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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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[ 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, 1997
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:
Common Stock, without par value
(Title of Class)
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, 1997:
$24,901,170
As of August 20, 1997, there were 5,075,728 shares of Common Stock, without par
value, outstanding.
Documents Incorporated By Reference
Definitive Proxy Statement for 1997 Annual Meeting, which will be filed no later
than 120 days after June 30, 1997, is incorporated by reference in Part III to
the extent stated in this report.
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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 is incorporated under the laws of Connecticut. The
Company is engaged in developing, manufacturing, leasing, and selling
geophysical equipment, and providing geophysical data acquisition services for
use in the exploration for oil and gas. The Company operates in one business
segment but divides its business into two classes of products: (1) geophysical
equipment and (2) geophysical services. Geophysical equipment includes the
Company's marine and land air guns. Geophysical services represents the
acquisition of seismic data for use by the petroleum industry using the
Company's WELLSEIS(R) technology.
OVERVIEW
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, they are reflected by the
earth's subsurface strata and received as signals by devices known as
hydrophones for marine exploration and geophones for land exploration. 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.
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ITEM I. BUSINESS (CONT'D.)
OVERVIEW (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.
GEOPHYSICAL EQUIPMENT
The Company's air guns have been used worldwide since 1965, primarily in seismic
exploration for oil and gas. The air guns, by explosive release of high-pressure
air directly into the water, create elastic waves with a high energy yield in
those frequencies that penetrate readily to great depths in the earth.
A seismic exploration vessel may tow as many as 60 air guns along with multiple
hydrophone streamers of up to 8,000 meters in length. The air guns are fired
simultaneously every 75-150 feet along the survey line.
The Company has developed a new generation of marine air guns that extend 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 previous 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 also 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 significant source of the Company's revenue is from the sale of
replacement parts.
For seismic exploration on land, the Company leases a modified version of the
marine air gun that is installed together with all necessary auxiliary equipment
on a truck or, for use in particularly rough terrain, on an articulated buggy. A
specialized version of the land air gun is the OMNIPULSE(R) Shear Wave Generator
which is especially useful for seismic surveys defining fracture zones with high
resolution. Over the past five years, the revenue derived for the lease of land
seismic energy sources has not been material. The Company does not anticipate
that future leases of land seismic energy sources will provide any significant
revenue.
GEOPHYSICAL SERVICES
The Company developed its WELLSEIS(R) Borehole Seismic System which consists of
an Air Gun Energy Source Tool and a Multi-Level Geophone Receiver Tool and
Digital Recorder. The system has been used to acquire crosswell seismic data by
deploying both the air gun and geophone down separate wells. This seismic data
has been used for reservoir characterization, determination of fracture patterns
and salt flank imaging. In conjunction with this technology, the Company also
developed a fracture diagnostic service which provided the processing and
interpretation
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ITEM 1. BUSINESS (CONT'D.)
GEOPHYSICAL SERVICES (CONT'D.)
of microseismic activity created during hydraulic fracture treatments at
producing wells. The Company also provides service technicians to a major oil
company to operate a Wellseis System that the oil company had previously
purchased from the Company.
The Company's service operations reported operating losses for 1996 and 1997.
The Company determined that the outlook for securing sufficient contracts to
achieve profitable service operations was doubtful and, therefore, made the
decision in the fourth quarter of 1997 to reduce personnel assigned to its
service division. The Company will no longer offer its crosswell seismic
service or its fracture diagnostic service to the oil and gas industry. The
Company's geophysical services will consist of providing service technicians to
support Wellseis equipment previously sold by the Company. The Company does not
expect that geophysical services will be a material source of future revenue.
The Company does not expect to incur any substantial costs from reducing this
service facility.
GENERAL
FOREIGN SALES
During fiscal 1997, 1996 and 1995, approximately 55%, 46% and 54%, 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
Because of the short period between order and shipment dates for the principal
portion of the Company's sales, the dollar amount of current backlog is not
considered to be a reliable indication of future sales volume.
COMPETITION
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.
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ITEM 1. BUSINESS (CONT'D.)
MARKETING
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 and services 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 oil companies and to 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.
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 1997, 1996 and 1995, has spent $204,000, $161,000 and $200,000,
respectively, to develop new products and to upgrade its existing products and
services.
EMPLOYEES
As of June 30, 1997, the Company employed 39 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.
RAW MATERIALS AND ENVIRONMENTAL PROTECTION
The Company believes it has adequate sources of parts and materials for the
products it manufactures.
The nature of the Company's operations is such that there is little, if any,
impact upon the environment. The Company has not experienced any problems
complying with environmental protection laws and regulations. The Company does
not foresee the need for significant expenditures to ensure continued compliance
with current environmental protection laws.
INTELLECTUAL PROPERTY
The Company currently owns more than 20 United States patents and more than 30
patents in foreign countries relating to its existing products and planned
improvements.
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ITEM 1. BUSINESS (CONT'D.)
INTELLECTUAL PROPERTY (CONT'D.)
Patents covering improved features of the air gun expire in 1998 and 2005.
Patents covering the company's other products and planned improvements expire in
the period from 1997 to 2003. Although the Company's patents are considered
important to its operations, no one patent is considered essential to the
success of the Company.
MAJOR CUSTOMERS
Historically a significant portion of the Company's revenues have been
attributable to a few large customers. In 1997, sales to Schlumberger, Ltd.,
Petroleum Geo-Services (PGS) and Veritas DGC, Inc. accounted for 38%, 20% and
19%, respectively, of total revenue. In 1996, sales to Schlumberger, PGS and
Geoscience Corporation accounted for 33%, 16% and 11%, respectively, of total
revenue. In 1995, Schlumberger, and PGS accounted for 38% and 14%,
respectively, of total revenue.
The loss of any or all of the above customers or a significant decrease in the
amount of their purchases could have a material adverse effect on the Company.
ITEM 2. PROPERTIES
The following table sets forth certain information with respect to the Company's
principal properties:
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<CAPTION>
APPROXIMATE
AREA EXPIRATION
LOCATION NATURE OF PROPERTY (SQ. FEET) DATE OF LEASE
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<S> <C> <C> <C>
Norwalk, Connecticut Manufacturing 22,300 1997
Norwalk, Connecticut Administration/Engineering 6,600 1997
Houston, Texas Office/Warehouse 3,000 1999
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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 Company intends to enter into new
lease agreements for its property located in Norwalk, Connecticut.
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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted by the Company to its security holders during
the fourth quarter of the fiscal year covered by this report, through the
solicitation of proxies or otherwise.
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.
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FISCAL 1997 HIGH LOW
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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
FISCAL 1996 HIGH LOW
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First Quarter 1 7/8 1 3/16
Second Quarter 1 7/8 1 3/4
Third Quarter 1 13/16 1 1/8
Fourth Quarter 2 7/16 1 1/2
</TABLE>
The number of stockholders of record at July 31, 1997 was 415 and does not
include those stockholders who had shares in broker nominee accounts.
The Company has not declared any dividends since the second quarter of 1985.
The Company does not expect to pay dividends on its common stock for the
foreseeable future. Any decision concerning the payment of dividends on the
Company's common stock will depend upon results of operations, financial
condition, capital required for possible acquisitions as well as other factors
as the board of directors may consider relevant.
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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.
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<CAPTION>
YEARS ENDED JUNE 30,
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1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
(In thousands, except per share amounts)
INCOME STATEMENT DATA:
TOTAL REVENUES.............................. $10,531 $8,631 $7,707 $6,743 $7,786
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COSTS AND EXPENSES:
Cost of sales and service.................. 5,788 5,220 4,658 3,857 4,951
Research and development................... 204 161 200 202 240
Selling, general and administrative........ 2,485 2,034 1,830 1,768 1,875
Interest (income) expense, net............. (67) 6 66 87 -
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8,410 7,421 6,754 5,914 7,066
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Income before income taxes
and extraordinary item..................... 2,121 1,210 953 829 720
Benefit (provision) for income taxes (1).... - - 1,000 - (244)
------- ------ ------ ------ ------
Income before extraordinary item............ 2,121 1,210 1,953 829 476
Extraordinary item.......................... - - - 234 244
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NET INCOME................................. $ 2,121 $1,210 $1,953 $1,063 $ 720
======= ====== ====== ====== ======
NET INCOME PER COMMON SHARE:
Income before extraordinary item.......... $.41 $.24 $.38 $ .13 $.08
Extraordinary item......................... - - - .04 .04
------- ------ ------ ------ ------
NET INCOME.................................. $.41 $.24 $.38 $ .17 $ .12
======= ====== ====== ====== ======
Weighted average common and common
equivalent shares outstanding.............. 5,178 5,010 5,151 6,325 6,225
FINANCIAL POSITION DATA:
Working capital............................ $ 6,182 $4,122 $2,890 $1,873 $ 773
Total assets............................... 8,321 6,462 4,922 3,049 4,006
Long-term debt............................. - - - - -
Stockholders' equity....................... 7,011 4,872 3,662 2,006 930
Cash dividends............................. None None None None None
======= ====== ====== ====== ======
</TABLE>
(1) 1995 reflects recognition of previously reserved tax benefits.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Over the past three years, the Company has financed its operating cash
requirements from internally generated cash flow from operations. From July 1,
1995 to June 30, 1997, net cash provided by operating activities after changes
in working capital amounted to $3,299,000.
Accounts receivable and inventories increased $85,000 and $262,000,
respectively, from 1996 to 1997, primarily to support increased sales levels.
Accounts payable decreased $456,000 from 1996 to 1997. The higher 1996 accounts
payable balance included amounts due vendors for purchases required for a large
air gun system shipped in the fourth quarter of 1996; the 1997 accounts payable
balance did not include similar amounts. Accrued liabilities increased $176,000
largely as a result of a higher provision for incentive compensation because of
the Company's increased earnings in 1997. There were no currently payable
income taxes due at June 30, 1997 or 1996 because the Company's estimated tax
payments were adequate to discharge the current tax liability and the Company
also was able to utilize federal net operating loss carry-forwards.
The increase in other assets is primarily attributable to an increase in tax
assets. During 1997, tax assets increased by $213,000. The Company recorded
a $58,000 asset for alternative minimum tax payments made and $155,000
reduction in the valuation allowance.
Net property and equipment additions totaled $87,000 in 1997, $22,000 in 1996
and $86,000 in 1995. Included in 1997 equipment additions were normal
replacement of manufacturing equipment and the purchase of a computer aided
design system. The Company does not anticipate capital expenditures will exceed
$100,000 for 1998. These expenditures are expected to be funded from operating
cash flow.
The Company's current cash and cash equivalents balances, existing borrowing
capacity and projected cash flow from operations are currently in excess of its
foreseeable operating cash flow requirements. In June 1997, the Company entered
into a new $1,500,000 unsecured credit agreement. The Company then terminated
its $1,200,000 secured facility. The new agreement expires in March 1998.
Borrowings under the new agreement bear interest at the prime rate and there are
also certain restrictive covenants including limitation on indebtedness, asset
sales and the maintenance of certain financial ratios.
Management continues to evaluate suitable acquisition candidates. Any
acquisition opportunity may involve the use of cash, debt or equity financing.
The Company is the owner, through a joint venture, of a one-half interest in its
administrative and engineering building located in Norwalk, Connecticut. The
agreement expires in July 1997. Under the terms of the agreement, the Company
has the option to purchase the one-half interest owned by its joint venture
partner for $300,000. The Company is currently exploring various alternatives
with its joint venture partner including the exercise of the option.
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.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D.)
RESULTS OF OPERATIONS
Total revenue increased 22% from 1996 to 1997 and 12% from 1995 to 1996. The
revenue increase for both 1997 and 1996 reflect significant growth in marine
equipment sales which increased 26% and 20% in 1997 and 1996, respectively. The
higher demand for the Company's marine air guns has been due to the requirements
of the Company's customers to both upgrade existing seismic vessels and expand
their fleets. The increase in the number of seismic vessels operating world-
wide has been caused by the greater use of 3-D seismic surveys for exploration,
development and reservoir characterization.
Service revenue from the Company's Wellseis crew decreased 11% in 1997 and 46%
in 1996. The lower revenue in 1997 was caused by a reduction in consulting work
performed. The primary sources of service revenue in 1997 were generated from
fracture diagnostic service performed in conjunction with the Gas Research
Institute and from providing service technicians to a major oil company to
support Wellseis equipment owned by the oil company. The decrease in revenue in
1996 was caused by equipment problems which delayed scheduled work and the lower
demand for this specialized seismic service.
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 peripheral equipment purchases from third parties, which historically
carry lower margins and (iii) sales price increases. Cost of sales was
negatively impacted by a $32,000 increase in the provision for obsolete and slow
moving inventory. Cost of sales as a percentage of sales decreased from 56% in
1995 to 55% in 1996. Improved margins on long-life guns and replacement parts
and equipment rentals were the factors that contributed to the improvement.
Cost of service decreased by $231,000 from 1996 to 1997 because of lower salary
and consulting costs which were in line with the lower level of work performed.
Cost of service decreased by $90,000 from 1995 to 1996 because of the reduced
level of service work. The Company's Wellseis crew has reported significant
operating losses in 1996 and the first three quarters of 1997. In the fourth
quarter of fiscal 1997, in order to lower expenses, the Company reduced
personnel assigned to its service operation. With these efforts, the Company's
service operation reported a small operating loss of $8,000. For fiscal 1998,
the Company does not expect its service operation to provide significant
revenue. With the recent staff reduction, the Company's efforts will be limited
to providing service technicians to operate Wellseis equipment owned by others.
The Company is currently seeking a buyer for the major portion of the
geophysical equipment that comprises its Wellseis division. Since the carrying
value of these assets is less than fair market value, no impairment loss is
required nor is any other provision necessary for the reduction of the service
division.
Research and development costs increased 27% in 1997 and decreased 20% in 1996.
The increase in research and development costs in 1997 resulted from increased
efforts to develop new marine seismic energy sources. The lower level of
research and development expenditures in 1996 was due to the completion of the
Company's efforts with respect to its long-life marine air guns.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCAIL CONDITION AND RESULTS
OF OPERATIONS (CONT'D.)
RESULTS OF OPERATIONS (CONT'D.)
Selling, general and administrative expenses increased by $451,000 in 1997.
Factors that caused the increase in 1997 were a $243,000 increase in salary,
incentive compensation and other employee benefits due to the increased profit
levels; a $66,000 increase in shareholder expense caused primarily by the
Company's listing its common stock on the American Stock Exchange in September
1996 and a $56,000 increase in travel expenses from expanded sales efforts
overseas. The $204,000 increase in selling, general and administrative expenses
in 1996 was largely caused by a $121,000 increase in salary and benefits from
the overall growth in the business and a $52,000 increase in the provision for
uncollectible accounts.
Interest (income) expense, net decreased by $73,000 in 1997 due to the higher
level of interest income recorded from the Company's short-term investments.
Interest (income) expense, net decreased by $60,000 in 1996 due primarily to the
lower balances outstanding under the Company's credit facility, reduced
commitment fees and greater interest income from short-term investments.
The Company did not record a tax provision in 1997 or 1996. The Company offset
its federal and state tax provisions with previously reserved federal net
operating loss carry-forwards. The Company established a valuation allowance in
1994 to reduce its gross tax deferred tax asset to an amount which the Company
believed was more likely than not to be realized in the carry-forward period.
The valuation allowance established in 1994 was determined based upon the
following factors: (1) amount of prior years' taxable income; (2) lack of
meaningful backlog; (3) major product line dependent on level of worldwide
seismic activity which, in turn, is dependent on price of oil; and (4) future
revenue dependent on a few large customers for a significant percentage of
annual sales. The valuation allowance established in 1994 offset all of the
gross deferred tax asset except any alternative minimum tax credit carry-
forwards available.
In 1995, with the improvement in the above noted factors, the Company determined
that a portion of its net operating loss carry-forwards would more likely than
not be utilized before expiration and reduced the valuation allowance by
$1,000,000 ($0.20 per share).
During 1996 and 1997, the Company continued to evaluate the amount of tax loss
carry-forwards and other temporary differences that would more likely than not
be realized during the carry-forward period based upon the projected levels of
taxable income. Based upon the four factors described above and based upon
current circumstances, a valuation allowance has been established to reduce the
deferred tax assets to an amount that management believes will more likely than
not be realized during the carry-forward period.
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" in the second quarter of fiscal 1998.
The standard specifies the computation, presentation and disclosure requirements
for earnings per share. As required by the standard, the Company will restate
all prior period earnings per share data presented. The adoption of this new
standard is not expected to have a material effect on the Company's financial
statements.
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
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT'D.)
RESULTS OF OPERATIONS (CONT'D.)
in Note 5 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 at June 30, 1997.
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
There were no disagreements on any accounting and financial disclosure matters
between the Company and its independent certified public accountants on any
matter of accounting principles and practices, financial statement disclosures
or auditing scope or procedure.
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.
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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
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
Independent Auditors' Report 15
Consolidated Balance Sheets as of June 30, 1997 and 1996 16
Consolidated Statements of Income for the
Years Ended June 30, 1997, 1996 and 1995 17
Consolidated Statements of Cash Flows for the
Years Ended June 30, 1997, 1996 and 1995 18
Notes to Consolidated Financial Statement 19-29
FINANCIAL STATEMENT SCHEDULE FOR THE YEARS ENDED PAGE NUMBER
-----------
JUNE 30, 1997, 1996 AND 1995
II - Valuation and Qualifying Accounts and Reserves 30
</TABLE>
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.
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).
13
<PAGE>
EXHIBIT INDEX (CONT'D.)
EXHIBIT
NO.
- -------
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).
10.3
Bolt Technology Corporation 1993 Stock Option Plan (incorporated by reference to
Exhibit 10.5 to the 1994 Form 10-K).
11.
Statement re computation of earnings per share.
21.
Subsidiaries of the Registrant.
27.
Financial Data Schedule, which is submitted electronically to the Securities and
Exchange Commission for information only and not filed.
REPORTS ON FORM 8-K
There were no Form 8-K Reports filed during the quarter ended June 30, 1997.
14
<PAGE>
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, 1997 and 1996, and the related
consolidated statements of income and cash flows for each of the three years in
the period ended June 30, 1997. 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, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1997 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, 1997
15
<PAGE>
BOLT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
----------------------------
ASSETS 1997 1996
------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents................... $ 2,628,000 $ 1,364,000
Accounts receivable, less allowance for
uncollectible accounts of $96,000 in
1997 and $84,000 in 1996................... 2,266,000 2,181,000
Inventories................................. 1,886,000 1,624,000
Other current assets........................ 712,000 543,000
------------ ------------
7,492,000 5,712,000
------------ ------------
Plant and Equipment
Building and leasehold improvements......... 534,000 534,000
Geophysical equipment....................... 2,566,000 2,682,000
Machinery and equipment..................... 4,113,000 4,030,000
Equipment held for rental................... 822,000 822,000
------------ ------------
8,035,000 8,068,000
Less accumulated depreciation................... (7,908,000) (7,972,000)
------------ ------------
127,000 96,000
Deferred Income Taxes........................... 680,000 633,000
Other Assets.................................... 22,000 21,000
------------ ------------
$8,321,000 $ 6,462,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................... $ 449,000 $ 905,000
Accrued liabilities............................ 861,000 685,000
------------ ------------
1,310,000 1,590,000
------------ ------------
Stockholders' Equity:
Common stock, no par value, authorized
9,000,000 shares; issued and outstanding
5,074, 978 shares in 1997 and 4,971,431
in 1996....................................... 24,678,000 24,660,000
Accumulated deficit............................ (17,667,000) (19,788,000)
------------ ------------
Total Stockholders' equity.................... 7,011,000 4,872,000
------------ ------------
$ 8,321,000 $ 6,462,000
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
16
<PAGE>
BOLT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
--------------------------------------
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
REVENUES:.............................
Sales................................ $10,060,000 $8,102,000 $6,719,000
Service.............................. 471,000 529,000 988,000
----------- ---------- ----------
10,531,000 8,631,000 7,707,000
----------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales........................ 5,219,000 4,420,000 3,768,000
Cost of service...................... 569,000 800,000 890,000
Research and development............. 204,000 161,000 200,000
Selling, general and administrative.. 2,485,000 2,034,000 1,830,000
Interest (income) expense, net....... (67,000) 6,000 66,000
----------- ---------- ----------
8,410,000 7,421,000 6,754,000
----------- ---------- ----------
Income before income taxes............ 2,121,000 1,210,000 953,000
Benefit for income taxes.............. - - 1,000,000
----------- ---------- ----------
NET INCOME.......................... $ 2,121,000 $1,210,000 $1,953,000
=========== ========== ==========
NET INCOME PER COMMON SHARE: $0.41 $0.24 $0.38
=========== ========== ==========
Weighted average number of
common and common equivalent
shares outstanding 5,177,943 5,010,311 5,150,748
=========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
17
<PAGE>
BOLT TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................... $2,121,000 $1,210,000 $ 1,953,000
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation.............................................. 56,000 57,000 52,000
Deferred income taxes..................................... (155,000) (37,000) (1,000,000)
---------- ---------- -----------
2,022,000 1,230,000 1,005,000
Change in Operating Assets and Liabilities:
Accounts receivable....................................... (85,000) (220,000) (599,000)
Inventories............................................... (262,000) 29,000 (212,000)
Other assets.............................................. (62,000) (42,000) (29,000)
Accounts payable and accrued liabilities.................. (280,000) 433,000 371,000
---------- ---------- -----------
Net cash provided by operating activities.............. 1,333,000 1,430,000 536,000
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................... (87,000) (22,000) (86,000)
---------- ---------- -----------
Net cash used in investing activities.................. (87,000) (22,000) (86,000)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options.................................... 18,000 - 3,000
Net decrease in borrowings under revolving credit
agreement............................................... - (103,000) (154,000)
Purchase of warrant.......................................... - - (300,000)
---------- ---------- -----------
Net cash provided by (used in) financing activities....... 18,000 (103,000) (451,000)
---------- ---------- -----------
Net increase (decrease) in cash..................................... 1,264,000 1,305,000 (1,000)
Cash and cash equivalents at beginning of year...................... 1,364,000 59,000 60,000
---------- ---------- -----------
Cash and cash equivalents at end of year............................ $2,628,000 $1,364,000 $ 59,000
========== ========== ===========
Supplemental disclosure of cash flow information:
Interest paid....................................................... $ 16,000 $25,000 $66,000
Income taxes paid................................................... $ 186,000 $70,000 $12,000
</TABLE>
See Notes to Consolidated Financial Statements.
18
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
Bolt Technology Corporation is engaged in developing, manufacturing, leasing,
and selling geophysical equipment and providing geophysical data acquisition
services for use in the exploration and production of oil and gas. The Company
operates in one business segment but divides its business into two classes of
products: (1) geophysical equipment and (2) geophysical services. The
consolidated financial statements include the accounts of the Company and its
subsidiary companies. All significant intercompany balances and transactions
have been eliminated.
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.
REVENUE RECOGNITION AND WARRANTY COSTS:
The Company recognizes revenue from equipment sales upon shipment. Rental
income from short-term leases and service income are recorded monthly as earned.
Warranty costs and product returns incurred by the Company have been
insignificant.
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
19
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
INCOME TAXES: (CONT'D.)
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.
NET INCOME PER COMMON SHARE:
Net income per common and common equivalent share is calculated using the
weighted average number of common and common equivalent shares outstanding
during each year. When dilutive, stock options and warrants are included as
common stock equivalent shares using the treasury stock method.
The Company will adopt the provisions of Statement of Financial Accounting
Standards No. 128 (FAS128), "Earnings Per Share" in the second quarter of fiscal
1998. The standard specifies the computation, presentation and disclosure
requirements for earnings per share. As required by FAS 128, the Company will
restate all prior period earnings per share data presented. Based upon current
circumstances, this new standard is not expected to have a material effect on
the calculation of earnings per share.
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 5
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
In 1997, the Company adopted Statement of 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 at June 30, 1997.
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
20
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
USE OF ESTIMATES (CONT'D.)
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.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE 2 - INVENTORIES
Inventories, net of reserves, at June 30 consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Raw materials and sub-assemblies $1,665,000 $ 1,453,000
Work-in-process 221,000 171,000
---------- -----------
$1,886,000 $ 1,624,000
========== ===========
</TABLE>
NOTE 3 - INCOME TAXES
Income tax expense (benefit) consists of the following for the three years
ended June 30,:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- -----------
<S> <C> <C> <C>
Current:
Federal $ - $ - $ (408,000)
State 155,000 37,000 -
--------- ---------- -----------
155,000 37,000 (408,000)
--------- ---------- -----------
Deferred:
Federal (155,000) (37,000) (592,000)
State - - -
--------- ---------- -----------
(155,000) (37,000) (592,000)
--------- ---------- -----------
Income tax benefit $ - $ - $(1,000,000)
========= ========== ===========
</TABLE>
21
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - 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:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
Federal income taxes at the statutory rate 34% 34% 34%
State income taxes, net of federal tax benefit 5 2 -
Nondeductible expenses 2 3 3
Utilization of net operating loss carry-forwards (39) (36) (37)
Reduction in deferred tax valuation allowance (2) (3) (105)
---- ---- ------
- - (105%)
==== ==== ======
</TABLE>
At June 30, 1997 and 1996 the deferred tax asset under FAS 109 was comprised of
the following:
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
Tax loss carry-forward $ 5,013,000 $ 5,680,000
Investment tax credit carry-forward 200,000 200,000
Inventory reserve 311,000 370,000
Bad debt reserve 37,000 32,000
Alternative minimum tax
credit carry-forward 98,000 40,000
Other 1,000 13,000
----------- ------------
Gross deferred tax asset 5,660,000 6,335,000
Less: Valuation allowance (4,370,000) (5,258,000)
----------- ------------
Net deferred tax asset $ 1,290,000 $ 1,077,000
=========== ============
</TABLE>
At June 30, 1997 and June 30, 1996, current deferred tax assets of $610,000 and
$444,000, respectively, were included in the consolidated balance sheets
caption "Other current assets."
The Company has tax net operating loss carry-forwards (NOL's) totaling
$14,744,000 which expire as follows: 2002 - $3,938,000; 2003 - $4,680,000;
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.
FAS 109 requires that the tax benefit of such NOL's be recorded as an asset to
the extent that management assesses the utilization of such NOL's to be "more
likely than not". The major portion of the NOL available for future years was
generated in the years 1986 to 1990 before the Company undertook an operating
plan to return to profitability. This plan included the sale or disposal of
subsidiaries which had generated a significant portion of the losses and a focus
by the Company on its marine seismic equipment business which historically has
been profitable.
22
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INCOME TAXES (CONT'D.)
The Company established a valuation allowance in 1994 to reduce its gross tax
deferred tax asset to an amount which the Company believed was more likely than
not to be realized in the carry-forward period. The valuation allowance
established in 1994 was determined based upon the following factors: (1) level
of past years' taxable income; (2) lack of meaningful backlog; (3) products
dependent on level of worldwide seismic activity which, in turn, is dependent on
price of oil; and (4) future revenue dependent on a few large customers for a
significant percentage of annual sales. The valuation allowance established in
1994 offset all of the gross deferred tax asset except for any alternative
minimum tax credit carry-forwards available.
In 1995, with improvement in the above noted factors, the Company determined
that a portion of its net operating loss carry-forwards would more likely than
not be utilized before expiration and reduced the valuation allowances by
$1,000,000 ($0.20 per share).
During 1996 and 1997, the Company continued to evaluate the amount of tax loss
carry-forwards and other temporary differences that would more likely than not
be realized during the carry-forward period based upon the projected levels of
taxable income. Based upon the four factors described above and based upon
current circumstances, a valuation allowance has been established to reduce the
deferred tax assets to an amount that management believes will more likely than
not be realized during the carry-forward period.
In 1997 and 1996, the Company reduced the valuation allowance for deferred tax
assets by $888,000 and $737,000, respectively.
The amount of the net deferred tax asset considered realizable could be reduced
if estimates of future taxable income during the carry-forward period are
reduced.
NOTE 4 - NOTES PAYABLE
In March 1997, the Company entered into a $1,500,000 unsecured credit agreement
with a bank and terminated its prior $1,200,000 secured facility. The new
agreement expires in March 1998. Borrowings under the new line bear interest at
the prime rate. The agreement contains certain restrictive covenants including
limitation on indebtedness, asset sales and the maintenance of certain financial
ratios. The Company had no borrowings outstanding at June 30, 1997 or 1996.
NOTE 5 - STOCK OPTIONS
The 1993 Stock Option Plan ("the plan") provides for the granting of options to
purchase up to 300,000 shares of common stock 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.
23
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - STOCK OPTIONS (CONT'D.)
A summary of changes in stock options follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE NUMBER
EXERCISE PRICE PER SHARE OF SHARES
------------------------ ---------
<S> <C> <C>
Outstanding at June 30, 1994 $0.62 172,680
Granted 1.08 102,000
Exercised 0.19 (16,830)
Canceled 0.19 (3,850)
--------
Outstanding at June 30, 1995 0.84 254,000
Granted 1.81 6,000
--------
Outstanding at June 30, 1996 0.87 260,000
Granted 4.22 51,000
Exercised 0.80 (119,000)
Canceled 0.75 (750)
--------
Outstanding at June 30, 1997 1.80 191,250
========
At June 30, 1997
Exercisable $0.89 133,500
===== ========
</TABLE>
There were 47,453 shares available for grants under the plan at June 30, 1997.
The following tables summarize information about stock options outstanding at
June 30, 1997:
<TABLE>
<CAPTION>
Weighted
Range of Average Weighted
Exercise Number Remaining Average
Prices Outstanding Contractual Life Exercise Price
- ------------- ----------- ---------------- --------------
<S> <C> <C> <C>
$0.75 - $1.00 114,250 1.7 years $0.83
1.19 - 1.81 26,000 3.1 years 1.33
4.12 - 4.94 51,000 4.5 years 4.22
------- --------- -----
191,250 2.6 years $1.80
======= ========= =====
Range of Weighted
Exercise Number Average
Prices Exercisable Exercise Price
- ------------- ----------- --------------
$0.75 - $1.00 112,000 $ 0.83
1.19 - 1.81 21,500 1.23
4.12 - 4.94 - -
------- -------
133,500 $ 0.89
======= =======
</TABLE>
24
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - STOCK OPTIONS (CONT'D.)
The estimated fair value of options granted during 1997 and 1996 were $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
plans. Accordingly, no compensation cost has been recognized for its stock
option plans. Had compensation cost for the Company's stock option plans been
determined based on the fair value at option grant dates for awards in
accordance with accounting provisions of SFAS 123, the Company's net income and
earnings per share for the years ended June 30, 1997 and 1996 would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Net Income: 1997 1996
- ---------- ---------- ----------
<S> <C> <C>
As reported $2,121,000 $1,210,000
Pro forma 2,062,000 1,209,000
Net Income Per Common and Common Equivalent Share:
- -------------------------------------------------
As reported $ 0.41 $ 0.24
Pro forma 0.40 0.24
</TABLE>
The fair value of options granted under the Company's stock option plans during
1997 and 1996 was estimated on dates of grant using the Black-Scholes model with
the following weighted-average assumptions used: dividend yield 0%, expected
volatility of approximately 62%, risk free interest rate of approximately 6%,
and expected lives of options granted of five years. The effects of applying
SFAS 123 in this pro forma disclosure are not indicative of future pro forma
effects, SFAS 123 does not apply to awards prior to 1996, and additional awards
in future years are anticipated.
NOTE 6 - PROFIT-SHARING PLAN
The Company has a voluntary deferred compensation plan under Section 401(k) of
the Internal Revenue Code for all employees who satisfy the age and service
requirements under the plan. Contributions to the plan may be made by both
eligible employees and the Company. The Company's contributions to the plan,
which represent a matching percentage of employee contributions, for the years
ended June 30, 1997, 1996, and 1995 amounted to $42,000 , $28,000, and $25,000,
respectively.
25
<PAGE>
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, 1997 were as follows:
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance June 30, 1994.......................... 4,954,601 $24,957,000 $(22,951,000) $2,006,000
Purchase of warrant......................... - (300,000) - (300,000)
Exercise of stock options................... 16,830 3,000 - 3,000
Net income.................................. - - 1,953,000 1,953,000
--------- ----------- ------------ ----------
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
========= =========== ============ ==========
</TABLE>
NOTE 8 - ACCRUED LIABILITIES
Accrued liabilities at June 30 consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Compensation and related taxes.. $527,000 $390,000
Compensated absences............ 155,000 141,000
Commissions payable............. 74,000 93,000
Professional fees............... 41,000 39,000
Advance payments................ 10,000 9,000
Other........................... 54,000 13,000
-------- --------
$861,000 $685,000
======== ========
</TABLE>
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 receivables. 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. 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 three months or less in an effort to
maintain safety and liquidity.
26
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - COMMITMENTS AND CONTINGENCIES
CONCENTRATION OF CREDIT RISK (CONT'D.)
A relatively small number of customers has accounted for most of the Company's
revenue. The Company's three largest customers in 1997, 1996 and 1995 accounted
for 77%, 60%, and 58% of total revenue, respectively. Customers accounting for
10% or more of total revenue during 1997, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Customer A.. 38% 33% 38%
Customer B... 20 16 14
Customer C... 19 - -
Customer D... - 11 -
</TABLE>
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, notes payable, accounts
payable and accrued liabilities reflected in the June 30, 1997 and 1996 balance
sheets approximate carrying value at that date.
LEASE COMMITMENTS:
Rent expense amounted to $344,000, $301,000 and $286,000 for the years ended
June 30, 1997, 1996 and 1995, respectively.
Minimum annual rental commitments under operating leases with terms in excess of
one year are as follows:
YEAR ENDING JUNE 30, COMMITMENT
-------------------- ----------
1998 $ 65,000
1999 45,000
--------
$110,000
========
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 an initial term through June 30, 1999,
subject to extension as set forth in the agreement. The aggregate commitment
for these employment agreements approximates $2,519,000 as of June 30, 1997.
27
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONT'D.)
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.
NOTE 10 - OTHER FINANCIAL INFORMATION
Foreign sales as a percentage of total revenue are summarized by geographic area
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Europe........ 37% 34% 43%
Asia/Pacific.. 17 11 11
Other areas... 1 1 -
---- ---- ----
55% 46% 54%
==== ==== ====
</TABLE>
Interest income (expense), net consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest income..................... $ 87,000 $ 19,000 $ -
Interest expense.................... (20,000) (25,000) (66,000)
-------- -------- --------
Interest income (expense), net...... $ 67,000 $ (6,000) $(66,000)
======== ======== ========
</TABLE>
28
<PAGE>
BOLT TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - QUARTERLY RESULTS (UNAUDITED)
The following table summarizes the results of operations by quarter for the two
years ended June 30, 1997.
<TABLE>
<CAPTION>
TOTAL COSTS AND NET INCOME
REVENUES EXPENSES NET INCOME PER SHARE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
FISCAL 1997:
First Quarter $2,318,000 $1,925,000 $393,000 $0.08
Second Quarter 2,353,000 1,881,000 472,000 0.09
Third Quarter 2,886,000 2,316,000 570,000 0.11
Fourth Quarter 2,974,000 2,288,000 686,000 0.13
TOTAL COSTS AND NET INCOME
REVENUES EXPENSES NET INCOME PER SHARE
----------- ----------- ---------- ----------
FISCAL 1996:
First Quarter $2,129,000 $1,875,000 $254,000 $0.05
Second Quarter 1,777,000 1,567,000 210,000 0.04
Third Quarter 1,949,000 1,662,000 277,000 0.06
Fourth Quarter 2,776,000 2,317,000 469,000 0.09
</TABLE>
29
<PAGE>
BOLT TECHNOLOGY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
ADDITIONS CHARGED
BALANCE AT (CREDITED) TO
BEGINNING OF COSTS AND BALANCE AT
DESCRIPTION YEAR EXPENSES DEDUCTIONS END OF YEAR
- ----------- ------------ ----------------- ---------- ------------
<S> <C> <C> <C> <C>
Allowance for uncollectible
accounts:
1995 $ 41,000 $ 27,000 $ - $ 68,000
1996 68,000 78,000 (62,000) 84,000
1997 84,000 85,000 (73,000) 96,000
Reserve for inventory
valuation:
1995 $ 946,000 $ (30,000) $ - $ 916,000
1996 916,000 34,000 - 950,000
1997 950,000 66,000 (217,000)(1) 799,000
Valuation allowance
for deferred
tax asset:
1995 $7,411,000 $(1,000,000) $(416,000) $5,995,000
1996 5,995,000 (482,000) (255,000) 5,258,000
1997 5,258,000 (214,000) (674,000) 4,370,000
</TABLE>
(1) Inventory scrapped.
30
<PAGE>
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 16th day of
September 1997.
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 16 , 1997
- ---------------------------- and Director
(Raymond M. Soto) (Principal Executive
Officer and Principal
Financial Officer)
/ s / Alan Levy Vice President - Finance, September 16, 1997
- ---------------------------- Secretary and Treasurer
(Alan Levy) (Principal Accounting
Officer)
/ s / Kevin M. Conlisk Director September 16, 1997
- ----------------------------
(Kevin M. Conlisk)
/ s / Stephen Chelminski Director September 16, 1997
- ----------------------------
(Stephen Chelminski)
/ s / John H. Larson Director September 16, 1997
- ----------------------------
(John H. Larson)
/ s / Bernard Luskin Director September 16, 1997
- ----------------------------
(Bernard Luskin)
/ s / Robert M. Manning Director September 16, 1997
- ----------------------------
(Robert M. Manning)
/ s / Joseph Mayerick, Jr. Director September 16, 1997
- ----------------------------
(Joseph Mayerick, Jr.)
/ s / Gerald A. Smith Director September 16, 1997
- ----------------------------
(Gerald A. Smith)
31
<PAGE>
EXHIBIT 11
----------
BOLT TECHNOLOGY CORPORATION
COMPUTATION OF NET INCOME PER SHARE OF COMMON STOCK
---------------------------------------------------
YEARS ENDED JUNE 30,
--------------------
<TABLE>
<CAPTION>
1997 1996 1995
========== ========== ==========
<S> <C> <C> <C>
PRIMARY:
Net Income $2,121,000 $1,210,000 $1,953,000
Weighted average common shares outstanding 4,989,383 4,971,431 4,967,445
Shares which assume exercise of stock options reduced
by the number of shares which could be purchased
with proceeds from exercise of stock options at the
average market price per share of common stock 188,560 38,880 183,303
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 5,177,943 5,010,311 5,150,748
========== ========== ==========
Primary earnings per share $ 0.41 $ 0.24 $ 0.38
========== ========== ==========
FULLY DILUTED:
Net income $2,121,000 $1,210,000 $1,953,000
Weighted average common shares outstanding 4,989,383 4,971,431 4,967,445
Shares which assume exercise of stock options reduced
by the number of shares which could be purchased
with proceeds from exercise of stock options at the
ending market price per share of common stock,
if higher than the average 122,278 155,520 224,265
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 5,111,661 5,126,951 5,191,710
========== ========== ==========
Fully diluted earnings per share $0.41(1) $0.24(1) $0.38(1)
========== ========== ==========
</TABLE>
(1) This calculation is submitted in accordance with Item 601(b) 11 of
Regulation S-K although not required by APB Opinion No. 15 because the
options result in dilution of less than 3%.
32
<PAGE>
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, 1997)
State of
Incorporation
-------------
Bolt International Corporation Connecticut
Duke Place Investments Delaware
Bolt Export Corporation United States, Virgin Islands
Criterion Exploration, 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.
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 2,628,000
<SECURITIES> 0
<RECEIVABLES> 2,266,000
<ALLOWANCES> 96,000
<INVENTORY> 1,886,000
<CURRENT-ASSETS> 7,492,000
<PP&E> 8,035,000
<DEPRECIATION> (7,908,000)
<TOTAL-ASSETS> 8,321,000
<CURRENT-LIABILITIES> 1,310,000
<BONDS> 0
0
0
<COMMON> 24,678,000
<OTHER-SE> (17,667,000)
<TOTAL-LIABILITY-AND-EQUITY> 8,321,000
<SALES> 10,060,000
<TOTAL-REVENUES> 10,531,000
<CGS> 5,219,000
<TOTAL-COSTS> 5,788,000
<OTHER-EXPENSES> 2,689,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (67,000)
<INCOME-PRETAX> 2,121,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,121,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,121,000
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
