-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C+iqa3biJM3Ht3tLA37i7qpr4KQY/VEnhIu1oX3a68KnMrojgaBRiP55a9yVb0xl Hw4IkDZ81/Cm07+xL6goWQ== 0000950130-99-006019.txt : 19991028 0000950130-99-006019.hdr.sgml : 19991028 ACCESSION NUMBER: 0000950130-99-006019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOLT TECHNOLOGY CORP CENTRAL INDEX KEY: 0000354655 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 060773922 STATE OF INCORPORATION: CT FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12075 FILM NUMBER: 99734480 BUSINESS ADDRESS: STREET 1: FOUR DUKE PL CITY: NORWALK STATE: CT ZIP: 06854 BUSINESS PHONE: 2038530700 MAIL ADDRESS: STREET 1: FOUR DUKE PL CITY: NORWALK STATE: CT ZIP: 06854 10-Q 1 FORM 10-Q FOR THE QUARTERLY PERIOD ENDED 9/30/99 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1999 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: 0-10723 BOLT TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-0773922 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Four Duke Place, Norwalk, Connecticut 06854 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 853-0700 Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 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 [_] At October 16, 1999 there were 5,370,378 shares of common stock, without par value, outstanding. (1) BOLT TECHNOLOGY CORPORATION --------------------------- INDEX -----
Page Number ----------- Part I - Financial Information: Item 1. Financial Statements. Consolidated statements of income - three months ended September 30, 1999 and 1998...................................................... 3 Consolidated balance sheets - September 30, 1999 and June 30, 1999............................................. 4 Consolidated statements of cash flows - three months ended September 30, 1999 and 1998................................... 5 Notes to consolidated financial statements....................................... 6-10 Item 2. Management's discussion and analysis of financial condition and results of operations.............................................. 11-13 Item 3. Quantitative and Qualitative Disclosures about Market Risk....................... 13 Part II - Other Information: Item 6. Exhibits and reports on Form 8-K................................................. 14 Signatures....................................................................... 14
(2) PART I- FINANCIAL INFORMATION BOLT TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) -------------------------------------
Three Months Ended September 30, ------------------ 1999 1998 ---- ---- Revenues: Sales........................................ $ 4,058,000 $ 5,360,000 Costs and Expenses: Cost of sales................................ 2,032,000 2,803,000 Research and development..................... 125,000 50,000 Selling, general and administrative.......... 1,057,000 941,000 Amortization of intangibles.................. 165,000 57,000 Interest expense............................. 141,000 - Interest income.............................. (29,000) (26,000) ----------- ----------- 3,491,000 3,825,000 ----------- ----------- Income before income taxes........................ 567,000 1,535,000 Provision for income taxes........................ 262,000 - ----------- ----------- Net Income................................... $ 305,000 $ 1,535,000 =========== =========== Earnings per share: Basic........................................ $ 0.06 $ 0.29 Diluted...................................... $ 0.06 $ 0.29 Shares Outstanding: Basic........................................ 5,370,378 5,232,478 Diluted...................................... 5,415,370 5,371,623
See Notes to Consolidated Financial Statements. (3) BOLT TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS --------------------------- ASSETS ------
September 30, June 30, 1999 1999 (unaudited) ------------- -------- Current Assets: Cash and cash equivalents.................. $ 3,175,000 $ 3,500,000 Accounts receivable, net................... 2,637,000 2,208,000 Inventories................................ 5,100,000 5,413,000 Deferred income taxes...................... 1,129,000 1,091,000 Other...................................... 164,000 161,000 ------------- ------------ Total current assets.................... 12,205,000 12,373,000 ------------- ------------ Goodwill, net.................................. 12,446,000 12,610,000 Property and Equipment, net.................... 1,427,000 1,433,000 Deferred Income Taxes.......................... 1,156,000 1,403,000 Other Assets................................... 61,000 68,000 ------------- ------------ Total assets............................ $ 27,295,000 $ 27,887,000 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current maturities of long-term debt....... $ 1,700,000 $ 1,700,000 Accounts payable........................... 513,000 549,000 Accrued liabilities........................ 1,300,000 1,748,000 Income taxes payable....................... 737,000 725,000 ------------- ------------- Total current liabilities............... 4,250,000 4,722,000 Long-term Debt................................. 4,875,000 5,300,000 ------------- ------------- Total liabilities..................... 9,125,000 10,022,000 Stockholders' Equity: Common Stock............................... 26,117,000 26,117,000 Accumulated deficit........................ (7,947,000) (8,252,000) ------------- ------------- Total stockholders' equity.............. 18,170,000 17,865,000 ------------- ------------- Total liabilities and stockholders' equity.............................. $ 27,295,000 $ 27,295,000 ============= =============
See Notes to Consolidated Financial Statements. (4) BOLT TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -------------------------------
Three Months Ended September 30, ------------- 1999 1998 ---- ---- Cash Flows From Operating Activities: Net income............................................ $ 305,000 $1,535,000 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization....................... 235,000 70,000 Deferred income taxes............................... 209,000 (90,000) --------- ---------- 749,000 1,515,000 Changes in Operating Assets and Liabilities: Accounts receivable................................ (429,000) 1,260,000 Inventories........................................ 313,000 (83,000) Other assets....................................... 2,000 (9,000) Accounts payable and accrued liabilities........... (484,000) (914,000) Income taxes payable............................... 12,000 - --------- ---------- Net cash provided by operations................. 163,000 1,769,000 --------- ---------- Cash Flows From Investing Activities: Purchase of property and equipment.................... (63,000) (33,000) --------- ---------- Net cash used in investing activities............. (63,000) (33,000) --------- ---------- Cash Flows From Financing Activities: Repayment of long-term debt........................... (425,000) - --------- ---------- Net cash used in financing activities............. (425,000) - --------- ---------- Net (decrease) increase in cash and cash equivalents... $ (325,000) $ 1,736,000 =========== =========== Supplemental disclosure of cash flow information: Income taxes paid................................... $ 22,000 $ 83,000 Interest paid....................................... $ 141,000 -
See Notes to Consolidated Financial Statements. (5) BOLT TECHNOLOGY CORPORATION --------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (UNAUDITED) ----------- Note 1- Basis of Presentation - ----------------------------- The consolidated balance sheet as of September 30, 1999, the consolidated statements of income for the three month periods ended September 30, 1999 and 1998 and the consolidated statements of cash flows for the three month periods ended September 30, 1999 and 1998 are unaudited. In the opinion of management , all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. It is suggested that the September 30, 1999 consolidated financial statements be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended June 30, 1999. Note 2 - Acquisition - -------------------- In April 1999, the Company acquired all of the outstanding common stock of A-G Geophysical Products, Inc. ("AG"). AG manufactures underwater electrical connectors and cables, air gun signature hydrophones and pressure tranducers used in the marine seismic industry. The purchase price totaled $13,783,000 and consisted of $6,100,000 in cash; a note to the selling shareholder for $7,000,000; 63,492 shares of common stock valued at $500,000 and acquisition costs of $183,000. The results of operations of AG have been included in the consolidated statement of income from the acquisition date. The following table presents the unaudited pro forma consolidated results of operations of the Company and AG for the three months ended September 30, 1998. The pro forma results are not necessarily indicative of the actual results of operations that might have occurred, nor are they necessarily indicative of results in the future.
Three Months Ended September 30, 1998 ------------------ Sales $8,124,000 Net income $1,808,000 Earnings per share: Basic $ 0.34 Diluted $ 0.33
(6) BOLT TECHNOLOGY CORPORATION --------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) ----------- Note 3 - Debt - ------------- Credit Facility The Company has a $3,000,000 unsecured credit facility which expires in January 2003. Maximum borrowings under the facility decrease $500,000 each January and bear interest at the prime rate. The credit facility contains covenants which include: (i) prohibition of additional indebtedness; (ii) minimum tangible net worth of $4,998,000 at June 30, 1999 which increases by 75% of net income each year and; (iii) a ratio of total liabilities to tangible net worth of not more than 3 to 1 through December 31, 1999. This ratio decreases to 1.25 to 1 by December 31, 2000. Also, under the terms of the agreement the Company must maintain minimum debt service of not less than 2 to 1 and cannot have two consecutive quarterly losses. The Company is in compliance with these covenants at September 30, 1999. 8.25% Non-Negotiable Promissory Note In connection with the acquisition of AG, the Company issued a $7,000,000 note to the selling shareholder for a portion of the purchase price. The note has a final maturity of April 2002 and requires minimum principal payments of $425,000 per quarter. The Company has pledged the assets and common stock of AG as collateral for the note. Also under the terms of the note the Company must have AG maintain a current ratio of no less than 3 to 1 and maintain minimum tangible net worth of $4,000,000. Note 4 - Income Taxes - --------------------- At September 30, 1999, the Company had net operating loss carry-forwards of approximately $4,490,000 which expire in years 2002 through 2007. Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes", requires that the tax benefit of net operating loss ("nol") carry-forwards be recorded as an asset to the extent that management assesses the utilization of such nol carry-forwards to be "more likely than not". Based primarily upon the Company's recent earnings history and expected future levels of taxable income, management believes that it is more likely than not that it will realize the benefit of its net deferred tax asset. In the quarter ended September 30, 1998, the Company reduced the deferred tax valuation allowance by $90,000 because of expected higher levels of taxable income. The amount of the net deferred tax asset recorded could be adjusted if estimates of future taxable income during the carry-forward period are revised. (7) BOLT TECHNOLOGY CORPORATION --------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) ----------- Note 4 - Income Taxes (cont'd) - ------------------------------ Components of income tax (benefit) expense for the three months ended September 30, 1999 and 1998 follow:
September 30, September 30, 1999 1998 ---- ---- Current: State.................... $ 53,000 $ 90,000 -------- -------- Deferred: Federal.................. 209,000 (90,000) -------- -------- Income tax expense........... $262,000 $ - ======== ========
Note 5 - Inventories - -------------------- Inventories, net of reserves, are comprised of the following:
September 30, June 30, 1999 1999 ---- ---- Raw materials and sub-assemblies.... $4,530,000 $4,947,000 Work-in process..................... 570,000 466,000 ---------- ---------- $5,100,000 $5,413,000 ========== ==========
Note 6 - Property and Equipment - ------------------------------- Property and equipment are comprised of the following:
September 30, June 30, 1999 1999 ---- ---- Building and leasehold improvements.. $ 540,000 $ 534,000 Geophysical equipment................ 460,000 460,000 Machinery and equipment.............. 5,630,000 5,573,000 Equipment held for rental............ 480,000 480,000 ----------- ----------- 7,110,000 7,047,000 Less accumulated depreciation....... (5,683,000) (5,614,000) ----------- ----------- $ 1,427,000 $ 1,433,000 =========== ===========
(8) BOLT TECHNOLOGY CORPORATION --------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (CONTINUED) ----------- Note 7 - Earnings Per Share - --------------------------- As required by Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings Per Share", the Company must report both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income by the average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the average number of common shares outstanding assuming dilution, the calculation of which assumes that all stock options are exercised at the beginning of the period and the proceeds used to purchase shares at the average market price for the period. The following is a reconciliation from basic earnings per share to diluted earnings per share for the quarters ended September 30, 1999 and 1998.
Average Shares Earnings September 30, 1999 Net Income Outstanding Per share - ------------------ ---------- ----------- --------- Basic earnings per share $ 305,000 5,370,378 $0.06 Effect of Dilution: Stock Options - 44,992 ---------- --------- Diluted earnings per share $ 305,000 5,415,370 $0.06 ========== ========= September 30, 1998 - ------------------ Basic earnings per share $1,535,000 5,232,478 $0.29 Effect of dilution: Stock Options - 139,145 ---------- --------- Diluted earnings per share $1,535,000 5,371,623 $0.29 ========== =========
(9) BOLT TECHNOLOGY CORPORATION --------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------- (CONTINUED) ----------- Note 8 - Segment Information - ---------------------------- The Company's reportable segments are: (1) geophysical equipment and (2) industrial clutches. The following table provides selected financial information for both of the Company's segments for the quarters ended September 30, 1999 and 1998. Quarter ended September 30, 1999 - --------------------------------
Geophysical Industrial Equipment Clutches Total ----------- ---------- ----------- Sales $ 3,145,000 $ 913,000 $ 4,058,000 Interest income 29,000 - 29,000 Interest expense 141,000 - 141,000 Depreciation and amortization 172,000 63,000 235,000 Income before income taxes 333,000 234,000 567,000 Segment assets 21,062,000 6,233,000 27,295,000 Fixed asset additions 31,000 32,000 63,000
Quarter ended September 30, 1998 - --------------------------------
Geophysical Industrial Equipment Clutches Total ----------- ---------- ----------- Sales $ 4,634,000 $ 726,000 $ 5,360,000 Interest income 26,000 - 26,000 Depreciation and amortization 9,000 61,000 70,000 Income before income taxes 1,399,000 136,000 1,535,000 Segment assets 10,780,000 6,303,000 17,083,000 Fixed asset additions 33,000 - 33,000
The Company does not allocate income taxes to its segments. (10) BOLT TECHNOLOGY CORPORATION --------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Cautionary Statement for Purposes of Forward-Looking Statements - --------------------------------------------------------------- Certain statements contained herein and elsewhere may be deemed to be forward-looking within the meaning of The Private Securities Litigation Reform Act of 1995 and are subject to the "safe harbor" provisions of that act, including without limitation, statements concerning future sales, earnings, costs, expenses, asset recoveries, working capital, capital expenditures, financial condition, and other results of operations. Such statements involve risks and uncertainties. Actual results could differ materially from the expectations expressed in such forward-looking statements. Demand for the Company's geophysical equipment is dependent upon the level of world-wide oil and gas exploration activity. This activity depends primarily on oil and gas prices. Historically these markets have been volatile. Factors that cause this volatility are consumer demand, weather, world political conditions and overall economic conditions. Recent volatility in oil and gas prices has resulted in a reduction in exploration activity which has decreased the demand for geophysical equipment. Liquidity and Capital Resources - ------------------------------- For the three months ended September 30, 1999 cash and cash equivalents decreased $325,000 compared to an increase of $1,736,000 for the three months ended September 30, 1998. The primary causes for the change between quarters was the reduced level of net income and the repayment of $425,000 of long-term debt related to the acquisition of A-G Geophysical Products, Inc. For the three months ended September 30, 1999, the Company used $63,000 for capital expenditures. The Company does not anticipate capital expenditures for the current fiscal year to exceed $150,000. The Company has a $3,000,000 unsecured credit facility which matures in 2003. Available borrowings under the terms of the agreement decrease by $500,000 each year. Any borrowings under the agreement bear interest at the prime rate. There are no borrowings outstanding under this agreement at September 30, 1999. As part of the consideration for the acquisition of AG Geophysical Products, Inc. in April 1999, the Company issued a note for $7,000,000. The note bears interest at 8.25% payable monthly and requires quarterly principal payments of $425,000 with a final maturity in April 2002. The Company pledged the assets and common stock of AG as collateral for the note. Under the terms of the January 1998 asset purchase agreement for Custom Products, the Company may be required to make additional payments to the former owners of Custom Products in the maximum amount of $4,000,000 if net sales of Custom Products increase to certain levels by December 2002. (11) BOLT TECHNOLOGY CORPORATION --------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- (CONTINUED) ----------- Liquidity and Capital Resources (cont'd) - ---------------------------------------- The Company is owner of a one-half interest in its administrative and engineering building located in Norwalk, Connecticut through a joint venture agreement. The agreement expired in July 1999. Under the terms of the agreement, the Company can purchase the one-half interest owned by its joint venture partner, estimated at approximately $300,000. The Company is currently exploring various alternatives with its joint venture partner. If the Company does purchase the building, it will use existing cash on hand. On October 5, 1998, the Company announced that its board of directors approved a stock repurchase program under which the Company was authorized to buy up to 500,000 shares of its common stock in open market or private transactions. The Company will use its cash flow from operations and existing cash balances for the repurchase of any shares. The Company has not repurchased any shares under the program. Current cash and cash equivalent balances, existing borrowing capacity and projected cash flow from operations are currently considered adequate to meet foreseeable operating needs. The Company believes that inflation and changing prices have not had a material effect on the Company's revenues and profitability. Year 2000 ("Y2K") Compliance - ---------------------------- The Company outlined its plan to deal with the Y2K issue in its June 30, 1999 Form 10-K. During the first quarter of fiscal 2000 the Company continued this program . The Company expects to be Y2K compliant by November 1999. The cost of Y2K program will not be material to the financial condition or results of operations. The Company believes that there will be no material disruptions in its operations from Year 2000 related issues and therefore, no contingency plan in the event that Year 2000 issues not known at this time develop or have not been considered. Results of Operations - --------------------- The consolidated statement of income for the three months ended September 30, 1999 includes the results of operations of A-G Geophysical Products, Inc. which was acquired in April 1999. Sales for the quarter ended September 30, 1999 decreased $1,302,000 or 24% from the corresponding period last year. Sales of marine air guns and replacement parts decreased $2,718,000 because of the decline in product demand caused by the continued decrease in exploration spending which started in early 1999. Partially offsetting the decline in sales of marine air guns and replacement parts was the inclusion of sales of $1,229,0000 from AG and an increase in sales of industrial clutches of $187,000. (12) BOLT TECHNOLOGY CORPORATION --------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------ CONDITION AND RESULTS OF OPERATIONS ------------------------------------ (CONTINUED) ----------- Results of Operations (cont'd) - ------------------------------ Cost of sales as a percentage of sales decreased from from 52% to 50% for the quarter. The improvement in operating margins came from Custom Products and AG which generally have higher profit margins than the Company's marine air guns and replacement parts. Negatively effecting margins for the quarter was decreased manufacturing efficiencies associated with the lower sales volume of marine air guns and replacement parts. Research and development costs increased by $75,000 from the corresponding period of the prior year as a result of an increase in activities related to the final development and testing of the Company's new marine air gun. Selling, general and administrative expenses increased $116,000 over the prior year's first quarter. The inclusion of AG for the September 1999 quarter accounted for $ 283,000. Offsetting the additional expenses from the AG acquisition was reduced incentive compensation expense of $168,000 because of lower earnings for the quarter. Amortization of intangibles increased by $108,000 because of the acquisition of AG in April 1999. The Company is amortizing the goodwill related to its acquisitions over 20 years. Interest expense for the quarter of $141,000 represents amounts paid in connection with the note issued for the acquisition of AG. Interest income increased $3,000 for the quarter because of slightly higher cash balances. The provision for income taxes for the first quarter was $262,000, an effective tax rate of 46%. This amount is higher than the federal statutory federal rate of 34% principally from the effect of the goodwill related to the AG acquisition and state income tax expense. In the first quarter of fiscal 1999 the Company did not provide any income tax expense because of the utilization of previously reserved net operating loss carry-forwards available and a reduction in the deferred tax valuation allowance of $90,000. Item 3 - Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------- None (13) PART II- OTHER INFORMATION -------------------------- Item 6- Exhibits and Reports on Form 8-K - ---------------------------------------- (a) Exhibits. --------- (27) Financial Data Schedule. (b) Reports on Form 8-K. -------------------- The Company filed a Current Report on Form 8-K dated September 7, 1999 with the Securities and Exchange Commission with respect to acquisition of A-G Geophysical Products, Inc. The item reported was "Item 7. Financial Statements and Exhibits". SIGNATURES ---------- Pursuant to the requirements 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. /s/ Raymond M. Soto ------------------------------ Chairman, President and Chief Executive Officer (Principal Financial Officer) /s/ Alan Levy ------------------------------ Vice President-Finance Secretary and Treasurer (Principal Accounting Officer) October 27, 1999 (14) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-2000 JUL-01-1999 SEP-30-1999 3,175,000 0 2,637,000 0 5,100,000 12,205,000 0 0 27,295,000 4,250,000 0 0 0 26,117,000 (7,947,000) 27,295,000 4,058,000 4,058,000 2,032,000 2,032,000 1,347,000 0 141,000 567,000 262,000 305,000 0 0 0 305,000 0.06 0.06
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