Document/Exhibit Description Pages Size
1: 10-K Form 10-K Period End March 31, 1996 69 361K
2: EX-10.35 7th Amendment to Loan and Security Agreement 45 186K
3: EX-10.36 8th Amendment to Loan and Security Agreement 15 65K
4: EX-10.37 Deed of Trust,Assignment,Security Agreement 30 188K
5: EX-10.38 9th Amendment to Loan and Security Agreement 11 50K
6: EX-10.39 Amended & Restated Promissory Note Dated 3/29/96 5 24K
7: EX-10.40 Amended & Restated Promissory Noted Dated 3/29/96 5 24K
8: EX-10.41 Amended & Restated Promissory Note Dated 3/29/96 5 24K
9: EX-10.42 2nd Amendment to Standard Industrial Lease 1 11K
10: EX-10.43 U.S. Trademark License Agreement 73 188K
11: EX-10.44 Amendment to U.S. Trademark License Agreement 4 14K
12: EX-10.45 Intercreditor and Subordination Agreement 13 53K
13: EX-11.1 Statement Re Computation of Per Share Data 1 9K
14: EX-27.1 Financial Data Schedule 1 10K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-22716
BOLLINGER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2502577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 W. AIRPORT FREEWAY,
IRVING, TEXAS 75062
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (214) 445-0386
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$0.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant on June 24, 1996, was $3,231,564.
The number of shares of common stock of the registrant outstanding on June 24,
1996, was 4,000,210.
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TABLE OF CONTENTS
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ITEM PAGE
---- ----
PART I
1. Business.............................................................. 1
2. Properties............................................................ 2
3. Legal Proceedings..................................................... 3
4. Submission of Matters to a Vote of Security Holders................... 4
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters. 5
6. Selected Financial Data............................................... 6
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 7
8. Financial Statements and Supplementary Data........................... 23
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................. 24
PART III
10. Directors and Executive Officers of the Registrant.................... 26
11. Executive Compensation................................................ 28
12. Security Ownership of Certain Beneficial Owners and Management........ 29
13. Certain Relationships and Related Transactions........................ 30
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...... 32
Signatures................................................................. S-1
Index to Consolidated Financial Statements and Schedules................... F-1
PART I
ITEM 1. BUSINESS.
Bollinger is a leading domestic supplier of consumer fitness accessory
products. The Company's fitness accessory products also include certain light
equipment items. The Company markets, primarily to mass retailers, an extensive
consumer fitness line, including handheld barbells and dumbbells, aerobic steps
and other aerobics products, backyard trampolines, weightlifting belts and
gloves, exercise mats, ankle and wrist weights, weightlifting bars, waist
trimmers, compression shorts, and walking accessories.
GENERAL
Bollinger Industries, Inc. is a publicly held corporation which designs,
manufactures, and markets a variety of fitness equipment and fitness accessory
products.
During the fourth quarter of the 1996 fiscal year, the Company's
management undertook a comprehensive review of Bollinger Industries marketing
methods, operating policies and liquidity. The result of this review was a
decision to refocus the Company's marketing efforts on promotion of the
Bollinger brand name in the mass merchandise retail distribution channel. The
Bollinger brand enjoys wide acceptability with retail chains and with the
ultimate consumers. This strategy resulted in two decisions which are reflected
in the March 31, 1996, financial statements. The first was to implement a
Restructuring Plan (the "Plan") to enhance shareholder values through increased
profitability and liquidity. The second decision was to dispose of the
Company's sports medicine and safety products business (Healthcare Division),
which is reported as a discontinued operation.
In concert with this strategy of focusing on the Bollinger brand in the
mass merchandise distribution channel, the Company has entered into an
agreement with the NautilusTM Company to market a Nautilus brand product line
to a more upscale segment of the fitness equipment market.
RESTRUCTURING OF OPERATIONS
The Company has experienced rapid growth over the past five years, through
the expansion of its product line and increased penetration of retail chains.
However, profitability has been inconsistent, and management has not met its
primary objective of enhancing shareholder value. In an effort to remedy this
situation, management reached the decision in the fourth quarter of the 1996
fiscal year to restructure the Company's operations. The primary elements of
The Plan are to: promote the accepted Bollinger brand name and that of
Nautilus, with which the Company recently entered into a license agreement,
dramatically reduce inventory levels which will enhance liquidity, and improve
operating efficiency.
Celebrity Endorsements
Since fiscal 1993, a significant portion of the Company's fitness products
were sold with the use of celebrity endorsements. In the fourth quarter of the
1996 fiscal year, management evaluated the practice of selling celebrity
branded products instead of corporate branded products, the incremental costs
of celebrity endorsements, and the resulting impact on earnings. As a result of
this evaluation, management has decided to revert to emphasizing corporate
branded products.
In connection with this decision, the Company is phasing out its
relationship with one of its endorsers, Denise Austin, under its current terms.
Based on the Company's inventory levels, Ms. Austin
1
will continue to endorse certain of the Company's products through January
1997. Management plans to sell significantly all of its current inventory of
Denise Austin branded products during this phase out period.
The Company expects to continue its relationship with Nolan Ryan and Kiana
Tom to sell their branded products on terms that are more beneficial to the
Company.
Inventory Levels
As part of The Plan, management has implemented measures to reduce
inventory levels substantially. Approximately $12 million has been identified
for disposal through a variety of channels. The largest single category of
inventory reduction is the Denise Austin product line ($5 million), with the
remainder consisting of several Fitness product categories. The decision was
made to liquidate such inventory at reduced prices in order to re-deploy the
cash in growth of the Company's business based on corporate branded products
and reduce inventory carrying costs.
Operating Efficiencies
Concurrent with the inventory reduction, the Company will consolidate
warehouse operations. This action will result in the closing of two leased
warehouses, the reduction of the warehouse workforce, and reduction in other
operating costs through enhanced efficiency.
DISCONTINUED OPERATION
Management determined during the fourth quarter of fiscal 1996 that it
would be in the best interest of the Company to dispose of its Sports Medicine
and Safety Products business, known as Bollinger Healthcare (Healthcare). The
Healthcare business has been unprofitable for the past two years during which
time sales have declined by 52%.
PRODUCTS AND MARKETS
FITNESS ACCESSORY PRODUCTS. The Company manufactures and sells a complete
line of more than 250 fitness accessory products, including handheld barbells
and dumbbells, aerobic steps and other aerobics products, backyard trampolines,
weightlifting belts and gloves, exercise mats, ankle and wrist weights,
weightlifting bars, waist trimmers, and compression shorts. Other fitness
accessory products include weight sets, supports and support belts, handgrips
and jump ropes. The majority of the Company's fitness accessory products retail
for less than $20. During fiscal 1996, the Company also introduced a certain
related light equipment item, the TrimRider with a retail price ranging from
$50 to $100. During 1996, sale of this item accounted for approximately 12% of
the Company's total net sales.
In addition to the Bollinger Fitness(TM) trademark, the Company's fitness
accessories are sold under various trademarks to promote consumer
identification and coordinate affiliated products. Weightlifting products
include StarLock(C), SlipLock(TM) and CamLock(C) weightlifting systems, Zoom
Off(C) quick release weightlifting, gloves, and BrightBells(C) dumbbells.
Aerobics items include the Step by Step(TM), FlexStep and SoftStep(TM) low
impact aerobic step, RibMat(TM) exercise mats, TrimRider(TM) aerobic riders,
Nautilus(TM) Ab-Rock'it abdominal exerciser, and NBF(TM) and UltraBounce(TM)
trampolines. Solar(TM) trimming products, PowerShorts(TM) compression shorts,
Softone(C) wrist weights, and Exergrip(TM) strengthening putty are examples of
other fitness accessory products available through Bollinger.
2
A significant portion of the Company's fitness products were sold with the
use of celebrity endorsements. In the fourth quarter of the 1996 fiscal year,
management evaluated the practice of selling celebrity branded products, the
incremental costs of those endorsements, and the resulting impact on earnings.
As a result of this process, management has decided to reduce the Company's use
of celebrity endorsements along with the associated royalty expense.
Management determined that celebrity endorsements do not have a significant
impact on mass merchandise retail sales commensurate with their current royalty
payment structure.
In connection with this decision, the Company is phasing out its agreement
with Denise Austin under its current terms. Based on the Company's inventory
levels, Ms. Austin will continue to endorse certain of the Company's products
through January 1997. Management plans to sell substantially all of its
current inventory of Denise Austin branded products during this phase out
period.
The Company expects to continue its relationship with Nolan Ryan and Kiana
Tom to sell their branded products on terms that are more beneficial to the
Company. Additionally, the Company has entered into an agreement with the
Nautilus company to market and sell a Nautilus branded product line to a more
upscale segment of the market.
In May 1994, as the result of an asset acquisition, the Company began
selling NBF(TM) trampolines through its established distribution channels for
other fitness accessory products. In fiscal 1996 and 1995, trampoline sales
accounted for approximately 26% and 13% respectively of the Company's total net
sales.
The Company markets its fitness accessories primarily to mass retailers.
The Company broadly defines mass retailers to include discount chains,
department stores, sporting goods retailers and sports superstores, warehouse
clubs and direct response television. In 1996, 1995, and 1994, the Company
served approximately 500 customers, although the Company's ten largest fitness
accessory products customers accounted for approximately 80%, 77%, and 52% of
the Company's total net sales in fiscal 1996, 1995, and 1994. Discount chain
customers include KMart, Wal-Mart and Target. Sears and Montgomery Ward are
representative department store customers. The mass retailer category also
encompasses catalog customers like J.C. Penney and catalog showroom customers
such as Best Products and Service Merchandise. Sporting goods retailers and
sports superstore customers include chains like Oshman's Sporting Goods, H.
Modell & Company, The Sports Authority, and SportMart. QVC is a shop at home
cable television network that provides a direct response television outlet for
Bollinger. KMart, Wal-Mart, J.C. Penney and Oshman's have been customers of the
Company for approximately 20 years. The loss of one or more of the Company's
major customers could have a material adverse impact on the Company.
Packaging is an important element of the Company's merchandising strategy.
The Company's packaging is uniform with bright, coordinating colors that it
believes has enabled it to increase the in-store merchandising impact of its
products and awareness of the Bollinger brand name.
The Company generally markets its fitness accessory products as an
integrated line, or program, of products and offers program management services
to help customers maximize their results from the product line. Program
management assistance includes merchandising and product mix planning,
distinctive marketing presentations and displays, and responsive inventory
management. Through the use of a computerized Plan-O-Gram system, Bollinger is
able to customize and quickly illustrate an in-store merchandise display for a
customer with a selection of fitness accessory products from the broad
assortment offered by the Company. The Company can use the Plan-O-Gram
presentation to provide program advice to the customer on the kinds of
products, product mix and product arrangement that in its judgment will
generate the best results for its customer. Bollinger's ability to provide
these program management services
3
is enhanced by the size and diversity of its extensive product line, its
Electronic Data Interchange (EDI) link with customers and selected in-store
reviews.
MANUFACTURING
Approximately 50%, 55%, and 55% of the Company's net sales for fiscal
1996, 1995 and 1994, respectively, were derived from the sale of U.S.-made
products, the majority of which were manufactured by Bollinger. Management
believes that a domestic manufacturing capability enhances its ability to
supply certain mass retailers, to introduce new products on a timely basis and
to respond to short-term delivery schedules.
Most of the Company's fitness accessory products are manufactured in a
cut-and-sew operation in the Company's Grand Prairie, Texas, facility. These
Company-manufactured items are primarily made from Enlightened Rubber(TM)
materials, a special kind of rubber that allows for greater breathability than
standard neoprene. Enlightened Rubber(TM) is utilized in these products to
enhance the durability of the products. Bollinger obtains its Enlightened
Rubber(TM) materials from a single domestic supplier, although it believes
foreign sources are readily available. Although the loss of this domestic
supplier could have a short-term impact on the Company until it secures
alternative sources, the loss would not have a long-term material adverse
impact on the Company's business or operations. The Company manufactures most
of its NBFTM trampolines at its manufacturing facility in Americus, Georgia.
The remainder of Bollinger's sales of fitness accessory products,
including barbells, dumbbells, weightlifting bars and weightlifting gloves and
trampolines, are attributable to products imported in bulk from China, Taiwan,
and Pakistan. The Company's imported products are packaged in custom packaging
designed by the Company. Depending on the particular product, the packaging
materials may be printed overseas and packaging is part of the foreign
manufacturing process. With some products, including those items imported in
bulk, the Company repackages the products in U.S.-made materials. Bollinger's
custom packaging differentiate its products from its competitors. The Company
believes that the loss of one or more foreign suppliers could have a short term
adverse impact on the Company until it secures alternate sources.
SALES
The Company primarily relies upon networks of independent sales
representatives and distributors who are managed by an in-house sales
management staff. Bollinger's independent sales representatives, who work on a
commission-only basis, specialize in the sale of sporting goods products to
mass retailers. These independent sales representatives market a variety of
sporting goods, and therefore, generally have strong relationships with
customer purchasing personnel. The Company's in-house sales management staff
is supported by Bollinger's marketing department to produce a coordinated
marketing and sales effort.
Bollinger's executive officers manage the accounts of the top 20 fitness
accessory customers and focus on new customer development. A sales manager has
primary responsibility for all other fitness accessory customers and the
management of 10 independent sales representative firms, as well as focusing on
new customer development.
In the last few years, the Company began to focus on the development of
its international presence. During fiscal 1996, the Company signed an agreement
with Tradewinds International to represent Bollinger Industries in all
territories outside the United States. Tradewinds International is an
experienced
4
organization and the Company believes that their commitment is needed to expand
its international business.
PRODUCT DEVELOPMENT
The Company's product development effort continuously focuses on creating,
obtaining and developing new and innovative products and product ideas.
Similar effort is given to regular reevaluation of existing products and how
they may be repositioned to enhance the Company's competitive position in the
marketplace. Bollinger also frequently examines many unsolicited product
ideas, but generally does not make any advance commitments to purchase or
license a new product submission. New products and product ideas may come from
individual inventors, small companies that do not have sufficient manufacturing
capability or the relationships with mass retailers needed to market a new
product or consumers who submit new ideas based on personal experience. Once
the Company has identified a product, it will determine appropriate sourcing
for the product to attempt to ensure both quality manufacture and low costs.
The Company's product lines currently include more than 250 fitness accessory
products, including 55 new products introduced in fiscal 1996. Although the
Company has introduced a substantial number of new products in the last three
fiscal years, the Company may not continue to introduce products at the same
rate as it has in the past.
COMPETITION
Bollinger participates in a highly competitive industry, competing with a
number of established manufacturers, importers and distributors of fitness
products. Many competitors have significantly greater financial and other
resources than those available to the Company. The market for fitness products
is, however, large and fragmented. The Company believes that the principal
competitive factors affecting its business include customer service,
manufacturing and distribution capabilities, price, marketing and merchandising
expertise, quality, brand name recognition and the ability to create and
develop a broad variety of innovative products and concepts.
The Company believes its principal competitors are large fitness equipment
manufacturers, which also happen to sell fitness accessory products, and
smaller importers, which offer a more limited assortment of products than
Bollinger or the larger competitors. There are relatively few barriers to
entry in the fitness accessory products market.
The Company believes that one of the largest fitness and exercise
equipment manufacturers is Icon Health & Fitness, Inc. ("Icon"), which markets
products under the brand names of Weslo and ProForm. Icon offers, among many
other items, a line of packaged fitness accessory products similar to
Bollinger's fitness accessory products. Although the Company believes that the
majority of Icon's sales come from treadmills, exercise machines, and weight
benches, Icon competes directly with Bollinger for sales of a large number of
handheld fitness accessories. The Company believes that Icon has larger net
sales than the Company.
The Company's smaller competitors include businesses that are solely or
primarily direct importers. An example of these smaller competitors is Dynamic
Classics, Ltd., which offers a line of fitness accessory products. The Company
believes that the Company's net sales are larger than these competitors
individually.
5
PATENTS AND TRADEMARKS
The Company has rights to a number of patented inventions, trademarks and
trade names used in connection with the sale and marketing of its products and
believes that protection of its patents, trademarks and trade names is
important because of customer preferences for and recognition of the patented
products and the trademarks and trade names used with existing products. The
Company does not believe it infringes any patent, trademark or trade name
rights. However, the successful assertion or settlement of a patent, trademark
or trade name infringement claim against Bollinger could have a material
adverse effect on the Company's business depending on the nature of the claim
and the product or products affected. There can be no assurance that the
Company will have adequate funds available to defend or assert a claim for
infringement of any patents, trademarks or trade names, or that, if funds are
available, the defense or assertion of such a claim will not be prohibitively
expensive. In addition, no assurance can be given that Bollinger will be able
to protect against the duplication of its products or the use of its trademarks
or trade names.
The Company currently holds and protects the rights to a number of U.S.
patents and additionally has a number of exclusive and nonexclusive licenses
under various other U.S. patents. It does not hold any foreign patents.
Bollinger does not view any single patent as critical to its business.
Bollinger owns a number of trademarks and has licensed the use of
additional trademarks in the U.S. The Company intends to protect them to the
fullest extent practicable. Bollinger has registered its trademark in a number
of foreign countries.
EMPLOYEES
As of March 31, 1996, the Company employed approximately 548 persons on a
full-time basis, of which approximately 440 employees were engaged in
receiving, manufacturing, warehousing, and shipping activities. Approximately
108 employees were engaged in sales, customer service, accounting, MIS, and
other administration functions. In addition, the Company, from time to time,
uses part-time workers and/or contract labor. None of the Company's employees
are represented by a union. The Company believes relations with its employees
are good.
REGULATIONS
The Company and its products are subject to numerous federal, state, and
local laws, rules and regulations ("Regulations"). Among the more significant
of such Regulations are consumer product safety laws under which a company's
products can be barred from sale or subject to recall if found to be hazardous;
occupational safety and health laws; and environmental laws.
The Company is not a party to any threatened or pending material
regulatory action, other than as discussed below in Item 3. Legal Proceedings.
6
ITEM 2. PROPERTIES.
The Company owns a facility in Irving, Texas, which contains approximately
43,000 square feet. Approximately 16,000 square feet is used as office space
and serves as the Company's headquarters. All of the Company's accounting,
sales, and administrative functions operate out of this location. The
additional 27,000 square feet is used for the manufacture, warehousing, and
shipment of certain treadmills and exercise cycles.
The Company leases approximately 402,000 square feet in Grand Prairie,
Texas, which is used as the main manufacturing, warehousing, and shipping
facility for the Company's Fitness Accessory Products. This facility is
subject to two leases. The first lease for approximately 102,000 square feet
expires June 30, 1999, and has a renewal option for an additional four years.
The second lease for approximately 300,000 square feet expires August 31, 1999,
and does not contain a renewal option.
The Company also leases approximately 41,000 square feet in Lubbock,
Texas, which is used to manufacture, warehouse, and ship the Company's
Healthcare Products. This lease expires November 30, 1999, and does not
include a renewal option. Management intends to sublease this location as part
of the disposal of the Healthcare Division.
The Company also manufactures, warehouses, and ships trampolines out of a
facility in Americus, Georgia, which contains approximately 60,000 square feet.
The lease for this location expires on December 20, 2005, at which time the
Company is obligated to purchase the facility at a nominal amount.
In addition, the Company rents space in public warehouses and/or leases
other facilities on a short term basis, from time to time, as the need arises.
The Company believes that the above facilities are adequate to meet its
needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
The Company, Glenn D. Bollinger (Chairman & CEO), Bobby D. Bollinger
(President), Curtis D. Logan (former CFO), Michael J. Beck (former CAO), John
L. Maguire (Director), William Blair & Company, Rauscher Pierce Refnes, Inc.
(former underwriters of initial public offering), and Grant Thornton, L.L.P.
(former independent accountants), are defendants (the "Suntrust Defendants") in
a lawsuit brought in the District Courts, Dallas County, Texas, by shareholder
Suntrust Bank Atlanta, as trustee for Suntrust Retirement Sunbelt Equity Fund,
on behalf of themselves and all persons similarly situated. In addition, the
Company, Glenn D. Bollinger, Bobby D. Bollinger, Curtis D. Logan, and Michael
J. Beck, are defendants (the "STI Defendants"), in a lawsuit brought in the
United States District Court for the Northern District of Texas, Dallas
Division, by shareholders STI Classic Fund and STI Classic Sunbelt, on behalf
of themselves and all persons similarly situated. The lawsuits purport to be
class actions and allege certain misrepresentations and fraudulent actions by
the Suntrust and STI Defendants. Both lawsuits seek damages, exemplary damages,
interest, costs, and expenses. Management of the Company does not believe
either lawsuit has merit. However, if the plaintiffs should prevail in either
lawsuit, it could have a material adverse effect on the Company.
7
The Company has been contacted by the Department of Labor (DOL) in regard
to certain questions about its former Employee Stock Ownership Plan (the
"ESOP"). Assets of the ESOP are held in the Company's 401(K) plan which is the
successor to the ESOP. The Company is responding to and cooperating with the
DOL. The DOL has not initiated any proceeding with respect to the ESOP or any
other of the Company's employee benefit plans.
The staff of the Securities and Exchange Commission has indicated to the
Company it is their preliminary determination to recommend a civil injunctive
action be brought against the Company, Glenn Bollinger and Ronald Bollinger,
based upon what the staff believes to be violations of various securities laws,
including Sections 10(b), 13(a), and 13(b) of the Securities Exchange Act of
1934 and various rules promulgated thereunder. The purported violations are
alleged to arise out of certain transactions which occurred during the fiscal
years 1994 and 1995. The staff has stated it will not recommend seeking
monetary penalties against the Company.
From time to time, the Company is a party to various legal proceedings
arising in the ordinary course of business. The Company is not currently a
party to any other material litigation and is not aware of any litigation
threatened against the Company, arising in the ordinary course of business,
that could have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on January 18, 1996.
During this meeting, five directors, which constitutes the entire Board of
Directors, were elected to serve until the next Annual Meeting of Stockholders
or until their successors are elected and qualified. The following individuals
were elected:
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VOTING SUMMARY
------------------------------------------
NAME FOR WITHHELD NOT VOTING
------------------------- ------------ ------------ ------------
Glenn D. Bollinger 3,121,415 11,300 575,375
Bobby D. Bollinger 3,121,415 11,300 575,375
John L. Maguire 3,027,415 105,300 575,375
Stephen L. Parr 3,026,615 106,100 575,375
Richard J. Tucker 3,026,915 105,800 575,375
There were no other matters voted on during this meeting.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company completed its initial offering during November 1993 at a price
of $12.50 per share. The Common Stock was quoted on the NASDAQ National Market
under the trading symbol "BOLL." However, due to delinquency in filing
certain reports with the Securities and Exchange Commission, and other matters,
the NASDAQ "delisted" the Company's common stock during August 1995. The
Company is pursuing relisting on NASDAQ or another exchange. The Company's
common stock is currently traded over-the-counter. The following table sets
forth, on a per share basis for the periods indicated, the high and low closing
sale prices for the Common Stock as reported by NASDAQ (for the period April 1,
1994, through August 16, 1995), and a market maker of the Company's common
stock or the over-the-counter Bulletin Board (for the period August 17, 1995,
through March 31, 1996).
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PRICE RANGE
----------------------------------
FISCAL 1996 FISCAL 1995
---------------- ----------------
HIGH LOW HIGH LOW
------- ------- ------- -------
First Quarter ........... $ 9.00 $ 1.87 $12.00 $ 9.50
Second Quarter .......... 4.25 3.00 13.50 8.50
Third Quarter ........... 4.00 2.31 14.50 10.25
Fourth Quarter .......... 4.00 2.00 16.00 7.50
On June 24, 1996, the closing sale price of the Common Stock as reported
by the over-the-counter Bulletin Board was $2.00 per share. As of June 24,
1996, there were approximately 58 holders of record of the Common Stock.
The Company has not paid cash dividends on its Common Stock since its
inception. The Company's board of directors does not anticipate payment of any
cash dividends in the foreseeable future and intends to continue its present
policy of retaining earnings for reinvestment in the operations of the Company.
ITEM 6. SELECTED FINANCIAL DATA.
The selected historical financial data presented below is derived from the
consolidated financial statements of the Company. The consolidated financial
data of the Company for the year ended March 31, 1992, is derived from the
historical consolidated financial statements of the Company, which have been
audited by Lane Gorman Trubitt, L.L.P., independent certified public
accountants. The consolidated financial data for the years ended March 31,
1993 and 1994, is derived from the historical consolidated financial statements
of the Company, which have been audited by Grant Thornton, L.L.P., independent
certified public accountants. (The Company's historical consolidated financial
statements for the years ended March 31, 1992, and 1993 are not included in
this Report.) The consolidated financial data for the year ended March 31,
1995, and 1996, are derived from the historical consolidated financial
statements of the Company, which have been audited by King Burns & Company,
P.C. The selected financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and with the Company's consolidated financial statements and related
notes included elsewhere in this Report.
9
ˇ Enlarge/Download Table
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS (4)
Net Sales ........................................ $ 80,300 $ 67,894 $ 38,746 $ 27,586 $ 15,743
Cost of goods sold ............................... 62,197 50,546 26,982 20,060 10,982
-------- -------- -------- -------- --------
Gross profit ................................ 18,103 17,348 11,764 7,526 4,761
Selling expenses ................................. 7,877 6,862 4,070 2,282 1,423
Distribution, general and administrative
expenses ......................................... 12,115 8,422 4,224 3,331 2,336
Restructuring of operations ...................... 3,960 -- -- -- --
-------- -------- -------- -------- --------
23,952 15,284 8,294 5,613 3,759
-------- -------- -------- -------- --------
Operating profit (loss) ..................... (5,849) 2,064 3,470 1,913 1,002
Other expense (income)
Interest expense ............................... 2,252 1,167 667 320 392
Interest income ................................ (79) (94) (41) -- --
Miscellaneous .................................. (26) 47 (24) (47) 6
-------- -------- -------- -------- --------
2,147 1,120 602 273 398
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations
before income tax expense (benefit) .......... (7,996) 944 2,868 1,640 604
Income tax expense (benefit) ..................... (1,135) 350 1,042 685 --
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations (1) . (6,861) 594 1,826 955 604
Discontinued operations
Earnings (loss) from operations net of income
tax benefit .................................. (592) (525) 550 235 276
(Loss) on disposal, net of income tax benefit
including a $1,199,118 and $325,380 provision
for operating losses during phase out period
in 1996 and 1994 ............................. (770) -- (573) -- --
Earnings (loss) from discontinued operations (2) (1,362) (525) (23) 235 276
-------- -------- -------- -------- --------
Net earnings (loss) before extraordinary items ... (8,223) 69 1,803 1,190 880
Extraordinary items (3) .......................... -- -- -- -- 111
--------
Net earnings (loss) .............................. $ (8,223) $ 69 $ 1,803 $ 1,190 $ 991
======== ======== ======== ======== ========
Per share data:
Earnings (loss) from continuing operations ..... $ (1.85) $ 0.15 $ 0.59 $ 0.36 $ 0.23
======== ======== ======== ======== ========
Net earnings (loss) ............................ $ (2.22) $ 0.02 $ 0.59 $ 0.45 $ 0.37
======== ======== ======== ======== ========
Weighted average common and common equivalent
shares outstanding ............................. 3,710 3,967 3,079 2,650 2,650
======== ======== ======== ======== ========
10
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MARCH 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
BALANCE SHEET DATA
Working capital .................................. $ 8,322 $ 15,725 $ 18,038 $ 3,484 $ 2,595
Total assets ..................................... 58,381 55,422 27,632 20,663 12,058
Total long term debt ............................. 577 223 500 690 842
Total debt ....................................... 23,260 26,810 4,977 9,701 5,792
Stockholders' equity ............................. 12,463 20,467 19,398 4,369 3,179
(1) The Company sold substantially all of the assets of its C. G. Products
subsidiary effective September 13, 1993. The Company determined to
discontinue its Healthcare Division during January 1996. Earnings from
continuing operations does not reflect the results of operations for C. G.
Products and the Healthcare Division. See Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note B of
"Notes to Consolidated Financial Statements."
(2) Represents results of discontinued operations of C. G. Products and the
Healthcare Division. See Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note B of "Notes to
Consolidated Financial Statements."
(3) Extraordinary items represent gains on extinguishment of debt.
(4) The Statements of Operations for fiscal 1995, 1994, 1993, and 1992 have
been reclassified to reflect the discontinuance of the Healthcare
operation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto appearing elsewhere
in this Report.
GENERAL
Bollinger Industries, Inc. is a publicly owned corporation which designs,
manufactures, and distributes a variety of fitness equipment and accessories
(Fitness Accessory Products).
During the fourth quarter of fiscal 1996, management undertook a
comprehensive review of the Company's marketing strategy, profitability, and
liquidity. As a result of that review, management decided to refocus on
promotion of its Corporate name which has wide acceptability among retail
chains and the ultimate consumer. This strategy necessitated a three point
plan (the "Plan").
The components of the Plan comprise: providing a restructuring charge to
cover disposal of certain inventory and phase out of certain celebrity endorsed
products; disposal of the Company's Sports Medicine and Safety Products
business ("Healthcare Division"); and revision of certain operating policies
and procedures to further enhance profitability.
The primary goal of the Plan is to refocus the Company on its historical
marketing strength which is with high volume mass merchants, discounters, and
chain stores. The Bollinger brand name is the leader with these retailers. In
addition, the Company will utilize the recently licensed Nautilus brand name to
build sales to specialty sporting goods stores, high-end retailers, and other
relatively low volume channels of distribution where gross profit margins
justify a licensing fee.
Adoption of the Plan by the Company has resulted in the inclusion of the
following items in the financial statements for fiscal 1996: a charge for
restructuring of operations; an operating loss from discontinued operations of
the Healthcare Division; and a provision for loss on disposal of the Healthcare
Division. In addition, prior year Statements of Operations have been
reclassified to reflect the results of operations of the healthcare Division as
discontinued operations.
11
PROFITABILITY
In fiscal 1996, the Company had a substantial loss from continuing
operations of $6.9 million after income taxes. In evaluating this loss in terms
of the Company's prospects for the future, it is important to keep the 1996
results in proper perspective. First, the loss includes a $4 million
restructuring charge. The resulting loss before the restructuring charge is
$2.9 million from continuing operations. If the impact of the three elements of
the Plan had been in place for all of 1996, the result would have reduced the
loss by over $2.5 million more. The restructuring plan is expected to reduce
operating costs by $1.5 million and reduce the impact of customer returns and
charge-backs in excess of an additional $1.0 million. Further, negotiations
with vendors will yield additional savings. Strong continued sales and earnings
growth is expected from the Company's trampoline products. If current
projections are met, that growth, combined with the items mentioned above, give
the Company a reasonable prospect of returning to profitability in 1997.
RESTRUCTURING OF OPERATION
The Company has experienced rapid sales growth over the past five years
through expansion of products offered, increased customer base, and
acquisitions. However, profitability has been inconsistent, and management has
not met its primary objective, which is to create shareholder value. In an
effort to remedy this situation, management concluded in the fourth quarter of
fiscal 1996 to restructure its Fitness Accessory Products business. The
significant elements of the Restructuring Plan are to substantially reduce
inventory levels which have been excessive and to de-emphasize celebrity
endorsed products. As a result the Company expects to reduce interest costs;
generate much needed capital; reduce warehousing and related costs; reduce
royalty expense; improve gross profit; and increase net earnings per share.
The Company has identified approximately $12.0 million of inventory which
it plans to liquidate through various channels. The Company does not believe
that the liquidation of this inventory will significantly affect its normal
sales. The largest category of inventory to be liquidated is product endorsed
by Denise Austin (see discussion below). Inventory of Denise Austin product is
approximately $5.0 million. The balance of inventory to be liquidated of
approximately $7.0 million includes various Fitness Accessory Products. Many of
the items to be disposed of can still be sold by the Company at regular prices
over an extended period of time but the Company feels it necessary to
accelerate liquidation of this inventory to generate cash and reduce carrying
costs.
The Company introduced the Denise Austin line of Fitness Accessory
Products in Fiscal 1993. Sales of these products have increased since that
time to approximately $24.0 million in fiscal 1996. The Company pays Ms.
Austin a substantial royalty for the use of her name and her personal
appearances to promote these products. However, most of these products are sold
through mass merchants. The Company's gross profit for mass merchants tends to
be relatively lower than for other customers due to competitive factors. The
combination of low gross profit and a relatively high royalty are not cost
effective. As a result, the Company has decided, as part of its Restructuring
Plan, to phase out the Denise Austin relationship. The Company has negotiated
with Ms. Austin to continue to endorse certain of the Company's products
through January 1997 to help liquidate Denise Austin inventory under the same
contractual terms as are currently in effect. The Company anticipates that
substantially all of the Denise Austin inventory will be sold by that time.
At this time the Company expects to continue its current celebrity
endorsement agreements with Nolan Ryan and Kiana Tom and to evaluate additional
such agreements if beneficial.
12
Concurrent with the inventory reduction discussed above the Company will
consolidate warehouse operations. This will result in the closing of two
leased warehouses, the reduction of warehouse personnel, and cuts in other
operating costs through increased efficiency.
DISCONTINUED OPERATIONS - HEALTHCARE DIVISION
Management of the Company determined in January of fiscal 1996 to dispose
of its Healthcare business. Healthcare has been unprofitable for the past two
years and sales have declined by approximately 52% during that period.
Management does not believe it has the resources to reverse this trend.
However, the Company believes the Healthcare business may be attractive to
another company already in the healthcare or related business.
As a result of the decision to dispose of the Healthcare Division, the
operations of Healthcare have been accounted for as a discontinued operation in
this Report and the accompanying consolidated financial statements for fiscal
1996. In addition, the Consolidated Statements of Operations for fiscal years
1995 and 1994 have been reclassified to reflect the operations of Healthcare as
discontinued operations. An after-tax provision of $770,000 for loss on
disposal of Healthcare assets was made in fiscal 1996. Net sales for the
discontinued Healthcare operations were $3.3, $5.2 and $6.4 million in fiscal
1996, 1995, and 1994, respectively. The net gain (loss) from discontinued
Healthcare operations was ($592,000), ($525,000), and $702,000, in 1996, 1995,
and 1994, respectively.
OTHER
As part of the Plan, the Company has revised certain policies and
procedures involving customer returns and deductions ("Chargebacks").
Chargebacks represent a significant cost to the Company as they do for most
vendors supplying retailers. During fiscal 1996, the company implemented
improved procedures for identifying and recording customer chargebacks and
potential chargebacks. Despite such improved procedures and continuing review
by management, unanticipated chargebacks were particularly high during the
fourth quarter. In spite of a decrease in gross sales from approximately $32.9
million in the third quarter to approximately $18.0 million in the fourth
quarter, there was an unanticipated increase in returns and other customer
deductions of more that $450,000.
The most significant category of Chargebacks is returns of first quality
product. While the Company is not contractually obligated to accept returns of
first quality product , it is not unusual to do so as an accommodation to
maintain good customer relations. The costs associated with returns of first
quality product include receiving, replacing cartons damaged in-transit,
repackaging, relabeling, restocking, storage and reshipping. The Company has
adopted more stringent requirements before it will accept future returns of
first quality product. Among these requirements are: restocking charges;
agreement by the customer to buy additional product in the future; and
rejection of unwarranted returns.
In addition to first quality returns, the Company receives a significant
amount of Chargebacks for returns of allegedly defective product. In order to
reduce this category of Chargebacks, the Company has adopted a Defective
Product Allowance program by which the Company negotiates a flat percentage of
sales which a customer deducts in lieu of returning defective product. This
program saves the Company freight and handling costs; refurbishing and disposal
costs; and eliminates volatility in the financials. In addition, disputes over
manufacturing defects versus customer damaged product are eliminated. The
Company believes that this policy will have a favorable impact on fiscal 1997
operating costs.
Another significant category of Chargebacks involves customer imposed
penalties for non-compliance issues. Many retailers impose specific rules
involving product specifications, shipping instructions, labeling, invoicing,
etc. These retailers unilaterally deduct penalties from payments to their
13
vendors for infractions of their rules. Many of these penalties are onerous or
erroneous and are expensive to research and challenge. As part of the Plan,
the Company has formed a team from various functional areas of the organization
which will work to reduce this category of Chargebacks. In addition, the
Company wrote-off a number of older Chargebacks, in the fourth quarter of 1996,
that were in dispute in order to concentrate on more current Chargebacks and
focus on eliminating their reoccurrence.
Another aspect, of equal importance to reducing chargebacks, incorporated
in the Plan is the more aggressive negotiation for products, materials, and
services purchased by the Company. The Company has already had success with
two of its largest suppliers. The Company seeks to significantly improve its
gross profit through lowered costs negotiated with its primarily overseas
suppliers. Prior to fiscal 1997 such product cost reductions could not be
attained, as the Company did not have the liquidity to negotiate strongly with
vendors.
The Company also anticipates fiscal 1997 savings in operating expenses,
through implementation of the Plan, of approximately $1.5 million. Included in
these savings are an $800,000 reduction of expenses involving celebrity
endorsed products; a $400,000 reduction in warehouse rent and temporary storage
costs, and a $200,000 reduction in warehouse labor and increase in warehouse
efficiency. These savings are to be anticipated even greater in subsequent
fiscal years.
Improved liquidity is crucial to the future success and growth of the
Company. Recognition of this fact is one of the primary reasons that
management initiated the Plan. During 1997, the Plan anticipates generating
approximately $7 million from reduced inventory levels. In addition, the
Company will receive more than $2.0 million in federal income tax refunds
arising from losses in fiscal 1996. These funds will be used to reduce trade
accounts payable and other debt. As a result of anticipated lower debt, the
Company's interest expense should decrease towards the end of fiscal 1997.
DISCONTINUED OPERATIONS - PRIOR
Effective September 13, 1993, the Company sold substantially all of the
assets of its California manufacturing subsidiary, C.G. Products, Inc. ("C.G.
Products") formerly known as California Gym Equipment Company. C.G. Products
was engaged in the manufacture and sale of variable resistance weightlifting
machines and single station exercise machines. The sales price for the assets
was approximately $1.2 million, including $300,000 in cash, two promissory
notes from the purchaser in the aggregate principal amount of approximately
$818,000 (bearing interest at 7% per annum) and a $100,000 wholesale credit for
future purchases of weightlifting machines by the Company. The notes are
secured by a second lien on the purchaser's inventory and a first lien on other
assets, except for accounts receivable. The Company also subleased C.G.
Products' manufacturing facility to the purchaser, but remains the primary
obligor on the lease, which expires in May 1997. The Company has also agreed
to a non-competition agreement for the greater of five years or until payment
in full of the promissory notes. The purchaser did not assume certain
liabilities arising prior to the sale.
As a result of the sale, the operations of C.G. Products have been
accounted for as a discontinued operation in this Report and the accompanying
consolidated financial statements. The principal reasons for the sale were
C.G. products' inability to generate satisfactory profit margins on most of its
exercise machine product lines and management's strategic decision to exit the
market for weight stack equipment in order to stem continuing losses and focus
on the Company's consumer fitness accessories and light equipment products. An
after-tax provision of $573,000 for loss on disposal of these assets was made
in fiscal 1994. Net sales for the discontinued operations of C.G. Products
were $2.4 million for fiscal 1994. The net loss for the same period was
$152,000. See Note B to "Notes to Consolidated Financial Statements."
14
INITIAL PUBLIC OFFERING
On November 17, 1993, the Company completed an initial public offering of
Common Stock, with the issuance of 1,200,000 shares at $12.50 per share. The
Company received net proceeds of approximately $13.1 million after deducting
offering costs. The net proceeds were used (1) to repay approximately $10.9
million outstanding under a revolving credit facility, (2) to repay
approximately $1.5 million of other indebtedness, and (3) to increase funds
available for working capital purposes.
ACQUISITIONS
Effective May 24, 1994, the Company, through a newly formed and wholly
owned subsidiary, NBF, Inc., a Georgia Corporation, acquired substantially all
the assets and liabilities of NBF, Inc., a Florida Corporation, in exchange for
138,000 shares of the Company's restricted Common Stock. The purchase price
was approximately $2.8 million, including the assumption of certain
liabilities. Additionally, the Company acquired from an individual all of the
intellectual property rights to the products manufactured by NBF, Inc., a
Florida Corporation, for $150,000 in cash. NBF, Inc. is a manufacturer of
trampolines and other outdoor playground equipment. The acquisition was
accounted for as a purchase and accordingly, results of operations have been
included in the Consolidated Statement of Earnings since the acquisition date.
SALE OF ASSETS
In September of 1993, the Company sold substantially all of the assets of
its C.G. Products operations. C.G. Products was engaged in the manufacture and
sale of variable resistance weightlifting machines and single station exercise
machines. C.G. Products' net loss from operations for fiscal 1994 was
approximately $152,000. In addition, the Company realized a net loss on
disposal of the assets of C.G. Products of approximately $573,000 in fiscal
1994. The results of operations of C.G. Products are reflected in the Company's
consolidated financial statements as discontinued operations.
RESIGNATIONS
As a result of certain accounting and other issues raised by the Company's
independent accountants ("Accountants") (see Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure) two of
the Company's independent directors and the Company's Accountants resigned
during the month of June 1995. The Company subsequently filled these openings.
The Company does not believe that the issues raised by the Company's former
Accountants warranted the ensuing resignations of the Accountants and the
directors.
RESULTS OF OPERATIONS
The following table presents for the periods indicated, certain items
derived from the Company's consolidated statements of operations expressed as a
percentage of net sales. The trends in sales or earnings illustrated in the
following table may not be indicative of future earnings.
15
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PERCENTAGE INCREASE
PERCENTAGE OF NET SALES (DECREASE)
-------------------------- -------------------
FISCAL FISCAL
FISCAL YEAR ENDED MARCH 31, 1996 1995
OVER FISCAL
1996 1995 1994 1995 1994
------ ------ ------ ------ ------
Net sales ......................... 100.0 100.0 100.0 18 75
Cost of goods sold ................ 77.5 74.4 69.6 23 87
------ ------ ------
Gross profit .................... 22.5 25.6 30.4 4 47
Selling expenses .................. 9.8 10.1 10.5 15 69
Distribution, general and
administrative expenses ......... 15.1 12.4 10.9 44 99
Restructuring of operations ....... 4.9 0.0 0.0 0 0
29.8 22.5 21.4 57 84
Operating profit (loss) ........... (7.3) 3.0 9.0 (383) (40)
Interest expense .................. 2.8 1.7 1.7 93 75
Other expense (income) - net ...... (0.1) (0.1) (0.2) (78) 44
------ ------ ------
2.7 1.6 1.6 92 86
Earnings (loss) from
continuing operations before
income taxes .................. (10.0) 1.4 7.4 (947) (67)
Income tax expense (benefit) ..... (1.4) .5 2.7 (424) (66)
------ ------ ------
Earnings (loss) from
continuing operations ......... (8.5) .9 4.7 (1,255) (67)
====== ====== ======
(1) The percentages for 1995 and 1994 have been recalculated to reflect the
discontinuance of the Healthcare Division. See Management's Discussion of
Financial Condition and Results of Operations and Note B to "Notes to
Consolidated Financial Statements."
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995
The Company's fitness accessory products (Fitness Accessory Products)
consist of two major product categories - trampoline products (Trampoline
Products) and other fitness accessory products (Other Fitness Accessory
Products).
Net sales of Fitness Accessory Products in fiscal 1996 increased by
approximately $12.4 million from fiscal 1995, an increase of 18.3%
Approximately $11.5 million of this growth is attributable to net sales of
Trampoline Products which increased 127.9%. The balance of approximately
$900,000 is attributable to net sales of Other Fitness Accessory products,
which increased 1.4%. The Company introduced Trampoline Products to its
Fitness Accessory Products line during May 1994. Since that time net sales of
Trampoline Products has increased rapidly due to placement of trampolines at
several of the Company's high volume mass merchant customers. The Company
expects net sales of Trampoline Products will continue to grow at a high rate.
However, it is unlikely that the prior year percentage increase in net sales
can be maintained. The relatively flat net sales of Other Fitness Accessory
Products resulted from weak demand and a high level of product returns. The
high returns were a result of both defective product and accommodations to
certain of the Company's larger customers. Returns and other customer
deductions were particularly high in the fourth quarter of fiscal 1996. As a
result, the Company has adopted a tougher policy in regard to allowing customer
returns. In the first quarter of fiscal 1997, the Company rejected several
requests for sizable returns. The Company plans to reduce returns
significantly during fiscal 1997.
16
Gross profit for Fitness Accessory Products in fiscal 1996 increased by
approximately $800,000 over fiscal 1995, but decreased as a percentage of net
sales from 25.6% in 1995 to 22.5% in fiscal 1996. This is due to the fact that
trampoline products earn a lower gross margin than other Fitness Products and
were a higher proportion of sales in 1996. Gross margins of the other Fitness
Accessory Products were lower in 1996 than 1995 due primarily to a higher level
of customer returns and chargebacks.
During fiscal 1996, the Company implemented improved procedures for
identifying and recording customer chargebacks and potential chargebacks.
Despite such improved procedures and continuing review by management,
unanticipated chargebacks were particularly high during the fourth quarter. In
spite of a decrease in gross sales from approximately $32.9 million in the
third quarter to approximately $18.0 million in the fourth quarter, there was
an unanticipated increase in returns and other customer deductions of more than
$450,000. As a percentage of gross sales, returns and other customer deductions
increased from 9.7% in the third quarter to 19.9% in the fourth quarter. In
addition, certain customer deductions were written-off, in the fourth quarter,
that were previously disputed and expected to be collected prior to the end of
the quarter by the Company. These items had a significant impact on the fourth
quarter and therefore the year to date gross profit. The Company has adopted a
tougher policy beginning in fiscal 1997, in regard to accepting defective and
non-defective returns, and allowing other customer deductions.
Selling expenses for Fitness Accessory Products in fiscal 1996 increased
by approximately $1.0 million compared to fiscal 1995 and decreased as a
percentage of net sales of Fitness Accessory Products from 10.1% in fiscal 1995
to 9.8% in fiscal 1996. The dollar increase in selling expenses is attributed
to the overall increase in net sales of Fitness Accessory Products. The
decrease in selling expenses as a percentage of net sales of Fitness Accessory
Products is attributable to increased sales volume.
Distribution, general and administrative expenses for Fitness Accessory
Products increased by $3.7 million compared to fiscal 1995 and increased as a
percentage of net sales of Fitness Accessory Products from 12.4% in fiscal 1995
to 15.1% in fiscal 1996. The increase in distribution, general and
administrative expenses in dollars is attributed to the increase in net sales;
excessive warehouse rent and labor costs associated with product returns. In
addition, distribution, general and administrative expenses were higher than
anticipated due to increased consulting and temporary employee expenses to
address problems with the Company's computer system; increased legal expenses
and audit fees; expenses associated with taking extra physical inventories; and
certain other expenses.
In particular, the fourth quarter was impacted by significant temporary
storage charges associated with in-transit inventory, legal expenses, and
insurance costs associated with product liability. As a result of the
restructuring plan discussed earlier, the Company expects to significantly
reduce warehouse rent, temporary storage charges, and warehouse labor.
The Company took a charge of $4.0 million to operating profit for
restructuring of continuing operations during the fourth quarter.
Restructuring of operations is discussed elsewhere in Management's Discussion
and Analysis of Financial Condition and Results of Operations.
Operating profit from continuing operations in fiscal 1996 as compared to
fiscal 1995 decreased by $7.9 million including a restructuring charge of $4.0
million. As a percentage of net sales, operating profit decreased from a 3.0%
operating profit to a 7.3% operating loss.
Interest expense for continuing operations in fiscal 1996 increased
approximately $1.0 million from fiscal 1995 primarily due to a higher interest
rate on the Company's borrowings. In addition, the average
17
loan balance was higher in fiscal 1996 due to increased working capital
required to support increased sales volume partially offset by higher accounts
payable.
Due to a loss from continuing operations the Company recorded an income
tax benefit of $1.0 million which is based on an effective tax rate of 14.2%.
The tax benefit was reduced to reflect the amount expected to be realized. The
Company may potentially realize additional tax benefit depending on future
earnings.
FISCAL YEAR ENDED MARCH 31, 1995 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1994
Net sales in fiscal 1995 increased by $29.1 million from fiscal 1994, an
increase of 75.2%. Approximately $20.1 million of this increase in net sales is
attributable to Other Fitness Accessory Products, and the balance of
approximately $ 9.0 million is attributable to the addition of Trampolines
Products to the Company's Fitness Accessory Products line in May 1994. The
increase in net sales of Other Fitness Accessory Products resulted from
increased placement; and increased volume of products sold to the Company's
core customers. The Company generated additional business with these customers
through promotional and "buy back" programs. Buy back programs entail
purchasing a competitor's products from a retailer in order to replace the
competitor's product with the Company's.
Gross profit in fiscal 1995 increased by $5.6 million from fiscal 1994 but
decreased as a percentage of net sales from 30.4% in fiscal 1994 to 25.6% of
net sales in fiscal 1995. Accessory Fitness Products experienced a decline in
gross profit as a percentage of net sales primarily due to additional costs to
generate higher sales volume; costs associated with higher customer buybacks,
returns and deductions; and the addition of Trampoline Products. In order to
increase sales volume during fiscal 1995, the Company, in some cases, was
required to buy competitors' products from retailers before the Company could
ship its products. This resulted in a charge to gross profit for increased
reserve for inventory obsolescence. In addition, the Company experienced
higher than normal customer returns and allowances during fiscal 1995 which
also reduced gross profit. Net sales of the newly acquired Trampoline Products
increased from zero in fiscal 1994 to approximately $9.0 million, 13.3% of net
sales, in fiscal 1995. Trampoline Products have a lower gross profit as a
percentage of net sales as compared to Other Fitness Accessory Products. As a
result, weighted average gross profit as a percentage of net sales decreased.
Finally, the Company experienced certain start up inefficiencies in the
Trampoline Product operation which further reduced gross profit.
Selling expenses in fiscal 1995 increased by $2.8 million compared to
fiscal 1994 but decreased as a percentage of net sales from 10.5% in fiscal
1994 to 10.1% of net sales in fiscal 1995. The dollar increase in selling
expenses is primarily a result of increased volume during fiscal 1995. The
decrease in selling expenses as a percentage of net sales is primarily a result
of certain selling expenses being relatively fixed and Trampoline Products
requiring less selling expense as compared to Other Fitness Accessory Products.
Distribution, general and administrative expenses increased by $4.2
million compared to fiscal 1994 and increased as a percentage of net sales from
10.9% in fiscal 1994 to 12.4% in fiscal 1995. The increase in distribution,
general and administrative expenses in dollars and as a percentage of net sales
is primarily attributable to certain inefficiencies in the warehousing and
distribution of product caused by excessive inventory and inadequate space for
a portion of the year. This resulted in inflated payroll and rent expense.
Other contributing factors include higher costs associated with increased
volume and costs incurred in anticipation of continuing increases in sales.
18
Operating profit in fiscal 1995 decreased $1.4 million from fiscal 1994.
Due to the factors discussed above, operating profit as a percentage of net
sales in fiscal 1995 decreased to 3.0% from 9.0% in fiscal 1994.
Interest expense in fiscal 1995 increased $501,000 as a result of
increased borrowings under the Company's revolving line of credit in order to
finance higher working capital needs to support increased sales and resulting
higher inventory and accounts receivable.
Income tax expense for earnings from continuing operations in fiscal 1995
and fiscal 1994 reflect an effective tax rate of 37.1% and 36.3% respectively.
SEASONALITY; QUARTERLY RESULTS
In the past, the Company's net sales and earnings have been higher in the
last six months of the fiscal year compared to the first six months of the
fiscal year. This trend has continued for net sales. As a percentage of
annual net sales the net sales for the last six months of both fiscal 1996 and
1995 were approximately 57.3%. The higher net sales in the last six months
results from the Christmas selling season and increased consumer demand in
response to New Year's resolutions to "take better care of one's self." Net
earnings for the Company will generally rise and fall with sales volume
although not directly in proportion to the change in net sales due to certain
of the Company's expenses being relatively fixed while others are relatively
variable. The Company's quarterly operating results may also vary depending on
such other factors as the timing of significant customer orders, the mix of
products sold, and the efficiency of operations. However, during the last two
fiscal years, the Company experienced a net loss from continuing operations in
the fourth quarter. The fourth quarter of fiscal 1996 was adversely impacted
by a restructuring charge, high customer returns and deductions, write-off of
customer deductions previously disputed by the Company, increase in product
scrapped resulting from refurbished returns; high temporary storage charges
associated with in-transit inventory; high legal expenses; and certain
insurance costs associated with product liability. During fiscal 1995, the
Company also experienced a net loss in the fourth quarter. The fourth quarter
of fiscal 1995 was adversely impacted by certain inefficiencies in the newly
acquired trampoline subsidiary; higher than normal customer buybacks; certain
inefficiencies in the distribution operation; and a significant drop in sales
from the third quarter of fiscal 1995. Although net sales for fiscal 1995 were
up approximately 75.2% from fiscal 1994 the Company anticipated substantially
higher sales for the fourth quarter of fiscal 1995 than were realized. As a
result, and because of fixed expenses, certain selling, distribution, and
general and administrative expenses in the fourth quarter were not reduced in
proportion to the decrease in net sales.
The following table sets forth selected quarterly unaudited information
for the 1996, 1995, and 1994 fiscal years. In the opinion of the Company, such
information reflects all adjustments, consisting only of normal recurring
adjustments necessary to present fairly the information set forth below. The
operating results for any quarter are not necessarily indicative of the results
for any future period. In addition, sales growth in recent quarters has
resulted from significantly increased product penetration at certain large
retailers and the Company believes that sales growth may be more modest in the
future.
19
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THREE MONTHS ENDED
FISCAL 1996 FISCAL 1995
---------------------------------------------- ---------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1994 1994 1994 1995
--------- --------- --------- --------- --------- --------- --------- ---------
Net Sales ......... $ 12,762 $ 21,489 $ 31,648 $ 14,401 $ 12,760 $ 16,245 $ 23,256 $ 15,633
Operating Profit
(loss) .......... (748) 1,434 1,683 (8,218) 953 898 1,569 (1,355)
Earnings (loss)
from continuing
operations ...... (703) 694 701 (7,553) 572 465 744 (1,187)
Earnings (loss) per
share from
continuing
operations ...... (0.19) 0.18 0.18 (2.03) 0.15 0.12 0.19 (0.32)
THREE MONTHS ENDED
FISCAL 1994
---------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1993 1993 1993 1994
--------- --------- --------- ---------
Net Sales ......... $ 7,333 $ 8,940 $ 11,585 $ 10,888
Operating Profit
(loss) .......... 664 854 1,064 888
Earnings (loss)
from continuing
operations ...... 347 421 599 459
Earnings (loss) per
share from
continuing
operations ...... 0.12 0.16 0.19 0.12
The above table for Fiscal 1995 and 1994 has been reclassified to
retroactively recognize the discontinued Healthcare Division.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of financing in the past several years
have been short-term borrowings from banks, asset based lenders and an IPO.
The Company's cash flow from operations was approximately $4.0 million for
fiscal 1996, although there was negative cash flow from operations in fiscal
1995 and 1994. The improvement in cash flow from operations is due primarily
to significantly smaller increases in inventory and trade accounts receivable
in fiscal 1996 compared to fiscal 1995. In addition, there was a significantly
larger increase in accounts payable in fiscal 1996 as compared to fiscal 1995.
The above were partially offset by a large loss in fiscal 1996 as compared to a
profit in fiscal 1995.
The Company currently has a revolving credit facility ("Credit Line") with
a bank that provides for a maximum Credit Line of $22.5 million through May 16,
1996, $23.3 million from May 17, 1996, through July 30, 1996. In accordance
with the Company's plan, the credit line will be reduced to $22.5 million on
July 31, 1996, and to $21.5 million on September 30, 1996. The Credit Line is
subject to borrowing base requirements, certain covenants, and other
provisions. As of March 31, 1996, the Company was in default or out of
compliance with certain of the covenants or other provisions of the Credit
Line. The bank has agreed to forebear exercising any of its rights and
remedies regarding these defaults or non-compliance items through November 8,
1996.
The outstanding balance under the Credit Line, $22.5 million as of March
31, 1996, is collateralized by the Company's trade accounts receivable,
inventory, and headquarters building.
The outstanding balances under the Credit Line from September 8, 1994, to
September 8, 1995, bore interest at the bank's prime interest or, at the
Company's discretion LIBOR plus 2%. From September 9, 1995, to December 28,
1995, the rate increased to prime plus 2% on the first $22.5 million and prime
plus 3% on the balance. From December 29, 1995, until November 8, 1996, the
rate is prime plus 3% on the entire balance.
The original Credit Line expired on September 8, 1995, but the bank has
extended the Credit Line several times, most recently until November 8, 1996,
with the understanding that the Company continue to actively pursue alternative
financing. The Company has been and continues to pursue such alternative and
additional financing to replace and increase the Credit Line.
20
The Company entered into a commitment agreement (the "Agreement") with a
financial institution on July 12, 1996, establishing a revolving credit
facility (the "Credit Line") for up to a maximum of $30 million. Borrowing
under the Credit Line is limited to a percentage of eligible trade accounts
receivable and inventory as defined in the Agreement. The Credit Line has a
three year maturity and is collateralized by the Company's assets including
inventory, trade accounts receivable, and real property. The interest rate
under the Credit Line is prime plus 1.75%. In addition, the Company is
required to pay certain closing, commitment, management, and unused line fees.
Furthermore, the Credit line requires the Company to comply with certain
financial and other covenants as defined in the Agreement. Limited personal
guarantees by Glenn and Bob Bollinger are also required. The Agreement
terminates on July 31, 1996, if final documentation cannot be negotiated and
certain other conditions precedent are not met by that time. The Company
believes that the Agreement will close by July 31, 1996.
In addition, the Company expects to raise funds through the sale of
certain inventory disposed of as part of the restructuring of the Fitness
Accessory Product line and improved earnings as a result of the restructuring
and disposal of the Healthcare business.
However, there is no guarantee that the Company will be successful in
raising adequate funds from any of these sources or obtaining a further
extension from the Company's current bank or closing the financing Agreement.
Improved liquidity is crucial to the future success and growth of the
Company. Recognition of this fact is one of the primary reasons that management
initiated the Plan discussed earlier. During 1997, the Plan anticipates
generating approximately $7 million from disposal of inventory. In addition,
the Company will receive approximately $2.3 million in federal income tax
refunds arising from losses in fiscal 1996. These funds will be used to reduce
trade accounts payable and other debt. As a result of anticipated lower debt,
the Company's interest expense should decreased towards the end of fiscal 1997.
Other operating improvements will also generate cash flow.
Failure to raise adequate alternative and additional funds may have a
materially adverse effect on the Company.
The Company from time to time reviews the possible acquisition of
businesses or products that complement its current business. In May 1994, the
Company acquired substantially all the of the assets and certain liabilities of
NBF for 138,000 shares of the Company's restricted common stock and the
assumption of approximately $1.7 million in liabilities. The Company also
acquired certain intellectual property rights for an additional $150,000. The
business acquired consists of the manufacture and sale of large size
trampoline, trampoline parts, and other outdoor playground equipment. NBF had
net sales of approximately $4.0 million in 1993. The Company currently has no
plans, arrangements or understandings with respect to any other acquisitions of
businesses or products.
Capital expenditures during fiscal 1996 were approximately $425,000. The
Company has budgeted approximately $500,000 for capital expenditures for fiscal
1997.
INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
To date, inflation and foreign currency fluctuations have not had a
material impact on the Company's operations. There can be no assurance,
however, that future inflation or foreign currency fluctuations will not have a
material adverse effect on the Company, or that the Company will be able to
pass on resulting cost increases without experiencing a reduction in demand for
its products. A substantial
21
portion of the Company's existing indebtedness bears, and future indebtedness
may bear, interest that fluctuates with the prime rate.
FACTORS THAT COULD AFFECT FUTURE PERFORMANCE
This report contains certain forward looking statements about the business
and financial condition of the Company, including various statements contained
in "Management's Discussions and Analysis of Financial Condition and Results of
Operations." The actual results of the Company could differ materially from
those forward looking statements. The following information sets forth certain
factors that could cause the actual results to differ materially from those
contained in the forward looking statements.
Disposal of Denise Austin Branded Product
The current Restructuring Plan anticipates disposing of approximately $5.0
million of Denise Austin branded product at a certain realizable value. This
valuation is based on the Company's best estimate of market demand at the time
of this report. The actual realizable value of this inventory may differ
materially from these estimates.
Legal Proceedings
The Company and certain officers and directors are defendants in two
separate lawsuits that purport to be class actions and allege certain
misrepresentations and fraudulent actions by the defendants. While the Company
believes both actions are without merit, a negative outcome would have a
material adverse effect upon the Company's business, operating results and
financial condition. In addition, the staff of the Securities and Exchange
Commission has indicated to the Company it is their preliminary determination
to recommend a civil injunctive action be brought against the Company, Glenn
Bollinger, and Ron Bollinger. A negative outcome in this matter would have a
material adverse effect upon the Company's business, operating results and
financial condition. See Item 3. Legal Proceedings.
Discontinued Operations
Management plans to dispose of the Company's Healthcare Division. A net
provision of approximately $400,000 has been established to cover estimated
operating losses through December 31, 1996, the planned disposal date offset by
an expected gain on sale of assets. While the Company believes that the
provision is adequate, a reduced selling price for the assets, higher operating
loss, or an extended disposal date could results in an additional charge to
earnings.
Products and Markets
A significant part of previous years sales have been generated by
celebrity endorsed product which the Company, as part of the Restructuring
Plan, plans to substantially reduce in the future. The Company believes the
Bollinger brand name and other trademarks and brands are sufficiently strong to
continue the recent sales growth trend. Sales of the Company's products may be
adversely affected by general economic conditions and unexpected consumer
preference for celebrity endorsed product. Additionally, sales of Trampoline
Products are expected to continue to grow based on current customer demand.
This demand may weaken as consumer preferences and other market conditions
change.
22
Financing
The Company signed a financing commitment agreement to replace its current
credit facility. If the commitment is not closed by July 31, 1996, it will
terminate. The Company believes the agreement will be consummated. However,
there is no guarantee that the financing will close or that other financing can
be arranged. Failure to arrange adequate financing could have a material
adverse effect on the Company. See Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources.
CHARGEBACKS
The Company has instituted certain changes in policies and procedures in
regard to customer chargebacks to be implemented in fiscal 1997. As a result,
the Company anticipates a substantial reduction in customer chargebacks during
fiscal 1997, as compared to fiscal 1996. However, there is no guaranty that
the Company will be successful in this endeavor due to customer resistance or
other factors. Failure to successfully reduce chargebacks could have a
significant effect on the Company's future earnings.
VENDOR PRICING
The Company plans to negotiate better prices form its vendors in fiscal
1997. The Company has had initial success with two large vendors. However,
there are no guarantees that it will have additional success in this regard.
Failure to negotiate lower prices can have a material impact on the Company's
future earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The consolidated financial statements and schedules of the Company as of
March 31, 1996, and 1995, and for each of the years in the three-year period
ended March 31, 1996, are included as part of this Report beginning on page F-1
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) On Thursday, June 22, 1995, Grant Thornton L.L.P., the
Company's independent accountant, advised by letter that it was
resigning in its capacity as auditor and certifying accountant for
the Company, effective immediately.
(b) Reports prepared by Grant Thornton L.L.P. on the financial
statements of the Company for each of the past two (2) fiscal years
do not contain any adverse opinions or disclaimers of opinion, nor
were they qualified or modified with respect to any uncertainty,
audit scope, or accounting principles.
(c) The audit committee of the Board of Directors did not recommend
or approve of the resignation.
(d) During the audit of the Company's fiscal year ended March 31,
1995, as conducted by Grant Thornton L.L.P., questions were raised
concerning certain transactions identified by the auditors and about
certain internal controls perceived as lacking by the auditors, which
subjects resulted in disagreements between the Company and Grant
Thornton L.L.P.
23
Specifically, the concerns as expressed to management centered around:
1. Questions concerning two sales of inventory to customers of the
Company in the fourth quarter ended March 31, 1995;
2. A lack of comfort with certain internal accounting procedures
in the shipping and receiving departments.
3. Questions concerning the validity of certain shipping
documentation; and
4. The conduct of certain warehouse personnel viewed by the
auditors as reflecting an uncooperative posture and a negative
attitude toward the personnel of Grant Thornton L.L.P. performing
audit functions.
On June 6, 1995, Grant Thornton L.L.P. met with two members of the audit
committee of the Board of Directors to discuss these concerns. Thereafter, on
June 7, the members of the audit committee who attended the June 6 meeting
advised management of the scope of the disagreements and proposed a modified
management structure that Grant Thornton L.L.P. had approved and which if
implemented, would hopefully result in a resolution of the disagreements.
Management discussed the subject matter of the disagreements and the modified
management structure with all of the Company's directors and with Grant
Thornton L.L.P., but were unable to reach any agreement. Consequently, on June
20, the two directors who attended the June 6 meeting resigned and thereafter,
on June 22, Grant Thornton L.L.P. resigned as independent accountants, stating
that it could not rely on representations of management.
The Company cannot conclude with any certainty that these disagreements,
if not resolved to the satisfaction of the auditors, would have caused Grant
Thornton L.L.P. to make reference to the subject matter of the disagreements
in connection with its report to be issued on the financial statements of the
Company for its fiscal year ended March 31, 1995. The Company has requested
that Grant Thornton L.L.P. fully respond to any inquiries by a designated
successor accountant concerning the subject matter of each and all of the
disagreements set forth above.
The following is the response submitted to the SEC by Grant Thornton
L.L.P.:
"We have read Item 4 of the Form 8-K of Bollinger Industries, Inc.
(Bollinger) dated June 28, 1995. We do not believe that Item 4 (d) of
Bollinger's Form 8-K accurately or completely describes the events which led
Grant Thornton L.L.P. (Grant) to resign as the Company's auditors. Nor do we
agree with Bollinger's characterization of the questions Grant raised regarding
certain transactions which took place during Bollinger's fiscal year ended
March 31, 1995.
On June 7, 1995, we met with two of the three members of the audit
committee of the Board of Directors. These two members represented all outside
directors who were not employed by or closely associated with Bollinger. At
that meeting, we informed those directors of certain transactions, situations
and issues, as set forth in the following paragraph, that had come to our
attention during the course of the 1995 audit that caused us to conclude that
we could no longer rely on the representations of management. Accordingly, we
had concluded that it was necessary for us to resign as independent auditors.
The two directors proposed an alternative whereby they would initiate an
investigation to determine the depth of the problems and create a modified
management structure that would separate current management from the operations
of Bollinger. We agreed that such a structure would enable us to continue as
auditors. We understand that the two board members then met with management to
inform them of our position and to
24
present their proposal. Management requested a meeting with us which occurred
on June 15, 1995. During that June 15th meeting, we discussed the
circumstances that caused us not to be able to rely on management's
representations, and especially highlighted the transactions, situations and
issues set forth in the next paragraph of this letter. Finally, we informed
management of our intention to resign as independent auditors unless the
Board's alternative management structure was implemented or another acceptable
alternative found. On June 20, 1995, the two outside directors resigned. We
thereafter resigned on June 22, 1995, because management had not agreed to the
Board proposal that would have enabled us to remain as auditors and no other
acceptable solution had been suggested.
The transactions, situations and issues that caused us to conclude that we
could no longer rely on the representations of management are as follows:
1. Questions concerning the substance of sales to two customers
during March 1995.
2. Questions concerning the substance of a previous sale in March
1994 to one of the aforementioned customers.
3. Questions concerning the validity of certain shipping documents
supporting sales recorded during the last week of March 1995.
4. Questions regarding the apparent override of internal controls
in the shipping and receiving departments.
5. Reluctance of employees to answer our questions during the
course of the 1995 audit.
We agree with the statements contained in paragraphs (a), (b), and (c) of
Item 4.0.
On Tuesday, July 25, 1995 the Company engaged the firm of King, Burns &
Company, P.C. as independent accountants to audit the Company's financial
statements for fiscal year ending March 31, 1995. During the Company's two
most recent fiscal years, and any subsequent interim period prior to engaging
that accounting firm, neither the registrant nor anyone acting on its behalf
consulted the newly engaged accounting firm regarding the application of
accounting principles to a specified transaction, the type of audit opinion
that might be rendered on the Company's financial statements, or any matter
that was either the subject of a disagreement with the Company's former
accountants or a reportable event.
25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:
ˇ Download Table
NAME AGE POSITION
---- --- --------
Glenn D. Bollinger 45 Chairman of the Board and Chief Executive Officer
Bobby D. Bollinger 43 Vice Chairman of the Board and President
John T. Pryor 46 Senior Vice President - Finance, Chief Financial
Officer, Treasurer and Secretary
Ron C. Bollinger 48 Executive Vice President - Fitness and President -
NBF Division
James A. Burgin 54 Executive Vice President - Sales
Jack P. Carrithers 48 Executive Vice President - Marketing
Dell K. Bollinger 69 Senior Vice President - Administration
Robert B. Logan 54 Controller and Chief Accounting Officer
John L. Maguire 65 Director
Stephen L. Parr 42 Director
Richard J. Tucker 48 Director
Set forth below is a description of the backgrounds of each of the
directors and executive officers of the Company.
Glenn D. Bollinger is a co-founder of the Company and has served as
Chairman of the Board and Chief Executive Officer since 1979. Mr. Bollinger is
primarily responsible for the Company's overall operations, including in
particular inventory, manufacturing and warehousing.
Bobby D. Bollinger is a co-founder of the Company and has served as Vice
Chairman of the Board and President since 1979. Mr. Bollinger is primarily
responsible for sales, marketing and product development. Mr. Bollinger is
Glenn Bollinger's brother.
John T. Pryor became Senior Vice President - Finance, Chief Financial
Officer, Treasurer and Secretary of the Company in May 1996. Mr. Pryor is a
certified public accountant. Mr. Pryor was most recently employed by Insilco
Corporation, a publicly owned company headquartered in Dublin, Ohio. Insilco is
a diversified manufacturing firm with operations throughout the United States.
Mr. Pryor served as Vice President - Administration, Treasurer and a Director
of Taylor Publishing Company, an Insilco subsidiary, for the past seven years.
He was employed by Insilco in a variety of financial management positions for
approximately fifteen years. Insilco filed a petition under Chapter XI of the
Bankruptcy Code in 1991, and a subsidiary of Insilco, Contract Talents, Inc.,
was included in the Bankruptcy proceeding. Eventually Contract Talents was
liquidated. Mr. Pryor was an officer and director of that subsidiary.
26
Ron C. Bollinger has served as a Vice President of the Company since April
1993 and became Executive Vice President - Fitness in September 1993. In July
1995, Mr. Bollinger became Executive Vice President and President - NBF
Division. Mr. Bollinger was previously a principal in a firm providing
consulting, training, contracting, and development services. Mr. Bollinger is
the brother of Glenn and Bobby Bollinger.
James A. Burgin became Vice President - Sales in December 1993. He became
Executive Vice President of Sales in November 1994. Before joining the Company,
Mr. Burgin was Executive Vice President of Dynamic Classics, Ltd., distributor
of fitness products. Mr. Burgin was employed by Dynamic for approximately three
years. Prior to Dynamic, Mr. Burgin was employed by various companies in the
fitness and toy industries for approximately twenty years.
Jack P. Carrithers became acting Vice President - Marketing in December
1993 and was elected Vice President - Marketing in May 1994. He became
Executive Vice President in November 1994. Before joining the Company, Mr.
Carrithers was a Vice President and Creative Director of Penny & Speier
Advertising Agency from July 1991 to November 1993. Prior to that employment,
he was an Executive Vice President and Creative Director of Evans
Communications for six years. In these past positions, Mr. Carrithers had
responsibility for developing marketing and advertising programs and materials
for a broad range of products and services.
Dell K. Bollinger became involved in the Company's business when it was
founded by her sons, Glenn and Bobby Bollinger, in 1974. Mrs. Bollinger has
served as a Vice President of the Company since 1979. Mr. Ron Bollinger is also
Mrs. Bollinger's son.
Robert B. Logan became Controller and Chief Accounting Officer in
September 1995. Mr. Logan is a certified public accountant. Before joining the
Company, Mr. Logan was most recently President, General Manager, Secretary and
Treasurer of Plastics Manufacturing Company, a subsidiary of a publicly owned
company. Plastics, headquartered in Dallas, Texas, is a manufacturer of
compression and injection molded dinnerware. Mr. Logan was employed by Plastics
for approximately twenty-seven years.
John L. Maguire became a director in September 1993 and served as interim
Chief Financial Officer from August 1992 to August 1993. In addition, the
Company employs Mr. Maguire as a salaried consultant on certain financial
matters and acquisitions. Mr. Maguire is a certified public accountant. In
addition to his duties at Bollinger, Mr. Maguire is President of Code Rite,
Inc., and Ampro Medical Services, Inc., two healthcare companies. Since 1982,
he has been self-employed, concentrating on private family investments. He was
previously Chief Financial Officer of Tyson Foods, Inc., for 12 years. Mr.
Maguire was a director of Arkansas Equity Growth Fund, Inc., a publicly held
investment company which was liquidated in July 1993 and subsequently
dissolved.
Stephen L. Parr became a Director of the Company in November 1995. Mr.
Parr is currently President of Navigator Capital Management, LLC. Mr. Parr was
previously a Vice President of Goldman Sachs where he was an international
specialist. Mr. Parr was with Goldman Sachs from 1977 to 1995. Mr. Parr serves
on the Board of Directors of DayStar Digital, a Georgia computer company,
Nextek, Inc., an Alabama electronics company, and Corphealth, Inc., a Texas
behavioral healthcare company.
Richard J. Tucker became a Director in July of 1995. In addition, the
Company is retaining Mr. Tucker as a consultant on certain financial and other
matters. Mr. Tucker is the Chairman and Chief Executive Officer of First
Fidelity Acceptance Corporation, a nationwide automobile finance company
headquartered in Plano, Texas. Mr. Tucker has been employed by First Fidelity
since 1992. Prior to First
27
Fidelity, Mr. Tucker was President of two holding companies, EntreCap
International, Inc. and Asset International Management Group, Inc.
The Company's board of directors is currently composed of five directors,
two of whom are not employees of the Company. However, one of the non-employee
directors is currently retained as a consultant to the Company. All of the
current directors serve until the next annual shareholder's meeting or until
their successors have been duly elected and qualified.
ITEM 11. EXECUTIVE COMPENSATION.
The following table summarizes the compensation paid to the Company's
chief executive officer and the Company's two other most highly compensated
executive officers for services rendered in all capacities to the Company
during fiscal 1996, 1995 and fiscal 1994.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
ˇ Enlarge/Download Table
OTHER ANNUAL
NAME AND SALARY BONUS COMPENSA- ALL OTHER
PRINCIPAL POSITION YEAR ($) ($) TION ($)(1) OPTIONS (#) COMPENSA-TION ($)
------------------ ---- -------- ------ -------------------- ----------- -----------------
Glenn D. Bollinger......... 1996 $275,717 -- -- -- --
Chairman of the Board and 1995 275,735
Chief Executive Officer... 1994 277,500 -- -- -- --
Bobby D. Bollinger......... 1996 275,717 -- -- -- --
Vice Chairman of the Board 1995 275,735
and President............. 1994 277,500 -- -- -- --
James A. Burgin (2)......... 1996 118,024 -- -- -- --
Executive Vice President - 1995 78,462 18,748 -- 5,000 --
Sales..................... 1994 21,058 -- -- 10,000 --
(1) Certain of the Company's executive officers receive personal benefits in
addition to salary and cash bonuses. The aggregate amount of the personal
benefits, however, do not exceed the lesser of $50,000 or 10% of the total
of the annual salary and bonus reported for the named executive.
(2) Mr. Burgin did not become an officer of the Company until December 1993.
The salary shown reflects compensation paid by the Company for
approximately three months of fiscal 1994. Mr. Burgin's annual base
salary was $75,000.
There were no options granted to the above individuals during fiscal 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In January 1994, the Company's board of directors appointed a Compensation
Committee, which was comprised of Messrs. Rundell and Jenkins, both of whom
were independent directors. Decisions concerning compensation before the
Company's initial public offering in November 1993 were made by the Company's
board of directors, which consisted of Messrs. Glenn Bollinger and Bobby
Bollinger prior to the Company's reincorporation during September 1993, as a
Delaware corporation and, additionally, of Mr. Maguire after the
reincorporation. Messrs. Glenn Bollinger and Bobby Bollinger have been
executive officers of the Company since 1979. Mr. Maguire was an officer of the
Company from August 1992 to August 1993 and is currently retained as a
consultant by the Company. Messrs. Rundell and Jenkins were replaced by Messrs.
Tucker and Green after the former independent directors resigned in June 1995.
Mr. Tucker is currently retained as a consultant by the Company. Mr. Green was
replaced by Mr. Parr during November 1995.
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OPTIONS EXERCISES AND HOLDINGS
The following table sets forth information with respect to the named
executives concerning exercise of options during fiscal 1996 and unexercised
options held as of the end of fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
ˇ Enlarge/Download Table
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END (#) YEAR-END ($) (1)
--------------------------- ---------------------------
SHARES
ACQUIRED
ON
NAME EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------- ------------- ------------------ ----------- ------------- ----------- -------------
Glenn D. Bollinger 146,060 292,419(2) -- -- -- --
Bobby D. Bollinger 146,060 292,419(2) -- -- -- --
James A. Burgin -- -- 5,250 9,750 -- --
(1) Based on the closing sale price of the Common Stock on March 31, 1996, of
$2.75 per share as reported by the over-the-counter Bulletin Board and a
weighted average exercise price per share of $10.33.
(2) Based on the closing sale price of the Common Stock on March 29, 1996 of
$2.75 per share as reported by the over-the-counter Bulletin Board and an
exercise price of $.75 per share.
DIRECTOR COMPENSATION
Each independent director receives a fee of $10,000 annually and is
reimbursed for out-of-pocket expenses incurred in connection with attendance at
board of directors and committee meetings. Each independent director was
granted options to purchase 8,333 shares of Common Stock at the time he became
a director.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information with respect to the
beneficial ownership of the shares of Common Stock of the Company, as of June
24, 1996, by (i) each director, (ii) the Company's chief executive officer and
two other most highly compensated executive officers in fiscal 1996, (iii) all
officers and directors of the Company as a group, and (iv) each person deemed
to beneficially own more than five percent of the outstanding shares of Common
Stock. Except as otherwise indicated, each stockholder identified in the table
has sole voting and investment power with respect to its or his shares.
ˇ Download Table
SHARES OWNED
---------------------
NAME NUMBER PERCENTAGE
---- --------- ----------
Glenn D. Bollinger (1)(2) 1,950,459 48.8
Bobby D. Bollinger (1)(3) 1,950,459 48.8
James A. Burgin (4) 5,250 *
John L. Maguire (5) 57,333 1.4
Richard J. Tucker -- *
Stephen L. Parr 2,500 *
All directors and executive officers as a
group (11 persons) (6) (7) (8) 2,459,927 60.3
---------------
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* Less than 1% of the outstanding shares of Common Stock.
(1) Business mailing address is 222 W. Airport Freeway, Irving, Texas 75062.
(2) Includes (i) 425,069 shares over which Glenn Bollinger has sole voting
and investment control; (ii) 436,000 shares held by Glenn Bollinger Family
Enterprises, Ltd., a Texas limited partnership, over which Glenn Bollinger
has shared voting and investment power because he and his brother Bobby
Bollinger each own 49.5% of the outstanding stock of the sole general
partner; (iii) 436,000 shares held by Bob Bollinger Family Enterprises,
Ltd., a Texas limited partnership, over which Glenn Bollinger has shared
voting and investment power because he and his brother Bobby Bollinger
each own 49.5% of the outstanding stock of the sole general partner; and
(iv) 653,390 shares held by the trustees of the Company's 401(K) Plan
successor to the Company's Employee Stock Ownership Plan (the "401(K)
Plan"), including Glenn Bollinger, and over which he has shared voting and
investment power. Neither the inclusion of shares owned by Bob Bollinger
Family Enterprises, Ltd., nor the inclusion of any 401(K) Plan shares not
allocated to Glenn Bollinger's 401(K) participant account is to be
construed as an admission that he is the beneficial owner of such shares.
(3) Includes (i) 425,069 shares over which Bobby Bollinger has sole voting
and investment control; (ii) 436,000 shares held by Bob Bollinger Family
Enterprises, Ltd., a Texas limited partnership, over which Bobby Bollinger
has shared voting and investment power because he and his brother Glenn
Bollinger each own 49.5% of the outstanding stock of the sole general
partner; (iii) 436,000 shares held by Glenn Bollinger Family Enterprises,
Ltd., a Texas limited partnership, over which Bobby Bollinger has shared
voting and investment power because he and his brother Glenn Bollinger
each own 49.5% of the outstanding stock of the sole general partner; and
(iv) 653,390 shares held by the trustees of the 401(K) Plan, including
Bobby Bollinger over which he has shared voting and investment power.
Neither the inclusion of shares owned by Glenn Bollinger Family
Enterprises, Ltd., nor the inclusion of any 401(K) Plan shares not
allocated to Bobby Bollinger's 401(K) participant account is to be
construed as an admission that he is the beneficial owner of such shares.
(4) Includes options to purchase 5,250 shares of Common Stock that are
currently exercisable or will be exercisable within sixty days.
(5) Includes options to purchase 53,333 shares of Common Stock that are
currently exercisable or will be exercisable within sixty days. Does not
include 1,000 shares of Common Stock held in trust for which the reporting
person is the trustee and is a contingent beneficiary. The reporting
person disclaims beneficial ownership of these shares.
(6) Includes options to purchase 76,499 shares of Common Stock that are
currently exercisable or will be exercisable within sixty days.
(7) Shares which are included beneficially under both Glenn and Bobby
Bollinger are only included once in the group total.
(8) Includes 1,300 and 100 shares of Common Stock, respectively, beneficially
owned by two executive officers of the Company, which are held by brokers
as custodians for the officers' individual retirement accounts.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In April 1993, an independent sales representative of the Company,
advanced $500,000 to the Company for working capital. The loan was evidenced by
the Company's real estate lien note bearing interest at 10% per annum due March
31, 1996, and secured in part by a lien on the Company's Irving facility. In
connection with this loan, the Company issued 34,405 shares of Common Stock. In
December 1993, Messrs. Glenn and Bobby Bollinger and Mrs. Dell Bollinger
purchased the note and received an assignment of the real estate lien in
consideration of payment of the outstanding principal balance of the note. On
March 29, 1996, the Company paid each of Messrs. Glenn and Bobby Bollinger
$110,000 against the note. The proceeds of the note payments were used by
Messrs. Glenn and Bobby Bollinger to exercise certain stock options granted in
1991. The balance of the notes which total $280,000 was extended to March 31,
1998. In May 1996, a priority lien on the real estate was granted to a bank to
secure the Company's credit facility.
The Company believes that the terms of the above transaction were at least
as favorable to the Company as those which could have been obtained in an arm's
length transaction with an unaffiliated party.
30
The Company retains Mr. Richard J. Tucker, a director of the Company, as a
consultant on certain financial and other matters. Mr. Tucker receives $75,000
per year and is guaranteed a total of $150,000 over two years. Mr. Tucker
received $56,250 during fiscal 1996.
All transactions, if any, between the Company and any of its directors,
officers, principal stockholders, employees and other affiliates of the Company
are subject to the approval of a majority of the independent directors of the
Company who are disinterested in the transactions. All such transactions and
loans must be on terms no less favorable to the Company than those generally
available from unaffiliated third parties.
31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated financial statements to this Report are listed in the
"Index to Consolidated Financial Statements and Schedules" at page F-1.
2. Consolidated financial statement schedules to this Report are listed in
the "Index to Consolidated Financial Statements and Schedules" at page F-1.
All other schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements or noted therein.
3. Exhibits.
3.1 - Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Form S-1 Registration
Statement No. 33-69708)
3.2 - By-Laws of the Company (incorporated by reference to Exhibit 3.2
to the Company's Form S-1 Registration Statement No. 33-69708)
4.1 - Form of certificate representing shares of the Company's Common
Stock (incorporated by reference to Exhibit 4.1 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.1 - Bollinger Industries 1993 Stock Option Plan (incorporated by
reference to Exhibit 10.1 to the Company's Form S-1 Registration
Statement No. 33-69708)
10.2 - Bollinger Industries Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 10.2 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.3 - Form of Indemnification Agreement with independent director
(incorporated by reference to Exhibit 10.3 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.4 - Bollinger Industries, Inc. 1991 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.4 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.5 - Lease Agreement dated April 4, 1991, between William A. McCarty,
Jr., and Elinor F. McCarty and Bollinger Sports, Inc., formerly
known as Bollinger Industries, Inc. ("Bollinger-Texas")
(incorporated by reference to Exhibit 10.8 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.6 - Assignment and Assumption Agreement dated as of October 1, 1993,
between Bollinger-Texas as Assignor and Bollinger Industries, L.P.,
as Assignee with respect to such lease (incorporated by reference
to Exhibit 10.8.1 to the Company's Form S-1 Registration Statement
No. 33-69708)
10.7 - Lease Agreement dated August 30, 1992, between Reba McPherson,
individually and as Trustee of the Reba McPherson Trust u/w/o
Harold Lynn McPherson, and Tarbox, Inc., as extended by an
Agreement dated August 9, 1993 (incorporated by reference to
Exhibit 10.9 to the Company's Form S-1 Registration Statement No.
33-69708)
32
10.8 - Assignment and Assumption Agreement dated as of October 1, 1993,
between Tarbox, Inc., as Assignor and Bollinger Industries, L.P.,
as Assignee with respect to such lease (incorporated by reference
to Exhibit 10.9.1 to the Company's Form S-1 Registration Statement
No. 33-69708)
10.9 - Standard Industrial Lease dated March 17, 1993, between National
Life Insurance Company and Bollinger-Texas (incorporated by
reference to Exhibit 10.10 to the Company's Form S-1 Registration
Statement No. 33-69708)
10.10 - Assignment and Assumption Agreement dated as of October 1, 1993,
between Bollinger-Texas as Assignor and Bollinger Industries, L.P.,
as Assignee with respect to such lease (incorporated by reference
to Exhibit 10.10.1 to the Company's Form S-1 Registration Statement
No. 33-69708)
10.11 - $500,000 Real Estate Lien Note dated March 18, 1993, in favor of
Sid Reisman and executed by Bollinger-Texas, as modified by a
Renewal, Extension, and Modification Agreement dated as of April 6,
1993, and subsequently assigned to Glenn, Bobby and Dell Bollinger
(incorporated by reference to Exhibit 10.10 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.12 - Asset Purchase and Sale Agreement dated as of September 13, 1993,
by and between California Gym Equipment Company, S. G. Equipment,
Inc. and, for limited purposes, Bollinger-Texas and Sherman Grider
(incorporated by reference to Exhibit 10.13 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.13 - Standard Sublease dated as of September 13, 1993, between
California Gym Equipment Company and S. G. Equipment, Inc.,
together with the Industrial Real Estate Lease dated June 1, 1992,
between New England Mutual Life Insurance Company and
Bollinger-Texas attached thereto (incorporated by reference to
Exhibit 10.14 to the Company's Form S-1 Registration Statement No.
33-69708)
10.14 - Assignment and Assumption Agreement dated as of September 1, 1993,
between Bollinger-Texas and California Gym Equipment Company with
respect to Industrial Real Estate Lease dated June 1, 1992
(incorporated by reference to Exhibit 10.15 to the Company's Form
S-1 Registration Statement No. 33-69708)
10.15 - Letter agreement dated May 19, 1992, between Bollinger-Texas,
Denise Austin and Jeff Austin (incorporated by reference to Exhibit
10.16 to the Company's Form S-1 Registration Statement No.
33-69708)
10.16 - Letter agreement dated April 13, 1994, between Bollinger
Industries, L.P., Denise Austin and Jeff Austin (incorporated by
reference to Exhibit 10.16 to the Company's form 10-K for the
fiscal year ended March 31, 1994)
10.17 - Endorsement Agreement dated September 1, 1993, between
Bollinger-Texas and Nolan Ryan (incorporated by reference to
Exhibit 10.17 to the Company's form 10-K for the fiscal year ended
March 31, 1994)
10.18 - Loan Agreement dated as of January 4, 1994, between Bollinger
Industries, L.P., the Company, and First Interstate (incorporated
by reference to Exhibit 10.18 to the Company's form 10-K for the
fiscal year ended March 31, 1994)
33
10.19 - Standard Office/Warehouse Lease dated May 11, 1994, between
Fountain Parkway, Ltd., and Bollinger Industries, L.P.
(incorporated by reference to Exhibit 10.19 to the Company's form
10-K for the fiscal year ended March 31, 1994)
10.20 - Lease dated December 21, 1990, between Americus/Sumter Payroll
Development Authority and N.B.F., Inc. and R. Wayne Rich
(incorporated by reference to Exhibit 10.20 to the Company's form
10-K for the fiscal year ended March 31, 1994)
10.21 - Assignment and Assumption of Lease dated May 1, 1994, between
Americus/Sumter Payroll Development Authority, NBF, Inc., a Florida
corporation, and NBF, Inc., a Georgia corporation (incorporated by
reference to Exhibit 10.21 to the Company's form 10-K for the
fiscal year ended March 31, 1994)
10.22 - Amendment to Lease between Americus-Sumter Payroll Development
Authority and NBF, Inc., a Georgia corporation and R. Wayne Rich
amending the lease dated December 21, 1990 reflected at exhibit No.
10.20 above (incorporated by reference to Exhibit 10.2 to the
Company's form 10-Q for the quarter ended June 30, 1994)
10.23 - Asset Purchase Agreement dated May 24, 1994, and effective as of
May 1, 1994, between NBF, Inc., a Florida corporation, and NBF,
Inc., a Georgia corporation (incorporated by reference to Exhibit
10.3 to the Company's form 10-Q for the quarter ended June 30,
1994)
10.24 - First Amendment to Loan Agreement dated as of June 22, 1994,
between Bollinger Industries, L.P., the Registrant, Bollinger
Holding Corp., NBF and First Interstate Bank of Texas, N.A.
(incorporated by reference to Exhibit 10.5 to the Company's form
10-Q for the quarter ended June 30, 1994)
10.25 - Loan and Security Agreement dated September 9, 1994, between
Bollinger Industries, L.P. and NationsBank of Texas, N.A.
(incorporated by reference to Exhibit 10.1 to the Company's form
10-Q for the quarter ended September 30, 1994)
10.26 - First Amendment to Loan and Security Agreement dated September 9,
1994, between Bollinger Industries, L.P. and NationsBank of Texas,
N.A. (incorporated by reference to Exhibit 10.2 to the Company's
form 10-Q for the quarter ended September 30, 1994)
10.27 - Second Amendment to Loan and Security Agreement dated December 8,
1994, between Bollinger Industries, L.P. and NationsBank of Texas,
N.A. (incorporated by reference to Exhibit 10.1 to the Company's
form 10-Q for the quarter ended December 31, 1994)
10.28 - Lease Agreement dated November 16, 1994, between John Wilkerson,
individually and Bollinger Industries (incorporated by reference to
Exhibit 10.2 to the Company's form 10-Q for the quarter ended
December 31, 1994)
10.29 - Modification and Ratification of Lease dated November 1, 1994,
between Fountain Parkway, Ltd. and Bollinger Industries, L.P.
(incorporated by reference to Exhibit 10.3 to the Company's form
10-Q for the quarter ended December 31, 1994)
34
10.30 - Third Amendment to Loan and Security Agreement dated March 3, 1995
between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
(incorporated by reference to Exhibit 10.30 to the Company's Form
10-K for the fiscal year ended March 31, 1995)
10.31 - Fourth Amendment to Loan and Security Agreement dated May 15, 1995
between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
(incorporated by reference to Exhibit 10.31 to the Company's Form
10-K for the fiscal year ended March 31, 1995)
10.32 - Modification and Ratification of Lease dated February 22, 1995,
between Fountain Parkway, Ltd. and Bollinger Industries, L.P.
(incorporated by reference to Exhibit 10.32 to the Company's Form
10-K for the fiscal year ended March 31, 1995)
10.33 - Fifth Amendment to Loan and Security Agreement dated September 9,
1995, between Bollinger Industries, L.P. and NationsBank of Texas,
N.A. (incorporated by reference to Exhibit 10.1 to the Company's
Form 10-Q for the quarter ended December 31, 1995)
10.34 - Sixth Amendment to Loan and Security Agreement dated December 29,
1995, between Bollinger Industries, L.P. and NationsBank of Texas,
N.A. (incorporated by reference to Exhibit 10.2 to the Company's
Form 10-Q for the quarter ended December 31, 1995)
10.35 - Seventh Amendment to Loan and Security Agreement dated March 8,
1996, between Bollinger Industries, L.P. and NationsBank of Texas,
N.A.
10.36 - Eighth Amendment to Loan and Security Agreement dated May 8, 1996,
between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
10.37 - Deed of Trust, Assignment, Security Agreement and Financing
Statement dated May 8, 1996, between Bollinger Industries, L.P. and
NationsBank of Texas, N.A.
10.38 - Ninth Amendment to Loan and Security Agreement dated May 17, 1996,
between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
10.39 - Amended and Restated Promissory Note dated March 29, 1996, between
Bollinger Industries, L.P., and Glenn D. Bollinger.
10.40 - Amended and Restated Promissory Note dated March 29, 1996, between
Bollinger Industries, L.P., and Bobby D. Bollinger.
10.41 - Amended and Restated Promissory Note dated March 29, 1996, between
Bollinger Industries, L.P., and Dell Bollinger.
10.42 - Second Amendment to standard industrial lease dated January 31,
1996, between National Life Insurance Company and Bollinger
Industries, L.P., as assignee.
10.43 - U.S. Trademark License Agreement between International Apparel
Marketing Corp. dba Nautilus Wear International and Bollinger
Industries, Inc. dated May 1, 1995
10.44 - Amendment to U.S. Trademark License Agreement between International
Apparel Marketing Corp. and Bollinger Industries, Inc. dated March
1, 1996.
35
10.45 - Intercreditor and Subordination Agreement dated May 8, 1996,
between NationsBank of Texas, N.A. and Glenn D. Bollinger, Bobby D.
Bollinger, and Dell Bollinger
11.1 - Statement re Computation of Per Share Data
21.1 - List of the Company's subsidiaries (incorporated by reference to
Exhibit 21.1 to the Company's Form 10-K for the fiscal year ended
March 31, 1995)
27.1 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 16th day
of July, 1996.
BOLLINGER INDUSTRIES, INC.
By: /s/ Glenn D. Bollinger
--------------------------------
Glenn D. Bollinger
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of the 16th day of July, 1996.
ˇ Download Table
/s/ Glenn D. Bollinger Chairman of the Board, President, and Chief
-------------------------- Executive Officer (principal executive officer)
Glenn D. Bollinger
/s/ Bobby D. Bollinger Vice Chairman of the Board and President
--------------------------
Bobby D. Bollinger
/s/ John T. Pryor Senior Vice President - Finance, Chief Financial
-------------------------- Officer, Treasurer, and Secretary
John T. Pryor (principal financial officer)
/s/ Robert B. Logan Controller and Chief Accounting Officer (principal
-------------------------- accounting officer)
Robert B. Logan
/s/ John L. Maguire Director
--------------------------
John L. Maguire
/s/ Stephen L. Parr Director
--------------------------
Stephen L. Parr
/s/ Richard J. Tucker Director
--------------------------
Richard J. Tucker
S-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
ˇ Download Table
Page
----
Report of Independent Certified Public Accountants F-2
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheets as of March 31, 1996 and 1995 F-4
Consolidated Statements of Operations for each of the three
years ended March 31, 1996 F-6
Consolidated Statements of Changes in Stockholders' Equity for
each of the three years ended March 31, 1996 F-7
Consolidated Statements of Cash Flows for each of the three
years ended March 31, 1996 F-8
Notes to Consolidated Financial Statements F-9
Report of Independent Certified Public Accountants on Schedule F-22
Report of Independent Certified Public Accountants on Schedule F-23
Schedule II F-24
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Bollinger Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Bollinger
Industries, Inc. and Subsidiaries as of March 31, 1996, and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Bollinger
Industries, Inc. and Subsidiaries as of March 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
King, Burns and Company, P.C.
Dallas, Texas
June 21, 1996 (except for Note P as to which the date is July 15, 1996)
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Bollinger Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity, and cash flows of Bollinger Industries, Inc. and
Subsidiaries for the year ended March 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated statements of operations,
changes in stockholders' equity, and cash flows are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated statements of operations,
changes in stockholders' equity, and cash flows. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated
results of operations and the consolidated cash flows. We believe our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated statements of operations, changes in
stockholders' equity, and cash flows referred to above present fairly, in all
material respects, the consolidated results of operations and the consolidated
cash flows of Bollinger Industries, Inc., and Subsidiaries for the year ended
March 31, 1994, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
May 19, 1994 (except for Note B "Discontinued Operations", as to which the
date is July 12, 1996)
F-3
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
ˇ Download Table
ASSETS 1996 1995
------------ ------------
CURRENT ASSETS
Cash $ 408,871 $ 116,476
Accounts receivable
Trade, net of allowance for doubtful accounts
of $457,829 and $920,215 18,344,827 16,519,849
Other 229,735 311,211
Income tax refund 2,307,235 --
Inventories 30,112,934 31,060,004
Current assets of discontinued operations - net 1,601,954 --
Prepaid expenses 525,272 1,183,620
Deferred income taxes 66,309 1,206,879
------------ ------------
Total current assets 53,597,137 50,398,039
PROPERTY, PLANT AND EQUIPMENT - NET 2,015,282 2,365,006
NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS 161,999 --
OTHER ASSETS
Goodwill, net of accumulated amortization of
$157,884 and $60,822 1,233,482 1,330,545
Notes receivable and other 1,373,003 1,328,841
------------ ------------
Total other assets 2,606,485 2,659,386
------------ ------------
TOTAL ASSETS $ 58,380,903 $ 55,422,431
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
MARCH 31,
ˇ Enlarge/Download Table
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------ ------------
CURRENT LIABILITIES
Current portion of long-term debt (including $500,000 notes
payable to officers and shareholders in 1995) $ 78,026 $ 528,567
Notes payable 22,605,549 26,058,100
Accounts payable - trade 16,913,821 6,639,357
Federal income tax payable 43,847 433,696
Other current liabilities 1,674,046 1,013,232
Provision for restructuring of operations 3,960,000 --
------------ ------------
Total current liabilities 45,275,289 34,672,952
LONG-TERM LIABILITIES
Long-term debt, net of current portion (including $280,000
notes payable to officers and shareholders in 1996) 576,777 223,254
Deferred income taxes 66,309 58,829
------------ ------------
Total long-term liabilities 643,086 282,083
------------ ------------
Total liabilities 45,918,375 34,955,035
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes G, H, and N)
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value;
1,000,000 shares authorized; none issued -- --
Common stock - $.01 par value; 8,000,000 shares authorized;
4,000,210 and 3,708,090 shares issued and outstanding 40,001 37,080
Capital in excess of par 15,323,059 15,107,488
Retained earnings (accumulated deficit) (2,900,532) 5,322,828
------------ ------------
Total stockholders' equity 12,462,528 20,467,396
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,380,903 $ 55,422,431
============ ============
The accompanying notes are an integral part of these financial statements.
F-5
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31,
ˇ Download Table
1996 1995 1994
------------ ------------ ------------
Net sales $ 80,300,431 $ 67,894,489 $ 38,746,178
Cost of goods sold 62,197,227 50,546,515 26,982,357
------------ ------------ ------------
Gross profit 18,103,204 17,347,974 11,763,821
Selling expenses 7,876,538 6,861,621 4,070,319
Distribution, general and
administrative expenses 12,115,284 8,421,762 4,223,895
Restructuring of operations 3,960,000 -- --
------------ ------------ ------------
23,951,822 15,283,383 8,294,214
------------ ------------ ------------
Operating profit (loss) (5,848,618) 2,064,591 3,469,607
Other expense (income)
Interest expense 2,251,807 1,166,794 665,729
Interest income (78,748) (93,621) (41,291)
Miscellaneous (25,173) 46,826 (22,893)
------------ ------------ ------------
2,147,886 1,119,999 601,545
------------ ------------ ------------
Earnings (loss) from continuing
operations before income tax
expense (benefit) (7,996,504) 944,592 2,868,062
Income tax expense (benefit) (1,135,098) 350,416 1,042,017
------------ ------------ ------------
Earnings (loss) from continuing
operations (6,861,406) 594,176 1,826,045
Discontinued operations
Gain (loss) from operations, net of
income tax benefit (591,886) (524,914) 549,742
(Loss) on disposal, net of income tax
benefit including a $1,199,118 and
$325,380 provision for operating
losses during phase-out periods
in 1996 and 1994 (770,068) -- (573,012)
------------ ------------ ------------
(Loss) from discontinued operations (1,361,954) (524,914) (23,270)
------------ ------------ ------------
Net earnings (loss) $ (8,223,360) $ 69,262 $ 1,802,775
============ ============ ============
Per Share Data:
Earnings (loss) from continuing
operations $ (1.85) $ .15 $ .59
============ ============ ============
Net earnings (loss) $ (2.22) $ .02 $ .59
============ ============ ============
Weighted average common and common
equivalent shares outstanding 3,710,484 3,966,631 3,079,075
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-6
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ˇ Enlarge/Download Table
RETAINED
COMMON STOCK CAPITAL IN EARNINGS
---------------------------- EXCESS OF (ACCUMULATED
SHARES AMOUNT PAR DEFICIT) TOTAL
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1993 2,358,146 $ 23,581 $ 894,870 $ 3,450,791 $ 4,369,242
Shares issued in connection
with debt financing 34,405 344 109,656 -- 110,000
Sale of common stock, net
of expenses of $1,884,383 1,200,000 12,000 13,103,617 -- 13,115,617
Net earnings -- -- -- 1,802,775 1,802,775
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1994 3,592,551 35,925 14,108,143 5,253,566 19,397,634
Shares issued in connection
with acquisition 138,000 1,380 999,120 -- 1,000,500
Shares retired (22,461) (225) 225 -- --
Net earnings -- -- -- 69,262 69,262
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1995 3,708,090 37,080 15,107,488 5,322,828 20,467,396
Shares issued on exercise
of stock options 292,120 2,921 215,571 -- 218,492
Net loss -- -- -- (8,223,360) (8,223,360)
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1996 4,000,210 $ 40,001 $ 15,323,059 $ (2,900,532) $ 12,462,528
============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-7
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
ˇ Enlarge/Download Table
1996 1995 1994
------------ ------------ ------------
Cash flows from operating activities
Net earnings (loss) $ (8,223,360) $ 69,262 $ 1,802,775
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities
(Gain) loss on disposal of assets -- (5,341) 374,872
Deferred income tax benefit 1,148,050 (655,005) (169,147)
Depreciation and amortization 651,500 442,926 289,178
Provision for restructuring of operations 3,960,000 -- --
Other -- 74,000 (21,583)
Provision for doubtful accounts (311,514) 793,931 455,468
Provision for obsolete inventory 365,795 852,204 33,586
Changes in operating assets and liabilities
Trade accounts receivable (1,513,464) (5,175,131) (3,784,260)
Other receivables 81,476 (159,247) (130,457)
Inventories 581,275 (18,906,836) (4,025,566)
Income tax refund (2,307,235) -- --
Prepaid expenses 658,348 (393,078) (392,336)
Notes receivable, deposits and other (44,161) (599,000) 47,157
Current assets of discontinued operations (1,601,954) -- 524,860
Accounts payable 10,274,464 3,944,881 (3,015,086)
Federal income tax payable (389,849) (160,166) (185,124)
Other current liabilities 660,813 284,644 (253,403)
------------ ------------ ------------
Net cash provided by (used in) operating
activities 3,990,184 (19,591,956) (8,449,066)
Cash flows from investing activities
Purchases of property and equipment (425,041) (1,268,970) (475,439)
Proceeds from sale of assets 58,329 36,205 335,059
------------ ------------ ------------
Net cash used in investing activities (366,712) (1,232,765) (140,380)
Cash flows from financing activities
Proceeds from long-term borrowings 348,000 21,298 500,000
Payments on long-term debt (including
$220,000 to officers and shareholders) (445,018) (687,223) (922,898)
Net proceeds from (payments on) note payable (3,452,551) 21,580,607 (3,992,431)
Net advance from (payments to) officers -- -- (84,327)
Proceeds from issuance of common stock 218,492 -- 13,115,617
------------ ------------ ------------
Net cash provided by (used in) financing
activities (3,331,077) 20,914,682 8,615,961
------------ ------------ ------------
Net increase in cash 292,395 89,961 26,515
Cash at beginning of year 116,476 26,515 --
------------ ------------ ------------
Cash at end of year $ 408,871 $ 116,476 $ 26,515
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-8
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BUSINESS ACTIVITY
The Company is a supplier of consumer fitness equipment and accessories.
(See Note B for a discussion of discontinuing operations.)
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Bollinger
Industries, Inc. (Bollinger) which was reincorporated in Delaware in
September 1993, its wholly-owned subsidiaries and Bollinger Industries,
L.P., a partnership wholly-owned by Bollinger's subsidiaries (collectively
"the Company"). All significant intercompany accounts and transactions
have been eliminated.
INVENTORIES
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed using
straight-line and accelerated methods for financial reporting purposes
over the following useful lives:
ˇ Download Table
Buildings and improvements 5-20 years
Equipment 3- 7 years
Automobiles 3 years
Furniture and fixtures 3- 5 years
Maintenance and repairs are expensed as incurred. Major renewals and
improvements are capitalized.
INCOME TAXES
Deferred income taxes are determined using the asset and liability method,
under which deferred tax assets and liabilities are calculated based on
differences between financial accounting and tax basis of assets and
liabilities. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax
expense or benefit is the payable or refund for the period plus or minus
the change during the period in deferred tax assets and liabilities.
EARNINGS (LOSS) PER COMMON SHARE
Net earnings (loss) per common share is based on the net earnings (loss)
applicable to the weighted average number of common shares and common
stock equivalents outstanding. Common stock equivalents include the
dilutive effect of all stock options outstanding (except in the case of a
net loss, in which case they would be anti-dilutive), as though they had
been outstanding for all periods presented.
F-9
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Continued
GOODWILL AND COVENANT NOT TO COMPETE
The excess of the purchase price of acquired companies over the fair value
of net identifiable assets at the date of acquisition has been recorded as
goodwill and is being amortized on a straight line basis over a twenty
year period. The Company periodically evaluates the net balance of
goodwill based on the projected operating income of the respective
businesses on an undiscounted cash flow basis. If necessary, the goodwill
would be written down to fair market value.
A covenant not to compete in the amount of $309,950 net of accumulated
amortization of $43,050 is included in "Notes receivable and other" and is
being amortized on a straight-line basis over its duration of 41 months.
USE OF ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were used.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1996
presentation and to retroactively recognize the discontinued Healthcare
Division.
ACCOUNTING STANDARDS NOT YET ADOPTED
In October 1995, Statement of Financial Accounting Standards No. 123.
"Accounting for Stock-based Compensation" ("SFAS 123"), was issued. This
statement requires the fair value of stock options and other stock-based
compensation issued to employees to either be included as compensation
expense in the income statement, or the pro forma effect on net income and
earnings per share of such compensation expense to be disclosed in the
footnotes to the Company's financial statements commencing with the
Company's 1997 fiscal year. The Company expects to adopt SFAS 123 on a
disclosure basis only. As such, implementation of SFAS 123 is not expected
to impact the Company's balance sheet or statement of operations.
NOTE B - ACQUISITION, DISCONTINUED OPERATIONS, AND RESTRUCTURING OF OPERATIONS
ACQUISITION
On May 24, 1994, in exchange for 138,000 shares of its restricted common
shares, the Company acquired substantially all of the assets and
liabilities of NBF, Inc. (a Florida Corporation) which manufactures
trampolines and other outdoor playground equipment. The total
consideration for the assets and liabilities acquired including
liabilities assumed was approximately $2,762,472. Additionally, for cash
of $150,000, the Company acquired from an individual, all of the
intellectual property rights to the products manufactured. If the
acquisition had occurred as of April 1, 1994,
F-10
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
consolidated results would not have been materially effected. The
acquisition was accounted for as a purchase and accordingly the
consolidated financial statements include the results of operations from
the acquisition date.
DISCONTINUED OPERATIONS
The Company determined in July 1993 to discontinue operations of its C.G.
Products, Inc. subsidiary, (C.G.) formally known as California Gym
Equipment Company, a manufacturer of variable resistance weightlifting
machines and single station exercise machines. In September 1993,
substantially all of the assets of C.G. were sold for $1,218,050, which
included $818,050 of 7% notes, a $100,000 credit against future purchases
of product by the Company and cash of $300,000. Interest on the notes has
been imputed at 12%, which resulted in a discount of approximately
$145,000. The results of operations of C.G. have been presented in the
financial statements as discontinued operations.
The Company determined during January 1996 to sell its Healthcare Division
which manufactures a line of sports medicine and safety products. The
Company expects to sell the Healthcare Division by December 31, 1996, and
estimates that the sales price will exceed the net book value of the
assets sold. The results of operations of the Healthcare Division have
been presented in the financial statements as discontinued operations.
Results of operations in prior years have been restated to reclassify the
Healthcare Division as discontinued operations.
Interest expense has been allocated to discontinued operations based on
the proportion of average net assets of the discontinued Healthcare
operations as compared to consolidated average net asset of the Company.
Following is a summary of the discontinued operations:
ˇ Enlarge/Download Table
YEARS ENDED MARCH 31,
1996 1995 1994
------------ ------------ ------------
NET SALES OF DISCONTINUED OPERATIONS:
Healthcare Division $ 3,327,893(1) $ 5,170,521 $ 6,416,565
C.G. Products Subsidiary -- -- 2,429,451
------------ ------------ ------------
Total net sales of discontinued operations $ 3,327,893 $ 5,170,521 $ 8,846,016
============ ============ ============
LOSS (GAIN) FROM DISCONTINUED OPERATIONS:
Healthcare Division $ 689,784(1) $ 795,324 $ (1,063,365)
Less: Tax (expense) benefit 97,898 270,410 (361,544)
------------ ------------ ------------
Net loss (gain) from discontinued operations -
Healthcare Division $ 591,886 $ 524,914 $ (701,821)
C.G. Products Subsidiary $ -- $ -- $ 231,079
Less: Tax benefit -- -- 79,000
------------ ------------ ------------
Net loss (gain) from discontinued operations -
C.G. Products Subsidiary $ -- $ -- $ 152,079
Total loss (gain) from discontinued operations $ 689,784 $ 795,324 $ (832,286)
Less: Tax benefit (expense) 97,898 270,410 (282,544)
------------ ------------ ------------
Total net loss (gain) from discontinued operations $ 591,886 $ 524,914 $ (549,742)
============ ============ ============
(1) April 1, 1995, to December 31, 1995
F-11
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
ˇ Enlarge/Download Table
1996 1995 1994
------------ ------------ ------------
LOSSES ON DISPOSAL, INCLUDING PROVISION FOR OPERATING
LOSSES DURING PHASE-OUT PERIOD:
Healthcare Division $ 897,574 $ -- $ --
Less: Tax benefit 127,506 -- --
------------ ------------ ------------
Net loss on disposal - Healthcare Division $ 770,068 $ -- $ --
============ ============ ============
C.G. Products Subsidiary $ -- $ -- $ 868,000
Less: Tax benefit -- -- 294,988
------------ ------------ ------------
Net loss on disposal - C.G. Products Subsidiary $ -- $ -- $ 573,012
============ ============ ============
Total loss on disposal $ 897,574 $ -- $ 868,000
Less: Tax benefit 127,506 -- 294,988
------------ ------------ ------------
Total net loss on disposal $ 770,068 $ -- $ 573,012
============ ============ ============
OPERATING LOSSES DURING PHASE-OUT PERIOD:
Healthcare Division - January 1, 1996 to
December 31, 1996 $ 1,397,574 $ -- $ --
C.G. Products Subsidiary - July 1993 to
September 1993 -- -- 493,000
------------ ------------ ------------
Total operating losses during phase-out period 1,397,574 -- 493,000
Less: Tax benefit 198,456 -- 167,620
------------ ------------ ------------
Total operating losses during phase-out
period included above $ 1,199,118 $ -- $ 325,380
============ ============ ============
NET LOSS FROM DISCONTINUED OPERATIONS JANUARY 1, 1996,
TO MARCH 31, 1996:
Operating loss from discontinued operations -
Healthcare Division $ 497,574
Less: Tax benefit 70,656
------------
Net loss from discontinued operations
January 1, 1996, to March 31, 1996 $ 426,918
============
ESTIMATED NET LOSS ON DISPOSAL OF HEALTHCARE DIVISION:
Estimated operating loss during phase-out period
April 1, 1996, to December 31,1996 $ 900,000
Less: Estimated gain on sale of assets 500,000
------------
400,000
Less: Tax benefit 56,850
------------
Estimated net loss on disposal of Healthcare Division $ 343,150
============
NET LOSS ON DISPOSAL OF C.G. PRODUCTS SUBSIDIARY:
Loss during phase-out period July 1993 to
September 1993 $ 493,000
Add: Loss on sale of assets 375,000
------------
868,000
Less tax benefit 294,988
------------
Net loss on disposal of C.G. Products Subsidiary $ 573,012
============
F-12
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
RESTRUCTURING OF OPERATIONS
The Company sustained a net loss of $8.2 million during fiscal 1996, including
an after income tax restructuring charge of $3.4 million and a net loss from
discontinued operations of $1.4 million. A significant portion of the loss and
cash flows from operations were funded by increasing amounts due to trade
creditors. The Company's credit facility with a bank proved to be inadequate
in light of the loss and increased working capital needed to sustain increased
sales volume. In addition, the bank notified the Company of its intention not
to renew the credit facility although the bank granted several extensions while
the Company pursued alternate financing.
As a result of declining earnings and liquidity issues, management undertook a
comprehensive review of the Company's liquidity, profitability and marketing
strategy during the fourth quarter of fiscal 1996. As a result of that review,
management decided to implement a plan (the "Plan") to reorganize the Company's
operations. The primary goal of the Plan is to refocus the Company on its
historical marketing strength which is with high volume mass merchants,
discounters and chain stores. This entails a reemphasis on the Bollinger brand
name, which is the leading brand name for fitness accessories with these
retailers. At the same time, the Company will de-emphasize certain celebrity
endorsed products. Additional aspects of the Plan are to discontinue the
Company's Healthcare Division which has sustained losses in the last two years
and to institute certain policies and procedures to reduce operating costs.
The Plan calls for disposal of certain inventory which no longer meets the
Company's marketing strategy. Disposal of inventory should generate
approximately $7.0 million during fiscal 1997. In addition, the Company
expects a Federal income tax refund of approximately $2.3 million during fiscal
1997. The Company plans to use these amounts to reduce accounts payable and
other debt and to fund operations.
The Company signed a commitment agreement for financing to replace the current
credit facility (See Note P Subsequent Event).
Management believes the new credit facility, inventory reduction, projected
increased profitability, sale of the Healthcare Division, and the income tax
refund will provide adequate cash flow to support the operations of the Company.
F-13
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures are as follows:
ˇ Download Table
YEAR ENDED MARCH 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
Interest paid $2,213,613 $1,400,146 $ 864,521
Income taxes paid $ 200,000 $ 865,507 $1,286,785
Noncash financing transactions:
Purchase of assets financed by debt $ 42,488 $ -- $ --
Purchase of NBF, Inc. $ -- $2,762,472 $ --
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
NOTE D - CREDIT RISK
The Company's assets which are subject to potential credit risk consist of
trade accounts receivable and cash. The Company sells its products primarily to
retailers, including national chains, geographically dispersed throughout the
United States on an unsecured basis. Risks associated with extension of credit
to customers are affected by the economic condition of the retail industry. The
Company performs ongoing credit evaluations of its customers' financial
condition to reduce credit risk. The Company has provided an allowance for
doubtful accounts which reflects its estimate of uncollectible accounts.
Cash is at risk to the extent that it exceeds Federal Deposit Insurance
Corporation ("FDIC") insured amounts (approximately $945,000 at March 31,
1996). To minimize risk, the Company places its cash with high credit quality
institutions.
NOTE E - INVENTORIES
ˇ Download Table
MARCH 31,
----------------------------
1996 1995
------------ ------------
Raw materials $ 9,858,597 $ 13,557,009
Work-in-process 305,777 395,498
Finished goods 23,117,280 17,908,469
Reserve for Obsolescence (1,166,766) (800,972)
------------ ------------
32,114,888 $ 31,060,004
Less: Discontinued operations - net 2,001,954 ============
------------
$ 30,112,934
============
F-14
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - PROPERTY, PLANT AND EQUIPMENT
ˇ Download Table
MARCH 31,
-----------------------
1996 1995
---------- ----------
Land, buildings and improvements $1,835,658 $1,787,931
Equipment 1,585,146 1,490,680
Automobiles 53,860 61,443
Furniture and fixtures 1,238,752 1,006,650
---------- ----------
4,713,416 4,346,704
Less accumulated depreciation 2,536,135 1,981,698
---------- ----------
2,177,281 $2,365,006
Less: Discontinued Operations - Net 161,999 ==========
----------
$2,015,282
==========
Depreciation expense for the years ended March 31, 1996, 1995, and 1994 was
approximately $554,000, $407,000, and $231,000, respectively.
NOTE G - NOTES PAYABLE
ˇ Download Table
MARCH 31,
---------------------------
1996 1995
------------ ------------
Note payable under a line of credit for
$22,500,000 ($28,000,000 in 1995) with a
bank, bearing interest at the prime rate
(8.25% at March 31, 1996) plus 3% in 1996
and the lesser of the prime rate (9% at
March 31, 1995) or, at the Company's
discretion, LIBOR (6.3% at March 31, 1995)
plus 2% for 1995; interest payable
monthly; collateralized by receivables
and inventory $ 22,500,000 $ 26,000,000
Other, all current 105,549 58,100
------------ ------------
$ 22,605,549 $ 26,058,100
============ ============
The loan agreement with the bank provides that borrowings under the line of
credit are subject to limitations based on the borrowing base, as defined in
the agreement. The terms of the agreement require the Company to maintain
specific levels of debt to net worth, working capital and coverage of fixed
charges as defined in the agreement. At March 31, 1996, and at the date of this
report, June 21, 1996, the Company was not in compliance with all covenants.
The bank has waived such defaults through November 8, 1996. At March 31, 1996,
the Company had no additional borrowing capacity under the loan agreement. The
loan agreement has an extended expiration date of November 8, 1996. See Note P
- Subsequent Event.
F-15
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
NOTE H - LONG-TERM DEBT
ˇ Download Table
MARCH 31,
---------------------------
1996 1995
------------ ------------
Notes to certain officers and shareholders
of the Company bearing interest at 10%,
due in March 1998, as extended:
collateralized by real estate note
(purchased by officers and shareholders
from an individual in December 1993) $ 280,000 $ 500,000
Other 374,803 251,821
------------ ------------
654,803 751,821
Less current portion 78,026 528,567
------------ ------------
$ 576,777 $ 223,254
============ ============
Future maturities of long-term debt at March 31, 1996, are as follows:
ˇ Download Table
Year ending March 31,
1997 $ 78,026
1998 352,069
1999 72,478
2000 19,121
2001 19,971
Thereafter 113,138
---------
$ 654,803
=========
NOTE I - CHANGE IN CAPITAL STRUCTURE
On September 28, 1993, the Company was reincorporated in Delaware with
authority to issue 8,000,000 shares of common stock at $.01 par value and
1,000,000 shares of preferred stock at $.01 par value. Each existing
stockholder of the Company contributed shares of no par value stock to the
new Delaware corporation in exchange for shares of common stock of the new
corporation for each old share. The consolidated financial statements,
including all references to the number of shares of common stock and all
per share information, have been adjusted to reflect the reincorporation,
common stock exchange and other changes in the capital structure on a
retroactive basis.
NOTE J - EMPLOYEE STOCK OWNERSHIP PLAN AND 401(K) PLAN
The Company had an employee stock ownership plan which provided for
discretionary contributions by the Company. During 1995, the Company
amended and restated the plan to qualify as a 401(k) employee deferred
compensation plan under the terms of which employees who have been
employed for one year or more are entitled to contribute up to the lesser
of $9,500 or 15% of their annual compensation. The Company may at its
discretion contribute to the 401(k) plan. No Company contributions were
made under either plan for any of the three years in the period ended
March 31, 1996.
F-16
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
NOTE K - STOCK OPTIONS
1991 PLAN
The 1991 Stock Option Plan provides for options covering a total of
542,820 common shares, all of which were issued to the Chief Executive
Officer and the President of the Company. The exercise price of the
options granted must be at least 110% of the fair value of the common
stock at date of grant. During the year ended March 31, 1994, 250,700
options for shares were canceled. The remaining options were exercised on
March 29, 1996. At March 31, 1996, there were no options outstanding or
available for grant.
Following is a summary of option activity under the 1991 Plan:
ˇ Download Table
OPTION PRICE
-------------------------------------
SHARES PER SHARE TOTAL
---------- ---------- ----------
Outstanding at March 31, 1993 542,820 $.75-$.88 $ 437,912
Granted -- -- --
Canceled (250,700) .88 (219,420)
---------- ---------- ----------
Outstanding at March 31, 1994 292,120 .74795 218,492
Granted -- -- --
Canceled -- -- --
---------- ---------- ----------
Outstanding at March 31, 1995 292,120 .74795 218,492
Granted -- -- --
Canceled -- -- --
Exercised (292,120) .74795 (218,492)
---------- ---------- ----------
Outstanding at March 31, 1996 -- $ -- $ --
========== ========== ==========
1993 PLAN
The 1993 Stock Option Plan provides for options covering a total of
500,000 common shares to be issued to key employees and directors other
than the Chief Executive Officer and the President. Under the Plan,
incentive stock options (ISO's) and non-qualified stock options may be
granted at prices no less than 100% and 50%, respectively, of the fair
value of the Company's common stock. Options granted expire in ten years
and will generally vest in annual installments. At March 31, 1996, options
for 232,001 shares were available for grant.
F-17
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
Following is a summary of option activity under the 1993 Plan:
ˇ Download Table
OPTION PRICE
-------------------------------------------
SHARES PER SHARE TOTAL
----------- -------------- -----------
Outstanding at March 31, 1993 -- $ -- $ --
Granted 272,666 10.00 - 12.50 3,058,537
Canceled (10,000) 10.00 (100,000)
----------- -------------- -----------
Outstanding at March 31, 1994 262,666 10.00 - 12.50 2,958,537
Granted 50,000 9.00 - 13.00 560,000
Canceled (46,000) 10.00 - 12.50 (550,000)
----------- -------------- -----------
Outstanding at March 31, 1995 266,666 9.00 - 13.00 2,968,537
Granted 110,999 3.00 - 7.50 424,621
Canceled (109,666) 3.63 - 12.50 (1,148,079)
----------- -------------- -----------
Outstanding at March 31, 1996 267,999 $3.00-$13.00 $ 2,245,079
=========== ============== ===========
At March 31, 1996, options covering 96,199 shares were exercisable under
the 1993 Plan.
NOTE L - INCOME TAXES
Income tax expense (benefit) from continuing operations consists of the
following:
ˇ Download Table
1996 1995 1994
------------ ------------ ------------
Federal
Current $ (2,031,628) $ 848,220 $ 1,070,333
Deferred 891,354 (497,804) (130,243)
State 5,176 -- 101,927
------------ ------------ ------------
$ (1,135,098) $ 350,416 $ 1,042,017
============ ============ ============
The Company's effective income tax rate from continuing operations
differed from the Federal statutory rate as follows:
ˇ Download Table
YEAR ENDED MARCH 31,
---------------------------
1996 1995 1994
------ ------ ------
U.S. Federal statutory rate 34.0 % 34.0% 34.0%
Amortization of goodwill (.5)% 1.8% --
Meals and entertainment (.1)% .9% --
State income taxes, net of federal benefit -- -- 2.3%
Change in prior tax estimates (.7)% -- --
Valuation allowance (17.6)% -- --
Other, net (.9)% .4% --
------ ------ ------
14.2% 37.1% 36.3%
====== ====== ======
F-18
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
Following are the components of deferred tax assets and deferred tax
liabilities:
ˇ Download Table
MARCH 31,
----------------------------
1996 1995
------------ ------------
Net current deferred tax assets
Inventories $ 753,188 $ 683,236
Allowance for doubtful accounts 96,110 447,356
Inventory reserves 3,208 181,545
Accrued expenses 42,500 --
Prepaid expenses -- (105,258)
Provision for discontinued operation 136,000 --
Net operating loss 725,917 --
Less valuation allowance (1,690,614) --
------------ ------------
$ 66,309 $ 1,206,879
============ ============
Noncurrent deferred tax liabilities
Accumulated depreciation $ (66,309) $ (58,829)
============ ============
NOTE M - MAJOR CUSTOMERS
Customers accounting for 10% or more of total sales from continuing
operations are as follows:
ˇ Download Table
YEAR ENDED
MARCH 31, PERCENTAGE
---------- ----------
1996
Customer A 31%
Customer B 25%
1995
Customer A 32%
Customer B 13%
1994
Customer A 20%
Customer B 13%
F-19
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
NOTE N - COMMITMENTS AND CONTINGENCIES
The Company leases certain manufacturing and warehouse space;
manufacturing and computer equipment; and other items. These leases are
operating leases and have future minimum lease payments, excluding
sublease income, as follows:
ˇ Download Table
YEAR
----
1997 $1,429,077
1998 1,105,551
1999 871,390
2000 330,887
2001 65,000
Thereafter 737,000
----------
$4,538,905
==========
Total lease expense for the years ended March 31, 1996, 1995 and 1994 was
approximately $1,552,000, $793,000 and $476,000, respectively.
Included in the future minimum payments above is approximately $263,480
for the lease on the manufacturing facility of C.G. which runs
through May 1997. In connection with the sale of C.G.'s assets (Note B),
the Company subleased the facility to the buyer and remains liable on the
lease.
The Company, certain of its officers and directors, former officers,
former independent auditor, and the underwriters of the Company's initial
IPO are defendants in certain shareholder lawsuits. The Company believes
the lawsuits are without merit. However, if the plaintiffs prevail, the
lawsuits could have a material adverse effect on the Company. The Company
is unable to estimate the range of loss, if any.
The staff of the Securities and Exchange Commission has indicated to the
Company that they will recommend a civil injunctive action against the
Company, Glenn Bollinger (CEO and Director of the Company), and Ronald
Bollinger (Executive Vice President of the Company) for certain alleged
violations of securities laws arising from several sales transactions
during fiscal 1995 and 1994. The staff has indicated it will not recommend
monetary penalties against the Company.
The Company has been contacted by the Department of Labor (DOL) in regard
to certain questions about its former Employee Stock Ownership Plan
(the "ESOP"). Assets of the ESOP are held in the Company's 401(K) plan
which is the successor to the ESOP. The Company is responding to and
cooperating with the DOL. The DOL has not initiated any proceeding with
respect to the ESOP or any other of the Company's employee benefit plans.
In the normal course of business, the Company is involved in various
litigation. Management believes that the aggregate effect of any liability
arising from such items would not be material to the consolidated
statements of operations or financial position at March 31, 1996.
F-20
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED
NOTE O - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS (UNAUDITED)
ˇ Download Table
Significant fourth quarter adjustments
amounting to $5,490,000 (net of income
taxes of $780,000) were recorded as follows:
Increase in provision for returns and allowances $ 1,130,000
Restructuring charge 3,960,000
Provision for discontinued operations 400,000
-----------
5,490,000
Less: Income tax effect (780,000)
-----------
Fourth quarter adjustments $ 4,710,000
===========
NOTE P - SUBSEQUENT EVENT
The Company entered into a commitment agreement (the "Agreement")
with a financial institution on July 12, 1996, establishing a revolving
credit facility (the "Credit Line") for up to a maximum of $30 million.
Borrowing under the Credit Line is limited to a percentage of eligible
trade accounts receivable and inventory as defined in the Agreement. The
Credit Line has a three year maturity and is collateralized by the
Company's assets including inventory, trade accounts receivable, and real
property. The interest rate under the Credit Line is prime plus 1.75%. In
addition, the Company is required to pay certain closing, commitment,
management and unused line fees. Furthermore, the Credit Line requires the
Company to comply with certain financial and other covenants as defined in
the Agreement. Personal guarantees by Glenn and Bobby Bollinger are also
required. The Agreement terminates on July 31, 1996, if final
documentation cannot be negotiated and certain other conditions precedent
are not met by that time. The Company believes the Agreement will close by
July 31, 1996.
F-21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULE
Board of Directors and Stockholders
Bollinger Industries, Inc. and Subsidiaries
In connection with our audit of the consolidated financial statements of
Bollinger Industries, Inc. and Subsidiaries referred to in our report dated
June 21, 1996 (except for Note P as to which the date is July 15, 1996), we
have also audited Schedule II for the years ended March 31, 1996 and 1995. In
our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
King, Burns & Company, P.C.
Dallas, Texas
June 21, 1996
F-22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors and Stockholders
Bollinger Industries, Inc. and Subsidiaries
In connection with our audit of the consolidated statements of operations,
stockholders' equity, and cash flows of Bollinger Industries, Inc. and
Subsidiaries referred to in our report dated May 19, 1994, we have also
audited Schedule II for the year ended March 31, 1994. In our opinion this
schedule presents fairly, in all material respects, the information required to
be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
May 19, 1994
F-23
Schedule II
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1994, 1995, AND 1996
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ADDITIONS
-------------------------------------------
Balance at Charged to Charged
beginning costs and to other Balance at
Description of year expenses accounts Deductions end of year
----------- ------------ ------------ ------------ ------------ ------------
Year ended March 31, 1994
Allowance for doubtful
accounts $ 193,563 $ 455,468 $ -- $ (172,356) $ 476,675
Inventory obsolescence reserve 78,631 33,586 -- -- 112,217
Year ended March 31, 1995
Allowance for doubtful
accounts $ 476,675 $ 793,931 $ -- $ (350,391) $ 920,215
Inventory obsolescence reserve 112,217 852,204 -- (163,449) 800,972
Year ended March 31, 1996
Allowance for doubtful
accounts $ 920,215 $ (311,514) $ -- $ (150,872) $ 457,829
Inventory obsolescence reserve 800,972 365,794 -- -- 1,166,766
Note - Deductions represent uncollectible accounts or inventories written off.
F-24
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SEQUENTIALLY
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EXHIBITS PAGE
3.1 - Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Form S-1
Registration Statement No. 33-69708)
3.2 - By-Laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Form S-1 Registration Statement No.
33-69708)
4.1 - Form of certificate representing shares of the Company's
Common Stock (incorporated by reference to Exhibit 4.1 to the
Company's Form S-1 Registration Statement No. 33-69708)
10.1 - Bollinger Industries 1993 Stock Option Plan (incorporated by
reference to Exhibit 10.1 to the Company's Form S-1
Registration Statement No. 33-69708)
10.2 - Bollinger Industries Employee Stock Ownership Plan and Trust
(incorporated by reference to Exhibit 10.2 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.3 - Form of Indemnification Agreement with independent director
(incorporated by reference to Exhibit 10.3 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.4 - Bollinger Industries, Inc. 1991 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.4 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.5 - Lease Agreement dated April 4, 1991, between William A.
McCarty, Jr., and Elinor F. McCarty and Bollinger Sports,
Inc., formerly known as Bollinger Industries, Inc.
("Bollinger-Texas") (incorporated by reference to Exhibit 10.8
to the Company's Form S-1 Registration Statement No. 33-69708)
10.6 - Assignment and Assumption Agreement dated as of October 1,
1993, between Bollinger-Texas as Assignor and Bollinger
Industries, L.P., as Assignee with respect to such lease
(incorporated by reference to Exhibit 10.8.1 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.7 - Lease Agreement dated August 30, 1992, between Reba
McPherson, individually and as Trustee of the Reba McPherson
Trust u/w/o Harold Lynn McPherson, and Tarbox, Inc., as
extended by an Agreement dated August 9, 1993 (incorporated by
reference to Exhibit 10.9 to the Company's Form S-1
Registration Statement No. 33-69708)
II-1
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EXHIBITS PAGE
10.8 - Assignment and Assumption Agreement dated as of October 1,
1993, between Tarbox, Inc., as Assignor and Bollinger
Industries, L.P., as Assignee with respect to such lease
(incorporated by reference to Exhibit 10.9.1 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.9 - Standard Industrial Lease dated March 17, 1993, between
National Life Insurance Company and Bollinger-Texas
(incorporated by reference to Exhibit 10.10 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.10 - Assignment and Assumption Agreement dated as of October 1,
1993, between Bollinger-Texas as Assignor and Bollinger
Industries, L.P., as Assignee with respect to such lease
(incorporated by reference to Exhibit 10.10.1 to the Company's
Form S-1 Registration Statement No. 33-69708)
10.11 - $500,000 Real Estate Lien Note dated March 18, 1993, in
favor of Sid Reisman and executed by Bollinger-Texas, as
modified by a Renewal, Extension, and Modification Agreement
dated as of April 6, 1993, and subsequently assigned to Glenn,
Bobby and Dell Bollinger (incorporated by reference to Exhibit
10.10 to the Company's Form S-1 Registration Statement No.
33-69708)
10.12 - Asset Purchase and Sale Agreement dated as of September 13,
1993, by and between California Gym Equipment Company, S. G.
Equipment, Inc. and, for limited purposes, Bollinger-Texas and
Sherman Grider (incorporated by reference to Exhibit 10.13 to
the Company's Form S-1 Registration Statement No. 33-69708)
10.13 - Standard Sublease dated as of September 13, 1993, between
California Gym Equipment Company and S. G. Equipment, Inc.,
together with the Industrial Real Estate Lease dated June 1,
1992, between New England Mutual Life Insurance Company and
Bollinger-Texas attached thereto (incorporated by reference to
Exhibit 10.14 to the Company's Form S-1 Registration Statement
No. 33-69708)
10.14 - Assignment and Assumption Agreement dated as of September 1,
1993, between Bollinger-Texas and California Gym Equipment
Company with respect to Industrial Real Estate Lease dated June
1, 1992 (incorporated by reference to Exhibit 10.15 to the
Company's Form S-1 Registration Statement No. 33-69708)
10.15 - Letter agreement dated May 19, 1992, between Bollinger-Texas,
Denise Austin and Jeff Austin (incorporated by reference to
Exhibit 10.16 to the Company's Form S-1 Registration Statement
No. 33-69708)
II-2
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EXHIBITS PAGE
10.16 - Letter agreement dated April 13, 1994, between Bollinger
Industries, L.P., Denise Austin and Jeff Austin (incorporated
by reference to Exhibit 10.16 to the Company's form 10-K for
the fiscal year ended March 31, 1994)
10.17 - Endorsement Agreement dated September 1, 1993, between
Bollinger-Texas and Nolan Ryan (incorporated by reference to
Exhibit 10.17 to the Company's form 10-K for the fiscal year
ended March 31, 1994)
10.18 - Loan Agreement dated as of January 4, 1994, between
Bollinger Industries, L.P., the Company, and First Interstate
(incorporated by reference to Exhibit 10.18 to the Company's
form 10-K for the fiscal year ended March 31, 1994)
10.19 - Standard Office/Warehouse Lease dated May 11, 1994, between
Fountain Parkway, Ltd., and Bollinger Industries, L.P.
(incorporated by reference to Exhibit 10.19 to the Company's
form 10-K for the fiscal year ended March 31, 1994)
10.20 - Lease dated December 21, 1990, between Americus/Sumter
Payroll Development Authority and N.B.F., Inc. and R. Wayne
Rich (incorporated by reference to Exhibit 10.20 to the
Company's form 10-K for the fiscal year ended March 31, 1994)
10.21 - Assignment and Assumption of Lease dated May 1, 1994,
between Americus/Sumter Payroll Development Authority, NBF,
Inc., a Florida corporation, and NBF, Inc., a Georgia
corporation (incorporated by reference to Exhibit 10.21 to the
Company's form 10-K for the fiscal year ended March 31, 1994)
10.22 - Amendment to Lease between Americus-Sumter Payroll
Development Authority and NBF, Inc., a Georgia corporation and
R. Wayne Rich amending the lease dated December 21, 1990
reflected at exhibit No. 10.20 above (incorporated by
reference to Exhibit 10.2 to the Company's form 10-Q for the
quarter ended June 30, 1994)
10.23 - Asset Purchase Agreement dated May 24, 1994, and effective
as of May 1, 1994, between NBF, Inc., a Florida corporation,
and NBF, Inc., a Georgia corporation (incorporated by
reference to Exhibit 10.3 to the Company's form 10-Q for the
quarter ended June 30, 1994)
10.24 - First Amendment to Loan Agreement dated as of June 22, 1994,
between Bollinger Industries, L.P., the Registrant, Bollinger
Holding Corp., NBF and First Interstate Bank of Texas, N.A.
(incorporated by reference to Exhibit 10.5 to the Company's
form 10-Q for the quarter ended June 30, 1994)
II-3
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SEQUENTIALLY
NUMBERED
EXHIBITS PAGE
10.25 - Loan and Security Agreement dated September 9, 1994, between
Bollinger Industries, L.P. and NationsBank of Texas, N.A.
(incorporated by reference to Exhibit 10.1 to the Company's
form 10-Q for the quarter ended September 30, 1994)
10.26 - First Amendment to Loan and Security Agreement dated
September 9, 1994, between Bollinger Industries, L.P. and
NationsBank of Texas, N.A. (incorporated by reference to
Exhibit 10.2 to the Company's form 10-Q for the quarter ended
September 30, 1994)
10.27 - Second Amendment to Loan and Security Agreement dated
December 8, 1994, between Bollinger Industries, L.P. and
NationsBank of Texas, N.A. (incorporated by reference to
Exhibit 10.1 to the Company's form 10-Q for the quarter ended
December 31, 1994)
10.28 - Lease Agreement dated November 16, 1994, between John
Wilkerson, individually and Bollinger Industries (incorporated
by reference to Exhibit 10.2 to the Company's form 10-Q for
the quarter ended December 31, 1994)
10.29 - Modification and Ratification of Lease dated November 1,
1994, between Fountain Parkway, Ltd. and Bollinger Industries,
L.P. (incorporated by reference to Exhibit 10.3 to the
Company's form 10-Q for the quarter ended December 31, 1994)
10.30 - Third Amendment to Loan and Security Agreement dated March
3, 1995 between Bollinger Industries, L.P. and NationsBank of
Texas, N.A. (incorporated by reference to Exhibit 10.30 to the
Company's Form 10-K for the fiscal year ended March 31, 1995)
10.31 - Fourth Amendment to Loan and Security Agreement dated May
15, 1995 between Bollinger Industries, L.P. and NationsBank of
Texas, N.A. (incorporated by reference to Exhibit 10.31 to the
Company's Form 10-K for the fiscal year ended March 31, 1995)
10.32 - Modification and Ratification of Lease dated February 22,
1995, between Fountain Parkway, Ltd. and Bollinger Industries,
L.P. (incorporated by reference to Exhibit 10.32 to the
Company's Form 10-K for the fiscal year ended March 31, 1995)
10.33 - Fifth Amendment to Loan and Security Agreement dated
September 9, 1995, between Bollinger Industries, L.P. and
NationsBank of Texas, N.A. (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
December 31, 1995)
II-4
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SEQUENTIALLY
NUMBERED
EXHIBITS PAGE
10.34 - Sixth Amendment to Loan and Security Agreement dated
December 29, 1995, between Bollinger Industries, L.P. and
NationsBank of Texas, N.A. (incorporated by reference to
Exhibit 10.2 to the Company's Form 10-Q for the quarter ended
December 31, 1995)
10.35 - Seventh Amendment to Loan and Security Agreement dated March
8, 1996, between Bollinger Industries, L.P. and NationsBank of
Texas, N.A.
10.36 - Eighth Amendment to Loan and Security Agreement dated May 8,
1996, between Bollinger Industries, L.P. and NationsBank of
Texas, N.A.
10.37 - Deed of Trust, Assignment, Security Agreement and Financing
Statement dated May 8, 1996, between Bollinger Industries,
L.P. and NationsBank of Texas, N.A.
10.38 - Ninth Amendment to Loan and Security Agreement dated May 17,
1996, between Bollinger Industries, L.P. and NationsBank of
Texas, N.A.
10.39 - Amended and Restated Promissory Note dated March 29, 1996,
between Bollinger Industries, L.P., and Glenn D. Bollinger.
10.40 - Amended and Restated Promissory Note dated March 29, 1996,
between Bollinger Industries, L.P., and Bobby D. Bollinger.
10.41 - Amended and Restated Promissory Note dated March 29, 1996,
between Bollinger Industries, L.P., and Dell Bollinger.
10.42 - Second Amendment to standard industrial lease dated January
31, 1996, between National Life Insurance Company and
Bollinger Industries, L.P., as assignee.
10.43 - U.S. Trademark License Agreement between International
Apparel Marketing Corp. dba Nautilus Wear International and
Bollinger Industries, Inc. dated May 1, 1995
10.44 - Amendment to U.S. Trademark License Agreement between
International Apparel Marketing Corp. and Bollinger
Industries, Inc. dated March 1, 1996.
10.45 - Intercreditor and Subordination Agreement dated May 8, 1996,
between NationsBank of Texas, N.A. and Glenn D. Bollinger,
Bobby D. Bollinger, and Dell Bollinger
11.1 - Statement re Computation of Per Share Data
II-5
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NUMBERED
EXHIBITS PAGE
21.1 - List of the Company's subsidiaries (incorporated by
reference to Exhibit 21.1 to the Company's Form 10-K for the
fiscal year ended March 31, 1995)
27.1 - Financial Data Schedule
II-6
Dates Referenced Herein and Documents Incorporated By Reference
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