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:
availability 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. The Company’s primary operating subsidiary is Boss Manufacturing Company, a Delaware corporation (“BMC”), originally established in 1893.
The Company 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 approximately 60% of BMC domestic sales and consists of retailers ranging from convenience stores to mass merchandisers as well as hardware, and grocery 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. 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. In addition, a number of larger retailers have begun to import products directly in recent years. BMC competes on the basis of price, distribution service capabilities, 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, glove and protective wear 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 2003, BMC had an open order backlog of approximately $1,475,000, up about $50,000 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
1
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 2004.
During the fourth quarter of 2002, the Company entered into a trademark license agreement with Caterpillar, Inc. under which the Company markets work gloves and rainwear under the CAT® trademark. Management developed a complete new line of CAT® products during 2003, completing the process in the fourth quarter. Though sales were minimal in 2003 due to the time required for product development and obtaining licensor approval, the Company believes that the CAT® trademark will provide additional sales opportunities 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 Company operates in the pet supplies segment through two subsidiaries. The Warren Pet (“Warren”) division of the Company’s Boss Manufacturing Holdings, Inc. subsidiary imports, markets and distributes a comprehensive line of non-food 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 discount and hardware retailers utilizing a network of regional distributors.
Boss Pet Products, Inc. (“Boss Pet”), a wholly owned subsidiary of BMC imports, markets and distributes pet cable, restraints, shampoos and other pet chemicals. The Company acquired this business through the purchase of certain assets from RocCorp, Inc. during the fourth quarter of 2002. Boss Pet markets its products primarily to pet supply specialty retailers under the Prestige brand name. In addition, Boss Pet sells products to discount retailers under various privately labeled brand names. Essentially all sales in this segment 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. The Company competes primarily in selected market niches by focusing on customer service, specialized marketing, unique products and competitive pricing.
Sales in the pet supplies segment have historically exhibited seasonal fluctuations. Spring and summer months tend to generate higher sales at retail as consumers spend time outdoors with their pets during warm weather months. Cold weather months generally produce lower sales at retail. Because of this seasonality, pet supply sales tend to be higher in the Company’s first and second quarters, with sales declining through the third and fourth quarters.
The Company generally has multiple sources of supply for substantially all of its product requirements in this segment. Finished goods purchased have generally been readily available in sufficient quantities. However, the pet supplies segment is subject to the same potential for product interruptions noted in the work gloves and protective wear segment. Because of the seasonality in this segment, the open order backlog was not material at the end of 2003 or 2002.
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.
2
Employees
As of December 27, 2003, Boss employed approximately 124 full-time associates, essentially unchanged from the previous year. The Company employed no union employees at the end of 2003. Approximately 115 associates were located in the United States with 9 located in Canada at year-end.
The Company believes its employee relations are excellent as evidenced by relatively low turnover rates at most facilities. However, attracting and retaining employees has proven more difficult in recent years. The Company’s past success in this area cannot assure attainment of future employment objectives.
Available Information
Information concerning the Company and its products can be obtained from its Internet website at www.bossgloves.com. The Company’s public financial reports and insider trading reports can be accessed under the “Boss Holdings, Inc.” subsection of the website area titled “Company Information”.
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 27, 2003. 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 |
|
|
|
Kewanee |
|
Distribution |
|
|
70,000 |
|
|
$ |
0 |
|
|
Owned |
Illinois |
|
|
|
Kewanee |
|
Distribution — Pet Supplies |
|
|
19,000 |
|
|
$ |
0 |
|
|
Owned |
Illinois |
|
|
|
Springfield |
|
Available for Sale |
|
|
80,000 |
|
|
$ |
0 |
|
|
Owned |
Ontario, Canada |
|
|
|
Concord |
|
Distribution & Administration |
|
|
11,150 |
|
|
$ |
48,000 |
|
|
3/31/2006 |
Ohio |
|
|
|
Brunswick |
|
Manufacturing, Distribution &
Admin — Pet Supplies |
|
|
30,000 |
|
|
$ |
80,000 |
|
|
6/30/2004 |
The Company acquired two additional buildings in Kewanee, Illinois during 2003 and moved the products previously stored in Springfield, Illinois to these new facilities during the third quarter of the year. The Springfield building has been listed for sale since that time. The above properties not designated as used in the pet supplies segment or available for sale are predominantly used in the work gloves and protective wear segment. The Company believes its 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 meet expected business requirements.
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 2003.
3
PART II
Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s common stock (symbol: BSHI)
currently is 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 27, 2004 numbered
approximately 1,571. 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
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
2003 — High
bid |
|
|
|
$ |
3.90 |
|
|
$ |
4.80 |
|
|
$ |
5.00 |
|
|
$ |
5.26 |
|
2003 — Low
bid |
|
|
|
$ |
3.20 |
|
|
$ |
3.45 |
|
|
$ |
4.15 |
|
|
$ |
4.81 |
|
2002 — High
bid |
|
|
|
$ |
1.90 |
|
|
$ |
4.55 |
|
|
$ |
4.20 |
|
|
$ |
3.90 |
|
2002 — Low
bid |
|
|
|
$ |
1.55 |
|
|
$ |
1.90 |
|
|
$ |
3.70 |
|
|
$ |
3.50 |
|
There were no repurchases of common stock during the
three months ended December 27, 2003.
4
Item 6. Selected Financial Data
The following table contains selected consolidated
financial data for the five year period ended December 27, 2003 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
|
|
|
|
|
|
12/27/03
|
|
12/28/02
|
|
12/29/01
|
|
12/30/00
|
|
12/25/99
|
|
|
|
|
(Amounts in thousands, except per share data)
|
|
Working
capital |
|
|
|
$ |
18,890 |
|
|
$ |
18,167 |
|
|
$ |
17,486 |
|
|
$ |
18,434 |
|
|
$ |
14,332 |
|
Total
assets |
|
|
|
|
26,798 |
|
|
|
24,531 |
|
|
|
23,164 |
|
|
|
25,462 |
|
|
|
26,292 |
|
Long-term
debt, including current portion |
|
|
|
|
3,183 |
|
|
|
1,462 |
|
|
|
2,377 |
|
|
|
4,608 |
|
|
|
2,870 |
|
Stockholders’ equity |
|
|
|
|
20,856 |
|
|
|
20,220 |
|
|
|
18,591 |
|
|
|
17,715 |
|
|
|
17,690 |
|
Consolidated Statement of Operations Data
|
|
|
|
Year Ended
|
|
|
|
|
|
12/27/03
|
|
12/28/02
|
|
12/29/01
|
|
12/30/00
|
|
12/25/99
|
Net
sales |
|
|
|
$ |
35,932 |
|
|
$ |
33,488 |
|
|
$ |
33,737 |
|
|
$ |
36,429 |
|
|
$ |
36,024 |
|
Cost of
sales |
|
|
|
|
21,832 |
|
|
|
20,742 |
|
|
|
21,591 |
|
|
|
24,471 |
|
|
|
25,767 |
|
Gross
profit |
|
|
|
|
14,100 |
|
|
|
12,746 |
|
|
|
12,146 |
|
|
|
11,958 |
|
|
|
10,257 |
|
Operating
expenses |
|
|
|
|
13,683 |
|
|
|
11,830 |
|
|
|
11,817 |
|
|
|
11,914 |
|
|
|
12,047 |
|
Gain (loss)
from asset sales/writedowns |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,100 |
) |
Operating
earnings (loss) |
|
|
|
|
417 |
|
|
|
916 |
|
|
|
329 |
|
|
|
44 |
|
|
|
(2,890 |
) |
Interest
income |
|
|
|
|
62 |
|
|
|
97 |
|
|
|
77 |
|
|
|
166 |
|
|
|
103 |
|
Interest
expense |
|
|
|
|
(149 |
) |
|
|
(113 |
) |
|
|
(298 |
) |
|
|
(351 |
) |
|
|
(515 |
) |
Other income
(expense) |
|
|
|
|
305 |
|
|
|
847 |
|
|
|
588 |
|
|
|
217 |
|
|
|
1,164 |
|
Net earnings
(loss) before income taxes |
|
|
|
|
635 |
|
|
|
1,747 |
|
|
|
696 |
|
|
|
76 |
|
|
|
(2,138 |
) |
Income tax
benefit (expense) |
|
|
|
|
(7 |
) |
|
|
(40 |
) |
|
|
89 |
|
|
|
(42 |
) |
|
|
(18 |
) |
Net earnings
(loss) |
|
|
|
$ |
628 |
|
|
$ |
1,707 |
|
|
$ |
785 |
|
|
$ |
34 |
|
|
$ |
(2,156 |
) |
Basic
earnings (loss) per share |
|
|
|
$ |
.32 |
|
|
$ |
.88 |
|
|
$ |
.41 |
|
|
$ |
.02 |
|
|
$ |
(1.11 |
) |
Diluted
earnings (loss) per share |
|
|
|
$ |
.30 |
|
|
$ |
.82 |
|
|
$ |
.41 |
|
|
$ |
.02 |
|
|
$ |
(1.11 |
) |
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Contents
This item of the annual report on Form 10K is
divided into the following sections:
• |
|
Executive Summary — Provides a brief overview of the
year’s results and known uncertainties expected to have an effect on future results. |
• |
|
Critical Accounting Policies — Discusses the accounting
policies which management believes are the most essential to aid in understanding the Company’s financial results. |
• |
|
Results of Operations — Analyzes the Company’s
financial results comparing sales, operating margins and expenses to prior periods including management’s expectation of trends and uncertainties
on future results. |
• |
|
Liquidity and Capital Resources — Analyzes the
Company’s cash flow from operating, investing and financing activities and further discusses the Company’s current and projected
liquidity. |
• |
|
Inflation — Reviews the impact of inflation on the
Company’s reported results. |
• |
|
Market Risk — Discusses the Company’s exposure to
market risk sensitive instruments commonly referred to as derivatives. |
5
Executive Summary
Boss reversed its recent negative sales trend in
2003, with consolidated sales of $35,932,000 up over 7% from 2002. This growth in sales was attributable to revenues from the Boss Pet operation
acquired in the fourth quarter of 2002 and increased sales in the domestic industrial market of the work gloves and protective wear segment. Selling
prices continued to decline during the year in the Company’s primary work gloves and protective wear segment following the trend of the past
several years.
Though selling prices trended lower during 2003,
margins increased slightly because of lower costs on many imported products. However, the cost of imported finished goods began to stabilize in the
second half of the year and is expected to increase during 2004. With sales and margins up in 2003, Boss increased its gross profit to $14,100,000, up
over 10% from the prior year. This represents the Company’s highest gross profit level in over 5 years.
Boss made two major investments in 2003. First, the
Company incurred various costs in developing a line of CAT® gloves and rainwear, after securing a licensing agreement to market CAT® branded
products in the fourth quarter of 2002. This line was completed in the fourth quarter of 2003.
The second major investment of 2003 involved the
purchase of new warehousing facilities in close proximity to the Company’s current headquarters and primary distribution center in Kewanee,
Illinois. This allowed a consolidation of certain distribution and warehousing activities which should promote efficiency, improve customer service and
generate future cost savings.
Due in part to the investments noted above and costs
associated with the new Boss Pet subsidiary, operating expenses increased over 15% in 2003 compared to the previous year, more than offsetting the
favorable impact of higher sales and improved margins. As a result, the Company’s operating earnings declined to $417,000 in 2003, with net
earnings after tax totaling $628,000, or $0.30 per share on a diluted basis.
Looking ahead to 2004, management anticipates
several key factors to impact the upcoming year’s results. These factors include the cost of imported finished goods, market acceptance of new
CAT® products, customer retention and expansion efforts in each of Boss’s business segments, and the trend toward increased operating
expenses. Each of these will be further discussed in the following sections. In summary, management anticipates cost increases on imported goods to put
pressure on margins during the year, though revenues should continue to increase on higher selling prices and sales of CAT® branded products. The
increased operating costs associated with being a publicly held company and margin pressure from expected cost increases are likely to minimize the
favorable impact of expected sales growth in 2004.
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. 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.
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
6
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 income. Management periodically reviews inventory quantities on hand
and records a provision for excess, slow-moving and obsolete inventory based primarily on forecasted product demand. As of December 27, 2003, the
inventory valuation allowance totaled approximately $630,000. Should forecasted product demand 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 $33,726,000.
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 operating earnings
because of changing prices, expected margin pressure, increased operating expenses and uncertain profitability from the Company’s new product line
and new subsidiary, 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 complete utilization of the NOL benefit.
Results of Operations
Sales
Sales by Segment $(000)
|
|
|
|
2003
|
|
2002
|
|
2001
|
Work Gloves
& Protective Wear |
|
|
|
|
30,054 |
|
|
|
30,102 |
|
|
|
30,546 |
|
Pet
Supplies |
|
|
|
|
5,158 |
|
|
|
2,633 |
|
|
|
2,301 |
|
Corporate
& Other |
|
|
|
|
720 |
|
|
|
753 |
|
|
|
890 |
|
Total
Sales |
|
|
|
|
35,932 |
|
|
|
33,488 |
|
|
|
33,737 |
|
7
2003 Compared to 2002
Consolidated sales for the year ended December 27,
2003 totaled $35,932,000, up $2,444,000, or 7.3%, from 2002 following two years of declining sales. This sales growth was attributable to the pet
supplies segment, while sales in the Company’s other segments declined slightly.
Sales in the pet supplies segment increased
$2,525,000 in 2003 compared to the prior year and represented 14.4% of consolidated sales. This sales growth was attributable to the Boss Pet
acquisition completed in the fourth quarter of 2002. Boss Pet sales totaled approximately $2,825,000 in its first complete year of operation for the
Company, in line with management’s objective. The Company completed the assimilation of this operation with minimal customer loss to date. By
importing certain goods to compete with lower selling prices and focusing on new sales opportunities, Boss Pet successfully obtained new customer
commitments in the fourth quarter of 2003 which should result in increased sales for 2004.
Boss Pet sales consisted primarily of pet restraints
in 2003. This subsidiary has developed additional chemical and shampoo products to broaden its product line, though competition in these areas is very
intense increasing the difficulty of achieving sales expansion in these lines. Warren sales were essentially unchanged during 2003 as better than
expected fourth quarter sales offset reduced volume earlier in the year. Management anticipates limited sales growth in 2004 at Warren, with greater
growth potential for Boss Pet which serves more traditional pet supplies markets.
Sales in the Company’s primary work gloves and
protective wear segment declined 0.2% in 2003 compared to the prior year. Though down in total for this segment, sales in the domestic industrial
market increased 6.7% despite further reductions in selling prices during the year. Unit volume increased in line with the revenue increase as higher
sales of more expensive goods, particularly rainwear, offset the impact of lower selling prices.
Boss engaged additional manufacturer’s
representative groups to increase coverage in certain geographical areas and also utilized a west-coast warehouse facility available from one such
group to increase its presence in the western region. These actions helped to facilitate industrial sales growth, but also increased commission and
warehousing expense. Boss increased industrial market penetration during the year adding a number of new customers with minimal attrition of