | (2,890 | ) | 935 | |||||||||
| Interest
income |
97 | 77 | 166 | 103 | 151 | ||||||||||
| Interest
expense |
(113 | ) | (298 | ) | (351 | ) | (515 | ) | (532 | ) | |||||
| Other
income (expense) |
847 | 588 | 217 | 1,164 | 18 | ||||||||||
| Net
earnings (loss) before income taxes |
1,747 | 696 | 76 | (2,138 | ) | 572 | |||||||||
| Income
tax benefit (expense) |
(40 | ) | 89 | (42 | ) | (18 | ) | 68 | |||||||
| Net
earnings (loss) |
$ | 1,707 | $ | 785 | $ | 34 | $ | (2,156 | ) | $ | 640 | ||||
| Basic
earnings (loss) per share |
$ | .88 | $ | .41 | $ | .02 | $ | (1.11 | ) | $ | 0.34 | ||||
|
|
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies The discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.
The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating the Company’s reported financial results include the following:
Revenue Recognition The Company recognizes revenue from product sales at the time of shipment and passage of title. Management records estimated reductions to revenue for customer programs and incentive offerings including special pricing agreements, promotions and other volume-based incentives. Management periodically reviews the balance in the associated accrued promotional liability in relation to amounts charged and the current accrual rate. In addition, the Company maintains a schedule of allowances earned for all major customers to ensure accrued allowances are materially accurate.
Accounts Receivable Management performs ongoing customer credit evaluations and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by review of available credit information. The Company’s estimate for its allowance for doubtful accounts related to trade receivables is based on two methods. The amounts calculated from each of these methods are evaluated to determine the total amount reserved. First, the Company evaluates specific accounts on which available information indicates that the customer may have an inability to meet its financial obligations. In these cases, based on the best available facts and circumstances, the Company records a specific reserve for that customer against amounts due to reduce the receivable to the amount that is expected to be collected. Second, a general reserve is established for all customers based on a range of percentages applied to
aging categories. The Company has consistently applied these percentages for a number of years and management believes the results adequately provide for expected unrecoverable accounts. However, should circumstances change, for example an unexpected material adverse change in a major customer’s ability to meet its financial obligation to the Company, management’s estimate of the recoverability of amounts due the Company could be reduced by a material amount.
Inventories Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first-out method using a standard cost system. To facilitate up-to-date costing in the current rapidly changing environment, standards are updated upon receipt of goods when the cost of the goods received represents a material change from the current standard. Inventory gains and losses associated with these standard cost changes are amortized in an effort to match the impact of such gains and losses with the associated impact on margin recorded in the statement of operations. Management periodically reviews inventory quantities on hand and records a provision for excess, slow-moving and obsolete inventory based primarily on forecasted product demand. Should these forecasts prove inaccurate, the Company may be unable to realize the recorded value of certain products included in inventory.
Deferred Taxes The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Because of substantial losses in prior years, primarily during the years 1995 through 1997, the Company has available net operating loss (“NOL”) carryforwards of $35,325,000.
Accounting principles generally accepted in the United States require the recording of a valuation allowance against the net deferred tax asset associated with this NOL and other timing differences if it is “more likely than |
|
|
not” that the Company will not be able to utilize the NOL to offset future taxes. Due to the size of the NOL carryforward in relation to the Company’s taxable income in recent years and to the continuing uncertainties surrounding future earnings because of declining prices, unusual weather conditions and uncertain economic conditions in the Company’s primary operating segment, management has not recognized any of its net deferred tax asset. Because this asset has been offset by a valuation allowance, the Company currently provides for income taxes only to the extent of expected cash payments of taxes, primarily state income taxes, for current income. Should the Company’s earnings trend cause management to conclude that it is more likely than not the Company will realize all or a material portion of the NOL carryforward, management would record the estimated net realizable value of its deferred tax asset at that time. The Company would then provide for income taxes at a rate equal to its combined federal and state effective rates, which would approximate 39% under current tax rates. Subsequent revisions to the estimated net realizable value of the deferred tax asset could cause the provision for income taxes to vary significantly from period to period, although the Company’s cash tax payments would remain unaffected until the benefit of the NOL is utilized.
Results of Operations Sales |
| Sales
by Segment $(000) |
2002
|
2001
|
2000
|
||
|---|---|---|---|---|---|
Work
Gloves & Protective Wear |
30,102 | 30,546 | 32,440 | ||
Pet
Supplies |
2,633 | 2,301 | 2,634 | ||
Corporate
& Other |
753 | 890 | 1,355 | ||
Total
Sales |
33,488 | 33,737 | 36,429 | ||
|
2002 Compared to 2001 For the year ended December 28, 2002, consolidated sales totaled $33,488,000, a decrease of $249,000, or 0.7%, from 2001. Sales decreased slightly in the Company’s work gloves and protective wear segment, with this decrease partially offset by sales growth in the pet supplies segment attributable to the Company’s fourth quarter acquisition in this line of business.
In the Company’s primary segment, work gloves and protective wear, sales of $30,102,000 declined $444,000, or 1.5%, in 2002 compared to the previous year. The bulk of this decline was attributable to the Company’s consumer market where domestic revenues were down 2% compared to 2001 due primarily to lower selling prices. Unit sales increased 2.5% for the year. However, as expected the elimination of certain foreign governmental fees associated with importing products, excess foreign productive capacity and relatively low domestic demand resulted in declining selling prices throughout the year.
Sales in the industrial market declined approximately 1.1% compared to 2001 despite unit sales growth of 7%. As noted above, lower selling prices during 2002 were the primary factor in this sales reduction. The Company’s growth in unit sales was largely attributable to increased sales to certain national distributors and governmental district authorities during the year.
Management anticipates the deflationary trend in the work gloves and protective wear segment experienced over the past five years to ameliorate during 2003. Increases in the cost of petroleum and other raw materials used to manufacture certain gloves are likely to cause upward pressure on product cost and selling prices. However, low demand from a recession in the domestic economy combined with excess foreign capacity could limit the impact of upward price pressure during the coming year.
Sales in the Company’s pet supplies segment increased to $2,633,000 in 2002, up $332,000, or 14%, from the previous year. This increase was attributable to the new Boss Pet acquisition completed in October of 2002. Boss Pet sales during this period consisted primarily of dog restraint products. Warren Pet sales were essentially unchanged from the previous year. Sales growth experienced at Warren Pet during the second and third quarters attributable to customer additions was offset during the fourth quarter by reduced sales volume caused by the weak retail sector. The Company anticipates increased sales in the pet supplies segment during 2003 because of the new product lines acquired during 2002 and customer additions at Warren Pet. |
|
|
Sales in the Company’s corporate and other segment consist primarily of the Company’s Boss Balloon revenues. Management previously changed the market distribution method in this business in an effort to improve market coverage while reducing reliance on field sales representation with direct store servicing. This change negatively impacted a substantial portion of the account base in this segment. Management has thus far been unsuccessful regaining sales lost through the business realignment. During 2003, the Company expects to introduce certain new products and increase its presence in various trade-shows in addition to expanding its sales representative network.
2001 Compared to 2000 Consolidated sales for 2001 totaled $33,737,000, a decrease of $2,692,000, or 7.4%, from 2000. The Company experienced sales declines in each business segment due primarily to lower selling prices and unfavorable weather conditions.
In the Company’s primary segment, work gloves and protective wear, sales declined $1,894,000, or 5.8%, in 2001 compared to the previous year. Despite the addition of certain significant customers in the Company’s consumer market, domestic revenues in this market were down 5.5% on essentially unchanged unit sales during the year. Weather patterns hampered the Company’s efforts with weather much colder than normal in the spring reducing sales of seasonal gardening products. Winter weather at the end of 2001, however, was unusually warm, one of the warmest winters on record, causing reduced sales of winter products during the fourth quarter which is historically the Company’s peak sales season.
Sales in the industrial market declined approximately 5% despite unit sales growth of over 17%. Though the Company expanded its customer base and increased unit volume, revenue in this market decreased because of lower selling prices and increased sales of relatively low priced goods. The industry continues to experience declining costs on imported goods due to excess foreign productive capacity. During 2001, the Company improved market share with respect to disposable gloves and certain other low-priced, commodity gloves.
Sales in the Company’s pet supplies segment declined to $2,301,000 in 2001, down $333,000, or 12.6 %, from the previous year. The primary cause of this reduction in sales was the loss of two major customers during 2000 which caused a continued sales decline in 2001. Sales in the Company’s corporate and other segment consist primarily of the Company’s Boss Balloon revenues. Management efforts to improve the long-term potential of this operation through the realignment of its market distribution resulted in a loss of sales to certain accounts.
Gross Margin |
| 2002
|
2001
|
2000
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross
Margin by Segment $(000) |
$
|
%
|
$
|
%
|
$
|
%
|
||||||
Work
Gloves & Protective Wear |
11,457 | 38.1 | % | 10,755 | 35.2 | % | 10,075 | 31.1 | % | |||
Pet
Supplies |
899 | 34.1 | % | 925 | 40.2 | % | 1,099 | 41.7 | % | |||
Corporate
& Other |
390 | 51.8 | % | 466 | 52.4 | % | 784 | 57.9 | % | |||
Total
Gross Margin |
12,746 | 38.1 | % | 12,146 | 36.0 | % | 11,958 | 32.8 | % | |||
|
2002 Compared to 2001 The Company’s gross margin continued to improve during 2002 as a percentage of sales. Consolidated gross margin totaled $12,746,000, up $600,000 despite the slight reduction in sales for the year. Total gross margin increased to 38.1% of sales, an increase of 2.1% for the year. This increase was primarily attributable to aggressive purchasing efforts and the deflationary trend in the work gloves and protective wear segment. The gross margin in this segment improved 2.9% due in large part to the reduced cost of gloves, boots and rainwear imported for domestic sale.
The favorable margin impact realized in the work gloves and protective wear segment was partially offset by lower margins in the pet supplies segment. Lower margins in this segment resulted from increased promotional costs to obtain new business and lower margins in the recently acquired Boss Pet business which includes sales of certain domestically manufactured products at relatively low margins. |
|
|
2001 Compared to 2000 The Company’s gross margin during 2001 improved significantly as a percentage of sales compared to the previous year. Consolidated gross margin increased to $12,146,000, up $188,000 despite lower sales during the year. Total gross margin increased to 36% of sales, an increase of 3.2% for the year. This increase was due primarily to the elimination of domestic manufacturing in 2000 in the work gloves and protective wear segment. The gross margin in this segment improved 4.1% due to the elimination of manufacturing operational losses and relatively higher margins on imported goods previously manufactured domestically.
Operating Expenses |
| 2002
|
2001
|
2000
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating
Expense by Segment $(000) |
$
|
%
|
$
|
%
|
$
|
%
|
||||||
Work
Gloves & Protective Wear |
9,561 | 31.8 | % | 9,706 | 31.8 | % | 9,667 | 29.8 | % | |||
Pet
Supplies |
983 | 37.3 | % | 987 | 42.9 | % | 975 | 37.0 | % | |||
Corporate
& Other |
1,286 | — | 1,124 | — | 1,272 | — | ||||||
Total
Operating Expense |
11,830 | 35.3 | % | 11,817 | 35.0 | % | 11,914 | 32.7 | % | |||
|
2002 Compared to 2001 Consolidated operating expenses were essentially unchanged in 2002 compared to the previous year, both in total dollars and as a percentage of sales. In the work gloves and protective wear segment, operating expenses declined $145,000 due in large part to reduced warehousing expenses attributable to the Company’s lower inventory levels during most of the year in comparison to the previous year.
In the corporate and other segment, operating expenses increased by $162,000 due primarily to additional consulting and administrative expenses at the Company’s corporate offices. Operating expenses were essentially unchanged in the pet supplies segment.
2001 Compared to 2000 During 2001, operating expenses declined $97,000, less than 1%, from the prior year on a consolidated basis. While down in total, operating expenses increased as a percentage of sales due to the Company’s decline in 2001 revenues.
In the work gloves and protective wear segment, operating expenses increased $39,000. Though certain sales related and administrative expenses, notably commission expense, declined in 2001, these decreases were more than offset by increased warehousing and freight expenses. The increase in unit volume during 2001 was a significant factor in the escalation of warehousing and freight expense. The weight of products shipped and freight rates increased during the year. In addition, the units received, processed and shipped increased resulting in higher warehousing expense.
Operating expenses were essentially unchanged in the pet supplies segment. Declines in commission and administrative expenses were offset by increased bad debt expense attributable primarily to the bankruptcy of a customer. Corporate and other operating expenses declined $148,000 due to lower commission expenses in the Company’s balloon operations as well as reduced corporate office administrative expenses.
Operating Earnings |
| Operat |
|---|