pont blank soulution inc

SS Body Armor Inc Cash Flow is Shaking Might Fall Into Bankruptcy.

July 19th, 2012 Posted by Company Updates No Comment yet

SS Body Armor Inc Balance Sheet

SS Body Armor Inc Financial Liquidity

SS Body Armor Inc financial liquidity of the company is important. Investors are attracted to firms with stable financial. For SS Armor I Inc, the results of its financial liquidity from 2005 to 2008 are as shown below:

Particulars 2005 2006 2007 2008 Ave.
Current Ratio 1.01 1.15 1.31 1.24 1.18
Quick Ratio .79 .90 .92 .78 .85
Working Capital 2 19 35 20 19
  • The current ratio averaged 1.18 as shown in the above table, this means the current asset exceeded current liability by 18 percent.
  • Quick ratio or monetary assets were .85 average against the current liabilities of the company, this means that if inventory is excluded the current asset was 15 percent lesser than its current liabilities.
  • The average working capital was $19, with positive results over the past 4 years. The trend is going up from 2005 to 2007 but down in 2008 by 42 percent.

SS Body Armor’s working capital showed a high increase in 2006 and 2007 by 85 percent and 84 percent respectively, but, went down by 42 percent in 2008. However, records in 2009 showed that its average in three-quarters was $10.5 or it continues to go downtrend.

Looking back at the company’s line of business, the above trend in the generation of cash is normal since its products are not necessarily in nature, provided,  that there is a continuous flow of transactions in the business, meaning there is in and out the transaction on its products each period up to the present. If none, then the business is in critical condition.

Cash Conversion Cycle (CCC)

Usually, a company acquires inventory on credit, which results in accounts payable. A company can also sell products on credit, which results in accounts receivable. Cash, therefore, is not involved until the company pays the accounts payable and collects accounts receivable. So the cash conversion cycle measures the time between outlay of cash and cash recovery.

CCC is important for retailers and similar businesses. This illustrates how quickly a company can convert its products into cash through sales. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company’s bottom line. For SS Body Armor I Inc, results are:

  • The inventory conversion period was 68 days or more than 2 months. This is the average days to convert its inventory to sales.
  • Receivable conversion period was 66. The company’s average days to collect its receivable was 66 days or more than 2 months.
  • Payable conversion period was 34. The company’s payable was 34-day average to pay. Usually, this is the company’s credit term given by its supplier.
  • Cash conversion cycle was an average of 100 days or more than 3 months.
Particulars 2005 2006 2007 2008 Ave
Inventory Conversion Period 34 60 62 115 68
Receivable Conversion Period 57 55 52 101 66
Payable Conversion Period 13 33 22 69 34
Cash Conversion Cycle 79 82 92 146 100


As to the claimant of the company’s assets in case of bankruptcy, it is also important to know who is in control of the company; creditors, banks or the shareholders? For SS Body Armor I Inc, the creditors have 80 percent claims on the total assets of the company while the owners or shareholders have only 15 percent claims.   To further understand, below is the financial leverage ratios of the company:

  • The debt ratio was an average of .85, which means that the company’s debt capital was 85 percent of total assets.
  • Debt to equity ratio was 15.3 averages.  The company was highly indebted, with 1530 percent against equity.
  • Solvency ratio was -.06, which means that the company is insolvent.  It could hardly pay all debt obligations as they became due.
  • Current liabilities to total assets was .80 which shows the company’s current liabilities was an 80 percent average of total assets, so the creditors have 80 percent claims on the total assets.
  • Stockholders’ equity to total assets was .15.  The owners’ equity was only 15 percent average of total assets, therefore, the shareholders have 15 percent claims on the total assets of the company.
Particulars 2005 2006 2007 2008 Ave
Debt Ratio .98 .86 .81 .76 .85
Debt to Equity 47.66 6.29 4.18 3.19 15.3
Solvency Ratio -.22 -.04 .06 -.05 -.06
Current Liabilities to Total Assets .97 .86 .73 .67 .80
Stockholder’s Equity to Total Assets .02 .14 .19 .24 .15

SS Body Armor Inc is highly leveraged and there’s a rare chance that all its obligations will be settled as to the company’s total resources is concerned. The company’s debt obligation has been just 15 percent behind, nearly equal its total assets, and 1530 percent against owners’ equity and its ability to pay all debts was uncertain, so the company was insolvent.

Property, Plant & Equipment (PPE)

Property, plant, and equipment is still efficient for the next three years since its net book value was equivalent to 60 percent of the original cost, after deducting accumulated depreciation of 40 percent.

Therefore, the company could still continue to run its business without investing additional fixed assets and to wait until these are fully depreciated.  Rio, part of Numbers team, provided the detail data below followed by the interpretation.







Property, Plant & Equipment, Gross 5.9 4.4 9.2 15.4 6.98
Accumulated Depreciation 3.4 2.6 3.2 4.6 2.76
Property, Plant & Equipment, Net 2.5 1.8 6 10.8 4.21

The original cost of the company’s investment in PPE which was capitalized was $6.98 average, deducted by its accumulated depreciation of $2.76 resulted to net book value of $4.21. If the estimated life of the fixed asset is 5 years, then the remaining life would then be 3 years only considering that the accumulated depreciation was 40 percent of the original cost and the net book value was 60 percent (remaining cost of PPE before it is fully depreciated).


Inventory turnover ratio measures how well the company can manage to sell its inventory, or how well the company converts inventory into sales? If a company sells its inventory very well the turnover will be low. When we speak of receivable turnover ratio, it is the firm’s effectiveness in extending credit as well as collecting debts while accounts payable turnover ratio measures the number of times a company pays its suppliers during a specific period. And, asset turnover ratio measures the efficiency with which a company’s assets generate sales.   For SS Body Armor I Inc, results are as follows:







Inventory Turnover Ratio 11 6 6 3 6
Receivable Turnover Ratio 6 7 7 4 6
Payable Turnover Ratio 35 14 21 7 19
Fixed Asset Turnover Ratio 138 139 54 15 52
  • The average inventory turnover ratio was 6, which means that the inventory turns 6 times each period.
  • The receivable turnover ratio was 6, which means the company’s receivable turns 6 times average each period.
  • The payable turnover ratio was 19 times turn per year in five years.
  • The fixed asset turnover ratio was 52 times average each period.  This is the average turnover per period in five years.

SS Body Armor Inc Income Statement


The company’s profitability starting with their net margins was not looking good for the past years. It was only in 2007 wherein operations did well and got a 1.9 percent. Their asset turnover tends to be inversely related to the net profit margin resulting to higher volume but low profit. The return on asset was not favorable due to the net losses incurred.

Financial leverage depicts a high portion of the return on equity which is the result of debt. Therefore, return on equity shows unfavorable returns which resulted in bankruptcy as reported by DJ Dow Jones, “PBSI has debuted a chapter 11 plan. But what the creditors and equity holders did instead, they secured a $25 million replacement bankruptcy financing package for Point Blank.” To know, how they end up with this statement, let us give a look at the profitability ratios from 2005 – 2008 as shown in the table below:


2005 2006 2007 2008
Net margin  in percent -8.2 -2.1 1.9 -3.3
Asset turnover 2.9 1.86 2.11 1.17
Return on the asset  in percent -24.0 -3.88 4.08 -3.83
Financial leverage in percent 1010 7659 2573 1316
Return on equity  in percent -242 -298 104.8 -50.5
  • Net margin or simply is the after-tax profit a company generated for each dollar of sales. This tells us that net sales went down in 2005, 2006 and 2008; only in 2007 sales went up. Meaning net margins for the past years were not really doing well.
  • Asset turnover measures the efficiency of the company to convert its assets into revenues. This tells us that they were earning from their assets, meaning in 2005 sales from asset turn the highest with 2.9 times compared to 2006 and 2008 but in 2007 it slightly recovered to 2.1.
  • Return on assets tells us how much profit the company generated for each dollar of total assets.  With SS Body Armor I Inc, it earned -24.0, -3.88, 4.08, and -3.83 from their total assets from 2005 to 2008.


Income from sales to the U.S. Military comprises the largest portion of their business, followed by sales to federal, state and local law enforcement agencies, including correctional facilities plus their sports and health products. Their ability to increase their sales is highly dependent on the demand for their products. Nelly, of our Numbers team, laid the income of the company from 2005 to three-quarters of 2009 as shown below:






2009 (3Q)

Net sales in thousands






Gross profit






Operating income (loss)






Income (loss) before income tax






Net income (loss)






  • Net sales in thousands of dollars tell us that their yearly earnings growth ratio of -26, 26.2, and -48.5 has recovered in 2007and declined in 2008. Even their three-quarters total of 2009 amounted only 48 percent of the yearly average of 270,846 thousand dollars. This means the company was in a difficult period in maintaining their sales.
  • Gross profit was the result after deducting the cost of sales, manufacturing and warehouse expenses; tells us that their yearly growth ratio of -2.7, 12, and-34, same as net sales increase in 2007 and decreased in 2008. Three-quarters of 2009 amounted only 12 percent of the yearly average of 55,225 thousand dollars. This means gross profit is slipping down wherein it has been affected by variations of product mix, price changes in response to competitive factors and fluctuations in raw material costs and vendor programs in addition to inventory adjustments caused by excess and obsolete inventory.
  • Operating income (loss) was the result after deducting the following 1.) selling and marketing expenses, including commissions and marketing programs; 2.) general and administrative expenses, including administrative salaries, professional fees, and other office expenses; 3.) research and development expenses; and 4.) other expenses associated with our operations. This tells us that their yearly growth ratio of -88, 305, and -34, operating income has unpredictably increased in 2007 due to fluctuating orders from the US military and other government agencies plus market costs.
  • Income (loss) before income tax was the income generated after deducting interest income and expenses, net of non-operating cost. Still showing a growth only in 2007 against the previous and 2008 and three-quarters of 2009.
  • Therefore their net income (loss), showed that the company’s net earnings were not gainfully profitable only in 2007 when they tighten up on their revenues and cost with strict strategic planning and management but still it declines down in 2008 and 2009.

Net sales showed an increase in 2007 because of the increase in sales by the U.S. Military and domestic market then declined in 2008. This was primarily due to delays in military and contract awards. Therefore, we can say that delays affected net sales and results of operation significantly. And operations were greatly affected by competitive factors of price changes, raw material costs, and inventory. Thus, net income resulted in a deficit despite the implementation of their strategic plans and reshaping their focus to increase their market share and sales.


Moving forward to the expenses; the table below will show where areas their allotted money when it comes to their expenses from 2005 to 2008 and three-quarters of 2009.






2009 (3Q)

Cost of goods sold in a thousand 285,011 197,125 257,256 123,092 122,740
Selling, general administrative  expense 57,223 42,539 40,921 32,359 19,050
Unusual expense (income) 27,246 17,322 10,950 17,170 1,740
Interest income (expense) -551 -127 110 -411 220
Income tax -250 286 4,636 -2,393 -6,670
Minority interest expense 122 82 153 -754 -590
  • Cost of goods sold in the thousands has an average of 215,621. This tells us that growth decreased by -30.8 percent in 2006 then increased in 2007 to 30.5 due to increase also in sales but decrease down to 52 percent in 2008 and 2009 three quarter accounts 57 percent of average.  This means the cost has been fluctuating depending on the period of the sale of the products.
  • While their selling, general and administrative expense has an average of 43,260.50.  This shows a decreasing trend of -25.6, -3.8, and -21, meaning they were tightening up their expenses.
  • Their unusual expense (income), an average of 18,172, represented the cost of investigations and litigations the company has been facing with their US military and government contracts. And this shows a high cost and burden to the company for the last four years.
  • Interest income (expense), net non-operating has an average of -244.75.  This shows the interest on their obligations with financing institutions.
  • Their income tax had an average of 569.75. This represents the taxes incurred in their income generated.
  • And minority interest expense had an average of -99.25. This was interesting in their minority and non-controlling subsidiaries which declined down in 2008 and 2009.

In their expenses, the yearly average of cost of goods sold accounts 79.6 percent of average net sales, while their selling, general and administrative expenses account 16 percent, unusual expense (income) accounts 6.7, interest income (expense) accounts -0.09, income tax accounts 0.21 and minority interest expense -0.036. Therefore the remaining -3 percent represents their average net loss.

SS Body Armor Inc Cash Flow

Many investors or some analyst was first evaluating the cash flow than the result of the income statement and the balance sheet. Sometimes in one company, it resulted they have a lot of margins but no cash coming in, probably the company allowed on credit but it was not effective in handling their collection. Also from the viewpoint of cash flow, you can determine what kind of the company it does. Could they have enough funds for the operation itself; to sustain their future growth or they need to refinance.

Now, the question is do the SS Body Armor I Inc would be one of the best company to invest in? Is PBSOQ belongs to what grade if you rated into as A, B or C?

Based on their cash flow, SS Body Armor I Inc was graded C and was not a good company to invest in; just to emphasize, their free cash flow results from 2006 to 2008, indicates a financial distress in the future. Data below detailed the outcome of the cash flow from operating activities up to the total debt ratio in percentage.

Cash Flow from Operating

Table 1






Net Income -28.14 -5.32 6.21 -5.4 -13.39
Depreciation/depletion 0.62 0.64 0.64 1.48 3.36
Deferred taxes -20.26 1.06 26.64 -2.95 -17.68
Non-cash Items 21.07 1.64 3.89 5.03 1.12
Changes in working capital 60.25 -19.64 -37.36 -16.9 105.45
Cash from operating activities 33.53 -21.62 0.01 -18.74 78.85

The ideal result of cash flow from operating activities must be positive; it should exceed net income. As we can see in table 1, the net income was negative except in 2007; with positive result of 186 percent. In 2009, based on the total of the three-quarters there was a net loss of 60 percent. Depreciation in 2008 and 2009 stood up by 57 and 56 percent, respectively. Deferred taxes and non-cash items were in sideways. The changes in working capital were surprisingly happening in 2009, by 116 percent compared from the last three years falls in negative results. The changes in 2009 had a great impact on the cash from operating, reached at 124 percent. It signified the company’s operational inefficiency.

Cash from operating activities was an act of where the company can determine how much cash they can utilize from its operation. The starting line will be the net income earned by adding back all the non-cash items, depreciation and the changes in working capital.

To dig it further; net income was an income left after the company paid its direct cost, operating expenses, and taxes or in totality, it was called “the bottom line result” in business. Depreciation/ depletion was an allocation of the cost of the asset, it will be added back since we are computing the cash flow and depreciation does not involve cash.

Deferred tax is also known as future income tax.  Non-cash items include amortization, unrealized gains or losses from investments, allowances for doubtful accounts or returns and write-downs of inventory. With changes in working capital, it was a change coming from the current assets (like cash, accounts receivable and inventory) also from current liabilities (like accounts payable or current portion of the debt which payable in 12 months not exceeds in one year).

Cash from Investing Activities

Cash from investing activities denotes companies’ interest which they might also interested in. SS Body Armor I Inc invested in capital expenditures and other investments. A capital expenditure is an outlay of cash to acquire or upgrade a business asset. Common examples include the property plant and equipment or the cost of significant upgrades to an existing facility.

The cash flow from investing activities of SS Body Armor I Inc was contributed by the capital expenditures (please refer table 2 below), which the trend from 2005 to 2007 increased by 85 percent and in 2008 decreased by 28 percent. It had an inflow from other investing cash flow items, represented at 7 percent for a total of five years.

Table 2






Capital expenditures





Other investing cash flow items, total





Cash from investing activities





Cash Flow from Financing Activities

Cash flow from financing activities was a cash flow that a company acquires from a financing round instead of from operations. That is, cash flow from financing activities is the net amount that a company receives from issuing stock, bonds, and net after paying dividends. Dyne defined each term to help us understand the data:

Financing cash flow items include financing costs incurred like the cost to acquire debt. Also, when employees of a company exercise their stock options, the company can claim a tax benefit.  Total cash dividends paid, if the company pays dividends, that cash outflow is recorded here.

Issuance (Retirement) of stock, net;  if the company issues new stock or if the company buys back (retiree) its shares while issuance (retirement) of debt, net; if the company issues new bonds or if the company buys back (retiree) bonds or enters into a long-term debt.

The cash from financing activities of SS Body Armor I Inc results (see table 3 below) in 2005, -257 percent, meaning the company enters in a long-term debt but in 2006 to 2008 it was in both positive, an average of 55 percent; it means the company issues new stock. But in 2009 the company resulted to negative in Q3, compared to a 78 percent increase from the Q1. It tells us that the company had again a long-term debt from Q1 to Q3 and the trend is continuing.

Table 3






2009 ( Q1-Q3)

Financing cash flow items 0.58
Total cash dividends paid -0.34
Issuance (retirement) of stock, net -10.53 21.44 0 .09
Issuance (retirement) of debt, net -21.14 -1.04 4.8 23.32
Cash from financing activities -32.02 20.4 4.8 23.99 -71.77

Cash Flow Efficiency

The free cash flow of SS Body Armor I Inc showed in table 4, only in 2005, the company had sufficient of funds while from 2006 to 2008 they were insufficient, total in three years at 166 percent. It means the company would run into debt or will issue an additional stock to support the capital expenditures maintenance.

Free cash flow measures the company’s capability to cover capital expenditures maintenance and determine if the company has still funds for future expansion. Through the results from operating activities less the capital expenditures, we can determine the free cash flow available.

Table 4

Particulars 2005 2006 2007 2008
Cash from operating activities 33.53 -21.62 0.01 -18.74
Capital expenditures -0.73 -0.46 -4.82 -3.76
Free cash flow 32.8 -22.08 -4.81 -22.5

The total debt ratio measures a company’s ability to pay its debt or company’s total obligation. Using the result from the operating activities over the total liabilities per year, we can determine how much available cash would the company able to pay. The total debt ratio of SS Body Armor I Inc, shown in table 5, indicated insufficiency of funds based on the total result in five years; represents at -9 percent or in every $1 of debt they would only able to pay at -.009. It tells us the results would lead to bankruptcy. No money lenders would lend you money if one company does not even maintain to pay its operating maintenance.

Table 5

Particulars 2005 2006 2007 2008
Cash from operating activities 33.53 -21.62 0.01 -18.74
Total liabilities 122.95 127.88 126.19 95.48
Total debt ratio in percentage 27 -17 0 -20

Written by Rio, Nelly, and Dyne

Edited by Cris

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