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, 2000
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, 2000 there were 5,408,733 shares of common stock, without par
value, outstanding.
(1)
BOLT TECHNOLOGY CORPORATION
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INDEX
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Page Number
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Part I - Financial Information:
Item 1. Financial Statements.
Consolidated statements of operations - three months ended
September 30, 2000 and 1999................................................................. 3
Consolidated balance sheets -
September 30, 2000 and June 30, 2000........................................................ 4
Consolidated statements of cash flows -
three months ended September 30, 2000 and 1999.............................................. 5
Notes to consolidated financial statements.................................................. 6-9
Item 2. Management's discussion and analysis of financial
condition and results of operations......................................................... 10-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk.................................. 12
Part II - Other Information:
Item 6. Exhibits and reports on Form 8-K............................................................ 13
Signatures........................................................................................... 13
(2)
PART I - FINANCIAL INFORMATION
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
________________________________
Three Months Ended
September 30,
------------------
2000 1999
---- ----
Sales................................. $ 3,076,000 $ 4,058,000
Costs and Expenses:
Cost of sales........................ 1,891,000 2,032,000
Research and development............. 69,000 125,000
Selling, general and administrative.. 1,114,000 1,057,000
Amortization of intangibles.......... 165,000 165,000
Interest expense..................... 108,000 141,000
Interest income...................... (15,000) (29,000)
----------- -----------
3,332,000 3,491,000
----------- -----------
(Loss) income before income taxes..... (256,000) 567,000
(Benefit) provision for income taxes.. (42,000) 262,000
----------- -----------
Net (loss) income................... $ (214,000) $ 305,000
=========== ===========
(Loss) earnings per share:
Basic................................ $ (0.04) $ 0.06
Diluted.............................. $ (0.04) $ 0.06
Shares Outstanding:
Basic................................ 5,408,733 5,370,378
Diluted.............................. 5,408,733 5,415,370
See Notes to Consolidated Financial Statements.
(3)
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
September 30, June 30,
2000 2000
(unaudited)
------------ -----------
Current Assets:
Cash and cash equivalents.................... $ 1,940,000 $ 2,527,000
Accounts receivable, net..................... 2,371,000 2,088,000
Inventories.................................. 4,759,000 4,791,000
Deferred income taxes........................ 1,110,000 1,181,000
Other........................................ 172,000 209,000
----------- -----------
Total current assets..................... 10,352,000 10,796,000
----------- -----------
Goodwill, net................................. 11,842,000 12,005,000
Property and Equipment, net................... 1,307,000 1,300,000
Deferred Income Taxes......................... 991,000 886,000
Other Assets.................................. 47,000 51,000
----------- -----------
Total assets $24,539,000 $25,038,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term debt........ $ 1,700,000 $ 1,700,000
Accounts payable............................ 540,000 420,000
Accrued liabilities......................... 905,000 885,000
----------- -----------
Total current liabilities 3,145,000 3,005,000
Long-term Debt................................ 3,175,000 3,600,000
----------- -----------
Total liabilities 6,320,000 6,605,000
Stockholders' Equity:
Common stock................................ 26,152,000 26,152,000
Accumulated deficit......................... (7,933,000) (7,719,000)
----------- -----------
Total stockholders' equity 18,219,000 18,433,000
----------- -----------
Total liabilities and stockholders' equity $24,539,000 $25,038,000
=========== ===========
See Notes to Consolidated Financial Statements
(4)
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------------------------
Three Months Ended
September 30,
------------------
2000 1999
---- ----
Cash Flows From Operating Activities:
Net (loss) income................................... $(214,000) $ 305,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization................... 236,000 235,000
Deferred income taxes........................... (34,000) 209,000
--------- ---------
(12,000) 749,000
Changes in Operating Assets and Liabilities:
Accounts receivable............................. (283,000) (429,000)
Inventories..................................... 32,000 313,000
Other assets.................................... 37,000 2,000
Accounts payable and accrued liabilities........ 140,000 (484,000)
Income taxes payable............................ - 12,000
--------- ---------
Net cash (used in) provided by operations..... (86,000) 163,000
--------- ---------
Cash Flows From Investing Activities:
Purchase of property and equipment.................. (76,000) (63,000)
--------- ---------
Net cash used in investing activities......... (76,000) (63,000)
--------- ---------
Cash Flows From Financing Activities:
Repayment of long-term debt......................... (425,000) (425,000)
--------- ---------
Net cash used in financing activities........... (425,000) (425,000)
--------- ---------
Net decrease in cash and cash equivalents.............. $(587,000) $(325,000)
========= =========
Supplemental disclosure of cash flow information:
Income taxes paid................................... $ 5,000 $ 22,000
Interest paid....................................... $ 108,000 $ 141,000
See Notes to Consolidated Financial Statements.
(5)
BOLT TECHNOLOGY CORPORATION
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
-----------
Note 1 - Basis of Presentation
- ------- ----------------------
The consolidated balance sheet as of September 30, 2000, the consolidated
statements of operations for the three month periods ended September 30, 2000
and 1999 and the consolidated statements of cash flows for the three month
periods ended September 30, 2000 and 1999 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, 2000 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, 2000.
Note 2 - Debt
- -------------
8.25% Non-Negotiable Promissory Note
In connection with the acquisition of A-G Geophysical Products, Inc. in
April 1999, 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 A-G as collateral for the note. Also
under the terms of the note the Company must have A-G maintain a current ratio
of no less than 3 to 1 and maintain minimum tangible net worth of $4,000,000.
The Company was in compliance with these covenants at September 30, 2000.
Note 3 - Income Taxes
- ---------------------
Components of income tax expense for the three monts ended September 30,
2000 and 1999 follows:
2000 1999
---- ----
Current:
State $ (8,000) $ 53,000
Deferred:
Federal (34,000) 209,000
-------- --------
Income tax (benefit) expense $(42,000) $262,000
======== ========
The company has net operating loss carry-forwards totaling $3,414,000 which
expire as follows: 2005-$3,106,000; 2006 - $63,000 and 2007 - $245,000.
Under the liability method, a valuation allowance is provided when it is more
likely than not that some portion of the deferred tax assets will not be
realized. 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.
The amount of the net deferred tax asset recorded could be reduced if estimates
of future taxable income during the carry-forward period are reduced.
(6)
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(CONTINUED)
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Note 4 - Inventories
- --------------------
Inventories, net of reserves, are comprised of the following:
September 30, June 30,
2000 2000
---- ----
Raw materials and sub-assemblies.. $4,326,000 $4,307,000
Work-in process................... 433,000 484,000
---------- ----------
$4,759,000 $4,791,000
========== ==========
Note 5 - Property and Equipment
- -------------------------------
Property and equipment are comprised of the following:
September 30, June 30,
2000 2000
---- ----
Building and leasehold improvements.. $ 555,000 $ 555,000
Geophysical equipment................ 460,000 460,000
Machinery and equipment.............. 5,725,000 5,649,000
Equipment held for rental 480,000 480,000
----------- -----------
7,220,000 7,144,000
Less accumulated depreciation........ (5,913,000) (5,844,000)
----------- -----------
$ 1,307,000 $ 1,300,000
=========== ===========
Note 6 - 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
quarters ended September 30, 2000 and 1999:
(7)
BOLT TECHNOLOGY CORPORATION
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(CONTINUED)
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Note 6 - Earnings Per Share (cont'd)
- ------------------------------------
2000 1999
---- ----
Net (loss) income available to
common stockholders $ (214,000) $ 305,000
========== ==========
Divided by weighted common shares
and common share equivalents
Weighted average common shares 5,408,733 5,370,378
Weighted average common share equivalents - 44,992
---------- ----------
Total weighted average common
shares and common share equivalents 5,408,733 5,415,370
========== ==========
Basic (loss) earnings per share $ (0.04) $ 0.06
========== ==========
Diluted (loss) earnings per share $ (0.04) $ 0.06
========== ==========
At September 30, 2000 there were 224,000 shares subject to stock options
that were not included in the calculation of loss per share because to do so
would be antidilutive.
Note 7 - Segment Information
- ----------------------------
The Company's reportable segments are geophysical equipment and industrial
products. The following table provides selected financial information for both
of the Company's segments for the quarters ended September 30, 2000 and 1999.
Quarter ended September 30, 2000
- --------------------------------
Geophysical Industrial
Equipment Products Total
--------- -------- -----
Sales $ 2,255,000 $ 821,000 $ 3,076,000
Interest income 15,000 - 15,000
Interest expense 108,000 - 108,000
Depreciation and amortization 172,000 64,000 236,000
Income (loss) before income taxes (430,000) 174,000 (256,000)
Segment assets 18,433,000 6,106,000 24,539,000
Fixed asset additions 70,000 6,000 76,000
(8)
BOLT TECHNOLOGY CORPORATION
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(CONTINUED)
-----------
Note 7 - Segment Information (cont'd)
- -------------------------------------
Quarter ended September 30, 1999
- --------------------------------
Geophysical Industrial
Equipment Products 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
The Company does not allocate income taxes to its segments.
Note 8-Recent Accounting Pronouncements
- ---------------------------------------
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
In June 2000, the SEC issued SAB 101B to defer the effective date of
implementation of SAB 101 until no later than the fourth quarter of fiscal years
beginning after December 15, 1999, with earlier application encouraged. The
Company does not expect the adoption of SAB 101 to have a material effect on its
financial position or results of operations.
(9)
BOLT TECHNOLOGY CORPORATION
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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.
Overview
Demand for the Company's geophysical products is dependent upon the level
of world wide oil and gas exploration and development activity which is
dependent, primarily, on oil and gas prices. Because of the rapid decline in oil
prices in 1999, oil companies reduced exploration budgets which caused the
Company's customers, primarily seismic contractors, to reduce activities. This
reduction in activity resulted in under utilized and idle seismic vessels.
Although oil and gas prices have increased significantly from the low prices of
last year, the industry has been cautious in its capital spending on exploration
activities. Also, an over supply of marine seismic vessels has resulted in a
significant reduction in purchases of geophysical equipment.
Acquisitions
In January 1998, the Company completed the acquisition of Custom Products.
Custom Products is a manufacturer of miniature industrial clutches, brakes and
sub-fractional horsepower electric motors sold under the "Polyclutch" and
"Polyvolt" tradenames. The purchase price totaled $6,060,000 and consisted of
$4,971,000 in cash; 135,000 shares of common stock valued at $881,000;
acquisition costs of $208,000 and contingent cash payments. Such contingent cash
payments could total $4,000,000 and are dependent on annual increases in the net
sales of Custom Products for the period January 1, 1998 to December 31, 2002.
Any contingent cash payments will be capitalized and amortized over the
remaining life of the goodwill.
In April 1999, the Company acquired all of the outstanding common stock of
A-G Geophysical Products, Inc. A-G manufactures underwater electrical connectors
and cables, air gun signature hydrophones and pressure transducers 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.
Liquidity and Capital Resources
For the quarter ended September 30, 2000, cash and cash equivalents
decreased $587,000. Cash flows from operating activities after changes in
working capital items was a negative $86,000 for the quarter ended September 30,
2000, primarily due to the operating loss for the quarter and an increase in the
level of accounts receivable. For the quarter ended September 30, 1999 cash and
cash equivalents decreased $325,000. Cash flows from operating activities was
$163,000 primarily from net income for the quarter, depreciation and
amortization and deferred income taxes. These amounts were partially offset by
an increase in accounts receivable and the payment of prior year end
liabilities.
(10)
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(CONTINUED)
-----------
Liquidity and Capital Resources (cont'd)
For the three months ended September 30, 2000, the Company used $76,000 for
capital expenditures. The Company does not anticipate capital expenditures for
the current fiscal year to exceed $200,000.
As part of the consideration for the acquisition of A-G 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. The Company used
$425,000 of cash for principal payments during the quarter.
The Company's unsecured $2,500,000 credit facility requires the maintenance
of a debt service ratio of no less than 1.25 to 1. At September 30, 2000 the
Company was not in compliance with this covenant, and therefore, does not have
any borrowings currently available under the agreement. The Company has not used
this facility since January 1998 and believes its cash balances, working capital
and expected cash flow form operations provides sufficient liquidity for the
foreseeable future.
Under the terms of the 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.
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, for 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's 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. To date, the Company has not repurchased any shares
under the program.
Current cash and cash equivalent balances 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.
(11)
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(CONTINUED)
-----------
Results of Operations
Sales for the quarter ended September 30, 2000 decreased $982,000 or 24%
from the corresponding period last year, primarily from the lower sales of
marine air guns and replacements parts which declined $894,000. The Company did
not ship any air gun systems during the quarter.
Cost of sales as a percentage of sales increased from from 50% for the
quarter ended September 30, 1999 to 61% for the quarter ended September 30,
2000. The most significant factor negatively impacting 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 decreased by $56,000 from the corresponding
period of the prior year as the company completed the development of its new
marine air gun in the last half of fiscal 2000.
Selling, general and administrative expenses increased $57,000 over the
prior year's first quarter. The primary reason for the increase was higher
expense for trade shows in the current quarter.
Interest expense decreased $33,000 for the quarter because of the lower
balance outstanding of the note used for the purchase of A-G.
Interest income decreased $14,000 for the quarter because of lower average
cash balances.
The benefit for income taxes for the first quarter of fiscal 2001 was
$42,000, an effective tax rate of 16%. This benefit is lower than the federal
statutory federal rate of 34% principally from the effect of the goodwill
amortization related to the A-G acquisition not deductible for income taxes. For
the quarter ended September 30, 1999 the Company provided $262,0000 for income
tax expense, an effective rate of 46%. The goodwill amortization from the A-G
acquisition was also the primary factor in the higher tax rate.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
None
(12)
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.
--------------------
No reports on Form 8-K were filed for July, August or September 2000.
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 30, 2000
(13)