-----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, JFVNPfpIvebCTS3wPmz6U+GBY3N+b5+3L9B71zhVgOI5xaepS4+GFu56AYDhxP3n onG5yrEEMojSJx7XaTWJqQ== 0000950130-98-004675.txt : 19980924 0000950130-98-004675.hdr.sgml : 19980924 ACCESSION NUMBER: 0000950130-98-004675 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980923 SROS: AMEX 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-K405 SEC ACT: SEC FILE NUMBER: 001-12075 FILM NUMBER: 98713389 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-K405 1 FORM 10-K405 SECURITIES AND EXCHANGE COMMISSION FORM 10-K Washington, DC 20549 -------------------- [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended June 30, 1998 or [ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] 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 Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of Each Exchange -------------- on Which Registered ------------------- Common Stock, without par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of Common Stock, without par value, held by non-affiliates on August 20, 1998: $33,112,404 As of August 20, 1998, there were 5,232,478 shares of Common Stock, without par value, outstanding. Documents Incorporated By Reference Definitive Proxy Statement for 1998 Annual Meeting, which will be filed no later than 120 days after June 30, 1998, is incorporated by reference in Part III to the extent stated in this report. 1 Note Regarding Forward-Looking Statements Forward-looking statements in this Form 10-K, 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. PART I ITEM 1. Business Bolt Technology Corporation operates in two business segments; geophysical equipment and industrial clutches. Geophysical equipment comprises the development, manufacture, lease and sale of the Company's marine seismic energy sources. The industrial clutch segment includes the manufacture and sale of precision mechanical and pneumatic clutches by the Company's subsidiary, Custom Products Corporation ("Custom Products"), which was acquired on January 6, 1998. See Note 2 to the consolidated financial statements for information related to this acquisition. Also see Note 10 for information by industry segment. Products Geophysical Equipment An energy source, such as the Company's air gun, used in seismic exploration creates elastic waves at frequencies that readily travel to great depths in the earth. As elastic waves travel through the earth, portions are reflected by variations in the underlying rock layers and the reflected energy is received as signals by devices known as hydrophones. A shipboard unit containing electronic recording equipment converts the signals to digital form. By using computer programs with complex calculations to manipulate the processed seismic data, geoscientists can model and visualize the subsurface through the creation and analysis of spatial representations. The analysis of seismic and other geological data forms the basis of decisions to drill exploratory and development wells. Because of the significant expense associated with drilling oil and gas wells, decisions on whether or where to drill are critical to the overall process. Recent improvements in drilling success rates through the use of three-dimensional ("3-D") seismic surveys have substantially increased the demand for seismic data and, consequently, the demand for the Company's air guns and replacement parts. Also, 3-D surveys are increasingly used in field development and reservoir management activities. 2 ITEM I. Business (cont'd.) The precise shot to shot repeatability of the Company's marine air guns and their reliability of operation make them especially beneficial for use in 3-D surveys. A seismic exploration vessel may tow as many as 60 air guns along with multiple hydrophone streamers of up to 12,000 meters in length. The air guns are fired simultaneously every 75-150 feet along the survey line. The Company's latest generation of marine air guns extends the period between routine air gun maintenance cycles. These new "long-life" guns also provide improved high peak sound pressure levels and improved frequency spectrum as compared with older models. These improved characteristics are advantageous to geoscientists in designing 3-D surveys. A retro-fit kit, which incorporates the improvements of the new long-life guns, allows users to easily upgrade existing air gun models to the new long-life standard. The Company sells a modified version of the marine air gun, in which the portholes are closed at all times except when the gun is firing, for use in mud-holes, sand, or other penetrable materials. Unlike the Company's marine air guns which are used primarily in the exploration for new accumulations of oil and gas, the Company's down-hole air guns are used for seismic surveys at established oil and gas wells ("well-shooting") both on and offshore. The Company sells various models of air guns that range in price from $3,000 to $76,000. A majority of the air guns sold by the Company are priced in the $10,000 range. A significant source of the Company's revenue is from the sale of replacement parts. Industrial Clutches Slip clutches manufactured by the Company are used to control torque for intermittent, continuous or overload slip. The clutch will slip when the torque setting is reached and resume driving as the load is reduced. Other types of clutches manufactured by the Company include one-way clutches, jaw clutches and friction hinges. The slip clutch is basically two components, a cartridge and a housing. The cartridge contains inner and outer plates, friction pads, coil springs and a torque adjusting collar or a nut, all mounted in a central hub. The pins in the housing engage the outer clutch plates, carrying the controlled torque to a second shaft, gear or pulley mounted to the housing. The Company manufactures many variations of its standard clutch design depending on the specific application required by the customer. The Company's clutches are used in a wide variety of applications such as business machines, computer peripherals and medical equipment. The sales price of a clutch ranges from $5 for a standard design to $300 depending on size and complexity. The quantity ordered also effects the ultimate sales price. 3 ITEM 1. Business (cont'd.) Foreign Sales During fiscal 1998, 1997 and 1996, approximately 60%, 55% and 46%, respectively, of the Company's revenue was derived from sales to customers outside the United States. See Note 10 of Notes to the Consolidated Financial Statements for the geographic distribution of sales. In addition, sales are made to domestic customers who frequently use the Company's equipment internationally. Backlog Geophysical Equipment Because of the short period between order and shipment dates for the principal portion of geophysical equipment sales, the dollar amount of current backlog is not considered to be a reliable indication of future sales. Industrial Clutches As of June 30, 1998, the Company had an order backlog of $1,022,000. It is estimated that substantially all of the backlog as of June 30, 1998 will be shipped during the fiscal year ended June 30, 1999. Competition Geophysical Equipment The Company's marine air guns compete primarily with marine air guns manufactured by Input/Output, Inc. and Seismic Systems, Inc. The Company believes that technology is the primary basis of competition as oil and gas exploration companies require higher quality seismic data and improved productivity. The Company believes that its long-life marine air guns are the most technically advanced energy sources currently available. The Company believes that the remaining competitive factors in the industry are field product support and price. The Company believes that it competes effectively with respect to each of these factors, although there can be no assurance that the sales of the Company's marine air gun will not be adversely affected if its current competitors introduce a marine energy source with better performance or lower price. Industrial Clutches It is not possible to determine with accuracy the relative competitive position of the Company in the market for industrial clutches. The industry in which the Company operates is characterized by active and substantial competition. No single company dominates the market for the types of clutches manufactured by the Company. The Company's competitors include both larger and smaller manufacturers and divisions of larger diversified companies with substantial financial resources. Principal competitive factors in the market for the Company's products are quality, service, reliability and price. The Company's clutches compete with other torque control devices to solve design problems such as electric clutches and wrap spring clutches. Electric clutches are significantly more expensive than the pneumatic and mechanical clutches manufactured by the Company. Wrap spring clutches are comparable in price to the clutches manufactured by the company but do not offer smooth and consistent operation. 4 ITEM 1. Business (cont'd.) Marketing Geophysical Equipment The Company's principal customers for its seismic energy sources are seismic contractors which operate seismic vessels to collect seismic data in accordance with their customers specifications or for their own seismic data libraries and foreign national oil and gas companies. Marketing of the Company's geophysical equipment is principally performed by salaried sales personnel, all of whom are based in the United States. The Company also uses sales agents for individual sales in certain foreign countries. In general, the Company markets its products and services through its sales force, together with its technical services and engineering staffs, primarily to representatives of major geophysical contractors. The principal marketing techniques used by the Company are direct sales visits to current and potential customers, product demonstrations, and participation at industry trade shows and meetings. In general, products are sold on standard 30-day credit terms. In certain instances, the Company requires its customers to furnish letters of credit, payable upon shipment. Industrial Clutches The Company's clutches are primarily sold to original equipment manufacturers ("OEMs"). OEMs use the clutches manufactured by the Company to seek engineering solutions to torque related problems which will provide lower installed cost and high reliability, thereby lowering production and service costs. The Company's engineering staff and its independent sales representatives continually work in close collaboration with OEMs to determine the appropriate clutch for the specific application. Sales are made on standard 30-day credit terms. The Company sells its clutches in the United States, Canada and Europe. Research and Development The Company's ability to compete successfully depends upon, among other things, its ability to develop new products as well as to improve the technical capabilities of its existing products and services. The Company, during the fiscal years 1998, 1997 and 1996, has spent $216,000 , $204,000 and $161,000, respectively, to develop new products and to upgrade its existing products and services. Employees As of June 30, 1998, the Company employed 57 persons. The Company is not a party to any collective bargaining agreement and has had no work stoppages. The Company believes that its employee relations are good. 5 ITEM 1. Business (cont'd.) Manufacturing and Raw Materials The Company manufactures and assembles its geophysical equipment in Norwalk, Connecticut and its industrial clutches in North Haven, Connecticut. The Company's manufacturing and assembly operations consist of machining the necessary components and assembling and testing the final product. The Company maintains adequate levels of inventory to enable the Company to satisfy customer requirements within the shortest amount of time. The raw materials used by the Company are generally in adequate supply. With large marine air gun orders, the Company occasionally supplies auxiliary equipment such as compressors, air gun controllers or towing equipment. The Company has not experienced any supply problems with respect to these auxiliary items. Regulatory Matters The Company believes that compliance with federal, state and local laws and regulations that have been enacted or adopted regarding the discharge of materials into the environment, or otherwise, relating to the protection of the environment, will not have a material adverse effect upon the earnings or competitive position of the Company. Intellectual Property The Company currently owns more than 20 United States patents and 30 patents in foreign countries relating to the manufacture of its products. These patents have been of value in the growth of the Company's business and may continue to be of value in the future. However, the Company's business is generally not dependent upon the protection of any patent and would not be materially affected by the expiration thereof. Major Customers Geophysical Equipment Historically a significant portion of the Company's revenues have been attributable to a few large customers. In 1998, sales to Schlumberger, Ltd., Petroleum Geo-Services (PGS) and Veritas DGC, Inc. accounted for 22%, 10% and 10%, respectively, of total consolidated revenue. In 1997, sales to Schlumberger, PGS and Veritas DGC, Inc. accounted for 38%, 20% and 19%, respectively, of total consolidated revenue and in 1996, sales to Schlumberger, PGS and Geoscience Corporation accounted for 33%, 16%, and 11%, respectively, of total consolidated revenue. The loss of Schlumberger, PGS or Veritas DGC or a significant decrease in the amount of their purchases could have a material adverse effect on the Company. Industrial Clutches No customer accounted for 10% of total consolidated revenue. 6 ITEM 2. Properties The following table sets forth certain information with respect to the Company's principal properties:
Approximate Area Expiration Location Nature of Property (Sq. Feet) Date of Lease - -------- ------------------ ------------ ------------- Norwalk, Connecticut Manufacturing 22,300 1999 Norwalk, Connecticut Administration/Engineering 6,600 1999 Houston, Texas Office/Warehouse 3,000 1999 North Haven, Connecticut Manufacturing 6,500 2004
In the opinion of the Company's management, the properties described above are in good condition and repair and are suitable and adequate for the Company's purposes. The properties are currently fully utilized on a one shift basis which provides sufficient productive capacity. ITEM 3. Legal Proceedings From time to time, the Company is a party to what it believes is routine litigation and proceedings that may be considered as part of the ordinary course of its business. The Company is not aware of any current or pending litigation or proceedings that could have a material adverse effect on the Company's financial position, results of operations, or cash flow. ITEM 4. Submission of Matters to a Vote of Security Holders During the fourth quarter of fiscal 1998, no matter was submitted to a vote of the Company's security holders. 7 PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters Since September 10, 1996, the Company's Common Stock has been trading on the American Stock Exchange under the symbol BTJ. Prices set forth below prior to September 10, 1996 reflect the high and low bid prices reported by the National Quotation Bureau, Inc. and represent inter-dealer quotations that do not include retail markups, markdowns or commissions and do not necessarily represent actual transactions. Prices since September 10, 1996 reflect the high and low daily sales price, which represent actual transactions, as reported by the American Stock Exchange. Fiscal 1998 High Low ----------- ---- --- First Quarter 7 1/4 5 Second Quarter 10 5 5/8 Third Quarter 6 7/8 5 Fourth Quarter 10 3/4 6 1/4 Fiscal 1997 High Low ----------- ---- --- First Quarter 5 15/16 2 1/8 Second Quarter 6 5/8 3 7/8 Third Quarter 6 3 3/4 Fourth Quarter 5 3/16 4 1/4 The number of stockholders of record at July 31, 1998 was 367 and does not include those stockholders who had shares in broker nominee accounts. The Company has not paid a dividend since 1985. Under the Company's loan agreement, approximately $3,100,000 is available for the payment of dividends. The Company does not expect to pay dividends for the foreseeable future. Any decision concerning the payment of dividends will depend upon the results of operations, financial condition, capital required for possible acquisitions as well as other factors as the board of directors may consider relevant. 8 ITEM 6. Selected Financial Data The following table sets forth selected consolidated financial data with respect to the Company and should be read in conjunction with the consolidated financial statements provided elsewhere herein.
Year Ended June 30, ----------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (In thousands, except per share amounts) Income Statement Data: Total revenue ...................................... $18,053 $10,531 $8,631 $7,707 $6,743 ------- ------- ------ ------ ------ Costs and expenses: Cost of sales and service .................. 9,745 5,788 5,220 4,658 3,857 Research and development................... 216 204 161 200 202 Selling, general and administrative.......... 3,300 2,485 2,034 1,830 1,768 Amortization of intangibles.................... 114 - - - - Interest (income) expense, net................. (98) (67) 6 66 87 ------- ------- ------ ------ ------ 13,277 8,410 7,421 6,754 5,914 ------- ------- ------ ------ ------ Income before income taxes and extraordinary item .................. 4,776 2,121 1,210 953 829 Benefit for income taxes (1)....................... 358 - - 1,000 - ------- ------- ------ ------ ------ Income before extraordinary item.................. 5,134 2,121 1,210 1,953 829 Extraordinary item ................................. - - - 234 ------- ------- ------ ------ ------ Net income..................................... $5,134 $2,121 $1,210 $1,953 $1,063 ======= ======= ====== ====== ====== Per Share Data: (2) Earnings per common share: Income before extraordinary item: Basic..................................... $1.00 $0.43 $0.24 $0.39 $0.17 Diluted.................................... $0.97 $0.41 $0.24 $0.38 $0.13 Extraordinary item: Basic....................................... - - - - $0.05 Diluted..................................... - - - - $0.04 Net income: Basic...................................... $1.00 $0.43 $0.24 $0.39 $0.22 Diluted.................................... $0.97 $0.41 $0.24 $0.38 $0.17 Average number of common shares outstanding: Basic.................................. 5,146 4,989 4,971 4,967 4,912 Diluted.................................. 5,287 5,178 5,010 5,151 6,325 Financial Position Data: Working capital............................... $6,500 $6,182 $4,122 $2,890 $1,873 Total assets.................................. 16,462 8,321 6,462 4,922 3,049 Long-term debt ................................ - - - - - Stockholders' equity........................... 13,043 7,011 4,872 3,662 2,006 Cash dividends paid............................ None None None None None ==== ==== ==== ==== ====
(1) Reflects recognition of previously reserved tax benefits in 1998 and 1995. (2) In the second quarter of 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128 "Earnings per Share" (FAS 128). As required, the previously reported earnings per share and share outstanding information have been restated. 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Current cash and cash equivalent balances, existing borrowing capacity and projected cash flow from operations are currently in excess of foreseeable operating cash flow requirements. Net cash provided by operating activities increased to $3,946,000 in 1998 from $1,333,000 in 1997 primarily due to the 142% increase in net income in 1998 from 1997. The significant changes in working capital items in 1998 were increases in accounts receivable, accounts payable and accrued liabilities. These higher amounts resulted from the acquisition of Custom Products in January 1998 and the increased level of sales in 1998. Because of the cash used for the acquistion of Custom Products Corporation, net cash used in investing activities increased from $87,000 in 1997 to $4,998,000 in 1998. Net cash used in financing activities amounted to $259,000 in 1998 as the Company repaid the debt assumed in the Custom Products acquisition. In connection with the Custom Products acquisition, (See Note 2), the Company established a $3,500,000 unsecured credit facility through January 2003. The purpose of the credit facility was to assist funding of the acquisition and to support working capital requirements. Maximum borrowings under the agreement decrease by $500,000 on each anniversary of the agreement and bear interest at the prime rate. The credit facility contains certain covenants which include: (i) prohibition of additional indebtedness; (ii) minimum tangible net worth of $5,567,000 at June 30, 1998 which increases by 50% of the Company's net income each year; (iii) a ratio of total liabilities to tangible net worth of no more than 1.25 to 1; (iv) a ratio of maximum debt service of no less than 2 to 1 and (v) no two consecutive quarterly losses. Additions to property and equipment totaled $24,000 in 1998, $87,000 in 1997 and $22,000 in 1996. Additions in 1998 included normal replacement of manufacturing equipment. The Company does not anticipate that capital expenditures for 1999 will exceed $200,000 and will be funded from operating cash flow. The Company believes that inflation and changing prices have not had a material effect on the Company's revenues and profitability during the past three years. Under the terms of the asset purchase agreement for Custom Products, the Company is required to make additional payments to the former owners of Custom Products in the amount of $800,000 each year through January 2003 if net sales of Custom Products increase to specified levels. The Company expects to be able to make these payments, if required, from operating cash flow. The Company is the owner of a one-half interest in its administrative and engineering building located in Norwalk, Connecticut through a joint venture agreement. The agreement expires 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. 10 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Year 2000 Historically, most computer systems utilized software that processes transactions using two digits to represent the year of the transaction (i.e., 97 represents the year 1997). Software has to be modified to properly process dates beyond December 1999. The products manufactured by the Company and its subsidiary, Custom Products, do not contain any components that are year 2000 sensitive. In 1997 Custom Products installed manufacturing and accounting software that is year 2000 compliant. The developer of the manufacturing and accounting system used at Bolt Technology Corporation has released a version of its year 2000 compliant software. The Company will be testing and installing this software during 1999 and expects to be operational by the middle of 1999. The cost of this system upgrade will not be material to the financial condition or result of operations. The Company has not contacted its major vendors to determine if there are any year 2000 issues that would cause an interruption in the delivery of raw material or key components. The Company believes that since its most critical purchases are stainless steel with standard dimensions available from several sources, any year 2000 issues encountered by current vendors would not prevent the company from securing raw materials from other sources. The Company does not expect any material disruptions in its operations as a result of any year 2000 issues. Results of Operations The results of operations for 1998 include the operations of Custom Products from January 6, 1998, the date it was acquired by the Company. The Company's revenues increased 71% to $18,053,000 for 1998 from $10,531,000 for 1997. Net income for 1998 increased 142% to $5,134,000. The acquisition of Custom Products accounted for 22% of the revenue increase and 13% of the increase in net income for 1998. The remainder of the increase in revenue and net income was caused by the continued strong demand for the Company's marine seismic energy sources and replacement parts. The worldwide fleet of seismic vessels continues to grow to meet increasing demand for seismic data needed for oilfield exploration, development and reservoir production monitoring. Total revenue increased 22% in 1997 from 1996. Net income increased 75% for the same period. The same factors that contributed to the 1998 increase in marine seismic energy sources and replacement parts also contributed to the 1997 increase. Service revenue from the Company's Wellseis(R) crew decreased $456,000 from 1997 to 1998 and $58,000 from 1996 to 1997. Because of the poor outlook for this type of service provided by the Company, the decision was made to close its service operations at the end of the second quarter of fiscal 1998. Since the fair value of the assets comprising the Company's service division are in excess of carrying value, no impairment loss was required nor was any other provision necessary because of the closing of the service operations. Cost of sales as a percentage of sales increased from 52% in 1997 to 54% in 1998. The major factor contributing to the increase in the cost of sales percentage in 1998 was the higher proportion of auxillary equipment purchased by the Company which were required for certain marine air gun systems sold. This Auxiliary equipment historically has lower margins than the Company's proprietary air guns and replacement parts. The cost of sales percentage was positively affected by manufacturing efficiencies and the inclusion of Custom Products which has slightly higher margins than the air guns sold by the Company. 11 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Results of Operations (cont'd.) Cost of sales as a percentage of sales decreased from 55% in 1996 to 52% in 1997. The improved operating margin in 1997 was attributable to (i) the effect of $70,000 of royalty income included in sales in 1997 for which there was no associated cost; (ii) improved margins on air gun system sales because of reduced auxillary equipment purchased from third parties, which historically carry lower margins and (iii) sales price increases. Cost of sales in 1997 was negatively impacted by a $32,000 increase in the provision for obsolete and slow moving inventory. Research and development costs increased 6% in 1998 and 27% in 1997. Over the last two years, the Company has continued to concentrate its research and development efforts in developing a new marine seismic energy source. Selling, general and administrative expenses increased by $815,000 in 1998 as compared to 1997. The inclusion of Custom Products for the last half of 1998 caused selling, general and administrative expenses to increase by $333,000. Higher incentive compensation expense due to increased profits caused a $306,000 increase and travel expenses related to the company's foreign sales increased $105,000. In 1997 selling, general and administrative expenses increased $451,000. Factors that caused the increase were a $243,000 increase in salary, incentive compensation and other employee benefits due to increased profits; a $66,000 increase in shareholder related expenses from the Company's listing of its common stock on the American Stock Exchange and a $56,000 increase in foreign travel expenses. Amortization of intangible assets (principally goodwill) associated with the acquisition of Custom Products amounted to $114,000 in fiscal 1998. The Company is amortizing the goodwill related to the acquisition over 20 years. Net interest income increased $31,000 in 1998 and $73,000 in 1997. The higher level of interest income in 1998 reflects an increase in the level of short-term investments during the first half of fiscal 1998. These investments provided the majority of the funding for the Custom Products acquisition in January 1998. The 1997 increase in net interest income also resulted from the higher level of short-term investments. Statement of 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". During fiscal 1998, the Company continued its quarterly assessment of the expected realization of its deferred tax assets based upon the following factors: (a) past earnings history; (b) current sales backlog; (c) dependence on few customers for significant percentage of revenues; (d) the cyclical nature of the seismic exploration industry; and (e) the effect of the Custom Products acquisition on future taxable income. Based on this review, management concluded that future taxable income would be higher than amounts previously estimated at the end of 1997 and, therefore, it was more likely than not that previously reserved tax assets would be realized in future years. As required by FAS 109, $1,000,000 of the reduction in the valuation allowance was reflected in the allocation of the purchase price of the Custom Products acquisition and $642,000 was reflected as an income tax benefit in the consolidated statement of income. The remaining $1,531,000 decrease in the valuation allowance offset reductions in gross deferred tax assets, principally from the utilization of the operating loss carry-forward. Recent Accounting Pronouncements For the period ended December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 (FAS 128), "Earnings per Share". This standard specifies, among other things, the presentation of basic and diluted earnings per share data on the face of the income statement. As required by the statement, prior period earnings per share data has been restated to conform with the provisions of the statement. 12 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Recent Accounting Pronouncements (cont'd.) The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise and Related Information" in June 1997. FAS 131 requires a business enterprise to determine segments based on the "management approach." The management approach means reporting segment information similar to the way management reviews operating results and makes management decisions regarding its various operating divisions. The requirements of this statement are effective for fiscal years beginning after December 15, 1997. With the acquisition of Custom Products, the Company adopted the provisions of FAS 131 for the year ended June 30, 1998. See Note 10 to the consolidated financial statements for the related segment disclosure. In 1997, the Financial Accounting Standards Board Issued Statement of Financial Accounting Standards No. 130 (FAS 130), "Reporting Comprehensive Income". FAS 130 requires the adoption of its provisions for fiscal years beginning after December 15, 1997. FAS 130 calls for disclosure of comprehensive income in a financial statement that is displayed with the same prominence as other financial statements that constitute a full set of financial statements. Comprehensive income includes all changes in the equity of a business enterprise during a period except those resulting from investments by shareholders and distributions to shareholders. Such changes would include net income and the cumulative translation adjustment. The company will adopt this standard by the required date. In 1997, the Company adopted Statement of Financial Accounting Standards No. 123 (FAS 123), "Accounting for Stock Issued to Employees", and has provided in Note 6 to the consolidated financial statements proforma disclosures of the effect on net income and earnings per share as if the fair value-based method prescribed by FAS 123 had been applied in measuring compensation expense. In 1997, the Company adopted Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". In accordance with FAS 121, the Company reviews for the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Under FAS 121, an impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. No such impairment losses have been identified by the Company. ITEM 7. a. Quantitative and Qualitative Disclosures about Market Risk None ITEM 8. Financial Statements and Supplementary Data See Item 14 for an Index to Financial Statements and Financial Statement Schedule. Such Financial Statements and Schedule are incorporated herein by reference. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None 13 PART III ITEM 10. Directors and Executive Officers of the Registrant The information as to Directors required by Item 401 and 405 of Regulation S-K is incorporated by reference to the Company's definitive proxy statement (the "Definitive Proxy Statement") which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Form 10-K. ITEM 11. Executive Compensation The information required by Item 402 of Regulation S-K is incorporated by reference to the Definitive Proxy Statement. ITEM 12. Security Ownership of Certain Beneficial Owners and Management The information required by Item 403 of Regulation S-K is incorporated by reference to the Definitive Proxy Statement. ITEM 13. Certain Relationships and Related Transactions The information required by Item 404 of Regulation S-K is incorporated by reference to the Definitive Proxy Statement. PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Consolidated Financial Statements Page Number ----------- Independent Auditors' Report 16 Consolidated Balance Sheets as of June 30, 1998 and 1997 17 Consolidated Statements of Income for the Years Ended June 30, 1998, 1997 and 1996 18 Consolidated Statements of Cash Flows for the Years Ended June 30, 1998, 1997 and 1996 19 Notes to Consolidated Financial Statements 20-32 Financial Statement Schedule for the Years Ended Page Number ----------- June 30, 1998, 1997 and 1996 II - Valuation and Qualifying Accounts and Reserves 33 Schedules other than that listed above are omitted because they are not applicable, or the required information is shown in the financial statements or the notes thereto. 14 Exhibit Index Exhibit No. - ------- 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registration Statement No. 2-73456 on Form S-1). 3.2 Amendment of Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to Registration Statement No. 2-85529 on Form S-1). 3.3 Amendment of Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.3 to the August 15, 1996 Form 8-A). 3.4 Amendment of Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.4 to the August 15, 1996 Form 8-A). 3.5 By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3 to the September 30, 1983 Form l0-Q). 10.1 Bolt Technology Corporation Amended and Restated 1993 Stock Option Plan. * 10.2 Asset Purchase Agreement dated as of November 14, 1997, by and among Bolt Technology Corporation and Gerald Shaff and Carole Shaff (incorporated by reference to Exhibit 2.1 to Form 8-K dated January 14, 1998). 10.3 Commercial Revolving Loan and Security Agreement dated January 5, 1998 by and between Bolt Technology Corporation and Fleet National Bank (incorporated by reference to Exhibit 4.1 to Form 8-K dated January 14, 1998. 21. Subsidiaries of the Registrant.* 27. Financial Data Schedule. Reports on Form 8-K There were no Form 8-K Reports filed during the quarter ended June 30, 1998. _____________ * Filed herewith 15 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Bolt Technology Corporation Norwalk, Connecticut We have audited the accompanying consolidated balance sheets of Bolt Technology Corporation and subsidiaries as of June 30, 1998 and 1997, and the related consolidated statements of income and cash flows for each of the three years in the period ended June 30, 1998. Our audits also included the financial statement schedule listed in the Index at Item 14. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Bolt Technology Corporation and subsidiaries as of June 30, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. / s / Deloitte & Touche LLP Stamford, Connecticut August 5, 1998 16 Bolt Technology Corporation and Subsidiaries Consolidated Balance Sheets
June 30, --------------------- Assets 1998 1997 ---- ---- Current Assets: Cash and cash equivalents..................................... $1,317,000 $2,628,000 Accounts receivable, less allowance for uncollectible accounts of $136,000 in 1998 and $96,000 in 1997.................................... 5,002,000 2,266,000 Inventories................................................... 2,451,000 1,886,000 Deferred income taxes......................................... 1,060,000 610,000 Other current assets.......................................... 89,000 102,000 --------- --------- 9,919,000 7,492,000 --------- --------- Plant and Equipment: Building and leasehold improvements........................... 534,000 534,000 Geophysical equipment......................................... 1,523,000 2,566,000 Machinery and equipment....................................... 4,233,000 4,113,000 Equipment held for rental..................................... 822,000 822,000 --------- --------- 7,112,000 8,035,000 Less accumulated depreciation............................ (6,911,000) (7,908,000) ---------- --------- 201,000 127,000 Goodwill, net...................................................... 4,339,000 - Deferred Income Taxes.............................................. 1,945,000 680,000 Other Assets....................................................... 58,000 22,000 --------- --------- $16,462,000 $8,321,000 =========== ========== Liabilities and Stockholders' Equity Current Liabilities: Accounts payable............................................ $1,717,000 $449,000 Accrued liabilities......................................... 1,702,000 861,000 ---------- --------- 3,419,000 1,310,000 ---------- --------- Stockholders' Equity: Common stock, no par value, authorized 9,000,000 shares; issued and outstanding 5,232,478 shares in 1998 and 5,074,978 in 1997 ............................................. 25,576,000 24,678,000 Accumulated deficit......................................... (12,533,000) (17,667,000) ----------- ----------- Total Stockholders' equity............................. 13,043,000 7,011,000 ----------- ----------- $16,462,000 $8,321,000 =========== ===========
See Notes to Consolidated Financial Statements. 17 Bolt Technology Corporation and Subsidiaries Consolidated Statements of Income
For the Year Ended June 30, --------------------------- 1998 1997 1996 ---- ---- ---- Revenues: Sales............................................... $18,038,000 $10,060,000 $8,102,000 Service............................................. 15,000 471,000 529,000 ---------- ---------- --------- 18,053,00 10,531,000 8,631,000 ---------- ---------- --------- Costs and Expenses: Cost of sales....................................... 9,665,000 5,219,000 4,420,000 Cost of service..................................... 80,000 569,000 800,000 Research and development............................ 216,000 204,000 161,000 Selling, general and administrative................. 3,300,000 2,485,000 2,034,000 Amortization of intangibles......................... 114,000 - - Interest (income) expense, net...................... (98,000) (67,000) 6,000 ---------- --------- --------- 13,277,000 8,410,000 7,421,000 ---------- --------- --------- Income before income taxes ............................. 4,776,000 2,121,000 1,210,000 Benefit for income taxes.................................. 358,000 - - ---------- --------- --------- Net income..................................... $5,134,000 $2,121,000 $1,210,000 ========== ========== ========== Earnings per share: Basic............................................... $1.00 $0.43 $0.24 Diluted............................................. $0.97 $0.41 $0.24 Average number of common shares outstanding: Basic............................................... 5,146,185 4,989,383 4,971,431 Diluted............................................. 5,287,355 5,177,943 5,010,311
See Notes to Consolidated Financial Statements. 18 Bolt Technology Corporation and Subsidiaries Consolidated Statements of Cash Flows
For the Year Ended June 30, ------------------------------- 1998 1997 1996 ---- ---- ---- Cash Flows From Operating Activities: Net income.................................................... $5,134,000 $2,121,000 $1,210,000 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization............................. 163,000 56,000 57,000 Deferred income taxes..................................... (642,000) (155,000) (37,000) ---------- ---------- ---------- 4,655,000 2,022,000 1,230,000 Change in operating assets and liabilities: Accounts receivable....................................... (2,515,000) (85,000) (220,000) Inventories............................................... (26,000) (262,000) 29,000 Other assets.............................................. (60,000) (62,000) (42,000) Accounts payable and accrued liabilities.................. 1,892,000 (280,000) 433,000 ---------- ---------- ---------- Net cash provided by operating activities................. 3,946,000 1,333,000 1,430,000 ---------- ---------- ---------- Cash Flows From Investing Activities: Acquisition of net assets of business acquired................ (4,974,000) - - Purchase of property and equipment............................ (24,000) (87,000) (22,000) ---------- ---------- ---------- Net cash used in investing activities ................. (4,998,000) (87,000) (22,000) ---------- ---------- ---------- Cash Flows From Financing Activities: Exercise of stock options...................................... 17,000 18,000 - Borrowings from bank........................................... 800,000 - - Net decrease in borrowings under revolving credit agreement............................................... - - (103,000) Repayment of long-term debt ................................... (1,076,000) - - ---------- ---------- ---------- Net cash (used in) provided by financing activities...... (259,000) 18,000 (103,000) ---------- ---------- ---------- Net (decrease) increase in cash..................................... (1,311,000) 1,264,000 1,305,000 Cash and cash equivalents at beginning of year...................... 2,628,000 1,364,000 59,000 ---------- ---------- ---------- Cash and cash equivalents at end of year............................ $1,317,000 $2,628,000 $1,364,000 ========== ========== ========== Supplemental disclosure of cash flow information: Cash transactions: Interest paid ...................................................... $ 6,000 $ 16,000 $25,000 Income taxes paid .................................................. $ 278,000 $186,000 $70,000 Non-cash transaction: Common stock issued in connection with business acquisition..................................................... $ 881,000 - -
See Notes to Consolidated Financial Statements. 19 Bolt Technology Corporation Notes To Consolidated Financial Statements Note 1 - Description of Business and Significant Accounting Policies Bolt Technology Corporation develops, manufactures and sells marine seismic energy sources and auxillary equipment for use in the exploration and production of oil and gas. Its principal subsidiary, Custom Products Corporation, acquired in January 1998, manufactures precision mechanical and pneumatic slip clutches sold under the "Polyclutch" tradename. Principals of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiary companies. All significant intercompany balances and transactions have been eliminated. Cash and Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories: Inventories are valued at the lower of cost or market, with cost principally determined on an average cost method which approximates the first-in, first-out method. The Company reserves for all slow moving inventory. Amounts are charged to the reserve when the Company scraps or disposes of inventory. Plant and Equipment: Plant and equipment are carried at cost. Depreciation for financial accounting purposes is computed using the straight-line method over the estimated useful lives of 5 to l0 years for machinery and equipment and rental assets, 1 to l0 years for geophysical equipment, 15 to 30 years for buildings, and over the terms of the lease for leasehold improvements. Equipment held for rental consists of land air gun units, which are generally leased under short-term rental agreements. Goodwill: Goodwill results from the acquisition of Custom Products Corporation and represents the excess of acquisition costs over the fair value of the net assets acquired. Goodwill is being amortized over a 20 year period on a straight-line basis. Accumulated amortization at June 30, 1998 was $111,000. Revenue Recognition and Warranty Costs: The Company recognizes revenue from equipment sales upon shipment. Rental income from short-term leases, which has not been significant, and service income are recorded monthly as earned. Warranty costs and product returns incurred by the Company have been insignificant. 20 Bolt Technology Corporation Notes To Consolidated Financial Statements Note 1 - Description of Business and Significant Accounting Policies ( cont'd.) Income Taxes: Income taxes are provided using the liability method in accordance with Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes". Deferred tax assets and liabilities are recognized based upon differences between book and tax basis of assets and liabilities, using presently enacted tax rates. The provision for income taxes is the sum of the amount of income taxes paid or payable for the year as determined by applying the provisions of enacted tax laws to taxable income for that year and the net changes during the year in the Company's deferred tax assets and liabilities. Stock-Based Compensation: In 1997, the Company adopted Statement of Financial Accounting Standard No. 123 (FAS 123), "Accounting for Stock-Based Compensation". Upon adoption of FAS 123, the Company continued to measure compensation expense for its stock-based employee compensation plan using the intrinsic value method prescribed by APB No. 25, "Accounting for Stock Issued to Employees", and has provided in Note 6 proforma disclosures of the effect on net income and earnings per share as if the fair value-based method prescribed by FAS 123 had been applied in measuring compensation expense. Long-Lived Assets: The Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is considered impaired when anticipated undiscounted cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. The Company believes that no material impairment existed at June 30, 1998. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 21 Bolt Technology Corporation Notes To Consolidated Financial Statements Note 1 - Description of Business and Significant Accounting Policies (cont'd.) 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, by the Company, to purchase shares at the average market price for the period. Previously reported earnings per share have been restated to conform to FAS 128. The following is a reconciliation from basic earnings per share to diluted earnings per share for each of the last three years:
Average Shares Earnings 1998 Net Income Outstanding Per Share ---- ---------- ----------- --------- Basic earnings per share $5,134,000 5,146,185 $1.00 Effect of dilution: Stock options 141,170 ---------- --------- ----- Diluted earnings per share $5,134,000 5,287,355 $0.97 ========== ========= ===== 1997 Basic earnings per share $2,121,000 4,989,383 $0.43 Effect of dilution: Stock options 188,560 ---------- --------- ----- Diluted earnings per share $2,121,000 5,177,943 $0.41 ========== ========= ===== 1996 Basic earnings per share $1,210,000 4,971,431 $0.24 Effect of dilution: Stock options 38,880 ---------- --------- ----- Diluted earnings per share $1,210,000 5,010,311 $0.24 ========== ========= =====
22 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 1 - Description of Business and Significant Accounting Policies (cont'd.) Recent Accounting Pronouncements: The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("FAS 131"), "Disclosures about Segments of an Enterprise and Related Information", in June 1997. FAS 131 requires a business enterprise to determine segments based on the "management approach". The management approach means reporting segment information similar to the way management reviews operating results and makes management decisions regarding its various operating divisions. The requirements of this statement are effective for fiscal years beginning after December 15, 1997. With the acquisition of Custom Products, the Company adopted the provisions of FAS 131 for the year ended June 30, 1998. See Note 10 to the consolidated financial statements for the related segment disclosure. In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("FAS 130"), "Reporting Comprehensive Income". FAS 130 requires the adoption of its provisions for fiscal years beginning after December 15, 1997. FAS 130 calls for disclosure of comprehensive income in a financial statement that is displayed with the same prominence as other financial statements that constitute a full set of financial statements. Comprehensive income includes all changes in the equity of a business enterprise during a period except those resulting from investments by shareholders and distributions to shareholders. Such changes would include net income and the cumulative translation adjustment. The company will adopt this standard by the required date. Reclassifications: Certain prior year amounts have been reclassified to conform to current year presentation. Note 2 - Custom Products Corporation Acquisition On January 6, 1998 the Company completed the acquisition of Custom Products Corporation ("Custom Products") pursuant to the terms of an asset purchase agreement. Custom Products is a manufacturer of precision mechanical and pneumatic slip clutches sold under the "Polyclutch" tradename. The purchase price of the Custom Products' assets acquired included (i) $4,971,000 in cash; (ii) 135,000 shares of common stock valued at $881,000; (iii) estimated acquisition costs of $208,000; and (iv) contingent cash payments. Such contingent cash payments could total $4,000,000 and are dependent on the annual increases in the net sales of Custom Products for the period January 1, 1998 to December 31, 2003. The results of operations of Custom Products have been included in the consolidated statement of income from the acquisition date. 23 Bolt Technology Corporation Notes To Consolidated Financial Statements Note 2 - Custom Products Corporation Acquisition (cont'd.) The transaction was accounted for by the purchase method of accounting. Accordingly, acquired assets and assumed liabilities were recorded at their estimated fair value, which resulted in goodwill of $4,450,000 that is being amortized on a straight line basis over 20 years. A summary of the purchase price allocation is as follows: Cash $ 206,000 Accounts receivable 221,000 Inventories 538,000 Property and equipment 97,000 Goodwill 4,450,000 Deferred income taxes 1,000,000 Other assets 40,000 Accounts payable (51,000) Accrued liabilities (165,000) Long-term debt (276,000) ----------- Purchase price $6,060,000 =========== The following table reflects the unaudited pro forma combined results of the Company and Custom Products on the basis that the acquisition had taken place on July 1, 1996 and includes the impact of certain adjustments such as amortization of intangible assets, officers salary and interest expense. June 30, 1998 1997 ---- ---- Revenue $19,690,000 $13,652,000 Net income $5,595,000 $3,035,000 Earnings per share: Basic $1.07 $0.59 Diluted $1.04 $0.57 The pro forma results are not necessarily indicative of the results that might have occurred had the acquisition of Custom Products actually taken place on July 1, 1996, or of future results of operations. 24 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 3 - Long-Term Debt In connection with the Custom Products acquisition, the Company established a $3,500,000 unsecured credit facility through 2003. The purpose of the credit facility was to assist funding of the acquisition and to support working capital requirements. Maximum borrowings under the agreement decrease by $500,000 on each anniversary of the agreement and bear interest at the prime rate. The credit facility contains certain covenants which include: (i) prohibition of additional indebtedness; (ii) minimum tangible net worth of $5,567,000 at June 30, 1998 which increases by 50% of the Company's net income each year; (iii) a ratio of total liabilities to tangible net worth of no more than 1.25 to 1; (iv) a ratio of minimum debt service of no less than 2 to 1 and (v) no two consecutive quarterly losses. The Company is in compliance with the covenants contained in the agreement. The Company borrowed $800,000 under the above agreement in connection with the acquisition of Custom Products. This amount has been repaid. Note 4 - Inventories Inventories, net of reserves, at June 30 consist of the following: 1998 1997 ---- ---- Raw materials and sub-assemblies $2,182,000 $1,665,000 Work-in-process 269,000 221,000 ---------- ---------- $2,451,000 $1,886,000 ========== ========== Note 5 - Income Taxes Income tax (benefit) expense consists of the following for the three years ended June 30,: 1998 1997 1996 ---- ---- ---- Current: Federal $ -- $ -- $ -- State 284,000 155,000 37,000 ------- ------- ------ 284,000 155,000 37,000 ------- ------- ------ Deferred: Federal (642,000) (155,000) (37,000) State -- -- -- -------- ------- ------- 642,000 (155,000) (37,000) -------- ------- ------- Income tax benefit $(358,000) $ -- $ -- ======== ======= ======= 25 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 5 - Income Taxes (cont'd.) The benefit for income taxes differs from the amounts computed, based upon the Federal statutory rate for the reasons shown below:
Year Ended June 30, ------------------- 1998 1997 1996 ---- ---- ---- Federal income taxes at the statutory rate 34% 34% 34% State income taxes, net of federal tax benefit 4 5 2 Nondeductible expenses 1 2 3 Utilization of net operating loss carry-forwards (33) (39) (36) Reduction in deferred tax valuation allowance (13) (2) (3) ------ ------ ------ (7%) -- -- ====== ====== ======
Deferred tax assets (liabilities) at June 30, 1998 and 1997 are comprised of the following: 1998 1997 ---- ---- Deferred tax assets: Tax loss carry-forward $ 3,462,000 $ 5,013,000 Investment tax credit carry-forward 200,000 200,000 Inventory reserve 328,000 311,000 Bad debt reserve 53,000 37,000 Alternative minimum tax credit carry-forward 171,000 98,000 Other 2,000 1,000 ----------- ----------- Gross deferred tax asset 4,216,000 5,660,000 Deferred tax liability: Amortization of intangibles (14,000 - Deferred tax asset valuation allowance (1,197,000) (4,370,000) ----------- ----------- Net deferred tax asset $ 3,005,000 $ 1,290,000 =========== =========== The company has net operating loss carry-forwards totaling $10,181,000 which expire as follows: 2003 - $4,055,000; 2004 - $2,403,000; 2005 - $3,415,000; 2006 - - $63,000 and 2007 - $245,000. In addition, the company has $200,000 of investment tax credits which expire in 2001 and 2002. 26 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 5 - Income Taxes (cont'd.) Statement of 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". During fiscal 1998, the Company continued its quarterly assessment of the expected realization of its deferred tax assets based upon the following factors: (a) past earnings history; (b) current sales backlog; (c) dependence on few customers for significant percentage of revenue; (d) cyclical nature of seismic exploration industry; and (e) the effect of the Custom Products acquisition on future taxable income. Based on this review, management concluded that future taxable income would be higher than amounts previously estimated at the end of 1997 and, therefore, it was more likely than not that previously reserved tax assets would be realized in future years. As required by FAS 109, $1,000,000 of the reduction in the valuation allowance was reflected in the allocation of the purchase price of the Custom Products acquisition and $642,000 was reflected as an income tax benefit in the consolidated statement of income. The remaining $1,531,000 decrease in the valuation allowance offset reductions in gross deferred tax assets, principally from the utilization of the net operating loss carry-forwards. 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. Note 6 - Stock Options In November 1997, by a vote of the Company's stockholders, the 1993 Stock Option Plan was amended to provide the granting of options to purchase up to 550,000 shares of common stock of the Company at a price not less than fair market value at date of grant. Options granted to employees are exercisable for a period not to exceed ten years. The plan also provides for the granting to non-employee directors options to purchase 3,000 shares of common stock each time they are elected directors. A summary of the status of the Company's Stock Option Plan as of June 30, 1998, 1997 and 1996, and the changes during the years ending on those dates is presented below.
1998 1997 1996 ------------------------- ------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ -------- ------ -------- ------ -------- Outstanding at beginning of year 191,250 $ 1.80 260,000 $ 0.87 254,000 $ 0.84 Granted 117,500 $ 6.65 51,000 $ 4.22 6,000 $ 1.81 Exercised (22,500) $ 0.78 (119,000) $ 0.80 -- -- Canceled (750) $ 1.00 (750) $ 0.75 -- -- -------- -------- -------- -------- -------- -------- Outstanding at end of year 285,500 $ 3.88 191,250 $ 1.80 260,000 $ 0.87 ======== ======== ======== ======== ======== ========
There were 181,453 options available for future grants under the plan at June 30, 1998. 27 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 6 - Stock Options (cont'd.) The following table summarizes information concerning currently outstanding and exercisable options by three ranges of exercise prices at June 30, 1998:
Options Outstanding Options Exercisable ---------------------------------------------------------------------- -------------------------------------- Range of Number Outstanding Weighted Average Weighted Number Weighted Exercise as of Remaining Average Exercisable Average Prices June 30, 1998 Contractual Life Exercise Price As of June 30, 1998 Exercise Price - ---------- ---------------------- ----------------- -------------- -------------------- -------------- $0.75 - $1.00 91,000 0.8 years $0.84 91,000 $0.84 $1.19 - $1.81 26,000 2.1 years $1.33 24,500 $1.30 $4.12 - $6.94 168,500 4.2 years $5.92 48,000 $4.18 ------- --------- ----- ------- ----- 285,500 2.9 years $3.88 163,500 $1.89 ======= ========= ===== ======= =====
The estimated fair value of options granted during 1998, 1997 and 1996 were $3.97, $2.45 and $1.05 per share, respectively. The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock option plan. Accordingly, no compensation cost has been recognized for its stock option plan. Had compensation cost for the Company's stock option plan been determined based on the fair value at option grant dates for awards in accordance with accounting provisions of FAS 123, the Company's net income and earnings per share for the years ended June 30, 1998, 1997 and 1996 would have been reduced to the pro forma amounts indicated below: Net Income: 1998 1997 1996 - ----------- ---- ---- ---- As reported $5,134,000 $2,121,000 $1,210,000 Pro forma $4,839,000 $2,062,000 $1,209,000 Basic earnings per share: - ------------------------- As reported $ 1.00 $0.43 $0.24 Pro forma $ 0.94 $0.41 $0.24 Diluted earnings per share: - --------------------------- As reported $ 0.97 $0.41 $0.24 Pro forma $ 0.92 $0.40 $0.24 As required by FAS 123, the fair value of each grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for 1998, 1997 and 1996: dividend yield 0%; expected volatility of 65% for 1998 grants and 62% for 1997 and 1996 grants; risk-free interest rates of 5.75% for 1998 grants and 6.00% for 1997 and 1996 grants and expected option lives of 5 years for all option grants. 28 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 7 - Benefit Plans The Company maintains defined contribution retirement plans covering all employees who satisfy the age and service requirements of the plans. The Company's contributions to the plans for the years ended June 30, 1998, 1997 and 1996 amounted to $102,000, $42,000 and $28,000, respectively. Note 8 - Stockholders' Equity Changes in issued common stock and stockholders' equity for the three years ended June 30, 1998 were as follows:
Common Stock ------------ Accumulated Shares Amount Deficit Total ------ ------ ------- ----- Balance June 30, 1995.............................. 4,971,431 $24,660,000 $(20,998,000) $3,662,000 Net income.................................... - - 1,210,000 1,210,000 --------- ---------- ---------- ---------- Balance June 30, 1996.............................. 4,971,431 24,660,000 (19,788,000) 4,872,000 Exercise of stock options..................... 103,547 18,000 - 18,000 Net income.................................... - - 2,121,000 2,121,000 --------- ---------- ---------- ---------- Balance June 30, 1997.............................. 5,074,978 24,678,000 (17,667,000) 7,011,000 Exercise of stock options.................... 22,500 17,000 - 17,000 Common stock issued for acquisition.......... 135,000 881,000 - 881,000 Net income................................... - - 5,134,000 5,134,000 --------- ---------- ---------- ---------- Balance June 30,1998............................... 5,232,478 $25,576,000 $(12,533,000) $13,043,000 ========= =========== ============ ===========
Note 9 - Commitments and Contingencies Concentration of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, and trade accounts receivable. The Company believes that the concentration of credit risk in its trade receivables is substantially mitigated by the Company's ongoing credit evaluation and its short collection terms. The Company does not generally require collateral from its customers but, in certain cases, the Company does require the customer to provide a letter of credit or an advance payment. In limited cases the Company will grant customers extended payment terms of up to 12 months. The Company establishes an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers. Historically, the Company has not incurred significant credit related losses. The Company invests its excess cash in certificates of deposit with maturities of usually less than one month in an effort to maintain safety and liquidity. Financial Instruments: The Company does not hold or issue financial instruments for trading purposes, nor does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values of cash and cash equivalents, receivables, accounts payable and accrued liabilities reflected in the June 30, 1998 and 1997 balance sheets approximate carrying value at that date. 29 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 9 - Commitments and Contingencies (cont'd.) Lease Commitments: Rent expense amounted to $349,000, $344,000 and $301,000 for the years ended June 30, 1998, 1997 and 1996, respectively. Minimum annual rental commitments under operating leases with terms in excess of one year are as follows: 1999 - $320,000; 2000 - $51,000; 2001 - $31,000; 2002 - $31,000; 2003 - $31,000 and thereafter $26,000. Employment Agreements: The Company has a severance compensation plan for certain executive officers and key employees of the Company which becomes operative upon their termination if such termination occurs within 24 months subsequent to a change in ownership of the Company, as defined in the plan. The Company also has an employment agreement with its president and chief executive officer which provides for severance in the case of voluntary or involuntary termination and change in control. The employment agreement has a term through June 30, 1999, subject to extension as set forth in the agreement. The aggregate commitment for these employment agreements approximates $2,810,000 as of June 30, 1998. The Company also has an employment agreement with the president and chief executive officer of its subsidiary. The agreement has a term of five years, expiring in December 2002. Minimum annual salary under the agreement is $150,000. Litigation: In the ordinary course of business, the Company is involved in various pending or threatened legal actions. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from these actions will not have a material adverse effect on the Company's financial position, results of operations, or cash flows. 30 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 10 - Segment and Customer Information: Bolt Technology Corporation's reportable segments are its two specific business units: (1) seismic energy sources and auxillary equipment manufactured by Bolt Technology Corporation and (2) industrial clutches manufactured by Custom Products Corporation. Custom Products was acquired in January 1998. The following table provides selected financial information for each of the Company's segments for 1998. Prior to 1998, the Company operated in only one segment, seismic energy sources.
Seismic Energy Industrial Sources Clutches Total ------ -------- ----- Revenue $16,417,000 $1,636,000 $18,053,000 Interest income 104,000 - 104,000 Interest expense 5,000 1,000 6,000 Depreciation and amortization 39,000 124,000 163,000 Income before income taxes 4,394,000 382,000 4,776,000 Segment assets 9,987,000 6,475,000 16,462,000 Fixed asset additions 24,000 - 24,000
The Company does not allocate income taxes to segments. The following table reports sales by country for the years ended June 30, 1998, 1997 and 1996. Sales are attributed to each country based on the location of the customer. 1998 1997 1996 ---- ---- ---- United States.................... $7,215,000 $4,788,000 $4,620,000 Norway........................... 3,458,000 3,670,000 2,096,000 Peoples Republic of China........ 2,014,000 308,000 25,000 United Kingdom................... 1,930,000 95,000 530,000 Former Soviet Union.............. 1,269,000 92,000 - Singapore........................ 671,000 1,014,000 601,000 Other............................ 1,496,000 564,000 759,000 ----------- ----------- ---------- $18,053,000 $10,531,000 $8,631,000 =========== =========== ========== A relatively small number of customers has accounted for the Company's seismic energy source segment sales. The segment's three largest customers in 1998, 1997 and 1996 accounted for 42%, 77%, and 60% of total consolidated revenue, respectively. Customers accounting for 10% or more of consolidated revenue for 1998, 1997 and 1996 are as follows: 1998 1997 1996 1998 1997 1996 ---- ---- ---- Customer A....................... 22% 38% 33% Customer B....................... 10 20 16 Customer C....................... 10 19 - Customer D....................... - - 11 31 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 11 - Supplementary Information Accrued liabilities at June 30 consist of the following:
1998 1997 ---- ---- Compensation and related taxes.............................. $1,043,000 $527,000 Compensated absences........................................ 195,000 155,000 Commissions payable......................................... 192,000 74,000 Professional fees........................................... 84,000 41,000 Taxes payable............................................... 106,000 11,000 Other....................................................... 82,000 53,000 ---------- -------- $1,702,000 $861,000 ========== ========
Interest income (expense), net consists of the following:
1998 1997 1996 ---- ---- ---- Interest income............................................. $104,000 $87,000 $19,000 Interest expense............................................ (6,000) (20,000) (25,000) ------- -------- -------- Interest income (expense), net.............................. $98,000 $67,000 $(6,000) ======= ======== ========
Note 12 - Quarterly Results (unaudited) The following table summarizes results for each of the four quarters for the years ended June 30, 1998 and 1997.
Earnings per Share Costs and ------------------ Revenue Expenses Net Income Basic Diluted ------- -------- ---------- ----- ------- Quarters Fiscal 1998: First $2,657,000 $2,047,000 $868,000 $0.17 $0.17 Second 3,750,000 2,866,000 984,000 0.19 0.19 Third 5,117,000 3,894,000 1,223,000 0.23 0.23 Fourth 6,529,000 4,470,000 2,059,000 0.39 0.38 Quarters Fiscal 1997: First $2,318,000 $1,925,000 $393,000 $0.08 $0.08 Second 2,353,000 1,881,000 472,000 0.09 0.09 Third 2,886,000 2,316,000 570,000 0.11 0.11 Fourth 2,974,000 2,288,000 686,000 0.14 0.13
32 Bolt Technology Corporation Schedule II - Valuation and Qualifying Accounts and Reserves For the Three Years Ended June 30, 1998
Additions Charged Balance At (Credited) To Beginning Of Costs And Balance At Description Year Expenses Deductions End of Year ----------- ------------ ---------- ---------- ----------- Allowance for uncollectible accounts: 1996 $ 68,000 $78,000 $(62,000) $84,000 1997 84,000 85,000 (73,000) 96,000 1998 96,000 79,000 (39,000) 136,000 Reserve for inventory valuation: 1996 $ 916,000 $34,000 - $950,000 1997 950,000 66,000 $(217,000) (1) 799,000 1998 799,000 82,000 (40,000) (1) 841,000 Valuation allowance for deferred tax asset: 1996 $5,995,000 $(482,000) $(255,000) $5,258,000 1997 5,258,000 (214,000) (674,000) 4,370,000 1998 4,370,000 (642,000) (2,531,000) (2) 1,197,000
(1) Inventory scrapped. (2) Includes $1,000,000 allocated to the purchase price of Custom Products Corporation. 33 Signatures Pursuant to the requirements of Section 13 or 15(d) 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 on the 23rd day of September 1998. BOLT TECHNOLOGY CORPORATION By / s / Raymond M. Soto ---------------------------------- Raymond M. Soto (President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date / s / Raymond M. Soto President, September 23, 1998 - ----------------------------------- and Director (Raymond M. Soto) (Principal Executive Officer and Principal Financial Officer) / s / Alan Levy Vice President - Finance, September 23, 1998 - ----------------------------------- Secretary and Treasurer (Alan Levy) (Principal Accounting Officer) / s / Kevin M. Conlisk Director September 23, 1998 - ----------------------------------- (Kevin M. Conlisk) / s / Stephen Chelminski Director September 23, 1998 - ----------------------------------- (Stephen Chelminski) / s / John H. Larson Director September 23, 1998 - ----------------------------------- (John H. Larson) / s / Bernard Luskin Director September 23, 1998 - ----------------------------------- (Bernard Luskin) / s / Joseph Mayerick, Jr. Director September 23, 1998 - ----------------------------------- (Joseph Mayerick, Jr.) / s / Gerald H. Shaff Director September 23, 1998 - ----------------------------------- (Gerald H. Shaff) / s / Gerald A. Smith Director September 23, 1998 - ----------------------------------- (Gerald A. Smith)
34 EX-10.1 2 AMENDED & RESTATED 1993 STOCK OPTION PLAN EXHIBIT 10.1 BOLT TECHNOLOGY CORPORATION THE AMENDED AND RESTATED 1993 STOCK OPTION PLAN ARTICLE I -- GENERAL 1.01 PURPOSE The purpose of the Amended and Restated 1993 Stock Option Plan (the "Plan") is to aid Bolt Technology Corporation, (the "Company") and its subsidiaries in securing and retaining key employees and directors of outstanding ability and to motivate such employees and directors to exert their best efforts on behalf of the Company and its subsidiaries. In addition, the Company expects that it will benefit from the added interest which the respective optionees will have in the welfare of the Company as a result of their ownership or increased ownership of the Company's Common Stock. 1.02 ADMINISTRATION (a) The Plan shall be administered by a Committee of disinterested persons appointed by the Board of Directors of the Company (the "Committee"), as constituted from time to time. The Committee shall consist of at least two members of the Board, all of whom shall be disinterested persons (hereinafter referred to as "disinterested persons") within the meaning of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (hereinafter referred to as the "Exchange Act"). (b) The Committee shall have the authority, in its sole discretion and from time to time to: (i) designate the employees or classes of employees eligible to participate in the Plan: (ii) grant options provided in the Plan in such form, amount and with such exercise periods as the Committee shall determine; (iii) impose such limitations, restrictions and conditions upon any such option as the Committee shall deem appropriate; and (iv) interpret the Plan and any agreement with a participant under the Plan, adopt, amend and rescind rules and regulations relating to the Plan, and make all other determinations and take all other action necessary or advisable for the implementation and administration of the Plan. (c) Decisions and determinations of the Committee on all matters relating to the Plan and any agreement with a participant under the Plan shall be in its sole discretion and shall be final and conclusive. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any option granted hereunder. 1.03 ELIGIBILITY FOR PARTICIPATION All officers and key employees of the Company and its subsidiaries are eligible to receive incentive stock options or options other than incentive stock options under the Plan. Non-employee directors are hereby granted options other than incentive stock options as hereinafter provided in Article III. 1.04 TYPES OF OPTIONS AVAILABLE UNDER PLAN All options granted under the Plan shall be either options other than incentive stock options or incentive stock options as defined in section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Each option shall state whether or not it will be treated as an incentive stock option. 1.05 AGGREGATE LIMITATION ON STOCK SUBJECT TO PLAN (a) Shares of stock which may be issued under the Plan shall be authorized and unissued or treasury shares of Common Stock of the Company ("Common Stock"). Subject to Section 4.06 hereof, the maximum number of shares of Common Stock which may be issued under the Plan increased to 550,000: (b) For purposes of calculating the maximum number of shares of Common Stock which may be issued under the Plan: (i) all the shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when cash is used as full payment for shares issued upon exercise of a stock option; and (ii) only the net shares issued (including the shares, if any, withheld for tax withholding requirements) shall be counted when shares of Common Stock are used as full or partial payment for shares issued upon exercise of a stock option. (c) Any shares of Common Stock subject to a stock option which for any reason is terminated unexercised or expires shall again be available for options under the Plan. 1.06 EFFECTIVE DATE AND TERM OF PLAN (a) The Plan has been adopted and approved by the Board by action taken on September 16, 1997; provided, however, that the effectiveness of the Plan is expressly conditioned upon ratification and approval of the Plan by the affirmative votes of the holders of a majority of the Company's Common Stock present, or represented, and entitled to vote at the Annual meeting of the Company's shareholders in l997. Options granted under the Plan prior to such meeting shall be subject to, and the exercise thereof shall be expressly conditioned upon, such shareholder approval of the Plan. If said shareholder approval shall for any reason not be forthcoming at such meeting, the options shall be null and void. (b) No stock options shall be granted under the Plan after June 30, 2003; provided, however, that all options granted under the Plan prior to such date shall remain in effect until such options have been exercised or terminated in accordance with the Plan and the terms of such options. ARTICLE II -- EMPLOYEE STOCK OPTIONS 2.01 GRANT OF STOCK OPTION The Committee may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, grant any participant in the Plan one or more stock options to purchase for cash or shares the number of shares of Common Stock determined by the Committee. The date of a stock option shall mean the date on which the Committee selects a specific number of shares subject to the option granted to a participant pursuant to the Plan. 2 2.02 STOCK OPTION AGREEMENTS The grant of a Stock Option shall be evidenced by a written stock option Agreement, executed by the Company and the holder of a stock option (the "optionee"), stating at least the option price, the number of shares of Common Stock subject to the stock option evidenced thereby and the exercise period, and shall be in such form as the Committee may, from time to time, determine. 2.03 STOCK OPTION PRICE The option price per share of Common Stock deliverable upon exercise of a stock option shall be determined by the Committee, but shall not be less than 100% of the fair market value of a share of Common Stock on the date the stock option is granted. "Fair market value" as of any date and in respect of any share of Common Stock means the closing sales price on such date or on the next business day, if such date is not a business day, of a share of Common Stock as reported in The Wall Street Journal. The option price per share payable upon exercise of an incentive stock option granted to a person owning more than 10 percent of the voting power of the Company's voting stock shall not be less than 110% of the fair market value of such shares. 2.04 OPTION PERIOD Each option shall be exercisable during and over such period ending not later than ten years from the date it was granted, as may be determined by the Committee and stated in the option Agreement. No option shall be exercisable during the year ending on the first anniversary date of the granting of the option. Exercise of any option granted hereunder shall be conditional upon the prior approval of the listing on the principle securities exchange on which the Common Stock is traded. No incentive stock option granted to a person owning more than 10 percent of the voting power of the Company's voting stock shall be exercisable after the expiration of five years from the date the option is first granted. 2.05 EXERCISE OF OPTION Each stock option Agreement shall set forth the procedure governing the exercise of the stock option granted hereunder, and shall provide that, upon such exercise in respect of any shares of Common Stock subject thereto, the optionee shall pay to the Company, in full, the option price for such shares and applicable takes, if any, with cash (including check, bank draft or money order), with previously owned Common Stock or with a combination thereof. In no event shall any participant be granted an incentive stock option if such grant would permit the participant to exercise for the first time during any calendar year (under the Plan and all other plans of the Company and subsidiaries) incentive stock options to purchase shares of any or all such corporations having an aggregate fair market value (determined at time of grant of each such incentive stock option) in excess of $100,000. 3 2.06 EXERCISE UPON DEATH, DISABILITY OR RETIREMENT (a) Subject to Section 2.06(c) of the Plan, if an optionee's employment by the Company or a subsidiary terminates by reason of his death, his option may thereafter be exercised only to the extent to which it was exercisable at the time of his death and may not be exercised after the expiration of the period of fifteen months from the date of his death or the expiration of the stated period of the option, whichever period is the shorter. (b) Subject to Section 2.06(c) of the Plan, if an optionee's employment by the Company or a subsidiary terminates by reason of retirement or his total and permanent disability, his option may thereafter be exercised only to the extent to which it was exercisable at the time of such termination of employment and may not be exercised after the expiration of the period of three months from the date of such termination of employment or the stated period of the option, whichever period is shorter; provided, however, that if the optionee dies within such three month period, any unexercised stock option, to the extent to which it was exercisable at the time of his death, shall thereafter be exercisable for a period not exceeding fifteen months from the date of his death or for the stated period of the option, whichever period is the shorter. (c) If an optionee's employment terminates by death, by total and permanent disability or by retirement after the first anniversary date of the granting of the option and prior to an installment of his option (other than the first installment) becoming exercisable and if there are no conditions to the next succeeding installment becoming exercisable other than the passage of time, his option thereupon shall become exercisable with respect to a number of shares (in addition to shares covered by installments theretofore matured) equal to a pro rata portion of the shares for which it would become exercisable upon the maturity of the next succeeding installment, such pro rata portion to be based upon the proportion which the number of full months in the period beginning with the maturity date of the next preceding installment and ending with such termination of his employment bears to the total number of full months in the period beginning with the maturity date of the next preceding installment and ending with the maturity date of the next succeeding installment. 2.07 TERMINATION FOR OTHER REASON If an optionee's employment terminates for any reason other than death, total and permanent disability or retirement, his option shall thereupon terminate. ARTICLE III -- NON-EMPLOYEE DIRECTORS STOCK OPTIONS 3.01 GRANT OF OPTIONS Notwithstanding any provision of the Plan to the contrary, each director of the Company who is not a key employee of the Company or any of its subsidiaries and who is elected a director by the shareholders of the Company at an Annual Meeting of Shareholders held in 1993 and in years thereafter ending with the year 2002 shall be, and hereby is granted an option other than an incentive stock option to purchase 3,000 shares of Common Stock. The option price shall be the closing sales price per share on the principal securities exchange on which the Common Stock is traded on the date of the applicable Annual Meeting of Shareholders as reported in the Wall Street Journal (or if there is no sale on the relevant date, then on the next business 4 day on which a sale was reported). The option shall be exercisable for a period of five years from the date it is granted; provided it shall not be exercisable during the year ending on the first anniversary date of the grant and then until its expiration date the option may be exercised at any time and in any amount up to the total of the shares covered by the option. The option granted hereby is subject to the terms and conditions of the Plan except that if a director ceases to be director for any reason other than death, his option may thereafter be exercised only to the extent to which it was exercisable at the time he ceased to be a director and may not be exercised after the expiration of the period of 30 days from the date he ceased to be a director or the stated period of the option, whichever period is shorter. ARTICLE IV-MISCELLANEOUS 4.01 GENERAL RESTRICTION (a) The Committee may require each person purchasing shares pursuant to the option to represent to and agree with the Company in writing that he is acquiring the shares for investment, without a view to distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfers. (b) The option shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution. During the lifetime of an optionee the option shall be exercisable only by him. 4.02 WITHHOLDING TAXES Whenever the Company proposes or is required to issue or transfer shares of Common Stock under the Plan, the Company shall have the right to require the optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. Alternatively, the Company may issue or transfer such shares of Common Stock net of the number of shares sufficient to satisfy the withholding tax requirements. For withholding tax purposes, the shares of Common Stock shall be valued on the date the withholding obligation is incurred. 4.03 RIGHT TO TERMINATE EMPLOYMENT Nothing in the Plan nor in any stock option Agreement entered into pursuant to the Plan shall confer upon any participant the right to continue in the employment of the Company or affect any right which the Company or any subsidiary may have to terminate the employment of such participant. 4.04 NON-UNIFORM DETERMINATIONS The Committee's determinations under the Plan (including, without limitation, determinations of the persons to receive options, the form, amount and timing of such options, the terms and provisions of such options and the stock option Agreements evidencing same) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, options under the Plan, whether or not such persons are similarly situated. 4.05 RIGHTS AS A SHAREHOLDER The recipient of any option granted under the Plan shall have no rights as a shareholder with respect thereto unless and until certificates for shares of Common Stock are issued to him. 5 4.06 CHANGES IN CAPITAL In the event (a) of any merger or consolidation in which the outstanding shares of Common Stock are exchanged for securities, cash or property of a third party (other than any merger or consolidation with any wholly-owned subsidiary of the Company), (b) that all or substantially all of the assets or more than 50% of the outstanding voting stock of the Company is acquired by any other person or entity, or (c) of a liquidation of the Company, the Board, or the board of directors of any corporation assuming the obligations of the Company, shall provide for such successor corporation to assume the obligations of the Company with regard to options granted and, as to outstanding options, shall provide that all outstanding options shall become exercisable in full immediately prior to such event (except during the year ending on the first anniversary date of the granting of the option) and shall either (i) provide that all unexercised options shall be assumed or equivalent options shall be substituted by the acquiring or successor corporation (or an affiliate thereof), provided that any such options substituted for incentive stock options shall meet the requirements of section 424(a) of the Code, or (ii) upon written notice to the optionees, provide that all unexercised options will terminate immediately prior to the consummation of such merger, consolidation, acquisition, reorganization or liquidation unless exercised by the optionee within a specified number of days (but not less than fifteen days) following the date of such notice. The Company may grant options under the Plan in substitution for options held by employees of another corporation who become employees of the Company, or a subsidiary of the Company, as the result of a merger or consolidation of the employing corporation with the Company or a subsidiary of the Company, or as a result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The Company may direct that substitute options be granted on such terms and conditions as the Board considers appropriate in the circumstances. If the outstanding Common Stock of the Company, shares of which are eligible for the granting of options hereunder or subject to options theretofore granted, shall at any time be changed or exchanged by declaration of a stock dividend, splitup, combination of shares, recapitalization, merger, consolidation or other corporate reorganization in which the Company is the surviving corporation, the number and kind of shares subject to the Plan or subject to any options theretofore granted, and the option prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate option price. 4.07 AMENDMENTS The Board of Directors may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any optionee under any option theretofore granted, without his consent, or which, without the approval of the stockholders, would: (a) Except as is provided in Section 4.06 of the Plan, increase the total number of shares reserved for the purposes of the Plan. (b) Decrease the option price to less than 100% of the fair market value on the date of the granting of the option. (c) Change the persons eligible to receive options under this Plan. 6 EX-21 3 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES The Registrant, Bolt Technology Corporation, a Connecticut Corporation, has no parent. The following are the subsidiaries of the Registrant (at June 30, 1998) State of Incorporation ------------- Bolt International Corporation Connecticut Duke Place Investments Delaware Bolt Export Corporation United States, Virgin Islands Criterion Exploration, Inc. Texas Custom Products Corporation Connecticut The names of certain subsidiaries are omitted since such subsidiaries considered in the aggregate would not constitute a significant subsidiary at the end of the year covered by this report. EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS JUN-30-1998 JUL-01-1997 JUN-30-1998 1,317,000 0 5,002,000 136,000 2,451,000 9,919,000 7,112,000 (6,911,000) 16,462,000 3,419,000 0 0 0 25,576,000 (12,533,000) 16,462,000 18,038,000 18,053,000 9,665,000 9,745,000 3,630,000 0 (98,000) 4,776,000 358,000 5,134,000 0 0 0 5,134,000 1.00 .97 (1) INCOME TAX BENEFIT
EX-27.2 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 203,000 0 1,711,000 0 1,727,000 4,158,000 0 0 4,918,000 1,002,000 0 0 0 24,660,000 (20,744,000) 4,918,000 1,959,000 2,129,000 1,072,000 1,325,000 542,000 0 8,000 254,000 0 254,000 0 0 0 254,000 .05 .05 RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAS NO EFFECT ON EARNINGS PER SHARE.
EX-27.3 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-30-1996 JUL-01-1995 DEC-31-1995 575,000 0 1,370,000 0 1,768,000 4,192,000 0 0 4,950,000 824,000 0 0 0 24,660,000 (20,534,000) 4,950,000 3,636,000 3,909,000 1,971,000 2,411,000 1,020,000 0 14,000 464,000 0 464,000 0 0 0 464,000 .09 .09 RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAD NO EFFECT ON EARNINGS PER SHARE.
EX-27.4 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDING MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 748,000 0 1,646,000 0 1,705,000 4,584,000 0 0 5,340,000 937,000 0 0 0 24,660,000 (20,257,000) 5,340,000 5,418,000 5,864,000 2,884,000 3,511,000 1,582,000 0 20,000 751,000 10,000 741,000 0 0 0 741,000 .15 .15 RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAS NO EFFECT ON EARNING PER SHARE.
EX-27.5 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS JUN-30-1996 JUL-01-1995 JUN-30-1996 1,364,000 0 2,181,000 84,000 1,624,000 5,712,000 8,068,000 (7,972,000) 6,462,000 1,590,000 0 0 0 24,660,000 (19,788,000) 6,462,000 8,102,000 8,650,000 4,420,000 5,220,000 2,195,000 0 25,000 1,210,000 0 1,210,000 0 0 0 1,210,000 .24 .24 RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAD NO EFFECT ON EARNING PER SHARE.
EX-27.6 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-30-1997 JUL-01-1996 SEP-30-1996 1,243,000 0 2,382,000 0 1,645,000 5,866,000 0 0 6,647,000 1,382,000 0 0 0 24,660,000 (19,395,000) 6,647,000 2,158,000 2,332,000 1,126,000 1,294,000 640,000 0 5,000 393,000 0 393,000 0 0 0 393,000 .08 .08 RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAD NO EFFECT ON EARNINGS PER SHARE.
EX-27.7 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 1,646,000 0 2,000,500 0 1,936,000 6,170,000 0 0 6,980,000 1,240,000 0 0 0 24,663,000 (18,923,000) 6,980,000 4,378,000 4,671,000 2,251,000 2,596,000 1,232,000 0 (22,000) 865,000 0 865,000 0 0 0 865,000 .17 .17 * RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAD NO EFFECT ON EARNINGS PER SHARE.
EX-27.8 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JUN-30-1997 JUL-01-1996 MAR-31-1997 2,672,000 0 1,477,000 0 1,928,000 6,761,000 0 0 7,591,000 1,280,000 0 0 0 24,664,000 (18,353,000) 7,591,000 7,173,000 7,557,000 3,781,000 4,255,000 1,907,000 0 (40,000) 1,435,000 0 1,435,000 0 0 0 1,435,000 .29 .28 RESTATED FOR THE EFFECT OF THE ADOPTION OF SFAS 128.
EX-27.9 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS JUN-30-1997 JUL-01-1996 JUN-30-1997 2,628,000 0 2,266,000 96,000 1,886,000 7,492,000 8,035,000 (7,908,000) 8,321,000 1,310,000 0 0 0 24,678,000 (17,667,000) 8,321,000 10,060,000 10,531,000 5,219,000 5,788,000 2,689,000 0 (67,000) 2,121,000 0 2,121,000 0 0 0 2,121,000 .43 .41 RESTATED FOR THE EFFECT OF THE ADOPTION OF SFAS 128.
EX-27.10 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL. 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 3,633,000 0 1,531,000 0 1,662,000 7,847,000 0 0 8,670,000 790,000 0 0 0 24,679,000 (16,799,000) 8,670,000 2,647,000 2,657,000 1,304,000 1,349,000 732,000 0 (34,000) 610,000 (258,000) 868,000 0 0 0 868,000 .17 .17 * RESTATED FOR EFFECT OF SFAS 128. ADOPTION OF SFAS 128 HAD NO EFFECT ON EARNING PER SHARE.
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