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: December 31, 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 January 19, 2001 there were 5,408,733 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 operations - three and six
months ended December 31, 2000 and 1999.................. 3
Consolidated balance sheets -
December 31, 2000 and June 30, 2000...................... 4
Consolidated statements of cash flows -
six months ended December 31, 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...................... 10-13
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.............................................. 13
Part II- Other Information:
Item 4. Submission of Matters to a Vote of Security Holders...... 14
Item 6. Exhibits and reports on Form 8-K......................... 14
Signatures............................................... 14
2
PART I - FINANCIAL INFORMATION
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-------------------------------------
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Sales........................................... $ 3,000,000 $ 3,233,000 $ 6,076,000 $ 7,291,000
----------- ----------- ----------- -----------
Costs and Expenses:
Cost of sales................................... 1,724,000 1,720,000 3,615,000 3,752,000
Research and development........................ 54,000 81,000 123,000 206,000
Selling, general and administrative............. 955,000 1,077,000 2,069,000 2,134,000
Amortization of intangibles..................... 165,000 166,000 330,000 331,000
Interest expense................................ 97,000 133,000 205,000 274,000
Interest income................................. (9,000) (24,000) (24,000) (53,000)
----------- ----------- ----------- -----------
2,986,000 3,153,000 6,318,000 6,644,000
----------- ----------- ----------- -----------
Income (loss) before income taxes.................... 14,000 80,000 (242,000) 647,000
Provision for income taxes........................... 62,000 40,000 20,000 302,000
----------- ----------- ----------- -----------
Net income (loss)............................... $ (48,000) $ 40,000 $ (262,000) $ 345,000
=========== =========== =========== ===========
Earnings (loss) per share:
Basic............................................ $ (0.01) $ 0.01 $ (0.05) $ 0.06
Diluted.......................................... $ (0.01) $ 0.01 $ (0.05) $ 0.06
Shares Outstanding:
Basic............................................ 5,408,733 5,388,378 5,408,733 5,379,378
Diluted.......................................... 5,408,733 5,406,791 5,408,733 5,411,081
See Notes to Consolidated Financial Statements.
3
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
December 31, June 30,
2000 2000
(unaudited)
----------- --------
Current Assets:
Cash and cash equivalents...................................... $ 1,640,000 $ 2,527,000
Accounts receivable, net....................................... 2,091,000 2,088,000
Inventories.................................................... 4,910,000 4,791,000
Deferred income taxes.......................................... 1,102,000 1,181,000
Other 129,000 209,000
------------ ------------
Total current assets 9,872,000 10,796,000
------------ ------------
Goodwill, net....................................................... 11,678,000 12,005,000
Property and Equipment, net......................................... 1,240,000 1,300,000
Deferred Income Taxes............................................... 943,000 886,000
Other Assets........................................................ 41,000 51,000
------------ ------------
Total assets $ 23,774,000 $ 25,038,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term debt........................... $ 1,700,000 $ 1,700,000
Accounts payable............................................... 373,000 420,000
Accrued liabilities............................................ 780,000 885,000
------------ ------------
Total current liabilities 2,853,000 3,005,000
Long-term Debt...................................................... 2,750,000 3,600,000
------------ ------------
Total liabilities 5,603,000 6,605,000
Stockholders' Equity:
Common Stock................................................... 26,152,000 26,152,000
Accumulated deficit............................................ (7,981,000) (7,719,000)
------------ ------------
Total stockholders' equity..................................... 18,171,000 18,433,000
------------ ------------
Total liabilities and stockholders' equity $ 23,774,000 $ 25,038,000
============ ============
See Notes to Consolidated Financial Statements.
4
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
------------------------------------------
Six Months Ended
December 31,
----------------
2000 1999
---- ----
Cash Flows From Operating Activities:
Net income (loss).................................................... $ (262,000) $ 345,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization................................ 473,000 470,000
Deferred income taxes........................................ 22,000 214,000
----------- -----------
233,000 1,029,000
Changes in operating assets and liabilities:
Accounts receivable.......................................... (3,000) (318,000)
Inventories.................................................. (119,000) 407,000
Other assets................................................. 86,000 43,000
Accounts payable and accrued liabilities..................... (152,000) (1,032,000)
Income taxes payable......................................... - (727,000)
----------- -----------
Net cash provided (used) by operating activities......... 45,000 (598,000)
----------- -----------
Cash Flows From Investing Activities:
Purchase of property and equipment................................... (82,000) (95,000)
----------- -----------
Net cash used in investing activities.................... (82,000) (95,000)
----------- -----------
Cash Flows From Financing Activities:
Repayment of long-term debt.......................................... (850,000) (850,000)
Exercise of stock options............................................ - 18,000
----------- -----------
Net cash used in financing activities.................... (850,000) (832,000)
----------- -----------
Net decrease in cash and cash equivalents..................................... $ (887,000) $(1,525,000)
=========== ===========
Supplemental disclosure of cash flow information:
Income taxes paid.................................................... $ 22,000 $ 846,000
Interest paid........................................................ $ 205,000 $ 231,000
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 December 31, 2000, the consolidated
statements of operations for the three month and six month periods ended
December 31, 2000 and 1999 and the consolidated statements of cash flows for the
six month periods ended December 31, 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 December 31, 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, 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 December 31, 2000.
Note 3 - Income Taxes
- ---------------------
Components of income tax expense for the six months ended December 31, 2000
and 1999 follow:
2000 1999
---- ----
Current:
State.................................... $ (2,000) $ 70,000
--------- ---------
Deferred:
Federal.................................. 22,000 232,000
-------- ---------
Income tax expense............................ $ 20,000 $ 302,000
======== =========
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. Based
primarily upon the Company's earnings history and expected future level 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
------------------------------------------
(UNAUDITED)
-----------
Note 4 - Inventories
- --------------------
Inventories, net of reserves, are comprised of the following:
December 31, June 30,
2000 2000
---- ----
Raw materials and sub-assemblies............................. $ 4,349,000 $ 4,307,000
Work-in process.............................................. 561,000 484,000
----------- -----------
$ 4,910,000 $ 4,791,000
=========== ===========
Note 5 - Property and Equipment
- -------------------------------
Property and equipment are comprised of the following:
December 31, June 30,
2000 2000
---- ----
Building and leasehold improvements......................... $ 555,000 $ 555,000
Geophysical equipment....................................... 269,000 460,000
Machinery and equipment..................................... 5,719,000 5,649,000
Equipment held for rental................................... 320,000 480,000
----------- ------------
6,863,000 7,144,000
Less accumulated depreciation.......................... (5,623,000) (5,844,000)
----------- -----------
$ 1,240,000 $ 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
three and six month periods ended December 31, 2000 and 1999:
7
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
Note 6 - Earnings Per Share (cont'd)
- ------------------------------------
Three Months Ended Six Months Ended
December 31, December 31,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
Net earnings (loss) available to common
stockholders $ (48,000) $ 40,000 $ (262,000) $ 345,000
========== ========== ========== ==========
Weighted average number of common
shares outstanding 5,408,733 5,388,378 5,408,733 5,379,378
Common stock equivalents - stock options - 18,413 - 31,703
---------- ---------- ---------- ----------
Weighted average number of common shares and
common share equivalents outstanding 5,408,733 5,406,791 5,408,733 5,411,081
========== ========== ========== ==========
Basic earnings (loss) per share $ (0.01) $ 0.01 $ (0.05) $ 0.06
Diluted earnings (loss) per share $ (0.01) $ 0.01 $ (0.05) $ 0.06
At December 31, 2000 there were 224,000 shares subject to stock options
that were not included in the calculation of the 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 six months ended December 31, 2000 and 1999.
Six months ended December 31, 2000
- ----------------------------------
Geophysical Industrial
Equipment Products Total
--------- -------- -----
Sales $ 4,472,000 $ 1,604,000 $ 6,076,000
Interest income 24,000 - 24,000
Interest expense 205,000 - 205,000
Depreciation and amortization 344,000 129,000 473,000
Income (loss) before income taxes (591,000) 349,000 (242,000)
Segment assets 17,748,000 6,026,000 23,774,000
Fixed asset additions 76,000 6,000 82,000
8
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
Note 7 - Segment Information (cont'd)
- -------------------------------------
Six months ended December 31, 1999
- ----------------------------------
Geophysical Industrial
Equipment Clutches Total
--------- -------- -----
Sales $ 5,648,000 $ 1,643,000 $ 7,291,000
Interest income 53,000 - 53,000
Interest expense 274,000 - 274,000
Depreciation and amortization 344,000 126,000 470,000
Income before income taxes 281,000 366,000 647,000
Segment assets 19,589,000 6,102,000 25,691,000
Fixed asset additions 61,000 34,000 95,000
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
---------------------------
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 and seismic data
already in the market has resulted in a significant reduction in purchases of
geophysical equipment by our customers.
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 six months ended December 31, 2000, cash and cash equivalents
decreased $887,000. Cash flows from operating activities after changes in
working capital items was $45,000 primarily due to the operating loss for the
six month period offset by deprecation and amortization charges. The Company
also used $850,000 of cash to reduce long-term debt. For the six months ended
December 31,1999, cash and cash equivalents decreased $1,525,000 the repayment
of $850,000 of long-term debt from the A-G acquisition and the reduction in
current liabilities of $1,759,000 from the June 30, 1999 level.
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 six months ended December 31, 2000, the Company used $82,000 for
capital expenditures. The Company does not anticipate capital expenditures for
the current fiscal year to exceed $175,000.
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. Principal payments
for the first six months of fiscal 2001 amounted to $850,000.
The Company did not maintain the minimum debt service coverage required
under its unsecured credit facility, and therefore, terminated the agreement in
December 2000. The Company did not use this facility since January 1998 and
believes its cash balances, working capital and expected cash flow from
operations provide 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. A payment was not required
at December 31, 2000 because the sales of Custom Products did not meet amounts
specificed in the agreement.
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.
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
Six Months Ended December 31, 2000 Compared to Six Months
Ended December 31, 1999
Sales for the six months ended December 31, 2000 decreased $1,215,000
or 17% from the corresponding period last year. Sales of marine air guns and
replacement parts decreased $1,358,000 because of the continued over supply of
equipment in the market. Partially offsetting this decline was an increase in
sales of $182,000 at A-G.
Cost of sales as a percentage of sales was 59% for the six months ended
December 31, 2000 and 51% for the six months ended December 31, 1999. The effect
of the lower operating efficiencies caused by the decreased demand for marine
air guns and replacement parts caused the increase in the cost of sales
percentage for the first six months of fiscal 2001 as compared to the first six
months of fiscal 2000.
Research and development costs decreased by $83,000 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 expense remained relatively
unchanged for the first six months of fiscal 2001 compared to the first six
months of fiscal 2000.
Amortization of intangibles was $330,000 for the first six months of
fiscal 2001, unchanged from the first six months of fiscal 2000. The Company is
amortizing the goodwill relating to its acquisitions over twenty years.
Interest expense decreased $69,000 for the six months because of the
lower balance outstanding on the note used to purchase A-G. Interest income
decreased $29,000 due to the lower balance of short-term investments.
Although the Company recorded a loss before income taxes of $242,000
for the six months ended December 31, 2000, the Company provided income tax
expense of $20,000. This tax provision results primarily from the effect of the
amortization of the goodwill from the A-G acquistion which is not deductible for
income taxes and the effect of the reduction in the expected amount of
investment tax credit carry-forwards to be realized .The provision for income
taxes for the six month period ended December 31, 1999 was $302,000, an
effective tax rate of 47%. This amount is higher than the statutory federal rate
of 34% also because of the A-G goodwill amortization.
12
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(CONTINUED)
-----------
Results of Operations (cont'd)
Three Months Ended December 31, 2000 Compared to Three Months
Ended December 31, 1999
Sales for the quarter ended December 31, 2000 compared to the quarter
ended December 31, 1999 decreased $233,000 or 7%. Sales of marine air guns and
replacement parts decreased by $465,000 because of the same factors that caused
the decrease for the six month period. Partially offsetting this decline was an
increase of $176,000 in sales at A-G.
Cost of sales as a percentage of sales increased from 53% to 57% for
the quarter. The same factors that caused the increase in the cost of sales
percentage for the first six months caused the increase in the cost of sales
percentage for the second quarter.
Research and development costs decreased $27,000 for the quarter for
the same reason that caused the six month decrease.
Selling, general and administrative expense decreased $122,000 for the
quarter. Reduction in foreign travel of $35,000, a lower provision for bad debts
of $23,000 and lower cost of trade shows of $24,000 accounted for most of the
decrease.
Interest expense decreased $36,000 for the quarter and interest income
decreased by $15,000. The factors that effected these decreases for the six
months period were the same factors that caused the quarter to quarter decrease.
The provsion for income taxes for both the second quarter of fiscal
2001 and 2000 are in excess of the statutory federal income tax rate primarily
because of the effect of the amortization of the A-G goodwill which is not
deductible for income taxes. The provision for income taxes for the second
quarter of fiscal 2001 was also negatively impacted by the reduction in the
expected amount of investment tax credit carry-forwards to be realized.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
None
13
PART II- OTHER INFORMATION
--------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The 2000 Annual Meeting of Stockholders of the Company was held on
November 21, 2000 for the following purpose: the election of two directors, each
for a three year term expiring in 2003.
The vote tabulation in the election of directors was as follows:
Stephen Chelminski received 4,814,998 affirmative votes with 51,352 votes
withheld and Raymond M.Soto received 4,782,318 affirmative votes with 84,032
votes withheld.
Item 6- Exhibits and Reports on Form 8-K
- ----------------------------------------
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed by the Company during October,
November, and December 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)
January 31, 2001
14