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, 2001
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 Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
At October 16, 2001, there were 5,408,733 shares of common stock, without par
value, outstanding.
BOLT TECHNOLOGY CORPORATION
---------------------------
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, 2001 and September 30, 2000 ............................... 3
Consolidated balance sheets -
September 30, 2001 and June 30, 2001 .................................... 4
Consolidated statements of cash flows -
three months ended September 30, 2001 and September 30, 2000 ............ 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
Item 1 - Financial Statements
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
__________________________________________________
Three Months Ended
September 30,
--------------------------
2001 2000
---- ----
Sales ............................................ $ 4,191,000 $ 3,076,000
Costs and Expenses:
Cost of sales ................................ 2,505,000 1,891,000
Research and development ..................... 56,000 69,000
Selling, general and administrative .......... 1,079,000 1,114,000
Amortization of intangibles .................. - 165,000
Interest expense ............................. 71,000 108,000
Interest income .............................. (11,000) (15,000)
----------- -----------
3,700,000 3,332,000
----------- -----------
Income (loss) before income taxes ................ 491,000 (256,000)
Provision (benefit) for income taxes ............. 189,000 (42,000)
----------- -----------
Net income (loss) ........................ $ 302,000 $ (214,000)
=========== ===========
Earnings (loss) per share:
Basic ........................................ $ 0.06 $ (0.04)
Diluted ...................................... $ 0.06 $ (0.04)
Shares Outstanding:
Basic ........................................ 5,408,733 5,408,733
Diluted ...................................... 5,421,669 5,408,733
See Notes to Consolidated Financial Statements.
3
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
September 30, June 30,
2001 2001
(unaudited)
------------ ------------
Current Assets:
Cash and cash equivalents ..................................... $ 2,582,000 $ 1,329,000
Accounts receivable, net ...................................... 3,345,000 4,607,000
Inventories ................................................... 4,457,000 4,492,000
Deferred income taxes ......................................... 794,000 923,000
Other ......................................................... 152,000 126,000
------------ ------------
Total current assets .................................... 11,330,000 11,477,000
------------ ------------
Goodwill, net ..................................................... 11,266,000 11,276,000
Property and equipment, net ....................................... 1,263,000 1,345,000
Deferred income taxes ............................................. 572,000 603,000
Other assets ...................................................... 31,000 33,000
------------ ------------
Total assets ............................................ $ 24,462,000 $ 24,734,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Current maturities of long-term debt .......................... $ 3,175,000 $ 3,600,000
Accounts payable .............................................. 719,000 984,000
Accrued liabilities ........................................... 1,437,000 1,321,000
------------ ------------
Total current liabilities ............................... 5,331,000 5,905,000
------------ ------------
Stockholders' Equity:
Common stock .................................................. 26,152,000 26,152,000
Accumulated deficit ........................................... (7,021,000) (7,323,000)
------------ ------------
Total stockholders' equity .............................. 19,131,000 18,829,000
------------ ------------
Total liabilities and stockholders' equity ......... $ 24,462,000 $ 24,734,000
============ ============
See Notes to Consolidated Financial Statements.
4
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
___________________________________________
Three Months Ended
September 30,
---------------------
2001 2000
---- ----
Cash Flows From Operating Activities:
Net income (loss) ................................................ $ 302,000 $ (214,000)
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization .................................... 89,000 236,000
Deferred income taxes ................................... 170,000 (34,000)
----------- -----------
561,000 (12,000)
Changes in Operating Assets and Liabilities:
Accounts receivable ..................................... 1,262,000 (283,000)
Inventories ............................................. 35,000 32,000
Other assets ............................................ (25,000) 37,000
Accounts payable and accrued liabilities ................ (149,000) 140,000
----------- -----------
Net cash provided by (used in) operating activities ..... 1,684,000 (86,000)
----------- -----------
Cash Flows From Investing Activities:
Purchase of property and equipment ............................... (6,000) (76,000)
----------- -----------
Net cash used in investing activities ................... (6,000) (76,000)
----------- -----------
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 increase (decrease) in cash and cash equivalents ...................... $ 1,253,000 $ (587,000)
=========== ===========
Supplemental disclosure of cash flow information:
Income taxes paid ....................................... $ 8,000 $ 5,000
Interest paid ........................................... $ 71,000 $ 108,000
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, 2001, the
consolidated statements of operations for the three month periods ended
September 30, 2001 and 2000, respectively, and the consolidated statements of
cash flows for the three month periods ended September 30, 2001 and 2000,
respectively, 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, 2001 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, 2001.
Note 2 - Goodwill and Other Intangible Assets - Adoption of Statement 142
- -------------------------------------------------------------------------
During July 2001, SFAS No. 142, "Goodwill and Other Intangible Assets,"
was issued by the Financial Accounting Standards Board. Under SFAS No. 142,
goodwill amortization ceases when the new standard is adopted. The new rules
also require an initial goodwill impairment assessment in the year of adoption
and annual impairment tests thereafter. The Company is permitted under the rules
to adopt the Statement effective July 1, 2001 or defer adoption until July 1,
2002. Once adopted, annual goodwill amortization of $655,000 ceases. The Company
adopted SFAS No. 142 effective as of July 1, 2001. The Company has not yet
determined if any impairment charges will result from the adoption of the
Statement.
If the adoption of SFAS No. 142 had been in effect on July 1, 2000, net
loss, basic loss per share and diluted loss per share would have been as
follows:
For the Three Months Ended
---------------------------
September 30, September 30,
2001 2000
---- ----
Reported net income (loss) $ 302,000 $ (214,000)
Add: Goodwill amortization,
net of tax effect - 144,000
--------- ----------
Adjusted net income (loss) $ 302,000 $ (70,000)
========= ==========
Basic and Diluted earnings (loss) per share:
Reported net income (loss) $ 0.06 $ (0.04)
Goodwill amortization - 0.03
--------- ----------
Adjusted net income (loss) $ 0.06 $ (0.01)
========= ==========
6
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
-----------
Note 3 - Debt
- -------------
8.25% Non-Negotiable Promissory Note
In connection with the acquisition of A-G Geophysical Products, Inc.,
the Company issued a $7,000,000 note to the selling shareholder for a portion of
the purchase price. The balance of the note at September 30, 2001 was
$3,175,000. The Company is required to make quarterly principal payments of
$425,000 on November 1, 2001 and February 1, 2002, respectively, and a final
principal payment of $2,325,000 in April 2002.
Note 4 - Income Taxes
- ---------------------
Components of income tax expense for the three months ended September
30, 2001 and September 30, 2000 follows:
2001 2000
---- ----
Current:
State $ 9,000 $ (8,000)
Deferred:
Federal 180,000 (34,000)
--------- ---------
Income tax expense (benefit) $189,000 $ (42,000)
========= =========
The Company has net operating loss carry-forwards totaling $1,995,000
which expire as follows: 2005 - $1,687,000; 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 decreased.
Note 5 - Inventories
- --------------------
Inventories, net of reserves, are comprised of the following:
September 30, June 30,
2001 2001
---- ----
Raw materials and sub-assemblies ......... $3,982,000 $4,095,000
Work-in process .......................... 475,000 397,000
---------- ----------
$4,457,000 $4,492,000
========== ==========
7
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
---------
Note 6 - Property and Equipment
- -------------------------------
Property and equipment are comprised of the following:
September 30, June 30,
2001 2001
---- ----
Building and leasehold improvements .................... $ 555,000 $ 555,000
Geophysical equipment .................................. 269,000 269,000
Machinery and equipment ................................ 5,974,000 5,978,000
Equipment held for rental .............................. 320,000 320,000
------------ -----------
7,118,000 7,122,000
Less accumulated depreciation (5,855,000) (5,777,000)
------------ -----------
$ 1,263,000 $ 1,345,000
============ ===========
Note 7 - 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, 2001 and September 30, 2000:
2001 2000
---- ----
Net income (loss) available to
common stockholders $ 302,000 $ (214,000)
========== ==========
Divided by weighted common shares
and common share equivalents:
Weighted average common shares 5,408,733 5,408,733
Weighted average common share equivalents 12,936 -
---------- ----------
Total weighted average common
shares and common share equivalents 5,421,669 5,408,733
========== ==========
Basic earnings (loss) per share $ 0.06 $ (0.04)
========== ==========
Diluted earnings (loss) per share $ 0.06 $ (0.04)
========== ==========
For the quarter ended September 30, 2000, the effect of any shares
subject to option were not included in the calculation because to do so would be
antidilutive.
8
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
----------
Note 8 - 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, 2001 and
September 30, 2000.
Quarter ended September 30, 2001
- --------------------------------
Geophysical Industrial
Equipment Products Total
--------- -------- -----
Sales $ 3,580,000 $ 611,000 $ 4,191,000
Interest income 11,000 - 11,000
Interest expense 71,000 - 71,000
Depreciation and amortization 81,000 8,000 89,000
Income before income taxes 424,000 67,000 491,000
Segment assets 18,359,000 6,103,000 24,462,000
Fixed asset additions 6,000 - 6,000
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
The Company does not allocate income taxes to its segments.
9
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Cautionary Statement for Purposes of Forward-Looking Statements
Forward-looking statements in this Form 10-Q, future filings by the Company with
the Securities and Exchange Commission, the Company's press releases and oral
statements by authorized officers of the Company are intended to be subject to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve risks
and uncertainty, including without limitation (i) the risk of technological
change relating to the Company's products and the risk of the Company's
inability to develop new competitive products in a timely manner, (ii) the risk
of decreased demand for the Company's products due to fluctuations in energy
industry activity, (iii) the Company's reliance on certain significant
customers, (iv) risks associated with a significant amount of foreign sales, and
(v) risk of fluctuations in future operating results. The Company believes that
forward-looking statements made by it are based on reasonable expectations.
However, no assurances can be given that actual results will not differ
materially from those contained in such forward-looking statements. The words
"estimate," "project," "anticipate," "expect," "predict," "believe," and similar
expressions are intended to identify forward-looking statements.
Overview
Sales for the Company's geophysical products are related to the level of
worldwide 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 underutilized and idle seismic vessels. During the last
half of fiscal 2001 and into the first quarter of fiscal 2002, there has been an
increase in seismic exploration activity which has benefited the Company's
geophysical equipment sales and profitability.
The effect, if any, that a slowing international economy and the events of
September 11, 2001 may have on the Company's geophysical equipment business is
uncertain.
As to the industrial products segment of the Company's business, the sales
outlook remains adversely affected by the slowdown in the national economy.
Liquidity and Capital Resources
At September 30, 2001, the Company had $2,582,000 in cash and cash equivalents.
For the quarter ended September 30, 2001, cash and cash equivalents increased by
$1,253,000. Cash flows from operating activities after changes in working
capital items was a positive $1,684,000 for the quarter ended September 30,
2001, primarily due to the operating profit for the quarter and a decrease in
the level of accounts receivable.
10
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
For the three months ended September 30, 2001, the Company used $6,000 for
capital expenditures. The Company does not anticipate capital expenditures for
the current fiscal year to exceed $300,000 which we expect to fund through
operating cash flow.
The Company used $425,000 during the quarter ended September 30, 2001 for the
scheduled repayment of the debt issued for the A-G Geophysical Products, Inc.
acquisition.
At September 30, 2000, the Company had $1,940,000 of cash and cash equivalents.
For the quarter ended September 30, 2000, cash and cash equivalents decreased by
$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.
As discussed above, as part of the consideration for the acquisition of A-G
Geophysical Products, Inc. ("A-G"), the Company issued a $7,000,000 note
($3,175,000 outstanding at September 30, 2001). The note bears interest at 8.25%
payable monthly and requires principal payments of $425,000 on November 1, 2001
and February 1, 2002, respectively, with the remaining balance of $2,325,000 due
in April 2002. The Company pledged the assets and common stock of A-G as
collateral for the note. The Company expects to repay the note from operating
cash flow, but if the level of business in 2002 does not produce sufficient
cash, we believe that we can secure alternative financing or extend the maturity
of the note; however, there can be no assurance that we will be able to do so.
The Company did not maintain the minimum debt service coverage required under an
unsecured credit facility and therefore, terminated it in December 2000. The
Company had not used this facility since January 1998.
Under the terms of the January 1, 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. To date, no
additional payments have been required because the sales of Custom Products have
not met amounts specified in the asset purchase agreement.
In October 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. Although the program
remains authorized, the Company does not anticipate any repurchase of shares in
the near future.
Current cash and cash equivalent balances, potential borrowing capacity and
projected cash flow from operations are considered adequate to meet foreseeable
operating needs.
Results of Operations
Sales for the three months ended September 30, 2001 increased by $1,115,000 or
36% from the corresponding year-ago quarter. Sales of marine air guns and
replacement parts increased by $1,056,000 or 103% from the
11
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
comparable year-ago quarter reflecting an increase in marine seismic activity.
Sales for the quarter ended September 30, 2000 were especially depressed because
there were no air gun system sales during that quarter. Sales of underwater
electrical connectors and cables increased by $269,000 or 22% from last year's
first quarter also reflecting the higher level of marine seismic activity. These
increases were partially offset by a $210,000 or 26% decrease in sales of
industrial clutches compared to last year, as that business was adversely
affected by the general economic slowdown.
Cost of sales as a percentage of sales decreased from 61% for the three months
ended September 30, 2000 to 60% for the three months ended September 30, 2001.
The major reason for this improvement was increased manufacturing efficiencies
associated with the higher sales volumes for air guns and replacement parts,
substantially offset by decreased manufacturing efficiencies for industrial
clutches caused by the lower sales volume.
Research and development costs decreased by $13,000 from the corresponding
period of last year. Such decrease was not significant.
Selling, general and administrative expenses decreased by $35,000 primarily due
to lower compensation expenses.
As indicated in Note 2 to the consolidated financial statements, SFAS No. 142,
"Goodwill and Other Intangible Assets," was adopted by the Company in July of
2001 and goodwill amortization ceased. Accordingly, there was no amortization of
intangibles for the quarter ended September 30, 2001. For the quarter ended
September 30, 2000, amortization of intangibles was $165,000. The Company was
amortizing goodwill prior to July 1, 2001 over 20 years. If the adoption of SFAS
No. 142 had been in effect on July 1, 2000, the net loss for the quarter ended
September 30, 2000 would have been $70,000.
Interest expense for the first quarter of fiscal year 2002 was $71,000 which was
$37,000 lower than the year-ago quarter due to the lower average balance
outstanding on the note issued for the A-G acquisition.
The provision for income taxes for the first quarter of fiscal year 2002 was
$189,000, an effective tax rate of 38% which was 4% higher than the federal
statutory rate of 34% due primarily to the effect of state income taxes. The
benefit for income taxes for the first quarter of fiscal 2001 was $42,000, an
effective tax rate of 16%. This benefit was lower than the federal statutory
rate of 34% principally from the effect of the goodwill amortization related to
the A-G acquisition which was not deductible for income taxes.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
12
PART II- OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits.
--------
10.1 Employment Agreement between the Company and Raymond M. Soto
effective as of June 10, 1996.
10.2 Amendment to Employment Agreement between the Company and
Raymond Soto effective as of September 20, 2001.
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed during the three months ended
September 30, 2001.
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.
BOLT TECHNOLOGY CORPORATION
Date: October 30, 2001 /s/ Raymond M. Soto
-----------------------
Raymond M. Soto
Chairman of the Board, President and
Chief Executive Officer
Date: October 30, 2001 /s/ Joseph Espeso
------------------
Joseph Espeso
Senior Vice President-Finance and
Chief Financial Officer
13
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
10.1 Employment Agreement between the Company and Raymond M. Soto
effective as of June 10, 1996.
10.2 Amendment to Employment Agreement between the Company and Raymond
M. Soto effective as of September 20, 2001.
14