<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 0-10723
BOLT TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its charter)
CONNECTICUT 06-0773922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
FOUR DUKE PLACE, NORWALK, CONNECTICUT 06854
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 853-0700
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
At April 20, 1998 there were 5,226,478 shares of common stock, without par
value, outstanding.
(1)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
INDEX
-----
PAGE NUMBER
-------------
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements.
Consolidated statements of income - three and
nine months ended March 31, 1998 and 1997.......................... 3
Consolidated balance sheets -
March 31, 1998 and June 30, 1997.................................. 4
Consolidated statements of cash flows -
nine months ended March 31, 1998 and 1997......................... 5
Notes to consolidated financial statements........................... 6-10
Item 2. Management's discussion and analysis of financial
condition and results of operations................................ 11-14
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 14
PART II - OTHER INFORMATION:
Item 2. Changes in Securities......................................... 14
Item 6. Exhibits and reports on Form 8-K.............................. 14-15
Signatures............................................................. 15
(2)
<PAGE>
PART I - FINANCIAL INFORMATION
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
_____________________________________
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales....................................... $5,117,000 $2,795,000 $11,509,000 $7,173,000
Service..................................... - 91,000 15,000 384,000
---------- ---------- ----------- ----------
5,117,000 2,886,000 11,524,000 7,557,000
---------- ---------- ----------- ----------
Costs and Expenses:
Cost of sales................................ 2,973,000 1,530,000 6,383,000 3,781,000
Cost of service.............................. - 129,000 80,000 474,000
Research and development..................... 54,000 67,000 160,000 139,000
Selling, general and administrative.......... 817,000 608,000 2,216,000 1,768,000
Amortization of intangibles.................. 57,000 - 57,000 -
Interest income, net ........................ (7,000) (18,000) (89,000) (40,000)
---------- ---------- ----------- ----------
3,894,000 2,316,000 8,807,000 6,122,000
---------- ---------- ----------- ----------
Income before income taxes ...................... 1,223,000 570,000 2,717,000 1,435,000
Benefit for income taxes.......................... - - 358,000 -
---------- ---------- ----------- ----------
Net income.................................. $1,223,000 $ 570,000 $3,075,000 $1,435,000
========== ========== =========== ==========
Earnings per share:
Basic....................................... $0.23 $0.11 $0.60 $0.29
Diluted..................................... $0.23 $0.11 $0.59 $0.28
Shares Outstanding:
Basic....................................... 5,204,093 4,976,854 5,119,266 4,973,450
Diluted..................................... 5,335,892 5,185,285 5,254,064 5,172,023
</TABLE>
See Notes to Consolidated Financial Statements.
(3)
<PAGE>
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
(unaudited)
------------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................................... $ 623,000 $2,628,000
Accounts receivable, net....................................... 3,561,000 2,266,000
Inventories ................................................... 2,142,000 1,886,000
Deferred income taxes.......................................... 1,060,000 610,000
Other.......................................................... 105,000 102,000
__________ __________
Total current assets..................................... 7,491,000 7,492,000
__________ __________
Goodwill, net........................................................ 4,394,000 ---
Property and Equipment, net.......................................... 214,000 127,000
Deferred Income Taxes................................................ 1,830,000 680,000
Other Assets......................................................... 61,000 22,000
__________ __________
$13,990,000 $8,321,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C>
Current Liabilities:
Accounts payable............................................... $ 1,680,000 $ 449,000
Accrued liabilities............................................ 1,339,000 861,000
__________ __________
Total current liabilities ............................... 3,019,000 1,310,000
__________ __________
Stockholders' Equity:
Common stock................................................... 25,563,000 24,678,000
Accumulated deficit............................................. (14,592,000) (17,667,000)
__________ __________
Total stockholders' equity............................... 10,971,000 7,011,000
__________ __________
$13,990,000 $8,321,000
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
(4)
<PAGE>
BOLT TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
__________________________________________
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------
1998 1997
---- ----
Cash Flows From Operating Activities:
<S> <C> <C>
Net income.................................................... $ 3,075,000 $1,435,000
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization........................ 91,000 43,000
Deferred income taxes................................ (538,000) (100,000)
__________ __________
2,628,000 1,378,000
Change in Operating Assets and Liabilities
Accounts receivable.................................. (1,074,000) 704,000
Inventories.......................................... 283,000 (304,000)
Other assets......................................... (64,000) (79,000)
Accounts payable and accrued liabilities............. 1,492,000 (310,000)
__________ __________
Net cash provided by operating activities............ 3,265,000 1,389,000
__________ __________
Cash Flows From Investing Activities:
Acquisition of the net assets of Custom Products.............. (4,974,000) -
Purchase of property and equipment............................ (24,000) (85,000)
__________ __________
Net cash used in investing activities................ (4,998,000) (85,000)
__________ __________
Cash Flows From Financing Activities:
Exercise of stock options.................................... 4,000 4,000
Borrowings from bank......................................... 800,000 -
Payments of long-term debt................................... (1,076,000) -
__________ __________
Net cash (used in) provided by financing activites... (272,000) 4,000
__________ __________
Net (decrease) increase in cash and cash equivalents..................... $(2,005,000) $1,308,000
========= =========
Supplemental disclosure of cash flow information:
Interest paid . ......................................................... $ 6,000 $ 12,000
Income taxes paid........................................................ $ 207,000 $ 130,000
Common stock issued in connection with business acquisition.............. $ 881,000 -
</TABLE>
See Notes to Consolidated Financial Statements.
(5)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(UNAUDITED)
-----------
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The consolidated balance sheet as of March 31, 1998, the consolidated
statements of income for the three-month and nine-month periods ended March 31,
1998 and 1997 and the consolidated statements of cash flows for the nine-month
periods ended March 31, 1998 and 1997 are unaudited. In the opinion of manage-
ment, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only of normal
recurring items. Interim results are not necessarily indicative of results for a
full year. It is suggested that the March 31,1998 consolidated financial
statements be read in conjunction with the consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1997.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (FAS 131), "Disclosures about Segments of
an Enterprise and Related Information", which will be effective July 1, 1998.
FAS 131 requires disclosure of certain financial and descriptive information
about operating segments. Based upon current circumstances, the Company
anticipates that upon adoption of FAS 131 and the acquisition of Custom Products
Corporation (See Note 2), it will report two operating segments: (l) geophysical
equipment and (2) industrial products.
NOTE 2 - CUSTOM PRODUCTS CORPORATION ACQUISITION
- ------------------------------------------------
On January 6, 1998 the Company completed the acquisition of Custom Products
Corporation ("Custom") pursuant to the terms of an asset purchase agreement.
Custom is a manufacturer of precision mechanical and pneumatic slip clutches
sold under the "Polyclutch" tradename.
The purchase price of the Custom's assets acquired included (i) $4,971,000
in cash; (ii) 135,000 shares of common stock valued at $881,000; (iii) estimated
acquisition costs of $208,000; and (iv) contingent cash payments. Such
contingent cash payments could total $4,000,000 and are dependent on the annual
increases in the net sales of Custom for the period January 1, 1998 to December
31, 2003. The results of operations of Custom have been included in the
consolidated statement of income from the acquisition date.
(6)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
NOTE 2 - CUSTOM PRODUCTS CORPORATION ACQUISITION (CONT'D.)
- -------------------------------------------------
The transaction was accounted for by the purchase method of accounting.
Accordingly, acquired assets and assumed liabilities were recorded at their
estimated fair value, which resulted in goodwill of $4,450,000 that will be
amortized on a straight line basis over 20 years. A summary of the purchase
price allocation is as follows:
Cash $ 206,000
Accounts receivable 221,000
Inventories 538,000
Property and equipment 97,000
Goodwill 4,450,000
Deferred income taxes 1,000,000
Other assets 40,000
Accounts payable (51,000)
Accrued liabilities (165,000)
Long-term debt (276,000)
---------
Purchase price $6,060,000
=========
The allocation of the purchase price above is, in certain cases, based upon
preliminary information and is, therefore, subject to revision when additional
information concerning asset and liability valuations is obtained. In the
opinion of management, the asset and liability valuation will not be materially
different than above.
The following table presents the unaudited pro forma results of operations
for the nine months ended March 31, 1998 and 1997. The pro forma results are
not necessarily indicative of the results that might have occurred had the
acquisition of Custom actually taken place on July 1, 1996, or of future results
of operations.
Nine Months Nine Months
Ended Ended
March 31, 1998 March 31, 1997
-------------- --------------
Revenues $13,161,000 $9,803,000
Net income 3,536,000 2,022,000
Earnings per share:
Basic $ 0.68 $ 0.40
Diluted $ 0.66 $ 0.38
(7)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
NOTE 3 - LONG-TERM DEBT
- -----------------------
In connection with the Custom Products acquisition in January 1998, the
Company established a $3,500,000 unsecured credit facility. The purpose of the
credit facility is to fund the acquisition and to support working capital
requirements. The loan matures in January 2003. Maximum borrowings under the
agreement decrease by $500,000 on each anniversary of the agreement. Loans under
the agreement bear interest at the prime rate.
The credit facility contains certain covenants which include: (i)
prohibition of additional indebtedness; (ii) minimum tangible net worth of
$3,000,000 which increases by 50% of the Company's net income each year; (iii) a
ratio of total liabilities to tangible net worth of no more than 1.25 to 1; (iv)
a ratio of minimum debt service of no less than 2 to 1 and (v) no two
consecutive quarterly losses.
The Company borrowed $800,000 under the above agreement in connection with
the acquisition of Custom Products Corporation. This amount has been repaid.
NOTE 4 - INCOME TAXES
- ---------------------
At March 31, 1998, the Company had net operating loss carry-forwards of
approximately $12,000,000 which expire in the years 2002 through 2007.
Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for
Income Taxes", requires that the tax benefit of net operating loss ("nol")
carry-forwards be recorded as an asset to the extent that management assesses
the utilization of such nol carry-forwards to be "more likely than not". During
fiscal 1998, the Company continued its quarterly assessment of the realization
of its deferred tax assets based on its past earnings history and future trends,
current sales backlog, its dependence on a few customers for a significant
portion of revenue, the cyclical nature of the seismic exploration industry and
the effect of the acquisition of Custom on the future level of taxable income.
Management concluded that future taxable income would be higher than amounts
previously estimated. Therefore, it was more likely than not that additional
reserved tax assets would be realized in the future. As a result of this
continuing assessment, the Company reduced the valuation allowance related to
the deferred tax assets by $1,538,000 for the nine months ended March 31, 1998.
As required by FAS 109, $1,000,000 of the reduction in the valuation allowance
was reflected in the allocation of the purchase price of Custom and $538,000 was
reflected as an income tax benefit in the consolidated statement of income for
the nine months ended March 31, 1998.
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.
(8)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(CONTINUED)
-----------
NOTE 4 - INCOME TAXES (CONT'D.)
- ---------------------
Components of income tax (benefit) expense for the nine months ended March
31, 1998 and 1997 follow:
March 31, March 31,
1998 1997
---------- ----------
Current:
State.............. $ 180,000 $ 100,000
--------- ---------
Deferred:
Federal............ (538,000) (100,000)
--------- ---------
Income tax benefit.. $(358,000) $ -
========= =========
NOTE 5 - INVENTORIES
- --------------------
Inventories, net of reserves, are comprised of the following:
March 31, June 30,
1998 1997
---------- ----------
Raw materials and sub-assemblies.. $2,000,000 $1,665,000
Work-in process................... 142,000 221,000
---------- ----------
$2,142,000 $1,886,000
========== ==========
NOTE 6 - PROPERTY AND EQUIPMENT
- --------------------------------
Property and equipment are comprised of the following:
March 31, June 30,
1998 1997
------------ ------------
Building and leasehold improvements.. $ 534,000 $ 534,000
Geophysical equipment................ 1,523,000 2,566,000
Machinery and equipment.............. 4,232,000 4,113,000
Equipment held for rental............ 822,000 822,000
---------- ----------
7,111,000 8,035,000
Less accumulated depreciation........ (6,897,000) (7,908,000)
---------- ----------
$ 214,000 $ 127,000
========== ==========
(9)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(UNAUDITED)
-----------
NOTE 7 - EARNINGS PER SHARE
- ---------------------------
The Company adopted the Statement of Financial Accounting Standards No.
128, "Earnings per Share", during the second quarter of fiscal 1998. In
accordance with the new pronouncement, basic earnings per share is computed by
dividing net earnings available to common shareholders by the weighted average
number of common shares outstanding during the period. Diluted earnings per
share is determined on the assumption that outstanding dilutive stock options
have been exercised and the proceeds were used to reacquire the Company's
common stock at the average price of the common stock for the period. Prior
period earnings per share amounts have been restated in accordance with the
requirements of the pronouncement.
The following table summarizes the calculation of net earnings and the
weighted average common and common equivalent shares outstanding for the
purposes of the computation of earnings per share.
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
-------------------------- -------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---------- ---------- ---------- ----------
Net earnings available to common
stockholders $1,223,000 $ 570,000 $3,075,000 $1,435,000
Weighted average number of common
shares outstanding 5,204,093 4,976,854 5,119,266 4,973,450
Common stock equivalents - stock options 131,799 208,431 134,798 198,573
---------- ---------- ---------- ----------
Weighted average number of common shares
and common share equivalents outstanding 5,335,892 5,185,285 5,254,064 5,172,023
========== ========== ========== ==========
Basic earnings per share $ 0.23 $ 0.11 $ 0.60 $ 0.29
Diluted earnings per share $ 0.23 $ 0.11 $ 0.59 $ 0.28
</TABLE>
(10)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD-LOOKING STATEMENTS
- ---------------------------------------------------------------
Certain statements contained herein and elsewhere may be deemed to be
forward-looking within the meaning of The Private Securities Litigation Reform
Act of 1995 and are subject to the "safe harbor" provisions of that act,
including without limitation, statements concerning future sales, earnings,
costs, expenses, asset recoveries, working capital, capital expenditures,
financial condition, and other results of operations. Such statements involve
risks and uncertainties. Actual results could differ materially from the
expectations expressed in such forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Current cash and cash equivalents balances, existing borrowing capacity and
projected cash flow from operations are currently in excess of foreseeable
operating cash flow requirements. Cash flow from operating activities before
changes in working capital items amounted to $2,628,000 for the nine months
ended March 31, 1998. Cash flow from operating activities after changes in
working capital was $3,265,000. The significant changes in working capital
items over the nine month period were increases in accounts receivable, accounts
payable and accrued liabilities. These higher balances were a result of the
acquisition of Custom Products Corporation and the increased level of marine
seismic equipment sales for fiscal 1998.
In connection with the Custom Products acquisition in January 1998 (See
Note 2), the Company established a $3,500,000 unsecured credit factility. The
purpose of the credit facility is to fund the Custom Products acquisition and to
support working capital requirements. The loan matures in January 2003. Maximum
borrowings under the agreement decrease by $500,000 on each anniversary of the
agreement. Loans under the agreement bear interest at the prime rate.
The credit facility contains certain covenants which include: (i)
prohibition of additional indebtedness; (ii) minimum tangible net worth of
$3,000,000 which increases by 50% of the Company's net income each year; (iii) a
ratio of total liabilities to tangible net worth of no more than 1.25 to 1; (iv)
a ratio of maximum debt service of no less than 2 to 1 and (v) no two
consecutive quarterly losses. The Company borrowed $800,000 under the agreement
in connection with the acquisition of Custom Products. The amount has been
repaid.
Net property and equipment additions totaled $24,000 for the nine months
ended March 31, 1998. The Company does not anticipate capital expenditures to
exceed $100,000 for fiscal 1998. These expenditures will be funded from
operating cash flow.
The Company is the owner, through a joint venture, of a one-half interest
in its administrative and engineering building. The joint venture agreement
terminated 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.
(11)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
---------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES (CONT'D.)
- -------------------------------
Under the terms of the asset purchase agreement for the acquisition of
Custom Products, the Company will be required to make additional payments to the
former owners of Custom Products in the amount of $800,000 each year through
January 2003 if net sales of Custom Products increase to specified levels. The
Company expects to be able to make these payments, if required, from operating
cash flow.
YEAR 2000
- ---------
Historically, most computer systems utilized software that processes
transactions using two digits to represent the year of the transaction (i.e., 97
represents the year 1997). Software has to be modified to properly process
dates beyond December 1999. The Company is currently working with the supplier
of its accounting and manufacturing software to bring its systems into
compliance. The Company estimates that its software will be year 2000 compliant
by mid-1999. The Company does not expect that the cost to modify its
information system to be year 2000 compliant will be material to its financial
condition or results of operations. The Company does not anticipate any
material disruptions in its operations as a result of any failure by the Company
to be in compliance.
RESULTS OF OPERATIONS
- ---------------------
The results of operations for the three month period and nine month period
reflect the acquisition of Custom Products from January 6, 1998 pursuant to an
asset purchase agreement dated November 14, 1997.
The Company's third quarter revenue increased 77% to $5,117,000 compared to
the prior year's third quarter. Net income for the quarter increased 115% to
$1,223,000. The acquisition of Custom Products accounted for 36% of the revenue
increase and 28% of the increase in net income for the quarter. The remainder
of the increase in revenue and net income was generated by the increase in sales
of marine seismic air gun systems and replacement parts. The Company's
customers have continued to expand their worldwide fleet of seismic vessels to
meet the increased demand for seismic data needed for oilfield exploration,
development and reservoir production monitoring.
Total revenue and net income increased 52% and 114%,respectively, for the
first nine months of fiscal 1998 as compared to the first nine months of fiscal
1997. The acquisition of Custom Products accounted for 20% of the nine month
revenue increase and 11% of the nine month increase in net income. The same
factors that contributed to the third quarter increase in marine seismic air gun
systems and replacement parts also contributed to the increase for the nine
month period.
The Company closed its Wellseis(R) service operations at the end of the
second quarter of fiscal 1998. The Company has not recorded service revenue
since then. Because the fair value of the Company's geophysical assets is higher
than the carrying value, no impairment loss is required nor is any other
provision necessary because of the closing of the Company's service operation.
Cost of sales as a percentage of sales increased from 55% to 58% for the
third quarter and from 53% to 55% for the first nine months of fiscal 1998. The
major factor contributing to the increase in the cost of
(12)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
RESULTS OF OPERATIONS (CONT'D.)
- ---------------------
sales percentage for each period was the higher proportion of purchased items
required for marine seismic air gun systems shipped. These purchased items
historically have lower margins than the Company's proprietary air guns and
replacement parts.
Research and development costs decreased $13,000 for the quarter but
increased $21,000 for the first nine months of fiscal 1998. The Company is
continuing its efforts to develop new marine seismic energy sources.
Selling, general and administrative costs increased $209,000 for the
quarter and $448,000 for the nine month period. The inclusion of Custom
Products for the third quarter increased selling, general and administrative
expenses by $157,000. Higher incentive compensation expense caused the
remainder of the cost increase. For the nine month period, the increase in
selling, general and administrative expenses was caused by the acquisition of
Custom Products, an increase in incentive compensation costs of $242,000 because
of the higher level of profits and higher travel costs of $29,000 associated
with the Company's foreign sales efforts.
Amortization of the intangible assets associated with the acquisition of
Custom Products in the third quarter of fiscal 1998 amounted to $57,000. The
Company is amortizing the goodwill from the acquisition over a period of 20
years.
Interest income, net decreased $11,000 for the quarter as the Company used
its cash balances for the acquisition of Custom Products. The nine month
increase of $49,000 in net interest income reflects the higher level of short-
term investments during the first six months of fiscal 1998.
At March 31, 1998, the Company had net operating loss carry-forwards of
approximately $12,000,000 which expire in the years 2002 through 2007.
Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for
Income Taxes", requires that the tax benefit of net operating loss ("nol")
carry-forwards be recorded as an asset to the extent that management assesses
the utilization of such nol carry-forwards to be "more likely than not". During
fiscal 1998, the Company continued its quarterly assessment of the realization
of its deferred tax assets based on its past earnings history and future trends,
current sales backlog, its dependence on a few customers for a significant
portion of revenue, the cyclical nature of the seismic exploration industry and
the effect of the acquisition of Custom Products on the future level of taxable
income. Management concluded that future taxable income would be higher than
amounts previously estimated. Therefore, it was more likely than not that
additional reserved tax assets would be realized in the future. As a result of
this continuing assessment, the Company reduced the valuation allowance related
to the deferred tax assets by $1,538,000 for the nine months ended March 31,
1998. As required by FAS 109, $1,000,000 of the reduction in the valuation
allowance was reflected in the allocation of the purchase price of Custom
Products and $538,000 was reflected as an income tax benefit in the consolidated
statement of income for the nine months ended March 31, 1998.
For the period ending December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share". This standard
specifies, among other things, the presentation of basic and diluted earnings
per share data on the face of the income statement. As required by the
statement, prior period earnings per share data has been restated to conform
with the provisions of the statement. The effect of adoption of this standard
did not have a material effect.
(13)
<PAGE>
BOLT TECHNOLOGY CORPORATION
---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
-----------------------------------------------
RESULTS OF OPERATIONS (CONT'D.)
- -------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (FAS 131), "Disclosures about Segments of
an Enterprise and Related Information", which will be effective July 1, 1998.
FAS 131 requires disclosure of certain financial and descriptive information
about operating segments. Based upon current circumstances, the Company
anticipates that upon adoption of FAS 131 and the acquisition of Custom Products
Corporation (See Note 2), it will now report two operating segments: (1)
geophysical equipment and (2) industrial products.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Company is not yet required to provide the disclosures required by
Regulations S-K Item 305 pursuant to General Instruction 1.
PART II - OTHER INFORMATION
---------------------------
ITEM 2 - CHANGES IN SECURITIES
- ------------------------------
During the quarter ended March 31, 1998, the Company made no sales of its
equity securities that were not registered under the Securities Act of 1933, as
amended, except that on January 6, 1998, the Company issued in a privately-
negotiated transaction 135,000 shares of its common stock in connection with the
acquisition of Custom Products Corporation pursuant to terms of the asset
purchase agreement. The issuance of the common stock was effected in a
transaction exempt from registration pursuant to the provisions of Regulation D
of the Securities Act of 1933.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits.
--------
(27) Financial data schedule (included in EDGAR copy only).
(b) Reports on Form 8-K.
--------------------
The Company filed a Current Report on Form 8-K dated January 6, 1998
with the Securities and Exchange Commission on January 14, 1998 with
respect to the acquisition of Custom Products Corporation. The Form 8-
K was amended by amendment 8-K/A dated March 15, 1998. Items reported
were Item 2. - "Acquisition or Disposition of Assets" and Item 7. -
"Financial Statements and Exhibits".
The financial statements filed were as follows:
(a) Financial Statements of business acquired: Financial Statements
of Custom Products Corporation as of and for the years ended
December 31, 1997 and 1996:
Independent Auditor's Report
Balance Sheets of Custom Products Corporation as of December 31,
1997 and 1996
Statements of Operations of Custom Products Corporation for the
years ended December 31, 1997 and 1996
Statements of Cash Flows of Custom Products Corporation for the
years ended December 31, 1997 and 1996
Notes to the Financial Statements
(14)
<PAGE>
PART II - OTHER INFORMATION (CONTINUED)
---------------------------------------
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (CONT'D.)
- ---------------------------------------------------
(b) Pro Forma Financial Information:
Introduction
Pro forma Consolidated Balance Sheets of Bolt Technology Corporation
and Subsidiaries as of December 31, 1997 (unaudited)
Pro forma Consolidated Statements of Income of Bolt Technology
Corporation and Subsidiaries for the year ended June 30, 1997
(unaudited)
Pro forma Consolidated Statements of Income of Bolt and Subsidiaries
for the six months ended December 31, 1997 (unaudited)
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.
/s/ Raymond M. Soto
---------------------------
Chairman and President
(Principal Executive Officer and
Principal Financial Officer)
/s/ Alan Levy
----------------------------------
Vice President-Finance
Secretary and Treasurer
(Principal Accounting Officer)
April 28, 1998
(15)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 623,000
<SECURITIES> 0
<RECEIVABLES> 3,561,000
<ALLOWANCES> 0
<INVENTORY> 2,142,000
<CURRENT-ASSETS> 7,491,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,990,000
<CURRENT-LIABILITIES> 3,019,000
<BONDS> 0
0
0
<COMMON> 25,563,000
<OTHER-SE> (14,592,000)
<TOTAL-LIABILITY-AND-EQUITY> 13,990,000
<SALES> 11,509,000
<TOTAL-REVENUES> 11,524,000
<CGS> 6,383,000
<TOTAL-COSTS> 6,463,000
<OTHER-EXPENSES> 2,433,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89,000)
<INCOME-PRETAX> 2,717,000
<INCOME-TAX> 358,000
<INCOME-CONTINUING> 3,075,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,075,000
<EPS-PRIMARY> .60
<EPS-DILUTED> .59
</TABLE>
