0001021408-01-507250.txt : 20011009 0001021408-01-507250.hdr.sgml : 20011009 ACCESSION NUMBER: 0001021408-01-507250 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010925 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12075 FILM NUMBER: 1744280 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-K 1 d10k.txt FORM 10K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2001 or [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _____ to _____ Commission File Number 0-10723 BOLT TECHNOLOGY CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-0773922 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Four Duke Place, Norwalk, Connecticut 06854 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 853-0700 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, 2001: $24,624,735. As of September 19, 2001, there were 5,408,733 shares of Common Stock, without par value, outstanding. Documents Incorporated By Reference Definitive Proxy Statement for 2001 Annual Meeting, which will be filed no later than 120 days after June 30, 2001, is incorporated by reference in Part III to the extent stated in this report. 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 Preliminary Note: In this annual report on Form 10-K, we refer to Bolt Technology Corporation and its subsidiaries as "we", "our", "us", "the Registrant" or "the Company" unless the context clearly indicates otherwise. ITEM 1. Business We were organized as a corporation in 1962. We operate in two business segments: geophysical equipment and industrial products. Geophysical equipment includes the development, manufacture and sale of marine seismic energy sources and, through our subsidiary A-G Geophysical Products, Inc. ("A-G"), the manufacture and sale of underwater electrical connectors and cables, air gun signature hydrophones and pressure transducers used by the marine seismic industry. A-G was acquired on April 20, 1999. Our industrial products segment manufactures and sells miniature industrial clutches, brakes and sub-fractional horsepower electric motors through our subsidiary, Custom Products Corporation ("Custom Products"). Custom Products was acquired on January 6, 1998. See Note 9 for information regarding industry segments and sales by geographic areas. A description of the Company's products follows. During fiscal 2000 and 2001 demand for the Company's geophysical products decreased. We believe reduced demand was due to reductions in capital spending by seismic contractors, consolidations and mergers among energy producers and excess geophysical equipment in the field causing weak demand for new equipment. Although market conditions marginally improved in the last half of fiscal 2001, continued improvement will be necessary for the Company to return to the levels of sales and profitability of prior years. Geophysical Equipment Marine Air Guns An energy source, such as our 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. A seismic exploration vessel may tow 60 to 70 air guns along with multiple hydrophone streamers of 6,000 to 10,000 meters in length. The air guns are fired simultaneously every 75-150 feet along the survey line. Over the past ten years, improvements in drilling success rates through the use of advanced seismic survey techniques, particularly 3-D techniques, substantially increased the demand for seismic data. 2 ITEM 1. Business (cont'd.) Geophysical Equipment (cont'd.) As a result, 3-D surveys utilizing these advanced technologies have gained increased acceptance in the oil and gas industry as an exploration risk management tool. Moreover, 3-D surveys are increasingly employed in field development and reservoir management activities. We believe the precise shot to shot repeatability of our marine air guns and their reliability of operation make them especially beneficial for use in 3-D surveys. Our long-life marine air guns extend the period between routine air gun maintenance cycles. These 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 long-life guns, allows users to easily upgrade existing air gun models to the long-life standard. In fiscal 2000 we completed the development of our Annular Port Air Gun. This new design provides significant improvements in both operating efficiency and acoustic output. The principal feature of the Annular Port Air Gun is an annulus containing the air chamber and shuttle valve surrounding a hollow passage through which air supply hoses and electrical control cables are routed. This new configuration permits the implementation of simplified multi-gun arrays that produce less towing drag while being easier to deploy and retrieve than conventional air gun arrays. Significant improvements in operating efficiency are also achieved by shielding fragile hoses and cables from the effects of the high pressure air blast released from the air gun. We sell various models of air guns that range in price from $3,000 to $76,000. A majority of the air guns sold are priced in the $10,000 range. A significant source of our revenue comes from the sale of replacement parts. Underwater Cables, Connectors and Hydrophones Our marine cables and connectors are injection molded of thermoplastic polyurethane designed for marine air gun firing lines, bulkhead connectors and other connectors which are needed from the rear of the seismic vessel to the marine air gun. The cables and connectors are primarily for use with marine air guns and firing control systems where the connector is operating in close proximity to the high pressure release of air from marine air guns. We manufacture cables and connectors that can be used with marine air guns manufactured by us as well as air guns manufactured by others. Our signature hydrophones and pressure transducers are designed for marine applications in a high shock environment. Their primary use is with marine air gun firing and control systems. The purpose of the hydrophone or pressure transducer is for near field measurements of the outgoing energy waveforms from marine air guns. Industrial Products Our Industrial Products segment spans two basic disciplines: power transmission (miniature industrial clutches and brakes) and motion control (sub-fractional horsepower electric motors). Our clutch and brake products include a complete line of mechanical and pneumatic precision miniature slip clutches, one-way clutches, toothed jaw clutches and torque limiters. A slip clutch will start to slip once its torque setting is exceeded. This feature is useful as overload protection, constant tensioning or functional torque, in different industrial applications. Among other applications, our clutches and brakes are used in airplane video systems, hospital beds, barcode labelers and banking machines. Unit prices range from $7 to $400. 3 ITEM 1. Business (cont'd.) Industrial Products (cont'd.) In addition, we offer an electromagnetic clutch and brake product line which includes high performance engage/disengage clutches and brakes, power off brakes, magnetic particle clutches and brakes and multiple plate slip clutches. Applications include high speed mailing machines, packaging machines, elevators, machine tools and robotics. Unit prices range from $50 to $1,500. Our motor line is comprised of A.C. and D.C. sub-fractional horsepower motors and gear motors. These are available in various shapes and offer several design options (speed, voltage, etc.). Applications include air conditioning systems, valve timers, vending machines, point of purchase displays and business machines. Capacity ranges from 3 to 10 watts. Unit prices range from $4 to $20. Foreign Sales During fiscal 2001, 2000 and 1999, approximately 46%, 41% and 63%, respectively, of the Company's sales were derived from customers outside the United States. See Note 9 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 Products As of June 30, 2001, we had an order backlog of $816,000 as compared to $1,028,000 at June 30, 2000. It is estimated that substantially all of the backlog as of June 30, 2001 will be shipped during the fiscal year ending June 30, 2002. Competition Geophysical Equipment Our marine air guns compete primarily with marine air guns manufactured by Input/Output, Inc. and Seismic Systems, Inc. Our principal competitor for connectors and cables is Input/Output, Inc. We believe that technology, product reliability and durability are the primary bases of competition in the market for geophysical equipment and that the remaining competitive factors in the industry are field product support and price. We believe that we compete effectively with respect to each of these factors, although there can be no assurance that the sales of our geophysical equipment will not be adversely affected if current competitors or others introduce equipment with better performance or lower price. 4 ITEM 1. Business (cont'd.) Competition (cont'd.) Industrial Products It is not possible to determine with accuracy our relative competitive position in the market for industrial products. The industry in which we operate is characterized by active and substantial competition. No single company dominates the market for the types of products we manufacture. Our competitors include both larger and smaller manufacturers and divisions of larger diversified companies with substantial financial resources. Principal competitive factors in the market for our industrial products include quality, service, reliability and price. Our products also compete with other torque control devices to solve design problems. Marketing Geophysical Equipment Our principal customers for geophysical equipment are seismic contractors, which operate seismic vessels for collection of seismic data in accordance with their customers' specifications or for their own seismic data libraries, and foreign national oil and gas companies. Marketing of our geophysical equipment is principally performed by salaried sales personnel, all of whom are based in the United States. We also use sales agents for individual sales in certain foreign countries. In general, we market our products and services through our sales force, together with our technical services and engineering staffs, primarily to representatives of major geophysical contractors. The principal marketing techniques used 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, we require our customers to furnish letters of credit, payable upon shipment. Industrial Products Our industrial products are sold primarily to original equipment manufacturers ("OEMs"). OEMs use our products to solve torque related problems which will provide lower installed cost and high reliability, thereby lowering production and service costs. Our engineering staff and independent sales representatives continually work in close collaboration with OEMs to determine the appropriate product for the specific application. Sales are made on standard 30-day credit terms. We sell our industrial products primarily in the United States, Canada and Europe. Research and Development Our ability to compete successfully depends upon, among other things, the development of new products as well as the improvement of the technical capabilities of our existing products. We spent, during the fiscal years 2001, 2000, and 1999, $271,000, $348,000, and $386,000, respectively, to develop new products and to upgrade existing products. The Company's primary research and development efforts over the last three years have been focused on the development and field testing of the Annular Port Air Gun. 5 ITEM 1. Business (cont'd.) Employees As of June 30, 2001, we employed approximately 83 people on a full-time basis, all of whom are employed in the United States. We are not a party to any collective bargaining agreement and have had no work stoppages. We believe that our employee relations are good. Manufacturing and Raw Materials We manufacture and assemble our geophysical equipment in Norwalk, Connecticut and Cypress, Texas and manufacture our industrial products in North Haven, Connecticut. Our manufacturing and assembly operations consist of machining or molding the necessary components and assembling and testing the final product. We maintain adequate levels of inventory to enable us to satisfy customer requirements within the shortest amount of time. The raw materials used in our products are generally in adequate supply. For some marine air gun orders, we occasionally supply customers with auxiliary equipment, such as compressors, air gun controllers or towing equipment, manufactured by others. We have not experienced any supply problems with respect to these auxiliary items. Because we manufacture based on customer orders, no inventory of fully assembled finished goods is maintained. Regulatory Matters We believe that we are currently in compliance with the requirements of environmental and occupational health and safety laws and regulations. Compliance with such laws and regulations has not resulted in a significant expense in the past and we do not foresee the need for material expenditures to ensure compliance with such laws and regulations as they currently exist. Intellectual Property We seek to protect our intellectual property by means of patents, trademarks and other measures. We currently own more than 20 United States patents and 30 patents in foreign countries relating to the manufacture of our products. These patents have been of value in the growth of our business and may continue to be of value in the future. However, our business is generally not dependent upon the protection of any patent and would not be materially adversely affected by the loss or expiration thereof. Major Customers Geophysical Equipment Historically a significant portion of our sales of geophysical equipment has been attributable to a few large customers. In fiscal year 2001 WesternGeco and VeritasDGC accounted for 17% and 11%, respectively, of consolidated sales. The loss of WesternGeco or VeritasDGC as a customer or a significant decrease in the amount of their purchases could have a material adverse effect on the Company. Industrial Products No customer of industrial products accounted for more than 10% of consolidated sales in fiscal year 2001. 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 month-to- month Norwalk, Connecticut Administration/Engineering /Sales 6,600 month-to-month Houston, Texas Sales Office 3,000 2004 North Haven, Connecticut Manufacturing 6,500 2004 Cypress, Texas Manufacturing 30,000 2002
Industrial products are manufactured in the North Haven, Connecticut facility; geophysical equipment is manufactured and assembled in the Norwalk, Connecticut and Cypress, Texas facilities. 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. The building located in Cypress, Texas is leased from the former shareholder of A-G, which was acquired by the Company in April 1999. Monthly rental payments for the Cypress, Texas property are $10,000. We do not expect any difficulty in entering into a new lease for the Norwalk properties. ITEM 3. Legal Proceedings We are not aware of any current or pending litigation or proceedings that could have a material adverse effect on our results of operations, cash flows or financial condition. ITEM 4. Submission of Matters to a Vote of Security Holders None. 7 PART II ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters Our common stock is listed on the American Stock Exchange under the symbol "BTJ". The following table sets forth the high and low sales prices for our common stock for the quarters indicated: Fiscal 2001 High Low ----------- ---- --- First Quarter 5.44 3.75 Second Quarter 5.89 3.13 Third Quarter 4.87 3.63 Fourth Quarter 6.25 4.50 Fiscal 2000 High Low First Quarter 6.19 5.13 Second Quarter 5.88 3.38 Third Quarter 4.69 3.19 Fourth Quarter 4.88 3.13 The number of stockholders of record at September 19, 2001 was 300, which does not include those stockholders who had shares in broker nominee accounts. We believe that the number of beneficial owners is substantially greater than the number of record holders, because a large portion of our Common Stock is held of record in broker "street names". We have not paid a dividend since 1985. We do not intend to pay cash dividends on our common stock in the foreseeable future. Any future decision to pay cash dividends will depend upon our growth, profitability, financial condition and other factors that the Board of Directors may deem relevant. 8 ITEM 6. Selected Financial Data The following table has been derived form the Company's audited financial statements and sets forth selected consolidated financial data with respect to the Company and its subsidiaries. This information should be read in conjunction with the consolidated financial statements provided elsewhere in this Form 10-K.
Year Ended June 30, ------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (In thousands, except per share amounts) Income Statement Data: Sales............................................. $15,496 $14,748 $19,591 $18,053 $10,531 ------- ------- ------- ------- ------- Costs and expenses: Cost of sales................................ 8,912 7,968 10,091 9,745 5,788 Research and development..................... 271 348 386 216 204 Selling, general and administrative.......... 4,250 4,257 3,804 3,300 2,485 Amortization of intangibles.................. 660 660 335 114 - Interest expense (income), net.............. 332 425 (34) (98) (67) ------- ------- ------- ------- ------- 14,425 13,658 14,582 13,277 8,410 ------- ------- ------- ------- ------- Income before income taxes........................ 1,071 1,090 5,009 4,776 2,121 Provision (benefit) for income taxes (1).......... 675 557 728 (358) - ------- ------- ------- ------- ------- Net income........................................ $ 396 $ 533 $ 4,281 $ 5,134 $ 2,121 ======= ======= ======= ======= ======= Per Share Data: Earnings per common share: Net income: Basic..................................... $ 0.07 $ 0.10 $ 0.81 $ 1.00 $ 0.43 Diluted................................... $ 0.07 $ 0.10 $ 0.80 $ 0.97 $ 0.41 Average number of common shares outstanding: Basic..................................... 5,409 5,387 5,293 5,146 4,989 Diluted................................... 5,414 5,408 5,379 5,287 5,178 Financial Position Data: Working capital.............................. $ 5,572 $ 7,791 $ 7,651 $ 6,500 $ 6,182 Total assets................................. 24,734 25,038 27,887 16,462 8,321 Current portion of long-term debt............ 3,600 1,700 1,700 - - Long-term debt............................... - 3,600 5,300 - - Stockholders' equity......................... 18,829 18,433 17,865 13,043 7,011 Cash dividends paid.......................... None None None None None ==== ==== ==== ==== ====
(1) Reflects recognition of previously reserved tax benefits in 1998. 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following management's discussion and analysis should be read together with our consolidated financial statements and accompanying notes and other detailed information appearing elsewhere in this Form 10-K. This discussion includes forward looking statements about the demand for our products and future results. Please refer to the "Forward Looking Statements" section of this Form 10-K. Overview Sales of the Company's geophysical products are related to the level of worldwide oil and gas exploration and development activity which is dependent, primarily, on oil and gas prices. Because of the rapid decline in oil prices in 1999, oil companies reduced exploration budgets which caused the Company's customers, primarily seismic contractors, to reduce activities. This reduction in activity resulted in underutilized and idle seismic vessels. With the recent increases in oil and gas prices, seismic contractors have started to reduce excess vessel capacity but the industry remains cautious in its capital spending plans. Also, surplus seismic data already in the market has caused delays in purchases of geophysical equipment by the Company's customers. Liquidity and Capital Resources At June 30, 2001 we had $1,329,000 in cash and cash equivalents. For the year ended June 30, 2001, we generated $585,000 of cash from operating activities. Sources of cash for 2001 included net income of $396,000, depreciation and amortization of $954,000 and deferred income taxes of $616,000. These sources of cash were partially offset by net increases in operating assets and liabilities of $1,381,000, principally because of the sales increase in the fourth quarter of 2001 as compared to the fourth quarter of 2000. For the year ended June 30, 2001, we used $83,000 of cash for capital expenditures. We estimate that our capital expenditures for fiscal 2002 will be $300,000 for additional manufacturing capacity, which we expect to fund through operating cash flow. We used $1,700,000 for the year ended June 30, 2001 for the repayment of the debt issued for the A-G acquisition. We will use $3,600,000 in fiscal 2002 to repay the remaining balance of the A-G note. At June 30, 2000 we had $2,527,000 of cash and cash equivalents. We generated $836,000 from operating activities principally resulting from net income adjusted for depreciation and amortization. This source of cash was partially offset by decreases in current liabilities. We also used $1,700,000 for debt repayment and $144,000 for capital expenditures. At June 30, 1999 we had $3,500,000 of cash and cash equivalents. For the year ended June 30, 1999 cash generated from operating activities was $6,817,000 principally resulting from net income of $4,281,000 and a $4,083,000 decrease in accounts receivable. For the year ended June 30, 1999 we used $4,598,000 of net cash for the A-G acquisition and $77,000 for capital expenditures. 10 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Liquidity and Capital Resources (cont'd.) As discussed above, as part of the consideration for the acquisition of A-G, we issued a $7,000,000 note ($3,600,000 outstanding at June 30, 2001). The note bears interest at 8.25% payable monthly and requires remaining principal payments of $425,000 on July 1, 2001, November 1, 2001 and February 1, 2002 . The remaining balance of $2,325,000 is due in April 2002. We have pledged the assets and common stock of A-G as collateral for the note. We expect to repay the note from operating cash flow, but if the level of business in 2002 does not produce sufficient cash, we believe that we can secure alternative financing or extend the maturity of the note; however, there can be no assurance that we will be able to do so. We did not maintain the minimum debt service coverage required under our unsecured credit facility, and therefore, terminated the agreement in December 2000. The Company did not use this facility since January 1998. We believe the Company's cash balances, working capital and expected cash flows from operations will provide sufficient liquidity for the foreseeable future. Under the terms of the asset purchase agreement for Custom Products, the Company may be required to make additional payments to the former owners of Custom Products in the maximum amount of $4,000,000 if net sales of Custom Products increase to certain levels by December 2002. No additional payments were required at December 31, 1998, 1999 or 2000 because the sales of Custom Products did not meet amounts specified in the agreement. In October 1998, the Company's board of directors approved a stock repurchase program under which the Company was authorized to buy up to 500,000 shares of its common stock in open market or private transactions. Although the program remains authorized, the Company does not anticipate any repurchase of shares in the near future. Current cash and cash equivalent balances, potential borrowing capacity and projected cash flow from operations are currently considered adequate to meet foreseeable operating needs. Results of Operations Year Ended June 30, 2001 Compared to Year Ended June 30, 2000 Sales for the year ended June 30, 2001 increased $748,000 or 5% from the year ended June 30, 2000. Sales of marine air guns and replacement parts for the year ended June 30, 2001 increased $615,000 or 10% from the year ended June 30, 2000, primarily because of an increase in system sales in the last half of the fiscal year 2001. Sales of underwater electrical connectors and cables for the year ended June 30, 2001 increased $641,000 or 13% from the year ended June 30, 2000. Both air gun and connector and cable sales in fiscal 2001 increased over fiscal 2000 because of the increase in seismic work performed by contractors from the low level of activity in 2000. The general economic slowdown caused a decrease of $508,000 or 15% in industrial product sales in fiscal 2001 as compared to fiscal 2000. Cost of sales as a percentage of sales was 58% for fiscal 2001 and 54% for fiscal 2000. The increase in the cost of sales percentage in fiscal 2001 was caused by the effects of lower industrial products sales, which have a higher profit margin than geophysical products; very low factory utilization in the first half of the fiscal year; and the effects of auxiliary equipment purchased for marine air gun systems, which have lower margins than the Company's proprietary products. 11 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Results of Operations (cont'd.) Research and development costs in fiscal 2001 decreased $77,000 from fiscal 2000, as a result of our completion of the final development and testing of our new marine air gun in the last quarter of fiscal 2000. Selling, general and administrative expenses decreased $7,000 from fiscal 2000 to fiscal 2001. There were no significant changes in any selling, general and administrative expense item from fiscal 2000 to fiscal 2001. Amortization of intangibles remained unchanged from 2000 to 2001. We are amortizing the goodwill relating to our acquisitions over twenty years. During July 2001, FAS 142, "Goodwill and Other Intangible Assets" was issued by the Financial Accounting Standards Board. Under FAS 142, goodwill amortization ceases when the new standard is adopted. The new rules also require an initial goodwill impairment assessment in the year of adoption and annual impairment tests thereafter. We are permitted under the rules to adopt the Statement effective July 1, 2001 or defer adoption until July 1, 2002. Once adopted, annual goodwill amortization of $655,000 will cease. We have not yet determined if any impairment charges will result from the adoption of the Statement. At this time, we anticipate the adoption of these rules, effective as of July 1, 2001. Interest expense for fiscal 2001 decreased $141,000 over fiscal 2000 because of the lower balance outstanding on the note issued for the A-G acquisition. Interest income decreased $48,000 for the same period because of the lower average balance of cash and cash equivalents and lower interest rates. The provision for income taxes for fiscal 2001 was $675,000, an effective tax rate of 63%. This provision is higher than the federal statutory rate of 34% principally because of the amortization of the goodwill from acquisitions which was not deductible for tax purposes; the reduction in the amount of investment tax credit carry-forwards realized; and the effect of state income taxes. The provision for income taxes for fiscal 2000 was $557,000, an effective tax rate of 51%. The A-G goodwill amortization and state income taxes were also the factors that caused the fiscal 2000 effective tax rate to be higher than the statutory rate. We believe that inflation and changing prices did not have a material effect on our revenues and profitability for the fiscal year ended June 30, 2001 or the fiscal year ended June 30, 2000. Year Ended June 30, 2000 Compared to Year Ended June 30, 1999 The consolidated statement of income includes the results of operations for A-G for all of fiscal 2000 and the fourth quarter of fiscal 1999. Sales for the year ended June 30, 2000 decreased $4,843,000 or 25% from the year ended June 30, 1999. Sales of marine air guns and replacement parts decreased $8,750,000 from the fiscal year ended June 30, 1999 primarily as a result of the sharp decline in seismic vessel construction and the oversupply of equipment in the market place. This decrease was partially offset by the inclusion of A-G for all of fiscal 2000 which increased sales by $3,323,000 and a $584,000 increase in sales by Custom Products. Cost of sales as a percentage of sales was 54% for fiscal 2000 and 52% for fiscal 1999. The effect of lower operating efficiencies from the decreased demand for marine air guns and replacement parts was the primary cause for the increase in the cost of sales percentage. Research and development costs remained essentially unchanged from the prior year. As previously noted, We completed the final development and testing of our new marine air gun in the last quarter of fiscal 2000. 12 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (cont'd.) Results of Operations (cont'd.) Selling, general and administrative expense increased $453,000 from fiscal 1999 to fiscal 2000. The inclusion of A-G for all of fiscal 2000 added $879,000 to expense, and additional marketing costs in the industrial products segment for new product introductions increased expense by $174,000. Partially offsetting the added selling, general and administrative expense from A-G and Custom Products was a $554,000 decrease in incentive compensation expense. Amortization of intangibles increased $325,000 from fiscal 1999 to fiscal 2000, because A-G was included for all of 2000. Up until June 30, 2001 goodwill was being amortized over a twenty year period. Interest expense for fiscal 2000 increased $395,000 over fiscal 1999 because the note issued for the A-G acquisition was outstanding for the entire fiscal year. Interest income decreased $64,000 in fiscal 2000 as compared to fiscal 1999 because we used our short-term investments in late fiscal 1999 to finance a portion of the A-G acquisition. The provision for income taxes for fiscal 2000 was $557,000, an effective tax rate of 51%. This amount is higher than the federal statutory rate of 34% principally because the amortization of the goodwill from the A-G acquisition is not deductible for tax purposes and because of the effect of state income taxes. The provision for income taxes for fiscal 1999 was $728,000, an effective tax rate of 15%. This was lower than the federal statutory rate because of the utilization of previously reserved net operating loss carry-forwards. We believe that inflation and changing prices did not have a material effect on our revenues and profitability for the fiscal year ended June 30, 2000 or the fiscal year ended June 30, 1999. ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk Not applicable 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 and executive officers required by Item 10 is incorporated by reference to the information appearing under the captions "Election of Directors", "Management" and "Section 16(a) Beneficial Ownership Reporting Compliance in the Company's definitive proxy statement relating to its 2001 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K (the "Definitive Proxy Statement"). ITEM 11. Executive Compensation The information required by Item 11 is incorporated by reference to the information appearing under the caption "Executive Compensation" in the Definitive Proxy Statement. ITEM 12. Security Ownership of Certain Beneficial Owners and Management The information required by Item 12 is incorporated by reference to the information appearing under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Definitive Proxy Statement. ITEM 13. Certain Relationships and Related Transactions The information required by Item 13 is incorporated by reference to the information appearing under the caption "Certain Relationships and Related Transactions" in 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, 2001 and 2000 17 Consolidated Statements of Income for the Years Ended June 30, 2001, 2000, and 1999 18 Consolidated Statements of Cash Flows for the Years Ended June 30, 2001, 2000, and 1999 19 Notes to Consolidated Financial Statements 20-31 Financial Statement Schedule for the Years Ended June 30, 2001, 2000 and 1999 II - Valuation and Qualifying Accounts 32 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. ----- 2.1 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). 2.2 Stock Purchase Agreement for the acquisition at A-G Geophysical Products, Inc. by Bolt Technology Corporation from Albert H. Gerrans, Jr., Stephen Clay and Robert Bernard dated as of April 20, 1999 (incorporated by reference to Exhibit 2.1 to form 8-K dated April 30, 1999). 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 10-Q). 4.1 Promissory Note dated April 20, 1999 between Bolt Technology Corporation and Albert H. Gerrans, Jr. (incorporated by reference to Exhibit 4.1 to Form 8-K dated April 30, 1999). 4.2 Pledge Agreement dated April 20, 1999 between Bolt Technology Corporation and Albert H. Gerrans, Jr. (incorporated by reference to Exhibit 4.2 to Form 8-K dated April 30, 1999). 4.3 Security Agreement dated April 20, 1999 between A-G Geophysical Products, Inc., Albert H. Gerrans, Jr. and Bolt Technology Corporation (incorporated by reference to Exhibit 4.3 to Form 8-K dated April 30, 1999). 10.1 Bolt Technology Corporation Amended and Restated 1993 Stock Option Plan (incorporated by reference to Exhibit 10.1 to Form 10-K for the for the year ended June 30, 1998). 10.2 Lease Agreement dated April 20, 1999 between Albert H. Gerrans, Jr. and Bolt Technology Corporation (incorporated by reference to Exhibit 10.2 to Form 8-K dated April 30, 1999). 21. Subsidiaries of the Registrant.* Reports on Form 8-K None *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, 2001, and 2000, and the related consolidated statements of income and cash flows for each of the three years in the period ended June 30, 2001. 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 auditing standards generally accepted in the United States of America. 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, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2001 in conformity with accounting principles generally accepted in the United States of America. 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 16, 2001 16 Bolt Technology Corporation and Subsidiaries Consolidated Balance Sheets June 30, ------------------- Assets 2001 2000 ---- ---- Current Assets: Cash and cash equivalents....................... $ 1,329,000 $ 2,527,000 Accounts receivable, less allowance for uncollectible accounts of $187,000 in 2001 and $474,000 in 2000...................... 4,607,000 2,088,000 Inventories..................................... 4,492,000 4,791,000 Deferred income taxes........................... 923,000 1,181,000 Other current assets............................ 126,000 209,000 ----------- ----------- Total current assets........................ 11,477,000 10,796,000 ----------- ----------- Plant and Equipment: Building and leasehold improvements............. 555,000 555,000 Geophysical equipment........................... 269,000 460,000 Machinery and equipment......................... 5,978,000 5,649,000 Equipment held for rental....................... 320,000 480,000 ----------- ----------- 7,122,000 7,144,000 Less accumulated depreciation................. (5,777,000) (5,844,000) ----------- ----------- 1,345,000 1,300,000 Goodwill, net...................................... 11,276,000 12,005,000 Deferred Income Taxes.............................. 603,000 886,000 Other Assets....................................... 33,000 51,000 ----------- ----------- Total assets................................ $24,734,000 $25,038,000 =========== =========== Liabilities and Stockholders' Equity Current Liabilities: Current maturities of long-term debt............ $ 3,600,000 $ 1,700,000 Accounts payable................................ 984,000 420,000 Accrued expenses................................ 1,321,000 885,000 ----------- ----------- Total current liabilities................... 5,905,000 3,005,000 Long-term Debt..................................... - 3,600,000 ----------- ----------- Total liabilities........................... 5,905,000 6,605,000 ----------- ----------- Stockholders' Equity: Common stock, no par value, authorized 9,000,000 shares; issued and outstanding 5,408,733 shares in 2001 and 2000............. 26,152,000 26,152,000 Accumulated deficit............................. (7,323,000) (7,719,000) ----------- ----------- Total Stockholders' Equity.................... 18,829,000 18,433,000 ----------- ----------- Total liabilities and stockholders' equity.. $24,734,000 $25,038,000 =========== =========== See Notes to Consolidated Financial Statements. 17 Bolt Technology Corporation and Subsidiaries Consolidated Statements of Income
For the Year Ended June 30, --------------------------- 2001 2000 1999 ---- ---- ---- Revenues: Sales....................................... $15,496,000 $14,748,000 $19,591,000 Costs and Expenses: Cost of sales............................... 8,912,000 7,968,000 10,091,000 Research and development.................... 271,000 348,000 386,000 Selling, general and administrative......... 4,250,000 4,257,000 3,804,000 Amortization of intangibles................. 660,000 660,000 335,000 Interest expense............................ 369,000 510,000 115,000 Interest (income)........................... (37,000) (85,000) (149,000) ----------- ----------- ----------- 14,425,000 13,658,000 14,582,000 ----------- ----------- ----------- Income before income taxes.................... 1,071,000 1,090,000 5,009,000 Provision for income taxes................... 675,000 557,000 728,000 ----------- ----------- ----------- Net income............................... $ 396,000 $ 533,000 $ 4,281,000 =========== =========== =========== Earnings per share: Basic....................................... $ 0.07 $ 0.10 $ 0.81 Diluted..................................... $ 0.07 $ 0.10 $ 0.80 Average number of common shares outstanding: Basic....................................... 5,408,733 5,386,824 5,293,156 Diluted..................................... 5,413,626 5,408,486 5,378,724
See Notes to Consolidated Financial Statements. 18 Bolt Technology Corporation and Subsidiaries Consolidated Statements of Cash Flows
For the Year Ended June 30, --------------------------- 2001 2000 1999 Cash Flows From Operating Activities: Net income............................................ $ 396,000 $ 533,000 $ 4,281,000 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization....................... 954,000 940,000 448,000 Deferred income taxes............................... 616,000 426,000 322,000 ----------- ----------- ----------- 1,966,000 1,899,000 5,051,000 Change in operating assets and liabilities: Accounts receivable................................. (2,519,000) 120,000 4,083,000 Inventories......................................... 44,000 622,000 (418,000) Other assets........................................ 94,000 (70,000) (134,000) Accounts payable.................................... 564,000 (129,000) (1,248,000) Accrued liabilities................................. 436,000 (913,000) (321,000) Income taxes payable................................ - (693,000) (196,000) ----------- ----------- ----------- Net cash provided by operating activities......... 585,000 836,000 6,817,000 ----------- ----------- ----------- Cash Flows From Investing Activities: Payments for acquisitions, net of cash acquired....... - - (4,598,000) Purchase of property and equipment.................... (83,000) (144,000) (77,000) ----------- ----------- ----------- Net cash used in investing activities............. (83,000) (144,000) (4,675,000) ----------- ----------- ----------- Cash Flows From Financing Activities: Exercise of stock options............................. - 35,000 41,000 Repayment of long-term debt........................... (1,700,000) (1,700,000) - ----------- ----------- ----------- Net cash provided by (used in) financing activities.. (1,700,000) (1,665,000) 41,000 ----------- ----------- ----------- Net (decrease) increase in cash....................... (1,198,000) (973,000) 2,183,000 Cash and cash equivalents at beginning of year......... 2,527,000 3,500,000 1,317,000 ----------- ----------- ----------- Cash and cash equivalents at end of year............... $ 1,329,000 $ 2,527,000 $ 3,500,000 =========== =========== =========== Supplemental disclosure of cash flow information: Cash transactions: Interest paid.......................................... $ 369,000 $ 510,000 $ 115,000 Income taxes paid...................................... $ 62,000 $ 873,000 $ 673,000 Non-cash transactions: Common stock issued for business acquired............. - - $ 500,000 Debt issued for business acquired...................... - - $ 7,000,000 Transfer of inventory to plant and equipment.......... $ 255,000 - -
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 operates in two business segments: geophysical equipment and industrial products. Geophysical equipment includes the development, manufacture and sale of marine seismic energy sources and through its subsidiary A-G Geophysical Products, Inc., the manufacture of underwater electrical connectors and cables, air gun signature hydrophones and pressure transducers. The industrial products segment manufactures and sells miniature industrial clutches, brakes and sub-fractional horsepower electric motors through the Company's subsidiary, Custom Products Corporation. See Note 9 for information regarding industry segments. Principles of Consolidation: The consolidated financial statements include the accounts of the Bolt Technology Corporation 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. Fixed Assets and Depreciation: Plant and equipment are stated 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. Major improvements which add to the productive capacity or extend the life of an asset are capitalized, while, repairs and maintenance are charged to expense as incurred. Goodwill: Goodwill represents the excess cost over the value of net tangible assets acquired in business combinations and is being amortized using the straight-line method over 20 years. Accumulated amortization at June 30, 2001 was $1,750,000 ($1,095,000-2000). 20 Bolt Technology Corporation Notes To Consolidated Financial Statements Note 1 - Description of Business and Significant Accounting Policies (cont'd.) Revenue Recognition and Warranty Costs: Sales revenue is recognized when the risk of ownership has been transferred to the buyer, which is generally upon shipment. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements" summarizing certain guidance in applying generally accepted accounting principles to revenue recognition in financial statements. The Company adopted the provisions of SAB 101 in the fourth quarter of 2001, retroactive to July 1, 2000. The adoption of SAB 101 had no effect on the Company's financial position or results of operations. Warranty costs and product returns incurred by the Company have not been significant. Income Taxes: The deferred tax provision is determined under the liability method. Deferred tax assets and liabilities are recognized based on differences between the book and tax bases of assets and liabilities using the currently enacted tax rates. The provision for income taxes is the sum of the amount of income tax paid or payable for the year determined by applying the provisions of enacted tax laws to the taxable income for that year and the net change during the year in the Company's deferred tax assets and liabilities. Stock-Based Compensation: The Company adopted FAS No. 123, "Accounting for Stock-Based Compensation" in 1997. Under FAS 123, companies can, but are not required to, elect to recognize compensation expense for all stock-based awards using a fair value methodology. The Company has adopted the disclosure-only provisions, as permitted by FAS No. 123. The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock-based plans. Accordingly, no compensation expense has been recognized for grants under the Company's stock option plan. 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 nondiscounted 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, 2001. 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.) Computation of Earnings Per Share: Basic earnings per share is computed by dividing net income by the average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the average number of common shares outstanding assuming dilution, the calculation of which assumes that all stock options are exercised at the beginning of the period and the proceeds used to purchase shares at the average market price for the period. The following is a reconciliation from basic earnings per share to diluted earnings per share for each of the last three years:
Year Ended June 30, ------------------- 2001 2000 1999 ---- ---- ---- Net income available to common stockholders $ 396,000 $ 533,000 $4,281,000 ========== ========== ========== Divided by weighted common shares and common share equivalents Weighted average common shares 5,408,733 5,386,824 5,293,156 Weighted average common share equivalents 4,893 21,662 85,568 ---------- ---------- ---------- Total weighted average common shares and common share equivalents 5,413,626 5,408,486 5,378,724 ========== ========== ========== Basic earnings per share $ 0.07 $ 0.10 $ 0.81 ========== ========== ========== Diluted earnings per share $ 0.07 $ 0.10 $ 0.80 ========== ========== ==========
Recent Accounting Pronouncements: During July 2001, FAS 142, "Goodwill and Other Intangible Assets" was issued by the Financial Accounting Standards Board. Under FAS 142, goodwill amortization ceases when the new standard is adopted. The new rules also require an initial goodwill impairment assessment in the year of adoption and annual impairment tests thereafter. The Company is permitted under the rules to adopt the Statement effective July 1, 2001 or defer adoption until July 1, 2002. Once adopted, annual goodwill amortization of $655,000 will cease. The Company has not yet determined if any impairment charges will result from the adoption of the Statement. At this time, the Company anticipates the adoption of these rules, effective as of July 1, 2001. 22 Bolt Technology Corporation Notes To Consolidated Financial Statements Note 2- Debt 8.25% Non-Negotiable Promissory Note In connection with the acquisition of A-G, the Company issued a note to the selling shareholder for a portion of the purchase price. The balance of the note at June 30, 2001 was $3,600,000. The Company is required to make quarterly principal payments of $425,000 on August 1, 2001, November 1, 2001 and February 1, 2002, with the final principal payment of $2,325,000 due in April 2002. Note 3 - Inventories Inventories, net of reserves, at June 30 consist of the following:
2001 2000 ---- ---- Raw materials and sub-assemblies $ 4,095,000 $ 4,307,000 Work-in-process 397,000 484,000 ----------- ----------- $ 4,492,000 $ 4,791,000 =========== ===========
Note 4 - Income Taxes Income tax expense consists of the following for the three years ended June 30:
2001 2000 1999 ---- ---- ---- Current: Federal $ 21,000 $ 32,000 $ 99,000 State 38,000 99,000 307,000 Deferred: Federal 616,000 426,000 322,000 -------- ---------- ---------- Income tax expense $675,000 $ 557,000 $ 728,000 ======== ========== ==========
The differences between the effective tax rate reflected in the total provision for income taxes and the statutory federal rate of 34% follows:
Year Ended June 30, ------------------- 2001 2000 1999 ---- ---- ---- Federal income taxes at the statutory rate 34% 34% 34% State income taxes, net of federal tax benefit 3 6 4 Nondeductible expenses, principally goodwill 17 11 1 Utilization of net operating loss carry-forwards - - (24) Reduction in investment tax credit carry-forward 14 - - Exempt income from foreign sales (5) - - ---- ---- --- Effective tax rate 63% 51% 15% ==== ==== ===
23 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 4 - Income Taxes (cont'd.) Deferred income taxes under the liability method reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company's net deferred income tax asset were as follows: 2001 2000 ---- ---- Deferred tax assets: Tax loss carry-forward $ 841,000 $1,161,000 Investment tax credit carry-forward 49,000 200,000 Inventory reserves 339,000 309,000 Allowance for doubtful accounts 69,000 175,000 Plant and equipment 7,000 - Alternative minimum tax credit carry-forward 318,000 297,000 ---------- ---------- Gross deferred tax asset 1,623,000 2,142,000 Deferred tax liability: Plant and equipment - (7,000) Amortization of intangibles (97,000) (68,000) ---------- ---------- Gross deferred tax liability (97,000) (75,000) ---------- ---------- Net deferred tax asset $1,526,000 $2,067,000 ========== ========== The Company has net operating loss carry-forwards totaling $2,400,000 which expire as follows: 2005-$2,092,000; 2006 - $63,000 and 2007 - $245,000. Under the liability method, a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. Based primarily upon the Company's recent earnings history and expected future levels of taxable income, management believes that it is more likely than not that it will realize the benefit of its net deferred tax asset. The amount of the net deferred tax asset recorded could be reduced if estimates of future taxable income during the carry-forward period are reduced. Note 5 - Benefit Plans The Company maintains defined contribution retirement plans covering substantially 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, 2001, 2000, and 1999 amounted to $200,000, $150,000, and $155,000, respectively. 24 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 6- Stock Options The 1993 Stock Option Plan provides for 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 of up to 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, 2001, 2000, and 1999, and the changes during the years ended on those dates is presented below.
2001 2000 1999 ----------------- ------------------- -------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------- ----- ------- ----- ------- ----- Outstanding at beginning of year 203,000 $5.97 236,750 $5.20 285,500 $3.88 Granted 21,000 $4.56 9,000 $4.38 35,000 $6.46 Exercised - - (41,000) $1.15 (81,000) $1.05 Canceled - - (1,750) $6.63 (2,750) $6.63 ------- ----- ------- ----- ------- ----- Outstanding at end of year 224,000 $5.84 203,000 $5.97 236,750 $5.20 ======= ===== ======= ===== ======= =====
There were 130,190 options available for future grants under the plan at June 30, 2001. The following table summarizes information concerning outstanding and exercisable stock options by two ranges of exercise prices at June 30, 2001:
Options Outstanding Options Exercisable ------------------------------------------- ---------------------- Range of Number Outstanding Weighted Average Weighted Number Weighted Exercise at Remaining Average Exercisable Average Prices June 30, 2001 Contractual Life Exercise Price At June 30, 2001 Exercise Price ---------- --------------------- --------------------- --------------- ---------------------- --------------- $4.12-$4.94 76,000 1.8 Years $ 4.34 55,000 $4.25 $6.25-$7.75 148,000 1.8 Years $ 6.60 148,000 $6.60 ------- --------- -------- ------- ----- 224,000 1.8 Years $ 5.84 203,000 $5.97 ======= ========= ======== ======= =====
25 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 6- Stock Options (cont'd.) The estimated fair value of options granted during 2001, 2000, and 1999 were $2.66, $2.12, and $3.27 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, 2001, 2000, and 1999 would have been reduced to the pro forma amounts indicated below: Net Income: 2001 2000 1999 ----------- ---- ---- ---- As reported $396,000 $533,000 $4,281,000 Pro forma $331,000 $448,000 $4,000,000 Basic earnings per share: ------------------------- As reported $ 0.07 $ 0.10 $ 0.81 Pro forma $ 0.06 $ 0.08 $ 0.76 Diluted earnings per share: --------------------------- As reported $ 0.07 $ 0.10 $ 0.80 Pro forma $ 0.06 $ 0.08 $ 0.75 The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 2001 2000 1999 ---- ---- ---- Expected dividend yield 0% 0% 0% Expected stock price volatility 62% 46% 56% Risk-free interest rate 6.00% 6.10% 4.10% Expected life (years) 5 5 5 26 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 7 - Stockholders' Equity Changes in issued common stock and stockholders' equity for the three years ended June 30, 2001 were as follows:
Common Stock Accumulated ----------------- Shares Amount Deficit Total ------ ------ ------- ----- Balance June 30,1998.......................... 5,232,478 $25,576,000 $(12,533,000) $13,043,000 Exercise of stock options................... 74,408 41,000 - 41,000 Common stock issued for acquisition......... 63,492 500,000 - 500,000 Net income.................................. - - 4,281,000 4,281,000 --------- ----------- ------------ ----------- Balance June 30, 1999 5,370,378 26,117,000 (8,252,000) 17,865,000 Exercise of stock options................... 38,355 35,000 - 35,000 Net income.................................. - - 533,000 533,000 --------- ----------- ------------ ----------- Balance June 30, 2000......................... 5,408,733 26,152,000 (7,719,000) 18,433,000 Net income.................................. - - 396,000 396,000 --------- ----------- ------------ ----------- Balance June 30, 2001......................... 5,408,733 $26,152,000 $ (7,323,000) $18,829,000 ========= =========== ============ ===========
Note 8 - 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 or hedging 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, accrued liabilities and long-term debt reflected in the June 30, 2001 and 2000 balance sheets approximate carrying values at those dates. 27 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 8- Commitments and Contingencies (cont'd.) Lease Commitments: Rent expense amounted to $453,000, $455,000, and $348,000 for the years ended June 30, 2001, 2000, and 1999, respectively. Minimum annual rental commitments under operating leases with terms in excess of one year are as follows: 2002 - $160,000; 2003 - $60,000 and 2004 - $54,000. The Company leases a building from the former shareholder of A-G for $10,000 per month. The lease has an initial term through April 2002. 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 or change in control. The employment agreement has a term through June 30, 2004, subject to extension as set forth in the agreement. The aggregate commitment for these employment agreements approximates $3,215,000 as of June 30, 2001. The Company also has employment contracts with two other key executives. Minimum annual salaries due under the agreements amount to $370,000 per year. These agreements expire in January and February 2003, respectively. Litigation: 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. Note 9 - Segment and Customer Information The Company's reportable segments are: (1) geophysical equipment and (2) industrial products. The following table provides selected financial information for each segment for the years ended June 30, 2001, 2000 and 1999. Geophysical Industrial Fiscal Year ended June 30, 2001 Equipment Products Total ------------------------------- --------- -------- ----- Sales $12,508,000 $2,988,000 $15,496,000 Interest income 37,000 - 37,000 Interest expense 369,000 - 369,000 Depreciation and amortization 694,000 260,000 954,000 Income before income taxes 590,000 481,000 1,071,000 Segment assets 18,786,000 5,948,000 24,734,000 Fixed asset additions 76,000 7,000 83,000 28 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 9 - Segment and Customer Information (cont'd.) Geophysical Industrial Fiscal Year ended June 30, 2000 Equipment Products Total ------------------------------- --------- -------- ----- Sales $11,252,000 $3,496,000 $14,748,000 Interest income 85,000 - 85,000 Interest expense 510,000 - 510,000 Depreciation and amortization 684,000 256,000 940,000 Income before income taxes 283,000 807,000 1,090,000 Segment assets 18,820,000 6,218,000 25,038,000 Fixed asset additions 84,000 60,000 144,000 Geophysical Industrial Fiscal Year ended June 30, 1999 Equipment Products Total ------------------------------- --------- -------- ----- Sales $16,678,000 $2,913,000 $19,591,000 Interest income 149,000 - 149,000 Interest expense 115,000 - 115,000 Depreciation and amortization 198,000 250,000 448,000 Income before income taxes 4,456,000 553,000 5,009,000 Segment assets 21,723,000 6,164,000 27,887,000 Fixed asset additions 62,000 15,000 77,000 The Company does not allocate income taxes to segments. The following table reports sales by country for the years ended June 30, 2001, 2000, and 1999. Sales are attributed to each country based on the location of the customer. 2001 2000 1999 ---- ---- ---- United States.............. $ 8,321,000 $ 8,703,000 $ 7,161,000 Norway..................... 2,546,000 2,025,000 4,378,000 Peoples Republic of China.. 1,269,000 866,000 349,000 United Kingdom............. 689,000 602,000 3,180,000 Former Soviet Union........ 178,000 81,000 612,000 Singapore.................. 1,171,000 1,385,000 940,000 Japan...................... 100,000 279,000 1,650,000 France..................... 513,000 484,000 235,000 Other...................... 709,000 323,000 1,086,000 ----------- ----------- ----------- $15,496,000 $14,748,000 $19,591,000 =========== =========== =========== 29 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 9 - Segment and Customer Information (cont'd.) A relatively small number of customers has accounted for the Company's geophysical equipment segment sales. Customers accounting for 10% or more of consolidated sales for 2001, 2000, and 1999 are as follows: 2001 2000 1999 ---- ---- ---- Customer A.................. 17% 30% 21% Customer B.................. - - 14 Customer C.................. - - 10 Customer D.................. 11 11 - Note 10 - Supplementary Information Accrued expenses at June 30 consist of the following: 2001 2000 ---- ---- Compensation and related taxes........ $ 259,000 $ 225,000 Compensated absences.................. 274,000 284,000 Commissions payable................... 609,000 142,000 Professional fees..................... 64,000 67,000 Advanced payments..................... - 48,000 Other................................. 115,000 119,000 ----------- --------- $ 1,321,000 $ 885,000 =========== ========= 30 Bolt Technology Corporation Notes to Consolidated Financial Statements Note 11 - Quarterly Results (unaudited) The following table summarizes results for each of the four quarters for the years ended June 30, 2001 and 2000.
Three Months Ended ------------------ Sept. 30 Dec. 31 March 31 June 30 -------- ------- -------- ------- 2001 ---- Sales $3,076,000 $3,000,000 $4,405,000 $5,015,000 Cost of sales 1,891,000 1,724,000 2,457,000 2,840,000 Income (loss) before taxes (256,000) 14,000 480,000 833,000 Net income (loss) (214,000) (48,000) 253,000 405,000 Earnings (loss) per share: Basic $ (0.04) $ (0.01) $ 0.05 $ 0.07 Diluted $ (0.04) $ (0.01) $ 0.05 $ 0.07
Three Months Ended ------------------ Sept. 30 Dec. 31 March 31 June 30 -------- ------- -------- ------- 2000 ---- Sales $4,058,000 $3,233,000 $3,984,000 $3,473,000 Cost of sales 2,032,000 1,720,000 2,212,000 2,004,000 Income before taxes 567,000 80,000 278,000 165,000 Net income 305,000 40,000 138,000 50,000 Earnings per share: Basic $ 0.06 $ 0.01 $ 0.03 $ 0.01 Diluted $ 0.06 $ 0.01 $ 0.03 $ 0.01
31 Bolt Technology Corporation Schedule II - Valuation and Qualifying Accounts For the Three Years Ended June 30, 2001
Additions Charged Balance At To Beginning Of Costs And Balance At Description Year Expenses Deductions Other End of Year ----------- ------------- ----------------- ---------- ----- ----------- Allowance for uncollectible accounts: 1999 $ 136,000 $ 154,000 - $70,000 (2) $ 360,000 2000 360,000 147,000 $ (33,000) - 474,000 2001 474,000 125,000 (412,000) 187,000 Reserve for inventory valuation: 1999 $ 841,000 $ 69,000 $ (50,000) (1) $ 860,000 2000 860,000 13,000 - 873,000 2001 873,000 42,000 - 915,000 Valuation allowance for deferred tax assets: 1999 $ 1,197,000 - $ (1,197,000) -
(1) Inventory scrapped. (2) Represents allowance for uncollectible accounts assumed through acquisition. 32 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. BOLT TECHNOLOGY CORPORATION By /s/ Raymond M. Soto -------------------------- Raymond M. Soto (Chairman of the Board, 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 Chairman of the Board, September 20, 2001 ---------------------------- President and Chief Executive (Raymond M. Soto) Officer (Principal Executive Officer and Principal Financial Officer) /s/ Alan Levy (Principal Accounting September 20, 2001 ---------------------------- Officer) (Alan Levy) /s/ Kevin M. Conlisk Director September 20, 2001 ---------------------------- (Kevin M. Conlisk) /s/ Stephen Chelminski Director September 20, 2001 ---------------------------- (Stephen Chelminski) /s/ John H. Larson Director September 20, 2001 ---------------------------- (John H. Larson) /s/ Joseph Espeso Director September 20, 2001 ---------------------------- (Joseph Espeso) /s/ Joseph Mayerick, Jr. Director September 20, 2001 ---------------------------- (Joseph Mayerick, Jr.) /s/ Gerald H. Shaff Director September 20, 2001 ---------------------------- (Gerald H. Shaff) /s/ Gerald A. Smith Director September 20, 2001 ---------------------------- (Gerald A. Smith) 33 EX-21 3 dex21.txt 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, 2001) State of Incorporation ------------- Custom Products Corporation Connecticut A-G Geophysical Products, Inc. Texas 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. 34