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Firearms Training Systems, Inc. Reports Second Quarter Fiscal 1999
Revenue and Earnings
Business Wire - November 16, 1998 07:16
SUWANEE, Ga.--(BUSINESS WIRE)--Nov. 16, 1998--Firearms Training Systems, Inc. (Nasdaq: FATS) today
reports results for its second quarter ended September 30, 1998. Revenue for the second quarter was $12,111,000
versus $19,415,000 for the same period of the previous year. Second quarter net loss was $826,000 or $0.04 per
diluted share, compared with net income of $2,089,000 or $0.10 per diluted share for the same period of fiscal 1998.
Revenue for the six months ended September 30, 1998 was $24,376,000 versus $38,024,000 for the same period of
the previous year. Net loss before the nonrecurring restructuring charge for the six months ended September 30, 1998
was $2,270,000 or $0.11 per diluted share, compared with net income of $4,275,000 or $0.20 per diluted share for
the same period of fiscal 1998.
The decrease in revenues for the three and six months ended September 30, 1998 and the decrease in net income
before the special charge for the three and six months ended Sept. 30, 1998 were primarily due to reduced sales to
U.S. military customers. Management expects that the decrease in sales to this sector will be partially offset in future
reporting periods by a number of recent achievements, including the selection of FATS as the preferred tenderer to
supply small arms and indirect fire training systems to the Australian Army, a sole source contract to upgrade FATS(R)
systems owned by the British Ministry of Defense, an award by the Greek Police for the newest FATS(R) digital
system and a repeat order from the Federal Bureau of Investigation. While certain of these new initiatives have
contributed to FATS' revenues in the second quarter of fiscal 1999, management expects recognition of the majority of
sales from these contracts to begin in the third and fourth quarter of fiscal 1999.
Based upon these developments as well as a number of pending business opportunities in the domestic and international
military and law enforcement sectors, FATS' business opportunities are robust. Taking into consideration results through
the September quarter, however, we are revising our expectations for fiscal 1999 in the aggregate. Management now
estimates that revenue for fiscal 1999 will be in the $60 million to $70 million range, which is based upon the expected
delivery of approximately $24.6 million of the $39.6 million backlog as of September 30, 1998 as well as the receipt
and delivery of several new orders from existing and new customers. FATS currently anticipates gross margins of
approximately 38% to 42% and operating margins of approximately 8% to 15% in fiscal 1999. FATS expects to post
positive net income no later than the fourth quarter of fiscal 1999.
FATS continues to pursue vigorously a favorable resolution of its protest activities related to the pending U.S. Army
Engagement Skills Trainer program and expects that the matter will be concluded in the near future. The company
remains hopeful that it will achieve a positive outcome in this matter.
On November 13, 1998, FATS entered into an agreement with Centre Capital Investors II, L.P. and related entities
("Centre"), collectively owners of 49.8% of the Company's voting common shares, whereby Centre infused $3 million
of new equity through the purchase of 18,182 shares of Series A Preferred Stock and warrants to purchase an
additional 2,909,120 shares of FATS' Class B common stock. While Centre's investment does not affect its ownership
percentage of voting common shares, the $3 million infusion will provide FATS with additional working capital. Centre
initially invested in FATS in July 1996 and has not sold any portion of its equity interest in FATS since the Company's
initial public offering in November 1996. Concurrent with this investment, FATS reached an agreement with
NationsBank, N.A., to amend the terms of its credit facility. Included among the terms of this amendment are an easing
of the terms of certain financial covenants, the reduction of FATS' revolving credit facility by $1.5 million as of the
closing date and an additional $1.5 million no later than March 31, 1999 as well as a temporary increase in interest
rates. The investment by Centre, in conjunction with the amendments to the credit facility, provides the Company with
over $9 million in combined cash and revolver availability.
Backlog, representing customer orders that have been contracted for future delivery, totaled approximately $39.6
million as of September 30, 1998, comprised of $21.9 million from FATS' international customers, $14.1 million from
Canadian customers of FATS' Simtran subsidiary, and $2.6 million from FATS' U.S. military customers. Approximately
$24.6 million of the contracted orders are scheduled for delivery during fiscal year 1999.
FATS is the leading worldwide producer of interactive simulation systems designed to provide training in the handling
and use of small and supporting arms. FATS(R) products also include air defense, anti-armor, and armored vehicle
training products, which are designed and manufactured by its Canadian subsidiary, Simtran Technologies, Inc.
Commercial versions of FATS(R) products supporting the sports shooting enthusiast and professional hunter are
designed and manufactured by its Colorado-based subsidiary, Dart International, Inc.
Certain of the foregoing information are forward-looking statements regarding future events or the future financial
performance of the Company, and are subject to a number of risks and other factors which could cause the actual
results to differ materially from those contained in the forward-looking statements. Among such factors including those
discussed above are: general business and economic conditions; the company's success in competing for new contract
awards; customer acceptance of and demand for the Company's new products; receipt and delivery of a sufficient level
of orders from new and existing customers as well as satisfactory completion of delivery of a sufficient portion of
backlog, the Company's overall ability to design, test, and introduce new products on a timely basis; the cyclical nature
of the markets addressed by the Company's products; and the risk factors listed from time to time in documents on file
with the SEC.
FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,
1998 1997
--------- ---------
Revenues $12,111 $19,415
Cost of revenues 8,061 9,105
--------- ---------
Gross profit 4,050 10,310
--------- ---------
Operating expenses:
Selling, general and
administrative expenses 2,128 3,959
Research and development expenses 838 1,433
Depreciation and amortization 507 208
--------- ---------
Total operating expenses 3,473 5,600
--------- ---------
Operating income 577 4,710
--------- ---------
Other (expense), net:
Interest (expense), net (1,782) (1,466)
Other (expense) income, net (172) 20
--------- ---------
Total other (expense), net (1,954) (1,446)
--------- ---------
(Loss) income before income taxes (1,377) 3,264
(Benefit) provision for income taxes (551) 1,175
--------- ---------
Net (loss) income $ (826) $ 2,089
========= =========
Basic (loss) earnings per share
$ (0.04) $ 0.10
========= =========
Diluted (loss) earnings per share
$ (0.04) $ 0.10
========= =========
Weighted average common shares
outstanding - Basic 20,673 20,406
========= =========
Weighted average common shares
outstanding - Diluted 20,673 21,464
========= =========
FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Six months ended September 30,
------------------------------------------
1998 1997
------------------------------ ---------
As Special As As
Reported Charge(1) Adjusted Reported
--------- --------- --------- ---------
Revenues $ 24,376 $ - $ 24,376 $ 38,024
Cost of revenues 15,612 - 15,612 17,346
--------- --------- --------- ---------
Gross profit 8,764 - 8,764 20,678
--------- --------- --------- ---------
Operating expenses:
Selling, general and
administrative expenses 5,303 - 5,303 7,891
Research and development
expenses 2,372 - 2,372 2,796
Nonrecurring
restructuring charge 870 (870) - -
Depreciation and
amortization 984 - 984 384
--------- --------- --------- ---------
Total operating
expenses 9,529 (870) 8,659 11,071
--------- --------- --------- ---------
Operating (loss) income (765) 870 105 9,607
--------- --------- --------- ---------
Other (expense),
net:
Interest
(expense), net (3,393) - (3,393) (2,920)
Other
(expense), net (276) - (276) (7)
--------- --------- --------- ---------
Total other
(expense), net (3,669) - (3,669) (2,927)
--------- --------- --------- ---------
(Loss) income before
income taxes (4,434) 870 (3,564) 6,680
(Benefit) provision for
income taxes (1,590) 296 (1,294) 2,405
--------- --------- --------- ---------
Net (loss) income $ (2,844) $ 574 $ (2,270) $ 4,275
========= ========= ========= =========
Basic (loss) earnings
per share $ (0.14) $ 0.03 $ (0.11) $ 0.21
========= ========= ========= =========
Diluted (loss) earnings
per share $ (0.14) $ 0.03 $ (0.11) $ 0.20
========= ========= ========= =========
Weighted average common
shares outstanding -
Basic 20,668 20,668 20,668 20,405
========= ========= ========= =========
Weighted average common
shares outstanding -
Diluted 20,668 20,668 20,668 21,578
========= ========= ========= =========
(1) Nonrecurring restructuring charge related to workforce reduction
and certain other measures.
FIREARMS TRAINING SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 30, March 31,
1998 1998
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,560 $ 3,395
Accounts receivable, net 21,757 22,710
Inventories 16,806 17,725
Income taxes receivable 2,170 -
Prepaid expenses and other
current assets 740 594
Deferred income taxes, net - 1,050
--------- ---------
Total current assets 44,033 45,474
Property and equipment, net 4,096 3,971
Goodwill, net 4,800 2,751
Deferred financing costs, net 2,669 3,007
Deferred income taxes 988 1,065
Other assets 93 112
========= =========
$ 56,679 $ 56,380
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,829 $ 3,389
Accrued liabilities 7,874 11,060
Income taxes payable - 390
Deferred income taxes, net 1,231 -
Deferred revenue 3,125 6,428
Current maturities of
long-term debt 6,000 5,300
--------- ---------
Total current
liabilities 21,059 26,567
--------- ---------
Long-term debt, less current 64,700 57,700
maturities
--------- ---------
Other noncurrent liabilities 249 344
--------- ---------
Stockholders' equity:
Class A common stock - -
Additional paid-in-capital 114,280 112,390
Accumulated (deficit) earnings (143,414) (140,569)
Cumulative foreign currency
translation adjustment (195) (52)
--------- ---------
Total stockholders'
(deficit) equity (29,329) (28,231)
--------- ---------
$ 56,679 $ 56,380
========= =========
CONTACT: Firearms Training Systems, Inc.
Investor Relations
770/622-3236
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