UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period MARCH 31, 1996
-------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period to
Commission file number 0-6845
BOWLINE CORPORATION
(Exact name of registrant as specified in charter)
New York 13-1576392
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 201, 3400 West Chester Pike, Newtown Square, PA 19073
(Address of principal executive offices)
(610) 325-5330
(Registrant's telephone number, including area code
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 l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ -----
At April 30, 1996, there were 1,287,412 shares of the Registrant's
common stock, $.02 par value per share, outstanding.
Page 1 of 9
<PAGE>
BOWLINE CORPORATION AND SUBSIDIARIES
PART I
Item 1. FINANCIAL STATEMENTS
BOWLINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
3/31/96 3/31/95 3/31/96 3/31/95
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES $300,000 $300,175 150,000 $150,050
SELLING AND ADMINISTRATIVE
EXPENSE 358,851 341,092 187,852 183,144
INTEREST INCOME 42,233 39,112 20,566 21,547
LOSS ON DISPOSAL OF ASSETS 5,433
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES ( 16,618) ( 7,238) ( 17,286) ( 11,547)
PROVISION FOR INCOME TAXES 1,500 ( 1,189)
--------- --------- --------- ---------
NET INCOME (LOSS) ($16,618) ($ 8,738) ($16,097) ($ 11,547)
--------- --------- --------- ---------
NET INCOME (LOSS) PER
COMMON SHARE: ($ .01) ($ .01) ($ .01) ($ .01)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES 1,287,412 1,287,412 1,287,412 1,287,412
========= ========= ========= =========
</TABLE>
Page 2 of 9
<PAGE>
BOWLINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- ----------
<S> <C> <C>
ASSETS
CURRENT:
Cash $2,066,460 $1,978,008
Accounts receivable 0 53,000
Other current assets 9,500 8,238
---------- ---------
Total current assets 2,075,960 2,039,246
PLANT AND EQUIPMENT 124,402 161,121
----------- ----------
TOTAL ASSETS $2,200,362 $2,200,367
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 19,282 $ 36,464
Other current liabilities 97,978 64,183
----------- ----------
Total current liabilities 117,260 100,647
----------- ----------
STOCKHOLDERS' EQUITY:
Common stock, par value $.02 per share;
authorized 5,000,000 shares; issued
and outstanding 1,287,412 25,748 25,748
Additional paid-in capital 6,975,428 6,975,428
Accumulated deficit (4,918,074) (4,901,456)
----------- -----------
Total stockholders' equity 2,083,102 2,099,720
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,200,362 $2,200,367
========== ==========
</TABLE>
See notes to consolidated financial statements
Page 3 of 9
<PAGE>
BOWLINE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months ended
March 31,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) ($ 16,618) ($ 8,738)
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Depreciation & amortization 36,719 33,887
Loss on disposal of assets 0 5,433
(Increase) decrease in
Accounts receivable 53,000 74,552
Other current assets ( 1,262) ( 24)
Increase (decrease) in
Accounts payable ( 17,182) 15,715
Other current liabilities 33,795 8,977
--------- ---------
Total Adjustments 105,070 138,540
--------- --------
Net cash provided by (used in)
operating activities 88,452 129,802
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 88,452 129,802
CASH AND CASH EQUIVALENTS
Beginning of period 1,978,008 1,791,386
--------- ---------
End of period $2,066,460 $1,921,188
========== ==========
</TABLE>
See notes to consolidated financial statements
Page 4 of 9
<PAGE>
BOWLINE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Preparation
The accompanying financial statements have been prepared by Bowline Corporation
(the "Company") pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, these financial statements
give effect to all normal recurring adjustments necessary to present fairly the
financial position of the Company as of March 31, 1996, and September 30, 1995,
and the results of operations and cash flow for the six-month periods ended
March 31, 1996, and March 31, 1995.
Certain reclassifications have been made to the prior year's financial
statements to conform to classifications used in the current fiscal year.
The Company's revenue consists solely of providing data processing services to
an affiliate.
Although the Company believes that the disclosures included herein are adequate
to make the information not misleading, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. Accordingly,
the accompanying financial statements should be read in conjunction with the
financial statements and the related financial review included in the Company's
latest annual report on Form 10-K for the year ended September 30, 1995.
Note 2. Computation of Net Income per Common Share
Net earning per common share was computed by dividing the net income by the
number of common shares outstanding during each period presented.
Note 3. Income Taxes
Components of the provision for income taxes are as follows:
March 31, March 31,
1996 1995
-------- --------
State - current $ 0 $1,500
Federal 0 0
------- ------
Provision for income tax $ 0 $1,500
========= ======
On March 31, 1996, the Company had net operating losses carried forward of
approximately $18,800,000 for federal income tax purposes which expire as
follows: $2,600,000 in 1999, $800,000 in 2000, $2,200,000 in 2001, $12,200,000
in 2002, $200,000 in 2004 and $800,000 in 2005.
On March 31, 1996, the Company had investment tax credits of approximately
$255,000 which expire as follows: $155,000 in 1996, $52,000 in 1997, $44,000 in
1998, $1,000 in 1999 and $3,000 in 2000.
Page 5 of 9
<PAGE>
The Company adopted Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes," ("SFAS No. 109") beginning October 1, 1993.
No provision for federal income taxes is recorded due to the existence of net
operating losses carried forward. The Company has no means of realizing value
from any of the above, therefore, a valuation reserve was established in
accordance with SFAS 109 for 100% of the net operating losses and investment tax
credits carried forward. Accordingly, the adoption of SFAS 109 had no effect on
the Company's results of operations.
Note 4. Proposed Merger
On February 20, 1996, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Arrowhead Holdings Corporation ("Arrowhead")
pursuant to which the Company will be merged with and into Arrowhead, the
separate corporate existence of the Company will be extinguished and the equity
interest of the Company's public shareholders will cease to exist.
Pursuant to the terms of the Merger Agreement, each outstanding share of common
stock of the Company (other than the 141,419 shares held by Arrowhead which will
be canceled in the Merger and other than the 590,750 shares held by certain of
Arrowhead's affiliates which will be exchanged for shares of Arrowhead common
stock) will be converted into the right to receive $1.32 per share in cash.
Consummation of the merger is subject to a number of conditions, including
approval of the Merger Agreement and the principal terms of the merger by the
affirmative vote of the holders of two-thirds of the outstanding shares of the
Company's common stock. As of April 30, 1996, Arrowhead and its affiliates own
an aggregate of 732,169 shares of the Company's common stock, or 56.9% of the
total shares outstanding. It is anticipated that all of such shares will be
voted in favor of the Merger Agreement and the principal terms of the merger.
Page 6 of 9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Six months ended March 31, 1996, compared to six months ended March 31, 1995
Revenues for the six months ended March 31, 1996, were equal to revenues for the
six months ended March 31, 1995. The Company's revenue consists solely of
providing data processing services to an affiliate.
Selling and administrative expenses consist of operating expenses of the data
processing center and corporate expenses. These expenses were 5.2% higher than
the prior year, for the six month period ended March 31, 1996. This was due to
legal fees related to the proposed merger (see Note 4). Reductions in salaries
offset the higher legal cost for the three month period ended March 31, 1996.
Interest income increased by 7.9%, mostly a result of higher interest rates.
Changes in the Pennsylvania state income tax law, allowing carryover of losses
in prior years, reduced state income taxes to zero.
Liquidity and Capital Resources
Cash flow for the six months ended March 31, 1996, was positive $88,000. This
was primarily a result of operating profit before depreciation and faster
collection of accounts receivable.
The Company's business consists solely of servicing an affiliate. Expenditures
have been reduced through a reduction of personnel and relocating the computer
center to a lower cost facility. No major capital expenditures are planned and
the Company believes its liquidity is adequate to finance its cash requirements.
Page 7 of 9
<PAGE>
BOWLINE CORPORATION
PART II - OTHER INFORMATION
Item 5. Other Information
On February 20, 1996, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Arrowhead Holdings Corporation ("Arrowhead")
pursuant to which the Company will be merged with and into Arrowhead, the
separate corporate existence of the Company will be extinguished and the equity
interest of the Company's public shareholders will cease to exist.
Pursuant to the terms of the Merger Agreement, each outstanding share of common
stock of the Company (other than the 141,419 shares held by Arrowhead which will
be canceled in the Merger and other than the 590,750 shares held by certain of
Arrowhead's affiliates which will be exchanged for shares of Arrowhead common
stock) will be converted into the right to receive $1.32 per share in cash.
Consummation of the merger is subject to a number of conditions, including
approval of the Merger Agreement and the principal terms of the merger by the
affirmative vote of the holders of two-thirds of the outstanding shares of the
Company's common stock. As of April 30, 1996, Arrowhead and its affiliates own
an aggregate of 732,169 shares of the Company's common stock, or 56.9% of the
total shares outstanding. It is anticipated that all of such shares will be
voted in favor of the Merger Agreement and the principal terms of the merger.
Page 8 of 9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOWLINE CORPORATION
---------------------------------
JAMES BENENSON, JR., CHAIRMAN OF
THE BOARD
DATE: April 30, 1996
-------------------------
---------------------------------
CLIFFORD J. DEMAREST, CHIEF
EXECUTIVE OFFICER AND PRESIDENT
---------------------------------
MICHAEL BONIELLO, TREASURER,
PRINCIPAL ACCOUNTING AND FINANCIAL
OFFICER
Page 9 of 9
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
from the Consolidated Statement of Operation for the
Six Months ended March 31, 1996 and the Consolidated
Balance Sheet as of March 31, 1996 and is qualified
in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000034682
<NAME> BOWLINE CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 0
<CASH> 2,066,460
<SECURITIES> 0
<RECEIVABLES> 53,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,075,960
<PP&E> 663,407
<DEPRECIATION> 539,005
<TOTAL-ASSETS> 2,200,362
<CURRENT-LIABILITIES> 117,260
<BONDS> 0
0
0
<COMMON> 25,748
<OTHER-SE> 2,057,354
<TOTAL-LIABILITY-AND-EQUITY> 2,200,362
<SALES> 300,000
<TOTAL-REVENUES> 300,000
<CGS> 0
<TOTAL-COSTS> 358,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (16,618)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,618)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
