UNITED STATES
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 quarterly period ended June 26, 2004
Commission File No. 0-23204
BOSS HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1972066
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
221 West First Street
Kewanee, Illinois 61443
----------------------------------------
(Address of principal executive offices)
(309) 852-2131
---------------------------
(Issuer's telephone number)
Check 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 at least
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 ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding at July 31, 2004
- --------------------------------------------------------------------------------
Common Stock, $.25 par value 1,936,957
1
Part I - Financial Information
Item 1. Financial Statements
Boss Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
June 26, December 27,
Assets 2004 2003
- ----------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents .......................... $ 2,690 $ 4,479
Accounts receivable, net ........................... 5,453 6,254
Inventories ........................................ 12,907 10,759
Prepaid expenses and other ......................... 368 426
---------------------
Total current assets ......................... 21,418 21,918
Property and Equipment, net .......................... 3,241 3,043
Assets Held for Sale ................................. 1,694 1,694
Other Assets ......................................... 203 143
---------------------
$ 26,556 $ 26,798
=====================
Liabilities and Stockholders' Equity
- ----------------------------------------------------------------------------------
Current Liabilities:
Accounts payable ................................... $ 735 $ 798
Current portion of long-term obligations ........... 414 383
Accrued payroll and related expenses ............... 463 538
Accrued liabilities and other ...................... 1,164 1,309
---------------------
Total current liabilities .................... 2,776 3,028
---------------------
Long-Term Obligations, net of current portion ........ 2,818 2,800
---------------------
Deferred Compensation ................................ 175 114
---------------------
Stockholders' Equity:
Common stock, $.25 par value; 10,000,000 shares .... 488 488
Additional paid-in capital ......................... 67,380 67,471
Accumulated (deficit) .............................. (45,181) (45,237)
Accumulated other comprehensive (deficit) .......... (150) (116)
---------------------
22,537 22,606
Less treasury shares, at cost ...................... 1,750 1,750
---------------------
Total stockholders' equity ................... 20,787 20,856
---------------------
$ 26,556 $ 26,798
=====================
The accompanying notes are an integral part of these statements.
2
Boss Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Six Months Six Months
Quarter Ended Quarter Ended Ended Ended
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------
Net sales ............................... $ 9,046 $ 8,495 $ 19,311 $ 17,815
Cost of sales ........................... 6,150 5,902 13,167 12,138
--------------------------------------------------------
Gross profit .................... 2,896 2,593 6,144 5,677
Operating expenses ...................... 2,875 2,702 6,028 5,825
--------------------------------------------------------
Earnings (loss) from operations . 21 (109) 116 (148)
--------------------------------------------------------
Other income (expense):
Interest income ....................... 8 21 20 37
Interest expense ...................... (49) (35) (95) (60)
Other ................................. -- 148 15 244
-------------------------------------------------------
(41) 134 (60) 221
-------------------------------------------------------
Earnings (loss) before income tax (20) 25 56 73
Income tax expense ...................... -- -- -- --
-------------------------------------------------------
Net earnings (loss) ............. $ (20) $ 25 $ 56 $ 73
=======================================================
Comprehensive income .................... $ 45 $ 25 $ 22 $ 73
=======================================================
Weighed average shares outstanding ...... 1,918,951 1,952,404 1,927,736 1,952,404
Basic earnings per common share ......... $ (0.01) $ 0.01 $ 0.03 $ 0.04
=======================================================
Diluted earnings per common share ....... $ (0.01) $ 0.01 $ 0.03 $ 0.03
=======================================================
The accompanying notes are an integral part of these statements.
3
Boss Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Six Months Six Months
Ended Ended
June 26, June 28,
2004 2003
- -----------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net earnings ........................................... $ 56 $ 73
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization ........................ 183 162
Stock based compensation ............................. 11 --
Changes in assets and liabilities:
Decrease in accounts receivable .................... 801 2,123
Increase in inventories ............................ (2,148) (2,337)
Decrease in prepaid expenses and other current
assets ........................................... 58 161
(Increase) decrease in deferred charges and
other assets ..................................... 1 (53)
Decrease in accounts payable ....................... (63) (367)
Increase (decrease) in accrued liabilities ......... (220) 199
------------------
Net cash used in operating activities ............ (1,321) (39)
------------------
Cash Flows from Investing Activities:
Purchases of property and equipment .................... (381) (1,244)
------------------
Net cash used in investing activities ............ (381) (1,244)
------------------
Cash Flows Provided by Financing Activities
Net borrowings on long-term obligations ................ 49 1,843
Proceeds from exercise of stock options ................ 33 --
Purchase and retirement of stock ....................... (135) --
------------------
Net cash (used in) provided by financing
activities ....................................... (53) 1,843
------------------
Effect of exchange rates on cash and cash equivalents .. (34) 2
------------------
Increase (decrease) in cash and cash equivalents . (1,789) 562
Cash and cash equivalents:
Beginning of period .................................... 4,479 4,874
------------------
End of period .......................................... $ 2,690 $ 5,436
==================
The accompanying notes are an integral part of these statements.
4
Boss Holdings, Inc.
and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1. Basis of Presentation
The consolidated financial statements included in this report have been prepared
by Boss Holdings, Inc. (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission for interim reporting and include all
normal and recurring adjustments which are, in the opinion of management,
necessary for a fair presentation. These financial statements have not been
audited by an independent accountant. The consolidated financial statements
include the accounts of the Company and its subsidiaries.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that the
disclosures are adequate to prevent the information from being misleading.
However, these financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, for the year ended December 27, 2003. The financial data for the
interim periods presented may not necessarily reflect the results to be
anticipated for the complete year.
Note 2. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
(loss) per share:
(Dollars in Thousands, Except Per Share Data)
Quarter Ended Six Months Ended
------------------- ------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
---------------------------------------
Numerator for basic and diluted net earnings
(loss) per common share, earnings (loss)
attributable to common stockholders ...... $ (20) $ 25 $ 56 $ 73
======================================
Denominator for basic net earnings
(loss) per common share, weighted
average shares outstanding ............... 1,919 1,952 1,928 1,952
Effective of dilutive securities,
employee stock options ................... -- 152 234 147
--------------------------------------
Denominator for diluted earnings
(loss) per common share ............ 1,919 2,104 2,162 2,099
======================================
Basic earnings (loss) per common share ..... $ (0.01) $ 0.01 $ 0.03 $ 0.04
======================================
Diluted earnings (loss) per common share ... $ (0.01) $ 0.01 $ 0.03 $ 0.03
======================================
Note 3. Stock Options
At June 26, 2004, the Company had two stock option plans providing for the
issuance of options covering up to 425,000 shares of common stock to be issued
to officers, directors, or consultants to the Company. In addition, during the
second quarter of 2004 the Company adopted an equity-based incentive program
allowing the issuance of some or all of the following: stock options, stock
appreciation rights, performance based stock awards and restricted stock units.
The 2004 plan provides for the issuance of up to 150,000 shares of common stock.
Prior to 2003, the Company elected to follow the intrinsic value method under
APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), in
accounting for its stock options. Under the provisions of APB 25, no stock-based
employee compensation was recorded in years prior to 2003 because all options
granted had an exercise price equal to the market value of the underlying common
stock on the date of grant.
5
Effective December 29, 2002, the Company adopted the fair value recognition
provisions of FASB Statement No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure ("SFAS 148"), on a prospective basis for all employee
awards granted, modified, or settled after December 29, 2002. Awards under the
Company's plans generally vest over a three to four year period. The cost
related to stock-based compensation included in the determination of net income
for the periods presented is less than that which would have been recognized if
the fair value based method had been applied to awards issued during prior
periods.
The following table illustrates the effect on net income (loss) and earnings
(loss) per share if the fair value based method had been applied. This pro forma
presentation utilizes fair values developed by Company management with the
Black-Scholes options-pricing model. The Company amortizes the estimated fair
value of the options over their vesting period for purposes of pro forma
disclosure and recording stock-based compensation expense under SFAS 148.
Quarter Ended Six Months Ended
-------------------- ---------------------
June 26, June 28, June 26, June 28,
2004 2003 2004 2003
---------------------------------------------
(Dollars in Thousands, Except Per Share Data)
Net earnings (loss), as reported ......... $ (20) $ 25 $ 56 $ 73
Less stock-based compensation expense
determined under fair value based method
net of related tax effects ............. (11) (15) (22) (30)
---------------------------------------------
Pro forma net earnings (loss) .... $ (31) $ 10 $ 34 $ 43
=============================================
Earnings (loss) per share, as reported:
Basic .................................. $ (0.01) $ 0.01 $ 0.03 $ 0.04
=============================================
Diluted ................................ $ (0.01) $ 0.01 $ 0.03 $ 0.03
=============================================
Earnings (loss) per share, pro forma:
Basic .................................. $ (0.02) $ 0.01 $ 0.02 $ 0.02
=============================================
Diluted ................................ $ (0.02) $ 0.00 $ 0.02 $ 0.02
==============================================
Stock option transactions are summarized as follows:
Six Months Ended Year Ended
June 26, 2004 December 27, 2003
------------------- ------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------------------------------------
Outstanding, beginning of period ........ 361,080 $ 2.25 341,080 $ 2.19
Granted ............................... 20,000 7.00 20,000 3.20
Exercised ............................. (18,666) 1.82 -- --
------------------------------------------
Outstanding, end of period .............. 362,414 $ 2.53 361,080 $ 2.25
==========================================
Note 4. Reclassifications
Certain income and expense items have been reclassified, with no effect on net
income or earnings per common share, to be consistent with the classifications
adopted for the quarter ended June 26, 2004. Such reclassifications include the
treatment of shipping costs as cost of goods sold rather than operating
expenses.
6
Note 5. Subsequent Event
On July 30, 2004, the Company purchased all outstanding shares of common stock
of privately-held Galaxy Balloons, Incorporated, an Ohio corporation ("Galaxy").
Galaxy is a Cleveland, Ohio based manufacturer and distributor of imprinted and
personalized balloons, balls, toys, inflatable goods and other miscellaneous
premium items. The base purchase price for the Galaxy shares was $3,300,000,
with certain additional earn-out payments if Galaxy's future financial
performance exceeds specified benchmarks. The Company utilized a combination of
cash reserves, additional borrowings under its primary line of credit and a term
loan of approximately $1,750,000 provided by the Company's primary lender to
fund the acquisition of Galaxy. In connection with this transaction, the
Company's maximum availability under its revolving line of credit was increased
from $5,000,000 to $6,000,000 as of July 30, 2004.
The acquisition will be accounted for as a purchase of a business and as such
the results of operations of Galaxy will be included in the consolidated
financial statements beginning on July 31, 2004.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Certain statements, other than statements of historical fact, included in this
Quarterly Report including, without limitation, the statements under
"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. The words "believe," "expect", "anticipate", "should", "could" and
other expressions that indicate future events and trends identify
forward-looking statements. All subsequent forward-looking statements
attributable to the registrant or persons acting on its behalf are expressly
qualified in their entirety.
Sales
Sales by Segment Quarter Year-to-Date
-----------------------------------
$(000) 2004 2003 2004 2003
- --------------------------------------------------------------------------------
Work gloves and protective wear ........ 6,980 6,700 15,203 14,226
Pet supplies ........................... 1,912 1,579 3,686 2,973
Corporate and other .................... 154 216 422 616
-----------------------------------
Totals sales ........................... 9,046 8,495 19,311 17,815
===================================
Total revenues for the three months ended June 26, 2004 were $9,046,000 up
$551,000 or 6.5% from the comparable quarter in 2003. The sales increase during
the second quarter was attributable to growth in both of the Company's operating
segments with revenues up 4.2% in the work gloves and protective wear segment
and 21.1% in the pet supplies segment.
7
In the Company's primary work gloves and protective wear segment, sales
increased $280,000 during the second quarter of 2004 compared to 2003. This
increase was due primarily to sales growth in the domestic industrial market
where sales were up approximately 11% on a volume increase of 7.2%. Several
factors have contributed to the industrial market sales increase including
employment of manufacturer's representative groups in certain areas, utilization
of west coast warehouse facilities, product line expansion and aggressive sales
efforts. Sales in the domestic consumer market increased just over 1% as sales
of CAT(R) branded gloves and rainwear more than offset the loss of other
consumer accounts. Sales in this segment are historically lower during warm
weather months. The Company anticipates the sales growth trend in the industrial
market to continue, while growing CAT(R) brand sales should continue to offset
lower sales in the Company's traditional consumer markets. Sales efforts to
replace certain customers in the consumer market lost during 2003 are ongoing.
In the pet supplies segment, sales growth of $333,000 during the second quarter
was attributable to the Company's Boss Pet operations. Boss Pet sales increased
due to the addition of new customers in 2004, development of new shampoo
products and higher sales to this operation's largest customer attributable in
large part to the sale of additional products to this customer. Warren Pet sales
were essentially unchanged from the prior year.
On a year-to-date basis, consolidated sales were up $1,496,000, or 8.4%, in 2004
with revenues up 24.0% in the pet supplies segment and 6.9% in the work gloves
and protective wear segment. Increased sales in the pet supplies segment
resulted from Boss Pet operations and were attributable to customer additions,
new products and increased sales to Boss Pet's largest customer as noted in the
quarterly discussion. Revenue growth in the work gloves and protective wear
segment resulted from higher sales in the domestic industrial market and sales
of CAT(R) branded gloves and rainwear.
Cost of Sales
Cost of Sales by Segment Quarter Year-to-Date
$(000) -----------------------------------------------------------------------
2004 2003 2004 2003
-----------------------------------------------------------------------
$ % $ % $ % $ %
- ---------------------------------------------------------------------------------------------------------
Work gloves and protective wear 4,840 69.3% 4,684 69.9% 10,560 69.5% 9,729 68.4%
Pet supplies .................. 1,234 64.5% 1,107 70.1% 2,414 65.5% 2,097 70.5%
Corporate and other ........... 76 49.4% 111 51.4% 193 45.7% 312 50.6%
-----------------------------------------------------------------------
Totals cost of sales .......... 6,150 68.0% 5,902 69.5% 13,167 68.2% 12,138 68.1%
=======================================================================
8
Cost of sales for the three months ended June 26, 2004 totaled $6,150,000, up
$248,000 from the corresponding period of 2003. This increase in cost of sales
was primarily attributable to higher sales in the work gloves and protective
wear and pet supplies segments as discussed above. As a percentage of sales,
consolidated cost of sales declined 1.5% due in large part to improved margins
at the Company's Boss Pet operations. Margins at Boss Pet improved due to lower
cost on products that the Company began importing during the second half of
2003. As expected, costs in the work glove and protective wear segment have
stabilized in comparison to recent years, with import pricing increasing on many
products. Such increases are expected to have a negative impact on margins
during the balance of 2004.
For the six-month period, cost of sales increased $1,029,000 while remaining
essentially unchanged as a percentage of sales. Cost of sales increased in
dollars due to higher sales during the year. Margins improved in the pet
supplies segment due to the transition to imported goods during 2003, while
margins declined in the work gloves and protective wear segment due to cost
increases on various products.
Operating Expenses
Operating Expenses Quarter Year-to-Date
by Segment $(000) --------------------------------------------------------------------------
2004 2003 2004 2003
--------------------------------------------------------------------------
$ % $ % $ % $ %
- ----------------------------------------------------------------------------------------------------------
Work gloves and protective wear 2,093 30.0% 2,023 30.2% 4,364 28.7% 4,468 31.4%
Pet supplies .................. 507 26.5% 369 23.4% 1,048 28.4% 721 24.3%
Corporate and other ........... 275 -- 310 -- 616 -- 636 --
------------------------------------------------------------------------
Total operating expenses ...... 2,875 31.8% 2,702 31.8% 6,028 31.2% 5,825 32.7%
========================================================================
Operating expenses totaled $2,875,000 during the second quarter of 2004, up
$173,000 compared to the corresponding period in 2003. The bulk of this increase
occurred in the pet supplies segment and was attributable to increased warehouse
expense in the Company's Boss Pet operations. Certain facility costs at Boss Pet
have been charged to warehousing expense since the cessation of certain
manufacturing activities at this operation during the third quarter of 2003.
Operating expenses also increased in the work gloves and protective wear segment
by $70,000 in the second quarter of 2004 compared to the comparable period in
2003, due in large part to a favorable adjustment to bad debt expense recorded
during the second quarter of 2003.
For the six- month period ended June 26, 2004, operating expenses increased
$203,000 compared to the prior year. This increase was attributable to the pet
supplies segment, with higher operating expenses at Boss Pet representing the
bulk of the increase. As in the second quarter, higher warehousing expenses due
to the cessation of certain manufacturing operations were the primary factor. In
addition, commissions and certain other sales related expenses were higher due
to the revenue growth at this operation. Operating expenses declined $104,000 in
the work gloves and protective wear segment compared to 2003 due in large part
to lower warehousing expenses. During 2003, the Company incurred various charges
in connection with the consolidation of warehouses into Kewanee.
Earnings (Loss) From Operations
Operations by Segment Quarter Year-to-Date
$(000) -------------------------------------------------------------------------------------
2004 2003 2004 2003
-------------------------------------------------------------------------------------
$ % $ % $ % $ %
- -------------------------------------------------------------------------------------------------------------------------
Work gloves and protective wear ... 47 0.7% (7) -0.1% 279 1.8% 29 0.2%
Pet supplies ...................... 171 8.9% 103 6.5% 224 6.1% 155 5.2%
Corporate and other ............... (197) - (205) - (387) - (332) -
----------------------------------------------------------------------------------
Total operating income (loss) ..... 21 0.2% (109) -1.3% 116 0.6% (148) -0.8%
==================================================================================
On a consolidated basis, the Company's operating earnings for the second quarter
of 2004 increased to $21,000 from a loss of $109,000 during the same period in
2003. The Company typically operates at a loss during warm weather months. The
earnings improvement in the most recent quarter was primarily attributable to
increased sales in the pet supplies and work gloves and protective wear
segments.
Through June 2004, earnings from operations of $116,000 increased $264,000 from
2003. The work gloves and protective wear segment generated $279,000 in
earnings, up $250,000 on higher sales and reduced operating expenses. In
addition, the pet supplies segment generated $224,000 in earnings, up $69,000 on
improved results at the Company's Boss Pet operations. The loss from the
corporate and other segment of $387,000 increased $55,000 from 2003 due
primarily to lower sales and reduced profitability at Boss Balloon.
Other Income and (Expense)
The Company incurred $49 in interest expense during the second quarter of 2004,
an increase of $14 from the comparable period in 2003 due to increased
borrowings in connection with the acquisition of new warehouse facilities.
Interest income decreased from $21 in the second quarter of 2003 to $8 in the
second quarter of 2004 due to lower cash holdings and lower interest rates. Cash
holdings declined compared to the previous year due to higher working capital
during 2004. Other income during the second quarter of 2003 consisted primarily
of foreign exchange gains associated with the Company's Canadian operation.
Interest expense for the six months ended June 26, 2004 increased $35 from the
comparable period in 2003 due to increased borrowings in connection with the
acquisition of new warehouse facilities. Interest income declined $17,000 due to
lower cash holdings and lower interest rates. Other income during the first half
of 2003 consisted primarily of foreign exchange gains associated with the
Company's Canadian operation and a gain on the sale of certain marketable
securities.
Taxes
Because of losses in prior years, the Company recorded no federal income tax
expense during the periods presented and has available substantial net operating
loss carryforwards for federal income tax purposes.
9
Liquidity and Capital Resources
Operating activities used $1,321,000 in cash through the first six months of
2004, compared to a use of $39,000 in 2003. The primary change from the prior
year occurred in accounts receivable, which declined $1,322,000 less in 2004
than in the prior year. Several factors contributed to this change including
increased 2004 sales, lower year-end sales in 2003 compared to 2002 and improved
collection efforts which resulted in a lower 2003 year-end receivable balance
compared to 2002. Inventories increased $2,148,000 through the first six months
of 2004 due to CAT(R) branded inventory purchased to support anticipated sales,
higher pet supplies inventory to support increased sales, purchases of certain
goods in anticipation of price increases and below projected sales in the
Company's consumer market.
Investing activities used $381,000 in the first half of 2004, compared to
$1,244,000 during the comparable period in 2003. During 2004, major capital
expenditures included a new warehouse management software system, warehouse
renovation and the purchase of a new computer to run the Company's enterprise
software. In 2003, capital expenditures consisted primarily of warehouse
acquisitions and improvements in conjunction with warehouse consolidation
activities.
Cash flows used in financing activities totaled $53,000 through the six months
ended June 26, 2004. The Company used $135,000 to purchase stock pursuant to a
voluntary repurchase program for holders of less than 100 shares of the
Company's common stock. Net borrowings for the period totaled $49,000 due to
borrowings obtained in connection with certain capital expenditures. During
2003, the Company's net borrowing totaled $1,843,000 due primarily to mortgages
obtained in connection with the Company's purchase of warehouses in Kewanee.
At June 26, 2004, the Company had $2,690,000 in cash with no borrowings under
its $5 million revolving line of credit. The Company's availability under this
line totaled $5,000,000 as of June 26, 2004, but was increased to $6 million as
of July 30, 2004. The Company's cash on hand and availability under the credit
facility should provide ample liquidity for the Company's expected working
capital and operating needs. During July, the Company borrowed an additional
$1,750,000 from its primary lender under a term loan in connection with its
purchase of Galaxy Balloons, Incorporated. The Company used proceeds from this
term loan, cash on hand and borrowings on its revolving line of credit to fund
the purchase of Galaxy.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company has minimal exposure to market risks such as changes in foreign
currency exchange rates and interest rates. The value of the Company's financial
instruments is generally not materially impacted by changes in interest rates.
During July 2003, the Company entered into an interest rate swap agreement
related to its $1.04 million mortgage note on Kewanee warehouse facilities. The
swap is utilized to effectively fix the interest rate on this debt at 5.83%.
Fluctuations in interest rates are not expected to have a material impact on the
interest expense incurred under the Company's revolving credit facility.
Item 4. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal executive officer and principal financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. There was no change in the Company's internal control over financial
reporting during the Company's most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
PART II. -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to various legal actions incident to the normal operation
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 products liability insurers.
Management believes the ultimate disposition of these matters should not
materially impact the Company's consolidated financial position or liquidity.
10
Item 2. Changes in Securities
ISSUER PURCHASES OF EQUITY SECURITIES
(d) Maximum
Number (Or
(c) Total Approximate
Number of Dollar Value)
Shares (Or of Shares (Or
Units) Units) That
(a) Total Part of May Yet Be
Number Of (b) Average Publicly Purchased
Shares (Or Price Paid Per Announced Under the
Units) Share (Or Plans or Plans or
Period Purchased Unit) Programs (1) Programs
- --------------------------------------------------------------------------------
3/31/2004 1,343 $ 5.00 1,343 N/A
(1) All shares reported were purchased pursuant to a voluntary repurchase
program for holders of less than 100 shares of the Company's common stock.
The program was announced December 1, 2003, with an initial expiration date
of January 23, 2004, and subsequently extended to February 27, 2004. The
program did not contain any pre-determined limit on the number of shares
repurchased or the amount to be expended for repurchase.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's stockholders was held on Tuesday,
June 11, 2004 in St. Louis, MO. At the meeting the stockholders voted
on the following items:
1) Elected six directors of the Company, each to serve until the
next annual meeting of stockholders and until his successor has
been elected and qualified or until his earlier resignation or
removal.
For Withheld
-----------------------------
G. Louis Graziadio, III 1,790,482 2,487
Perry A. Lerner 1,790,806 2,163
Lee E. Mikles 1,790,537 2,432
Paul A. Novelly 1,790,857 2,112
Richard D. Squires 1,789,806 3,163
J. Bruce Lancaster 1,790,466 2,503
2) Approved the proposal to adopt the Company's 2004 Stock Incentive
Plan and to reserve 150,000 shares of common stock for potential
issuance under the plan.
1,407,013 for 7,001 against 12,839 abstain
3) Approved and ratified the appointment of McGladrey & Pullen, LLP
as the Company's independent auditors for the fiscal year ending
December 25, 2004.
1,732,069 for 11,952 against 48,948 abstain
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification of Principal Executive Officer pursuant to
section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer pursuant to
section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
For the current quarter, no reports on Form 8-K were filed.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOSS HOLDINGS, INC.
Dated: August 10, 2004 By: /s/ J. Bruce Lancaster
--------------- -----------------------------
J. Bruce Lancaster
Chief Financial Officer
(principal financial officer)
12