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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
For the transition period from _________ to ___________
Commission File No. 0-22429
DHB INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-3129361
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification
No.)
555 WESTBURY AVENUE, CARLE PLACE, NEW YORK 11514
(Address of principal executive offices)
Registrant's telephone number: (516) 997-1155
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)
Yes [ X ] No [ ]
As of November 13, 2003, there were 40,594,746 shares of Common Stock, $.001 par
value outstanding.
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1
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
2003(Unaudited) and December 31, 2002 3
Unaudited Condensed Consolidated Statements of Operations
For The Three and Nine Months Ended September 30, 2003
and 2002 4
Unaudited Condensed Consolidated Statements of Cash Flows
For The Nine Months Ended September 30, 2003 and 2002 5
Notes to Unaudited Condensed Consolidated Financial Statements 6-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-16
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Item 4. Controls and Procedures 17-19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19-20
Item 2. Changes in Securities and Use of Proceeds 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20-21
Signatures 22
Certifications 23-26
2
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
DHB INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 (UNAUDITED) AND DECEMBER 31, 2002
(In thousands, except share and per share data)
September 30, December 31,
ASSETS 2003 2002
---- ----
Current assets
Cash and cash equivalents $562 $393
Accounts receivable, less allowance for doubtful
accounts of $1,064 and $1,070, respectively 26,492 22,904
Inventories 49,933 33,360
Deferred income tax assets 784 3,319
Prepaid expenses and other current assets 2,829 971
------- -------
Total current assets 80,600 60,947
------- -------
Property and equipment, net 1,823 1,620
------- -------
Other assets
Other investment 942 942
Deferred income tax assets -- 1,402
Deposits and other assets 414 460
------- -------
Total other assets 1,356 2,804
------- -------
Total assets $83,779 $65,371
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $5,608 $5,368
Accrued expenses and other current liabilities 8,394 2,454
Capital lease obligation 1 --
------- -------
Total current liabilities 14,003 7,822
------- -------
Long term liabilities
Notes payable-bank 25,638 24,354
Note payable - stockholder -- 1,500
Other liabilities 439 350
------- -------
Total liabilities 40,080 34,026
------- -------
Commitments and contingencies
Stockholders' equity
Convertible preferred stock, $0.001 par value,
5,000,000 shares authorized, 500,000 shares of Series
A, 12% convertible preferred stock issued and
outstanding 1 1
Common stock, $0.001 par value, 100,000,000
shares authorized, 40,594,746 and 40,413,746 41 40
Additional paid in capital 35,108 34,792
Accumulated other comprehensive loss (54) (41)
Retained earnings (accumulated deficit) 8,603 (3,447)
------- -------
Total stockholders' equity 43,699 31,345
------- -------
Total liabilities and stockholders' equity $83,779 $65,371
======= =======
(See Notes to Unaudited Condensed Consolidated Financial Statements)
3
DHB INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2003 2002* 2003 2002*
---- ---- ---- ----
Net sales $54,417 $30,146 $157,095 $97,799
Cost of goods sold (includes related
party purchases of $6,802, $1,905,
$20,856, and $3,791 respectively) 39,599 21,005 113,785 69,166
------- ------- -------- -------
Gross profit 14,818 9,141 43,310 28,633
Selling, general and administrative expenses 9,055 7,605 22,621 17,156
------- ------- -------- -------
Income before other income (expense) 5,763 1,536 20,689 11,477
------- ------- -------- -------
Other income (expense)
Interest expense (306) (538) (977) (1,475)
Proceeds from settlement of lawsuit -- -- 739 --
Other income 24 35 48 79
------- ------- -------- -------
Total other income (expense) (282) (503) (190) (1,396)
------- ------- -------- -------
Income before income taxes 5,481 1,033 20,499 10,081
Income taxes 2,231 81 8,179 169
------- ------- -------- -------
Net income 3,250 952 12,320 9,912
Dividend - preferred stock (90) -- (270) --
------- ------- -------- -------
Income available to common stockholders
$3,160 $ 952 $12,050 $ 9,912
======= ======= ======== =======
Earnings per common share:
Basic shares $0.08 $0.02 $0.30 $0.27
===== ===== ===== =====
Diluted shares $0.07 $0.02 $0.27 $0.23
===== ===== ===== =====
Weighted average shares outstanding:
Basic shares 40,594,746 40,413,746 40,490,062 36,262,668
Effect of convertible preferred stock 500,000 500,000 500,000 500,000
Warrants 3,416,044 2,913,834 3,063,268 6,756,985
--------- --------- --------- ---------
Diluted shares 44,510,790 43,827,580 44,053,330 43,519,653
========== ========== ========== ==========
* - 2002 has been restated - see Note 2
(See Notes to Unaudited Condensed Consolidated Financial Statements)
4
DHB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands, except share and per share data)
For the Nine Months
Ended September 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2003 2002
---- ----
Income available to common stockholders $12,050 $ 9,912
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 432 377
Amortization of deferred financing costs 98 100
Stock issued for services 56 429
Deferred rent 89 119
Deferred income tax assets 3,938 --
Changes in operating assets and liabilities
Accounts receivable (3,588) (2,652)
Inventories (16,573) (8,731)
Prepaid expenses and other current assets (1,858) 284
Deposits and other assets (53) 66
Accounts payable 240 (4,947)
Accrued expenses and other current liabilities 5,939 1,893
--------- --------
Net cash provided by (used) in operating activities 770 (3,150)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the disposition of assets -- 302
Purchases of property and equipment (614) (259)
--------- --------
Net cash provided by (used in) investing activities (614) 43
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of notes payable- bank 1,283 6,417
Payments of note payable- stockholder (1,500) (8,500)
Principal payments on long-term debt (19) (1,634)
Proceeds from the issuance of common stock 261 6,333
Proceeds from the issuance of preferred stock -- 3,000
--------- --------
Net cash provided by financing activities 25 5,616
--------- --------
Effect of foreign currency translation (12) 5
--------- --------
Net increase in cash and cash equivalents 169 2,514
Cash and cash equivalents at beginning of the period 393 145
--------- --------
Cash and cash equivalents at end of the period $562 $2,659
========= ========
Supplemental cash flow information
Cash paid for:
Interest $1,000 $1,474
========= ========
Taxes $290 $71
========= ========
Non-cash investing and financing activities
Property and equipment acquired under capital lease $20 $--
========= ========
(See Notes to Unaudited Condensed Consolidated Financial Statements)
5
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements
of DHB Industries, Inc. and subsidiaries (collectively "DHB" or the "Company")
as of September 30, 2003 and for the three and nine months ended September 30,
2003 and 2002 have been prepared in accordance with accounting principles
generally accepted in the United States of America ("US GAAP"). The unaudited
financial statements include all adjustments, consisting only of normal and
recurring adjustments, which, in the opinion of management, were necessary for a
fair presentation of financial condition, results of operations and cash flows
for such periods presented. However, these results of operations are not
necessarily indicative of the results for any other interim period or for the
full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with US GAAP have been omitted in accordance
with published rules and regulations of the Securities and Exchange Commission
("SEC"). These consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's Form 10-K for the year ended December 31, 2002 filed with the SEC
on March 31, 2003, as amended on Form 10-K/A filed with the SEC on July 24,
2003.
NOTE 2. RESTATEMENT
During the fourth quarter of 2002, the Company recorded certain adjustments as
described in Note 15 to the Company's consolidated financial statements
contained in Form 10-K/A filed with the SEC on July 24, 2003. The effect of
these adjustments on the condensed consolidated statements of operations for the
first quarter of 2002 was a decrease in net income and no change in basic and
diluted earnings per share. For the second and third quarters of 2002 there
would have been a decrease in net income, basic earnings per share, and diluted
earnings per share for each quarter. The Company has restated the three and nine
months ended September 30, 2002, to show the effect of the adjustments on the
condensed consolidated statements of operations. The first adjustment was an
additional accrual to straight-line rent expense in accordance with SFAS No. 13
"Accounting for Leases," which increases the selling, general and administrative
expenses by $39 for each of the first three quarters of 2002 for a total of $117
for the nine months ended September 30, 2002. In addition to straight-lining
rent expense, the Company recorded in the fourth quarter of 2002 a $646 expense
for the issuance of stock warrants to an unaffiliated outside consultant, of
which $146 and $284 was applicable to the second and third quarter of 2002,
respectively. The following table shows the consolidated net income as
originally reported and restated for the each quarter of 2002. These adjustments
increase selling, general and administrative expenses for the first quarter,
second quarter and third quarter of 2002 and decreased the selling, general and
administrative expenses for the fourth quarter of 2002.
6
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 2. RESTATEMENT (Continued)
2002
----------------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
Straight-lining rent expense $(39) $(39) $(39) $117
Stock based compensation - (146) (284) 430
------------- -------------- ------------- ---------------
Total adjustments (39) (185) (323) 547
As reported - net income 4,758 4,426 1,275 5,176
------------- -------------- ------------- ---------------
As restated net income $4,719 $4,241 $952 $5,723
====== ====== ==== ======
Earnings per share
Basic shares as originally reported $0.14 $0.12 $0.03 $0.13
Effect of adjustments 0.00 (0.01) (0.01) 0.01
------------- -------------- ------------- ---------------
Basic share as restated $0.14 $0.11 $0.02 $0.14
------------- -------------- ------------- ---------------
Diluted shares as originally reported $0.11 $0.11 $0.03 $0.12
Effect of adjustments 0.00 (0.01) (0.01) 0.01
------------- -------------- ------------- ---------------
Diluted shares as restated $0.11 $0.10 $0.02 $0.13
------------- -------------- ------------- ---------------
NOTE 3. INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method and are summarized as follows:
September 30, December 31,
------------- ------------
2003 2002
---- ----
Raw materials and supplies $17,082 $14,833
Work in process 12,623 9,116
Finished goods 20,228 9,411
------ -----
$49,933 $33,360
======= =======
NOTE 4 LONG TERM DEBT
On September 24, 2001, the Company entered into a Loan and Security Agreement
(the "Credit Agreement"), as amended on June 28, 2002, February 25, 2003 and
effective August 30, 2003, which expires on October 1, 2004. Pursuant to the
Credit Agreement, the Company may borrow up to the lesser of (i) $35,000 during
the period commencing on February 18, 2003 and ending on December 31, 2003, and
$25,000 at all times on and after January 1, 2004, or (ii) 85% of eligible
accounts
7
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 4 LONG TERM DEBT (Continued)
receivable plus the lesser of $14,000 or certain percentages of eligible
inventory, as defined. Borrowings under the Credit Agreement bear interest, at
the Company's option, at the bank's prime rate or LIBOR plus 2 1/2% per annum
(3.66% and 3.928% at September 30, 2003 and December 31, 2002, respectively).
In June 2003, the Company repaid the entire $1,500 note payable to its majority
shareholder.
NOTE 5. STOCK BASED COMPENSATION
Warrants
In January 2003, the then five members of the Company's Board of Directors were
each awarded 50,000 warrants exercisable at $1.41 per share for five years. In
July 2003, the additional Board member was issued 50,000 warrants exercisable at
$4.28 per share for five years. In addition, in February 2003, the Board of
Directors awarded key employees a total of 35,000 warrants exercisable at $2.01
per share, which expire in February 2008. In July 2003, the Board of Directors
awarded a key employee 33,000 warrants exercisable at $3.85 per share, which
expire in July 2008. During the six months ended June 30, 2003, the Company also
issued 15,000 shares of stock to an employee.
During the nine months ended September 30, 2003, warrants were exercised to
purchase 166,000 shares of the Company's common stock with aggregate proceeds of
approximately $261.
Warrants to purchase 508,000 and 200,000 shares of the Company's common stock
that were outstanding at September 30, 2003 and 2002, respectively, were not
included in the computation of diluted earnings per share because their effect
would have been anti-dilutive, since the strike prices were above the average
fair market value of DHB's stock price.
The Company accounts for stock-based compensation using the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations ("APB
No. 25") and has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of FASB Statement No. 123" ("SFAS No.
148"). Under APB No. 25, compensation expense is only recognized when the market
value of the underlying stock at the date of grant exceeds the amount an
employee must pay to acquire the stock. Accordingly, no compensation expense has
been recognized in the condensed consolidated financial statements in connection
with employee stock warrant grants.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options and warrants which have no vesting restrictions and
are fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the
8
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 5. STOCK BASED COMPENSATION - (Continued)
expected stock price volatility. Because the Company's employee stock warrants
have characteristics significantly different from those of traded warrants and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock warrants.
The weighted-average warrant fair values and assumptions used to estimate these
values are as follows:
Grants Issued During
2003 2002
---- ----
Risk-free interest rate 3.942% 4.67%
Expected volatility of common stock 118.80% 94.55%
Dividend yield 0.00% 0.00%
Expected option term 5 years 5.14 years
The Company's net income and earnings per share would have been reduced to the
pro forma amounts shown below if compensation cost had been determined based on
the fair value at the grant dates in accordance with SFAS No. 123 and 148,
"Accounting for Stock-Based Compensation."
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2003 2002* 2003 2002*
---- ---- ---- ----
Income available to common stockholders, as reported $3,160 $ 952 $12,050 $9,912
Deduct: compensation determined under fair value based method for
all awards, net of related tax effect 439 665 656 665
------ ----- ------- ------
Pro forma net income 2,721 287 13,394 9,247
------ ----- ------- ------
Basic earnings per common share
As reported $0.08 $0.02 $0.30 $0.27
Pro forma $0.07 $0.01 $0.28 $0.26
Diluted earnings per common share
As reported $0.07 $0.02 $0.27 $0.23
Pro forma $0.06 $0.01 $0.26 $0.21
* - 2002 has been restated - see Note 2
Pro forma compensation expense may not be indicative of pro forma expense in
future years. For purposes of estimating the fair value of each warrant on the
date of grant, the Company utilized the Black-Scholes option-pricing model.
9
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 6. OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income (loss) is comprised solely of foreign
currency translation losses at September 30, 2003 and 2002. The components of
other comprehensive income, net of taxes, were as follows:
Three months ended Nine months ended
September 30, September 30,
2003 2002 2003 2002
---- ---- ---- ----
Net income $3,250 $ 952 $12,320 $ 9,912
Other comprehensive income (loss):
Foreign currency translation, net of tax (13) ( 13) (12) 5
------ ----- ------- -------
Comprehensive income $3,237 $ 939 $12,308 $ 9,917
====== ===== ======= =======
NOTE 7. SEGMENT INFORMATION
The Company operates in two principal segments: Ballistic-resistant equipment
and protective athletic/sports products. Net sales, income from operations,
depreciation and amortization expense, interest expense, income before income
taxes, income taxes, and identifiable assets for each of the Company's segments
are as follows:
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
NET SALES
Ballistic-resistant equipment $ 52,962 $ 28,737 $152,485 $ 93,389
Protective athletic & sports products 1,455 1,409 4,610 4,410
-------- -------- -------- --------
Consolidated net sales $54,417 $30,146 $157,095 $97,799
======= ======= ======== =======
INCOME FROM OPERATIONS
Ballistic-resistant equipment $ 7,604 $ 2,671 $24,249 $13,827
Protective athletic & sports products 142 202 618 649
Corporate and other (1) (1,983) (1,337) (4,178) (2,999)
-------- -------- -------- --------
Consolidated operating income $ 5,763 $ 1,536 $20,689 $11,477
======= ======= ======= =======
DEPRECIATION AND AMORTIZATION EXPENSE
Ballistic-resistant equipment $108 $ 64 $252 $231
Protective athletic & sports products 13 20 42 74
Corporate and other 46 19 138 72
---- ---- ---- ----
Consolidated depreciation and amortization
expense $167 $103 $432 $377
==== ==== ==== ====
INTEREST EXPENSE
Ballistic-resistant equipment $ 302 $ 229 $877 $558
Protective athletic & sports products -- -- -- --
Corporate and other (1) 4 309 100 917
----- ----- ----- ------
Consolidated interest expense $ 306 $ 538 $ 977 $1,475
===== ===== ===== ======
10
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 7. SEGMENT INFORMATION (Continued)
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
---- ---- ---- ----
INCOME BEFORE INCOME TAXES
Ballistic-resistant equipment $4,478 $537 $13,474 $4,798
Protective athletic & sports products 110 165 516 1,583
Corporate and other (1) 893 331 6,509 3,700
------ ------ ------- -------
Consolidated Income before income taxes $5,481 $1,033 $20,499 $10,081
====== ====== ======= =======
INCOME TAXES
Ballistic-resistant equipment $47 $ 9 $58 $18
Protective athletic & sports products 1 -- 1 --
Corporate and other (1) 2,183 72 8,120 151
------ ---- ------ ----
Consolidated tax expense $2,231 $ 81 $8,179 $169
====== ==== ====== ====
September 30, December 31,
2003 2002
---- ----
IDENTIFIABLE ASSETS
Ballistic-resistant equipment $77,826 $56,471
Protective athletic & sports products 3,530 2,907
------- -------
81,356 59,378
Corporate and other (2) 2,423 5,993
------- -------
Consolidated net assets $83,779 $65,371
======= =======
(1) Corporate and other expenses includes corporate general and
administrative expenses.
(2) Corporate and other assets are principally prepaid expenses,
deferred income tax assets, other investment and property and
equipment.
NOTE 8. CONTINGENCIES
The Company is party to various claims, legal actions and complaints arising in
the ordinary course of business. In the opinion of management, all such matters
are without merit or are of such kind, or involve such amounts, that an
unfavorable disposition would not have a material adverse effect on the
consolidated financial position, results of operations or liquidity of the
Company.
Since March, the UNITE Union, as part of its unsuccessful organizing campaign,
has filed eight unfair labor practice charges against the Company with the
National Labor Relations Board ("NLRB"). The union has withdrawn five of these
charges. The NLRB is currently investigating the remaining three charges. The
Company is confident it has not breached any provision of the National Labor
Relations Act.
11
DHB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
NOTE 8. CONTINGENCIES - (Continued)
On October 1, 2002, a shareholders' derivative action was commenced in the
Supreme Court of the State of New York, County of Nassau, on behalf of the
Company against the directors and officers of the Company and the Company as a
nominal defendant, by Plumbers & Pipefitters Local 112 Pension Fund,
derivatively on behalf of itself and all others similarly situated. This case
was dismissed with prejudice on March 13, 2003, without liability to the Company
or its officers or directors. The Company is seeking dismissal of a second
shareholder derivative action brought by William Gosner against the Company on
October 25, 2003 with essentially the same four separate causes of action of
fiduciary duty, aiding and abetting breach of fiduciary duty, constructive
fraud, and abuse of control that the Plumbers & Pipefitters Local 112 union Fund
previously brought against the Company, that the Supreme Court, Naussau county,
has already dismissed. Mr. Gosner is seeking declaratory and injunctive relief,
compensatory and punitive damages, plaintiff costs and attorney fees. The
Company maintains $10 million of directors' and officers' liability insurance
covering this type of claim.
On or about October 30, 2002, the Company filed a lawsuit in the United States
District Court for the Southern District of Florida against certain union
leaders, claiming defamation, conspiracy to defame and tortious interference
with contractual and ongoing business relationships. The case is still in its
preliminary stages, and the Company is vigorously pursuing this action.
The Company has filed a lawsuit in the Supreme Court of the State of New York,
County of Nassau, against its insurance carrier and an insurance agent, for
negligence and breach of fiduciary duties as a result of damages the Company
incurred during Hurricane Irene in October 1999. The Company is vigorously
pursuing this action. On March 17, 2003, the Company entered into a settlement
agreement with its insurance agent for a $1,000 payment to the Company. The
Company received a cash payment of approximately $739, net of the associated
legal fees of $261. The $739 received by the Company is included in other income
during the nine months ended September 30, 2003. The lawsuit against the
insurance carrier has been scheduled for arbitration in the winter of 2003.
NOTE 9. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during each reporting period. Actual results could differ from those estimates.
Note 10. RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS No.
150"). SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). SFAS No.
150 is effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory redeemable financial
instruments of nonpublic entities. The adoption of SFAS No. 150 has not had and
is not expected to have a material impact on the Company's consolidated
financial position or results of operations.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003, COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2002
Consolidated net sales for the quarter ended September 30, 2003 increased 80.5%
to $54.4 million as compared to the consolidated net sales of $30.1 million for
the quarter ended September 30, 2002. The Armor Group's revenue increased 84.3%
to $53.0 million for the three months ended September 30, 2003 from
approximately $28.7 million for the three months ended September 30, 2002. This
increase was attributable to additional orders from the military as well as a
61.3% increase in sales to state and local law enforcement agencies. The Sports
Group's revenue for the three months ended September 30, 2003 increased 3.3% to
approximately $1.5 million over revenue of approximately $1.4 million for the
three months ended September 30, 2002. The consolidated gross profit percentage
for the quarter ended September 30, 2003 was 27.2% as compared to 30.3% for the
quarter ended September 30, 2002. This decrease in the gross profit percentage
reflects a change in the product mix as well as the additional costs associated
with increasing and expediting the Company's sales orders to meet the
accelerated demand of our customers, including overtime costs and freight and
delivery charges. The Company expects the gross margins to remain between the
range mentioned about in the next year.
The Company's selling, general and administrative expenses as a percentage of
sales improved to 16.6% of revenues for the three months ended September 30,
2003 as compared to 25.2% for the three months ended September 30, 2002, as
restated. The Company did incur increased selling, general and administrative
expenses during the third quarter of 2003 over the second quarter 2003 in
conjunction with the resignation of its independent auditors, Grant Thornton
LLP, and the legal and accounting fees associated with the Form 10-K/A filed on
July 24, 2003 and the Form 8-Ks filed on August 27, September 2, and September
9, 2003. Selling, general and administrative expenses during the quarter ended
September 30, 2002 increased primarily due to non-recurring expenses including
sharply increased legal fees pertaining to the Company's successful defense of a
patent infringement suit, legal and professional fees associated with a union
organizing campaign relating to the Company's Point Blank Body Armor subsidiary,
and $284,000 for Black-Scholes value for the issuance of stock warrants to an
outside consultant. Operating income increased 275.2% in the third quarter of
2003 as compared to the 2002 period, driven primarily by the decrease in the
percentage of selling, general and administrative expenses and the increased
sales volumes. Operating income for the third quarter of 2003 was approximately
$5.8 million versus approximately $1.5 million for the three months ended
September 30, 2002.
Interest expense for the three months ended September 30, 2003 was approximately
$306,000, a 43.1% decrease from approximately $538,000 in the corresponding 2002
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period. This decrease was due primarily to lower interest rates under the
Company's revolving credit facility.
Income before taxes increased by 430% to approximately $5.5 million for the
three months ended September 30, 2003, as compared to approximately $1.0 million
for the same period in 2002, as restated. Income taxes for the three months
ended September 30, 2003 was $2.2 million as compared to $81,000 for the three
months ended September 30, 2002. The Company's 2003 income taxes are higher as
the effective tax rate was nominal in 2002 due to the utilization of net
operating loss carryforwards.
Income available to common stockholders was approximately $3.2 million or $0.07
per diluted share for the three months ended September 30, 2003 as compared with
income available to common stockholders of $952,000 or $0.02 per diluted share
for the three months ended September 30, 2002, as restated. The weighted average
shares outstanding on a diluted basis for the three months ended September 30,
2003 were 44,510,790 as compared to 43,827,580 for the three months ended
September 30, 2002.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003, COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2002
For the first nine months of 2003, consolidated net sales reached $157 million,
an increase of 60.6% over consolidated net sales of nearly $98 million for the
first nine months of 2002. The Armor Group's revenue increased 63.3% from $93.4
million for the nine months ended September 30, 2002 to $152.5 million for the
nine months ended September 30, 2003. This increase was attributable to an 83.2%
increase in the Armor Group's military revenues as well as a 52.1% increase in
revenues from state and local law enforcement agencies. The Sports Group's
revenue for the nine months ended September 30, 2003 increased 4.5% to $4.6
million, compared to revenue of $4.4 million for the nine months ended September
30, 2002. This was attributable to the addition of Longs drug stores and the
addtion of Wal-Mart stores in Canada to the Sports Group's customer base, and
expanded numbers of products in Target stores for 2003. The gross profit
percentage for the consolidated operations for the nine months ended September
30, 2003 was 27.6% as compared to 29.3% for the nine months ended September 30,
2002.
The Company's selling, general and administrative expenses as a percentage of
sales improved to 14.4% of revenues for the nine months ended September 30, 2003
as compared to 17.5% for the nine months ended September 30, 2002, as restated.
Driven by the decrease in the percentage of selling, general and administrative
expenses and coupled with the sales volume increases, operating income increased
80.3% to approximately $20.7 million for the nine months ended September 30,
2003 versus approximately $11.5 million for the nine months ended September 30,
2002.
In March 2003, the Company signed a settlement agreement settling the lawsuit
against its insurance agent for $1 million. The Company received a cash payment
of approximately $739,000, which is net of the associated legal fees of
$261,000. The Company still has pending its lawsuit against its insurance
carrier for the majority of its loss arising from a hurricane. This case is
14
scheduled for arbitration during winter 2003. The $739,000 received from the
insurance agent is included in other income for the nine months ended September
30, 2003.
Interest expense for the nine months ended September 30, 2003 was approximately
$977,000, a 33.8% decrease from the approximately $1,475,000 in corresponding
2002 period. This decrease was due primarily to lower interest rates under the
Company's revolving credit facility.
Income before taxes was approximately $20.5 million for the nine months ended
September 30, 2003, a 103.3% increase as compared to approximately $10.1 million
for the same period in 2002, as restated. Income taxes for the nine months ended
September 30, 2003 was approximately $8.2 million as compared to $169,000 for
the nine months ended September 30, 2002. The effective tax rate for 2003 is 40%
while the effective tax rate was nominal in 2002 due to the utilization of net
operating loss carryforwards. The Company recognized the deferred tax asset for
the tax benefit of the net operating loss carryforwards during the fourth
quarter of 2002, which was fully utilized during the three months ended March
31, 2003.
Income available to common stockholders was approximately $12.1 million for the
first nine months of 2003 or $0.27 per diluted share, as compared with income
available to common stockholders of $9.9 million or $0.23 per diluted share for
the first nine months of 2002, as restated. The weighted average shares
outstanding on a diluted basis for the nine months ended September 30, 2003 were
44,053,330 as compared to 43,519,653 for the nine months ended September 30,
2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity are borrowings under its credit agreement.
The credit facility currently permits borrowings of up to $35 million, which
decreases to $25 million by January 1, 2004. Borrowings under the Credit
Agreement bear interest, at the Company's option, at the bank's prime rate or
LIBOR plus 2 1/2% per annum (3.66% and 3.928% at September 30, 2003 and December
31, 2002, respectively). The Company plans to refinance this facility during the
fourth quarter of 2003. The Company's primary capital requirements over the next
twelve months are to assist its subsidiaries, Point Blank Body Armor, Inc.,
Protective Apparel Corporation of America (PACA) and NDL Products, Inc., in
financing their working capital requirements. Working capital is required to
finance the receivables, manufacturing process and inventory. Working capital at
September 30, 2003 was approximately $66.6 million as compared to approximately
$53.1 million at December 31, 2002. The current ratio is a measure of liquidity,
which indicates the extent to which the current liabilities are covered. The
current ratio is calculated by dividing current assets by current liabilities.
The current ratio at September 30, 2003 was 5.8:1 as compared to 7.8:1 as of
December 31, 2002. At September 30, 2003, stockholders' equity was approximately
$43.7 million, up from $31.3 million as of December 31, 2002.
On September 30, 2003, the balance due under the credit facility was
approximately $25.6 million compared to approximately $28.3 million at June 30,
2003, approximately $31.9 million at March 31, 2003, and approximately $24.4
million at December 31, 2002. In June 2003, the Company repaid the entire $1.5
million note payable to its majority shareholder.
For the nine months ended September 30, 2003, the Company's operations provided
cash of $770,000 compared to cash used in operations of $3.2 million for the
15
nine months ended September 30, 2002. The biggest use of cash during the nine
months ended September 30, 2003 was approximately $16.6 million to increase the
Company's inventory levels since year-end in support of the Company's increased
sales volumes. All of the components of inventory, raw materials, work in
process and finished goods increased. However, the increase in finished goods
outweighs the other components and represents increased orders to be shipped to
the Armor Group's customers. The accounts receivable days outstanding were 46
days at September 30, 2003.
Capital expenditures for the nine months ended September 30, 2003 were
approximately $614,000 as compared to $259,000 for the nine months ended
September 30, 2002. The primary reason for the increased capital expenditures is
the result of the Company expanding its operations by adding an additional
manufacturing facility for the Armor Group in Deerfield Beach, Florida.
EFFECT OF INFLATION AND CHANGING PRICES
The Company did not experience any measurable increases in raw material prices
during the nine months ended September 30, 2003. The Company believes it will be
able to increase prices on its products to meet future price increases in raw
materials, if they occur.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of the Company's management as well
as assumptions made by and information currently available to the Company's
management. When used in this document, the words "anticipate," "believe,"
"estimate", "expect", "going forward", and similar expressions, as they relate
to the Company or Company management, are intended to identify forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such statements reflect the current views of the Company with respect to
future events and are subject to certain risks, uncertainties and assumptions,
including, among others: risks associated with the uncertainty of future
financial results, additional financing requirements, development of new
products, government approval processes, the impact of competitive products or
pricing, technological changes, and the effect of economic conditions; and
continuing industry-wide pricing pressures and other industry conditions, as
well as other risks and uncertainties, including without limitation those set
forth in other sections of this Form 10-Q, in the Company's Annual Report on
Form 10-K/A for the year ended December 31, 2002, and/or in the Company's other
documents filed with the Securities and Exchange Commission, whether or not such
documents are incorporated herein by reference. In assessing forward-looking
statements, readers are urged to read carefully all such cautionary statements.
The forward-looking statements in this Form 10-Q speak only as of the date of
this Form 10-Q, and the Company disclaims any obligation or undertaking to
update such statements. If one or more of these risks or uncertainties
materialize, or if the underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not issue or invest in financial instruments or their
derivatives for trading or speculative purposes. The Company's market risk is
limited to fluctuations in interest rates as it pertains to its borrowings under
its revolving credit facility. The Company can borrow at either the bank's prime
rate of interest or LIBOR plus 2.50 percent. Any increase in these reference
rates could adversely affect the Company's interest expense. The Company does
not have any material sales, purchases, assets or liabilities denominated in
currencies other than the U.S. Dollar, and as such, is not subject to material
foreign currency exchange rate risk.
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out an evaluation, as required by Exchange Act Rule
13a-15(b), under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 of the
Exchange Act) as of the end of the period covered by this report. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
Securities and Exchange Commission filings. During the period covered by this
quarterly report, the Company has begun to implement certain changes its
internal control over financial reporting as described below, which that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Disclosure controls and procedures are those controls and other procedures that
are designed to ensure that information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Company's management, including the Company's principal executive officer
and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.
As disclosed in the Company's Form 8-K filed on August 27, 2003, Grant Thornton
LLP ("Grant Thornton"), the Company's former independent accountants, informed
the Company that they considered there to be certain deficiencies in the
Company's internal control procedures that would be deemed to be a material
weakness under standards established by the American Institute of Certified
Public Accountants. Grant Thornton made this determination in connection with
the preparation of the Company's consolidated financial statements as of and for
the year ended December 31, 2002 for inclusion in the Company's Form 10-K/A,
which was filed on July 24, 2003 to supplement the Company's Form 10-K filed on
March 31, 2003. The opinion of Grant Thornton in the Form 10-K/A did not contain
an adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
17
The former independent accountants informed the Company and the Audit Committee
of these deficiencies in a letter delivered on August 20, 2003. These
deficiencies included the failure to disclose certain related party transactions
in the Company's Form 10-K for the fiscal year ended December 31, 2002, the
Company's reliance on substantial outside assistance from outside professionals
in preparing the Company's financial statements, and understaffing in the
Company's accounting and finance department. The Form 10-K/A filed by the
Company on July 24, 2003 fully disclosed the related party transactions.
In response to these issues, senior management and the Audit Committee directed
the Company to dedicate resources and take additional steps to strengthen its
control processes and procedures to ensure that these internal control
deficiencies do not result in a material misstatement in the Company's
consolidated financial statements. Specifically, we have implemented or are
preparing to implement the following additional procedures:
o The Company briefed the Chairman and Chief Executive Officer on
the requirement to disclose related party transactions.
o The Company distributed a questionnaire to each of the Company's
officers and directors specific to related party transactions;
and the Company is considering more rigorous follow-up with its
directors and executive officers regarding their responses to
annual questionnaires used in preparing the Company's Form 10-K
and proxy materials.
o The Company developed a financial statement disclosure checklist
to be completed by the Chief Financial Officer each time the
Company prepares financial statements.
o The Company intends to begin the preparation of its quarterly and
annual financial statements sooner after the end of each fiscal
quarter and fiscal year, and to undertake an additional layer of
internal review prior to delivering drafts to its outside
professionals.
o The Company intends to reinforce with its new auditors their
ability to communicate with and obtain information from lower
level personnel in the Company's accounting and finance
department.
o The Company will evaluate further delegation and allocation of
responsibilities within its accounting and finance department to
facilitate prompt availability of financial information.
o Since the beginning of the current fiscal year, the Company hired
new financial reporting personnel, including a Corporate
Treasurer, a Controller for the Point Blank subsidiary and a
staff accountant/assistant controller. The Company also hired a
Controller within the last twelve months for its PACA facility.
o The Company intends to review, confirm and clarify with its
personnel their specific functions and responsibilities to
promote the orderly flow and availability of financial data and
information
o During the second quarter, the Company hired an internal control
professional to review and revamp the Company's internal control
policies and procedures. The Company also engaged the firm Eisner
LLP to assist management in complying with the internal control
requirements under Section 404 of the Sarbanes-Oxley Act of 2002
("SOXA") to gain greater efficiency and effectiveness. The
Company provided Eisner LLP with copies of the updated policies
and procedures and flowcharts of the Accounting and IT
departments.
18
The Company will continue to: (a) evaluate the effectiveness of its internal
controls and procedures on an ongoing basis, (b) implement actions to enhance
its resources and training in the area of financial reporting and disclosure
responsibilities, and (c) review such actions with the Audit Committee and the
Company's new independent accountants, Weiser LLP. The Company has discussed its
corrective actions and plans with the Audit Committee and Weiser LLP. The
Company separately has engaged the firm Eisner LLP to assist management in
complying with the internal control requirements under Section 404 of SOXA to
gain greater efficiency and effectiveness. Management estimates that this
internal control evaluation will be completed in November 2003.
The Company's management, including the Chief Executive Officer and Chief
Financial Officer, does not expect that the Company's disclosure controls or its
internal controls will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
The Company monitors its disclosure controls and internal controls and makes
modifications as necessary; the Company's intent in this regard is that the
disclosure controls and the internal controls will be maintained as dynamic
systems that change (including with improvements and corrections) as conditions
warrant.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has filed a lawsuit on March 14, 2000 in the Supreme Court of the
State of New York, County of Nassau, against its insurance carrier and an
insurance agent, for negligence and breach of fiduciary duties as a result of
damages the Company incurred during Hurricane Irene in October 1999. The Company
is vigorously pursuing this action. On March 17, 2003, the Company entered into
a settlement agreement with its insurance agent for a $1.0 million payment to
the Company. The Company received a cash payment of approximately $739,000,
which is net of the associated legal fees of $261,000. The $739,000 received by
the Company is included in other income during the nine months ended September
30, 2003. The lawsuit against the insurance carrier has been scheduled for
mediation in the winter of 2003.
19
Since March, the UNITE Union, as part of its unsuccessful organizing campaign,
has filed eight unfair labor practice charges against the Company with the
National Labor Relations Board ("NLRB"). The union has withdrawn five of these
charges. The NLRB is currently investigating the remaining three charges. The
Company is confident it has not breached any provision of the National Labor
Relations Act.
On October 1, 2002, a shareholders' derivative action was commenced in the
Supreme Court of the State of New York, County of Nassau, on behalf of the
Company against the directors and officers of the Company and the Company as a
nominal defendant, by Plumbers & Pipefitters Local 112 Pension Fund,
derivatively on behalf of itself and all others similarly situated. This case
was dismissed with prejudice on March 13, 2003, without liability to the Company
or its officers or directors. The Company is seeking dismissal of a second
shareholder derivative action brought by William Gosner against the Company on
October 25, 2003 with essentially the same four separate causes of action of
fiduciary duty, aiding and abetting breach of fiduciary duty, constructive
fraud, and abuse of control that the Plumbers & Pipefitters Local 112 union Fund
previously brought against the Company, that the Supreme Court, Nassau county,
has already dismissed. Mr. Gosner is seeking declaratory and injunctive relief,
compensatory and punitive damages, plaintiff costs and attorney fees. The
Company maintains $10 million of directors' and officers' liability insurance
covering this type of claim.
The Company is also involved in other litigation, which management considers to
be routine and incidental to the Company's business. Management does not expect
the results of any of these routine and incidental actions to have a material
adverse effect on the Company's consolidated business, results of operations or
financial condition.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's annual meeting of stockholders was held on
August 15, 2003.
(b) At the annual meeting, the Company's stockholders elected
David H. Brooks, Gary Nadelman, Dawn M. Schlegel, Jerome
Krantz, Cary Chasin and Barry Berkman as Directors for a
one-year term, which expires at the annual meeting of
stockholders in 2004. The following table represents the
shareholders votes for ratification of the Board of Directors.
NOMINEE FOR AGAINST ABSTAIN
David Brooks 37,386,692 1,136,838 -0-
Gary Nadelman 38,105,035 418,495 -0-
Jerome Krantz 38,105,035 418,495 -0-
Cary Chasin 37,539,717 983,813 -0-
Dawn Schlegel 37,423,142 1,100,388 -0-
Barry Berkman 38,209,735 313,795 -0-
(c) At the annual meeting, the Company's stockholders ratified the
appointment of Grant Thornton LLP as auditors of the Company
for 2003. The holders of approximately 38,060,950 shares of
Common Stock voted to ratify the appointment, the holders of
375,570 shares voted against the ratification, and the holders
of 87,010 shares abstained.
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ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.12 Third amendment to the Loan and Security Agreement
31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C.ss.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C.ss.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(B) REPORTS ON FORM 8-K
The Company filed the following Report on Form 8-K during the quarter ended
September 30, 2003:
Form 8-K filed July 24, 2003 to report financial results for the quarterly
period ended June 30, 2003. The Form 8-K included financial statements.
Form 8-K filed August 27, 2003 as amended by Form8-K/A filed September 9, 2003,
by Form 8-K/A #2 filed on October 16, 2003, and Form 8-K/A #3 filed on
October 29, 2003; all regarding the resignation of the Company's former
independent accountants, Grant Thornton LLP.
21
Form 8-K filed September 2, 2003 to report the engagement of Weiser LLP as the
Company's new independent accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
Dated: November 13, 2003 DHB INDUSTRIES, INC.
(Registrant)
SIGNATURE CAPACITY DATE
Chief Executive Officer November 13, 2003
/s/ DAVID H. BROOKS and Chairman of the Board
-------------------
Chief Financial Officer and November 13, 2003
/s/ DAWN M. SCHLEGEL Principal Accounting Officer
--------------------
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