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, 1997
[ ] 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: 0-22089
BRUNSWICK TECHNOLOGIES, INC.
----------------------------
Maine 01-0402052
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
43 Bibber Parkway, Brunswick, ME 04011
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
207-729-7792
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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. [x] Yes [ ] No
The registrant had 4,550,186 shares of Common Stock, $0.0001 par value,
outstanding as of May 14, 1997.
BRUNSWICK TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial information.
Item 1. Financial Statements.
Consolidated balance sheets as of December 31, 1996
and March 31, 1997. 3 - 4
Consolidated statements of income for the three months
ended March 31, 1996 and 1997. 5
Consolidated statements of cash flows for the
three months ended March 31, 1996 and 1997. 6
Notes to consolidated financial statements. 7 - 8
Report of Independent Accountants. 9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 10
Part II. Other Information.
Item 2. Changes in Securities. 11
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 6. Exhibits and Reports on Form 8-K. 11
</TABLE>
-2-
PART 1
FINANCIAL INFORMATION
Item 1. Financial Statements.
BRUNSWICK TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1996 1997
------ ---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 355 $ 6,581
Accounts receivable, net of allowance for doubtful accounts
of $38 in 1996 and $42 in 1997 2,619 3,045
Inventories 3,263 3,479
Refundable income taxes 21 -
Deferred income taxes 167 167
Other current assets 300 198
-------------- -------------
Total current assets 6,725 13,470
-------------- -------------
Property, plant and equipment:
Land and building 800 800
Furniture and fixtures 356 388
Leasehold improvements 74 77
Machinery and equipment 5,115 6,226
Vehicles 68 76
Machinery under construction 1,041 -
-------------- -------------
7,454 7,567
Less accumulated depreciation (1,453) (1,590)
--------------- --------------
Net property, plant and equipment 6,001 5,977
-------------- -------------
Deferred charges 513 -
Other assets, net 86 273
Goodwill, net 5,309 5,235
-------------- -------------
$ 18,634 $ 24,955
============== =============
</TABLE>
The accompanying notes are an integral
part of the financial statements
-3-
BRUNSWICK TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1996 1997
----- ----
(unaudited)
<S> <C> <C>
Current Liabilities:
Bank Overdraft $ 301 $ 226
Note payable to bank 1,180 -
Current installments of long-term debt 298 100
Due to stockholder 1,045 198
Accounts payable - trade 1,785 1,270
Accrued expenses 705 518
Income taxes payable - 131
-------------- -------------
Total current liabilities 5,314 2,443
-------------- -------------
Long-term debt, excluding current installments 8,853 3,968
Deferred income taxes 122 121
Commitments
Convertible preferred stock (liquidation preference of $6,641 in 1996) 6,589 -
Stockholder's equity (deficit):
Preferred stock $10 par value, 1,000,00 shares authorized, none outstanding - -
Common stock, $0.0001 par value, 20,000,000 shares authorized,
301,624 outstanding in 1996 and 4,550,186 outstanding in 1997 - -
Additional paid in capital 464 20,900
Treasury stock, 3,300 shares at cost (5) (5)
Accumulated deficit (2,703) (2,472)
--------------- --------------
Total stockholders' equity (deficit) (2,244) 18,423
--------------- -------------
$ 18,634 $ 24,955
============== =============
</TABLE>
The accompanying notes are an integral
part of the financial statements
-4-
BRUNSWICK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1996 1997
--------- ---------
(unaudited)
<S> <C> <C>
Net Sales $4,744 $7,332
Cost of goods sold (raw material purchased from a stockholder amounted to
$2,942 and $1,991 in 1996 and 1997, respectively) 3,631 5,448
-------------- ------------
Gross profit 1,113 1,884
Selling, general and administrative expenses 635 1,232
Research and development expenses 143 107
Moving costs 143 -
-------------- ------------
Operating income 192 545
-------------- ------------
Other income (expense):
Interest expense, net (26) (162)
Miscellaneous, net 44 87
-------------- ------------
18 (75)
-------------- -------------
Income before income tax 210 470
Income tax expense (75) (183)
--------------- -------------
Net income 135 287
Preferred stock dividend (113) (48)
Accretion of preferred stock redemption value (17) (8)
--------------- -------------
Net income attributable to common stock $ 5 $ 231
============== ============
Earnings per common share (pro forma in 1996) $ 0.04 $ 0.07
-------------- ------------
Weighted average common shares outstanding (pro forma in 1996) 3,460 4,352
============== ============
</TABLE>
The accompanying notes are an integral
part of the financial statements
-5-
BRUNSWICK TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1996 1997
------------ -----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 135 $ 287
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 101 211
Deferred taxes - (1)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 502 (426)
Increase in inventories (755) (216)
Decrease in refundable income taxes - 21
Decrease (increase) in other current assets and other assets 16 (85)
(Decrease) in due to stockholder - (847)
(Decrease) increase in other accounts payable and accrued expenses 535 (702)
Increase in income taxes payable - 131
------------ ------------
Net cash (used in) provided by operating activities 534 (1,627)
------------ -------------
Cash flows from investing activities:
Purchases of property, plant and equipment (212) (113)
------------- -------------
Net cash used in investing activities (212) (113)
------------- -------------
Cash flows from financing activities:
Bank overdraft 167 (75)
Net repayments under line of credit - (1,180)
Issuance of common stock, net of offering costs - 14,304
Repayment of long-term debt (20) (5,083)
------------- -------------
Net cash provided by financing activities 147 7,966
------------ ------------
Net increase in cash 469 6,226
Cash at beginning of period 107 355
------------ ------------
Cash at end of period $ 576 $ 6,581
============ ============
Non-cash items:
In February 1997, convertible preferred stock and accrued dividends were
converted into common stock (see Note 2 of Notes to Financial Statements).
</TABLE>
The accompanying notes are an integral
part of the financial statements
-6-
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. In the
opinion of management, the amounts shown reflect all adjustments
necessary to present fairly the financial position and results of
operations for the periods presented. All such adjustments are of a
normal recurring nature. The year-end consolidated balance sheet was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. It is
suggested that the financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report.
The consolidated financial statements include the accounts of
Brunswick Technologies, Inc. (BTI) and Advanced Textiles, Inc. (ATI),
its wholly owned subsidiary. The accounts of ATI are included from
October 30, 1996, the date of acquisition. Therefore, the March 31,
1996 financial statements included herein exclude the accounts of ATI.
All intercompany transactions have been eliminated.
Earnings per share has been presented on a pro forma basis for
1996 after giving effect to the conversion of the preferred stock
outstanding prior to their conversion into common stock on February 10,
1997, as well as to the 33 to 1 stock split of common stock on February
5, 1997, in connection with the Company's initial public offering (see
Note 2 of Notes to Financial Statements). The following table
represents information necessary to calculate earnings per share:
March 31,
1996 1997
---------- ---------
(in thousands, except
per share amounts)
Net income $ 135 $ 287
======== ========
Earnings per common share (pro forma in 1996) $ 0.04 $ 0.07
======= =========
Common shares outstanding:
Weighted average common shares 281 3,700
Common share equivalents 630 652
Conversion of preferred stock 2,337 -
Preferred stock dividend 211 -
Directors' stock grants 1 -
-------- ----------
Weighted average shares outstanding
(pro forma in 1996) 3,460 4,352
======== ==========
-7-
BRUNSWICK TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INITIAL PUBLIC OFFERING
On February 10, 1997, the Company completed its initial public
offering of common stock. The sale to the public totaled 2,675,000
shares, with 1,700,000 new shares being sold by the Company and 975,000
shares being sold from the holdings of an existing shareholder. The
offering price was $9.50 per share with proceeds to the Company, after
offering expenses, of approximately $13.7 million. From the proceeds,
the Company was obligated to pay $3,648,250 of the convertible
subordinated note plus accrued interest thereon. With the remaining
proceeds, the Company also paid off the balance of its bank debt of
approximately $2.9 million. Deferred charges of $512,679 at December
31, 1996, and other transactional expenses (together aggregating
approximately $1.3 million) were offset against stockholders' equity
upon completion of the offering.
Pursuant to the terms of the preferred stock, the outstanding
shares of preferred stock were automatically converted to common stock
on the consummation of the Company's initial public offering. As a
result, 70,824 shares of preferred stock were converted to 2,337,192
shares of common stock. In addition, on August 14, 1996, the Board of
Directors approved the issuance of common stock in lieu of cash payment
of the cumulative preferred dividend. This resulted in an additional
211,088 shares of common stock being issued to holders of preferred
stock as of the offering. In addition, the Board approved the grant of
stock to new Directors totaling 1,000 shares, which were issued at the
closing of the offering.
3. INVENTORIES:
Inventories consist of the following components:
December 31, March 31,
1996 1997
---- ----
(unaudited)
(in thousands)
Raw materials $ 576 $ 712
Work-in-process 653 635
Finished goods 2,034 2,132
--------------- --------------
$ 3,263 $ 3,479
=============== ==============
4. NEW ACCOUNTING PRONOUNCEMENTS:
During February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share" (SFAS No. 128), which will require a change in how the
Company calculates earnings per share. This statement is effective for
financial statements issued for periods ending after December 15, 1997,
with earlier application not permitted. The statement requires dual
presentation of basic and diluted earnings per share on the
consolidated statements of income. Had the earnings per share
calculation been applied on a basis consistent with the provisions of
SFAS No. 128 and Securities and Exchange Commission regulations, basic
earnings per share would have been $0.05 and $0.08 per share for the
three months ended March 31, 1996 and 1997, respectively. Diluted
earnings per share would have been equivalent to the amounts reported
in the statements of income.
-8-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Brunswick Technologies, Inc.
We have reviewed the accompanying consolidated balance sheet of Brunswick
Technologies, Inc. as of March 31, 1997, and the related consolidated statements
of income and cash flows for the three months then ended. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion. We previously audited and
expressed an unqualified opinion on the Company's consolidated financial
statements for the year ended December 31, 1996 (not presented herein). In our
opinion, the information set forth in the accompanying balance sheet as of
December 31, 1996, is fairly stated in all materials respects, in relation to
the statement of financial position from which it has been derived.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Portland, Maine
April 28, 1997
-9-
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1997 RESULTS.
GENERAL
As a result of the October 30, 1996, purchase of Advanced Textiles,
Inc. (ATI) from Burlington Industries (see Note 1 of Notes to Financial
Statements), the operations of ATI for the 1997 period are included in the
Consolidated Statements of Income and Cash Flow for the three months ended March
31, 1997, and ATI's net assets are included in the March 31, 1997 and December
31, 1996 Consolidated Balance Sheets.
RESULTS OF OPERATIONS
Net sales increased by $2,563,000 or 54% in 1997. Pounds sold were
4,810,952 in the first quarter of 1997 versus 3,360,067 in the corresponding
period in 1996.
Gross margin was 25.7% of net sales in the first three months of 1997
versus 23.5% the corresponding period in 1996. The increase is due primarily to
the addition of the operations of ATI whose products, in general, have higher
gross margins.
Operating expenses increased $418,000 in the first quarter of 1997,
primarily as a result of $568,000 of operating expense attributable to ATI
(including goodwill amortization of $66,000). Offsetting this increase was
$143,000 of moving expenses incurred in 1996 but not in 1997. Non-operating
expense amounted to $75,000 in the first quarter of 1997. This amount was
composed of $162,000 in interest expense ($136,000 in amounts owed to Burlington
Industries, Inc. from the purchase of ATI), reduced by $55,000 in interest
income and $22,000 from reimbursement under the Company's federal grant. In the
first quarter of 1996, non-operating income amounted to $19,000, which was a
combination of $45,000 in reimbursement under the federal grant offset by
$26,000 in the interest expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow activities for the quarter are reflected in the
consolidated Statements of Cash Flows. The Company's liquidity and capital
resources were favorably impacted by its initial public offering in February
1997, when it sold 1,700,000 newly issued shares at $9.50 per share to the
public. After selling commissions and other expenses, net proceeds to the
Company amounted to $13.7 million. With a portion of this amount, the Company
paid $3,648,250 of the principal amount due Burlington Industries, Inc. plus
interest of $94,954, as well as bank debt amounting to $2,892,960. The Company's
funds in excess of that required for normal operating activities are invested in
short-term, high-grade governmental and corporate obligations.
-10-
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
Immediately prior to its initial public offering in February 1997, all
shares of the Company's common stock underwent a 33 to 1 stock split, and upon
the consummation of the offering, each share of the Company's preferred stock
(of all series) converted into 33 shares of common stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held a special meeting of shareholders on January 23, 1997.
At that meeting, the shareholders voted to amend the 1991 Stock Option Plan and
1994 Stock Option Plan to: (i) allow grants to be made to consultants to the
Company, in addition to directors and employees; (ii) decrease the maximum
aggregate number of shares which may be issued under each of the plans; and
(iii) allow recipients to keep vested options in the event his or her
employment, consultant relationship or directorship is terminated, whether
voluntarily or involuntarily. The shareholders also voted to adopt the 1997
Equity Incentive Plan, whereby a committee of the Board of Directors is
authorized to grant incentive stock options, non-statutory stock options, stock
appreciation rights, restricted stock or similar securities defined thereunder,
all in its discretion, to key personnel, consultants and directors of the
Company or one of its affiliates. Further details on this meeting and the
actions taken may be found in the Prospectus contained in the Company's
Registration Statement on Form S-1 (File No. 333-10721), as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27. Financial data schedule.
(b) No reports on Form 8-K were filed during the quarter ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly authorized.
Brunswick Technologies, Inc.
by: /s/ John P. O'Sullivan
Chief Financial Officer
and Treasurer
Date: May 14, 1997
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Brunswick Technologies, Inc.'s consolidated financial statements as of and for
the three months ended March 31, 1997 and is qualified in its entirety by
reference to such financial statements. Amounts rounded to thousands (except for
per share amounts).
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,581
<SECURITIES> 0
<RECEIVABLES> 3,087
<ALLOWANCES> 42
<INVENTORY> 3,479
<CURRENT-ASSETS> 13,470
<PP&E> 7,567
<DEPRECIATION> 1,590
<TOTAL-ASSETS> 24,955
<CURRENT-LIABILITIES> 2,443
<BONDS> 0
0
0
<COMMON> 20,900
<OTHER-SE> (5)
<TOTAL-LIABILITY-AND-EQUITY> 24,955
<SALES> 7,332
<TOTAL-REVENUES> 7,332
<CGS> 5,448
<TOTAL-COSTS> 1,339
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162
<INCOME-PRETAX> 470
<INCOME-TAX> 183
<INCOME-CONTINUING> 287
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 287
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
