<PAGE> 1
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 June 30, 1999.
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.
(Exact Name of Registrant As Specified In Its Charter)
Maine 01-0405052
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
43 Bibber Pkwy., 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.
Yes X No
--- ---
The registrant had 5,198,757 shares of Common Stock, $.0001 par value,
outstanding as of August 9, 1999.
<PAGE> 2
BRUNSWICK TECHNOLOGIES, INC.
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I. Financial information.
Item 1. Financial Statements
Report of Independent Accountants 3
Consolidated balance sheets as of June 30, 1999
and December 31, 1998. 4
Consolidated statements of income for the three months
and six months ended June 30, 1999 and 1998. 5
Consolidated statements of cash flows six months ended
June 30, 1999 and 1998. 6
Consolidated statements of comprehensive income for
the three and six months ended June 30, 1999 and 1998. 7
Notes to consolidated financial statements. 8-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11-13
Item 3. Quantitative and Qualitative Disclosures about Market Risk. 13
Part II. Other Information.
Item 5. Submission of Matters to a Vote of Security Holders. 14
Item 6. Exhibits and Reports on Form 8-K. 14
Signature 15
</TABLE>
2
<PAGE> 3
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. and Subsidiaries as of June 30, 1999, and the related
consolidated statements of income and comprehensive income for the three month
and six month periods ended June 30, 1999 and 1998, and the consolidated
statements of cash flows for the six month periods 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.
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.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1998, and the related
consolidated statements of income, shareholders' equity (deficit) and
comprehensive income and of cash flows for the year then ended (not presented
herein), and in our report dated February 12, 1999, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1998, is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
PricewaterhouseCoopers
July 29, 1999
3
<PAGE> 4
BRUNSWICK TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share information)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,120 $ 796
Accounts receivable, net of allowance for doubtful
accounts of $143 in 1999 and $125 in 1998 5,681 6,056
Inventories 5,304 4,807
Refundable income taxes -- 27
Deferred income taxes 274 274
Other current assets 243 531
-------- --------
Total current assets 13,622 12,491
Property, plant and equipment:
Land and building 1,016 974
Furniture and fixtures 573 535
Leasehold improvements 120 117
Machinery and equipment 11,792 10,284
Machine under construction 160 280
Vehicles 92 92
Management information system 500 394
-------- --------
14,253 12,676
Less accumulated depreciation and amortization (3,402) (2,877)
-------- --------
Net property, plant and equipment 10,851 9,799
Due from shareholder 112 111
Other assets, including investment in Euro-Technology (net of accumulated
amortization of $207 in 1999 and $128 in 1998) 2,102 2,182
Goodwill (net of accumulated amortization of $717 in 1999 and $581 in 1998) 4,909 5,056
-------- --------
Total assets $ 31,596 $ 29,639
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ -- $ 474
Note payable to bank -- 261
Current installments of long-term debt 109 111
Accounts payable shareholder 337 226
Accounts payable 2,490 1,876
Accrued expenses 1,540 580
Income taxes payable 254 --
-------- --------
Total current liabilities 4,730 3,528
Long-term debt, excluding current installments 135 139
Deferred income taxes 1,020 1,034
Shareholders' equity:
Common stock, $0.0001 par value; 20,000,000 shares authorized,
5,196,729 outstanding in 1999 and 5,186,889 outstanding in 1998 1 1
Additional paid-in capital 24,923 24,837
Treasury stock at cost; 3,300 shares in 1999 and 1998 (5) (5)
Cumulative translation adjustment (183) 41
Retained earnings 975 64
-------- --------
Total shareholders' equity 25,711 24,938
-------- --------
Total liabilities and shareholders' equity $ 31,596 $ 29,639
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
BRUNSWICK TECHNOLOGIES, INC,
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except share information)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 12,112 $ 10,968 $ 23,586 $ 20,015
Cost of goods sold (raw material purchased from a
stockholder amounted to $1,705 in 1999 and
$2,064 in 1998 for the three months ended
June 30, and $4,000 in 1999 and $4,022 in
1998 for the six months ended June 30) 9,223 8,444 18,213 15,299
-------- -------- -------- --------
Gross profit 2,889 2,524 5,373 4,716
Selling, general and administrative expenses 1,864 1,673 3,604 3,168
Research and development expenses 168 139 395 299
-------- -------- -------- --------
Operating income 857 712 1,374 1,249
-------- -------- -------- --------
Other income (expense):
Interest income 19 12 30 62
Interest expense (7) (1) (15) (4)
Miscellaneous, net (10) 75 30 143
-------- -------- -------- --------
2 86 45 201
-------- -------- -------- --------
Income before income taxes 859 798 1,419 1,450
Income tax expense 313 280 508 514
-------- -------- -------- --------
Net income $ 546 $ 518 $ 911 $ 936
======== ======== ======== ========
Basic:
Earnings per share $ 0.11 $ 0.10 $ 0.18 $ 0.18
Weighted average common shares outstanding 5,193 5,161 5,190 5,156
Diluted:
Earnings per share $ 0.10 $ 0.10 $ 0.17 $ 0.17
Weighted average common shares outstanding 5,425 5,445 5,424 5,456
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
BRUNSWICK TECHNOLOGIES, INC,
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands except share information)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 911 $ 936
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 754 575
Deferred taxes (6) --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 308 (1,642)
Increase in inventories (535) (530)
Decrease in refundable income taxes 27 --
Decrease in other current assets 283 342
(Increase) decrease in due from shareholder (1) 37
Increase in accounts payable shareholder 111 380
Increase in accounts payable and accrued expenses 1,675 315
Increase (decrease) in income taxes payable 255 (17)
------- -------
Net cash provided by operating activities 3,782 396
------- -------
Cash flows from investing activities:
Acquisition of Tech Textiles, net of cash acquired, including
technology -- (5,993)
Sale of marketable securities -- 6,607
Purchases of property, plant and equipment (1,702) (1,129)
Decrease in other assets 5 39
------- -------
Net cash used in investing activities (1,697) (476)
------- -------
Cash flows from financing activities:
Decrease in bank overdraft (474) --
Net (repayments) proceeds under line of credit (261) 143
Repayment of long-term debt (4) --
Proceeds from exercise of common stock options and warrants 33 11
------- -------
Net cash (used in) provided by financing activities (706) 154
------- -------
Effect of currency exchange rate changes on cash (55) 3
------- -------
Net increase in cash 1,324 77
Cash at beginning of period 796 353
------- -------
Cash at end of period $ 2,120 $ 430
======= =======
Acquisition of Tech Textiles International Ltd.:
Working capital, other than cash $ 1,097
Machinery and equipment 2,552
Goodwill & technology 2,524
Deferred taxes (180)
-------
Net cash used to acquire Tech Textiles Ltd. $ 5,993
=======
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE> 7
BRUNSWICK TECHNOLOGIES, INC,
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands except share information)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income $ 546 $ 518 $ 911 $ 936
Foreign currency translation adjustments (73) (22) (224) 47
-------- -------- -------- --------
Comprehensive income $ 473 $ 496 $ 687 $ 983
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
7
<PAGE> 8
BRUNSWICK TECHNOLOGIES, INC,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. 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 disclosures
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.
Foreign Currency Translation
All assets and liabilities of foreign operations are translated into
U.S. dollars at period end exchange rates. Income and expense items are
translated at average exchange rates during the period. Foreign exchange gains
and losses arising from transactions are reflected in net income.
B. ACQUISITION OF TECH TEXTILES INTERNATIONAL LTD.:
On March 2, 1998 the Company acquired the business and assets of Tech
Textiles International Ltd. ("TTI") based in Andover, UK from T&N plc, for
approximately $5.9 million in cash. The acquisition was made by the Company and
through the Company's recently formed wholly owned subsidiary in the UK,
Brunswick Technologies Europe Ltd. ("BTI-Europe") and is being accounted for
using the purchase method of accounting. The operations of BTI-Europe have been
included in financial results of the Company since March 2, 1998 and have been
consolidated for the period ending June 30, 1999.
C. INVENTORIES:
Inventories consist of the following components:
JUNE 30, DECEMBER 31,
1999 1998
-------- -------------
(IN THOUSANDS)
(UNAUDITED)
Raw materials $ 1,467 $ 1,394
Work-in-process 892 957
Finished goods 2,945 2,456
------- -------
$ 5,304 $ 4,807
======= =======
D. NEW ACCOUNTING PRONOUNCEMENTS:
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including certain derivatives embedded in
other contracts, and for hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those financial instruments at fair value. The
accounting for changes in the fair value of a derivative under SFAS 133 depends
on the intended use of the derivative and its hedging destination. SFAS 133 is
required to be adopted for the Company's year ending December 31, 2000 and the
Company has not yet determined the impact SFAS 133 will have on its results of
operations, liquidity or financial position.
8
<PAGE> 9
E. EARNINGS PER SHARE:
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share calculations:
Three months ending June 30, 1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
1999 1998
--------------------------------------- ---------------------------------------
(UNAUDITED)
NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 546 5,193 $ 0.11 $ 518 5,161 $ 0.10
Effect of dilutive securities:
Conversion of Stock Options - 232 - 284
------ ----- ------- ----
Diluted EPS $ 546 5,425 $ 0.10 $ 518 5,445 $ 0.10
====== ===== ====== =====
</TABLE>
Six months ending June 30, 1999 and 1998:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
1999 1998
--------------------------------------- ---------------------------------------
(UNAUDITED)
NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 911 5,190 $ 0.18 $ 936 5,156 $ 0.18
Effect of dilutive securities:
Conversion of Stock Options - 234 - 300
----- ----- ----- -----
Diluted EPS $ 911 5,424 $ 0.17 $ 936 5,456 $ 0.17
===== ===== ===== =====
</TABLE>
F. SEGMENT INFORMATION:
The Company has two reportable segments - (1) Domestic and (2)
International. Revenue and asset information is based on the country in which
the legal entities are located. Segment data includes intersegment revenues, as
well as a royalty charge pursuant to an intersegment technology licensing
agreement.
9
<PAGE> 10
The international segment was acquired on March 2, 1998. Income
statement amounts reported in 1998 for the international segment are for the
period from March 2, 1998 to June 30, 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
(IN THOUSANDS) (IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Domestic
Net sales $ 10,019 $ 9,516 $ 19,476 $ 17,911
Operating income 567 464 765 887
Intercompany income 105 - 206 -
Pretax income 721 547 1,061 1,086
Net income 456 345 674 684
INTERNATIONAL
Net sales 2,093 1,451 4,110 2,104
Operating income 290 248 609 362
Intercompany expense 105 - 206 -
Pretax income 138 250 358 364
Net income 90 173 237 252
EBITDA
Domestic $ 1,041 $ 839 $ 1,692 $ 1,590
International 204 280 496 439
-------- ------- -------- --------
Total EBITDA $ 1,245 $ 1,119 $ 2,188 $ 2,029
======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------------- ---------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Domestic $ 29,205 $ 28,060
International 6,180 3,481
Intercompany elimination (3,789) (1,902)
-------- --------
Total assets $ 31,596 $ 29,639
========= ========
</TABLE>
10
<PAGE> 11
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Matters discussed in this news release with respect to expected financial
results and future events, including any discussion, expressed or implied, of
the Company's anticipated revenue growth, operating results and future earnings
per share are forward-looking statements (identified by the words "expect",
"estimate", "project", "plans", "believe", and similar expressions) that involve
known and unknown risks and uncertainties. For these statements the Company
claims the protection of the safe harbor of the Private Securities Litigation
Reform Act of 1995. The Company's future operating results are dependent on its
ability to achieve increased sales and to control expenses. Factors such as
lower than expected inflation, product cost fluctuations, changes in product
mix, continued or increased competitive pressures from existing competitors and
new entrants (both fiberglass and non-fiberglass), including price cutting
strategies and deterioration in general of regional economic conditions are all
factors which could adversely affect sales projections. Additionally, the
Company's operating results may be negatively affected by (i) difficulties and
uncertainties associated with the merger of three of the Company's large
distributors, (ii) fluctuations in valuation of the pound Sterling versus other
European currencies and the US Dollar, (iii) the failure to obtain necessary
capital for the expansion of facilities and acquisitions, (iv) unforeseen
results of the Y2K problem, (v) the inability to continue to improve production
capacity and scheduling and (vi) failure of implementation of legislative
incentives regarding wind energy industry. These and other risks are detailed
from time to time in the Company's SEC reports, including Form 10K for the year
ended December 31, 1998.
RESULTS OF OPERATIONS
Second Quarter Ended June 30, 1999. Net sales increased 10.4% in the second
quarter of 1999 over the same period last year and net income rose 5.4%. On a
consolidated basis, the gross profit margin was 23.9%, up from 23.0% in the
second quarter of 1998 and 21.6% in the first quarter of 1999. This marks the
third consecutive increase in the quarterly gross margin. Net income was
$546,000, or $.10 per fully diluted share.
Domestically, demand continued to be strong in the second quarter. There was
continued weakness in orders related to the wind energy industry as manufactures
of windblades await a renewal of legislative incentives which is expected later
this year. Orders are not expected to flow from this sector until late in the
fourth quarter of 1999 at the earliest; however, this weakness was more than
offset by strength in marine, offshore oil and gas, and industrial composite
markets. Production of White Steel(R) heavyweight fabrics used in the North Sea
offshore oil and gas industry was shifted to the UK where a new machine was
brought on line in the first quarter to produce these goods.
Internationally, demand continued to be strong. Late in the second quarter a new
50" multi-axial machine was installed and is expected to contribute to revenues
in the third quarter. The wind energy composite industry remains relatively
robust with other markets continuing strong as well.
The improved consolidated gross margin was due largely to efficiencies gained
through strong production levels in the company's production facility in Maine.
The margin also benefited from improved raw stock pricing obtained at the
beginning of the year.
Selling, general and administrative expenses were up 11.4% over the second
quarter last year reflecting increased costs associated with MIS software
implementation, maintenance and amortization and higher property taxes.
Research and development expenses were up slightly.
Interest income was up compared to last year's, reflecting monies earned on the
company's increased cash balances. Interest expense was up slightly due to
reduced level of interest capitalization associated with fewer machines under
construction. Foreign exchange ("FX") loses incurred during the quarter totaled
$63,400 which represents the majority of the decrease in "miscellaneous net"
from $75,000 (income) last year to $10,000 (expense) in the second quarter this
year. The FX loss was caused by Sterling strengthening against the Euro which
devalued Euro-denominated trade receivables and the Dollar strengthening against
Sterling which devalued Sterling-denominated inter-company obligations during
the period.
11
<PAGE> 12
FINANCIAL CONDITION
The consolidated balance sheet at June 30, 1999 reflected continued strong
liquidity due to strong cash flow during the first six months of the year. Net
cash from operations totaled $3,781,000 which was used to fund $1,702,000 in
capital expenditures and to pay down the Company's line of credit. Net increase
in cash for the six months was $1,324,000. The Company believes cash flow from
ongoing operations and funds available under the Company's credit facility will
be adequate to meet the Company's needs during 1999.
YEAR 2000 DISCLOSURE
The year 2000 (Y2K) issue is best defined as the ability of systems to
accurately process all date related information before, during and after
midnight on 12/31/99, including other `magic' or `null-set' dates such as
9/9/99, 1/11/11.
The Company has undertaken an initiative (begun in the second quarter of 1998)
to assess the readiness of its internal systems in regards to compliance with
the pending millennium change. The Company has assigned direct responsibility
for the Y2K project to the corporate controller, in conjunction with the chief
financial officer.
The Company has identified three broad categories of internal Y2K risk: network
hardware and software, manufacturing systems and processes, and financial,
manufacturing and time and attendance software.
- All network hardware has been inventoried, reviewed for compliance
and tested where necessary and appropriate. Upon completion of the
testing it was determined that some hardware was not in
compliance, replacement hardware has been purchased and
installation is complete in all areas identified as critical.
- The manufacturing equipment on which the Company places primary
reliance for production of saleable goods has been inventoried for
date sensitive components. Components identified with the
potential for containing date sensitive processors were researched
through the original manufacturer to determine compliance and
upgraded or replaced as necessary.
- As planned, as of August 2, 1999 the Company had completed the
migration of its system software in its domestic operations to a
fully integrated third party ERP application, which is Y2K
compliant. Internationally, the Company has decided not to
implement the integrated third party ERP application until after
the first of the year. The Company is upgrading the existing
accounting software in the UK operation to a Y2K compliant
version. Implementation of compliant upgrades to the software is
in the final stages and is expected to be complete prior to the
end of the third quarter.
The impetus for installing the new ERP system was the need for an enhanced,
fully integrated, management information system to support continued growth, not
specifically due to Y2K exposure. The Company has capitalized the costs of the
ERP and included them in Management Information Systems on the balance sheet,
which totaled $500,000 as of June 30,1999. The implementation of this ERP system
substantially addresses Y2K compliance issues related to our financial and
manufacturing data collection and reporting systems.
In addition to assessing internal systems, the Company is reviewing suppliers,
service providers and customers whose systems failures as a result of Y2K
non-compliance could have a significant impact on the Company's continued
business operations. The Company is principally dependent on a small number of
suppliers for the majority of its raw material. The Company has initiated
communications to directly address these suppliers' Y2K preparedness, however
the Company has limited or no control over the actions of these third party
suppliers to address and resolve their Y2K issues. Any failure of these
principal third party suppliers to resolve their Y2K issues could have a
materially adverse effect on continued uninterrupted business operations.
Based on the results of the internal compliance initiative and the assessment of
third parties preparedness for the millennium change, management is developing
appropriate contingency plans. The contingency plans are being developed to
address the following, but not limited solely to those, areas listed: adequate
stock of materials on-hand
12
<PAGE> 13
to mitigate any short-term disruptions of supply that may occur; adequate stock
of finished product to mitigate any disruptions due to lack of customer
forecasts; adequate alternative means of communication for transfer of voice and
data.
It is management's opinion that the Company's overall internal, as opposed to
supplier, risks associated with the Y2K problem are low. The implementation
costs associated with the ERP project are the only material costs incurred to
date in system software that would be reviewed as part of our Y2K project. The
Company has not incurred any other material costs related to the Y2K project,
and it is anticipated that total future costs associated with ensuring
compliance will not exceed $100,000 and will be funded by cash flows generated
from ongoing business operations. However, these expectations are subject to
uncertainties. Although the Company expects that its internal systems will be
Y2K compliant by the end of 1999, there can be no assurances that system
failures will not occur, or that such failures will not have a materially
adverse effect on continued uninterrupted business operations.
The following table provides a synopsis of the status, timetable, costs and
contingency plans of the categories BTI has identified as sensitive to Y2K.
<TABLE>
<CAPTION>
- ------------------------- --------------------- ---------------- ------------ ------------- -------------- ---------------
System/Process Phase Status Timetable Estimated Contingency Estimated
Cost Plan/Risks Contingency
Cost
- ------------------------- --------------------- ---------------- ------------ ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Financial, Implementation of $600,000 All mission $0
Manufacturing, and Time Integrated ERP critical
& Attendance Software System This cost software
Financial Complete - is not a domestically
Purchasing Complete - direct has been
Manufacturing ME Complete - result of upgraded to
Customer Service ME Complete the Y2K alleviate
- initiative, Y2K risk.
- but was
Manufacturing TX Complete incurred to
Customer Service TX Complete support
continued
Completion of In process 9/99 business
Accounting Software growth
Upgrades in UK -
Implementation of Complete
new time and
attendance system
- ------------------------- --------------------- ---------------- ------------ ------------- -------------- ---------------
Network Hardware and Inventory System Complete - $15,000 Greatest $20,000
Software Equipment Risk is over
WAN,
Test Complete - disruption
Hardware/Software would
Complete - necessitate
Upgrade/Replace local
installation
of ERP
software in
TX
- ------------------------- --------------------- ---------------- ------------ ------------- -------------- ---------------
Manufacturing Equipment Inventory System Complete - $0 Manufacturing $0
and Systems Equipment process does
not rely on
Test as appropriate Complete - date
sensitive
Remediate Complete - processing
equipment
- ------------------------- --------------------- ---------------- ------------ ------------- -------------- ---------------
</TABLE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management feels that the Market Risk profile of the Company is low.
The Company has a wholly owned subsidiary, BTI-Europe, located in Andover, UK.
The value of the Company's interest in, and inter-Company obligations to and
from, BTI-Europe may fluctuate from time to time in response to changes in the
relative exchange rates between the US Dollar ($) and British Pound Sterling
((pound)). The financial statements of BTI-Europe are
13
<PAGE> 14
consolidated into the financial statements of the Company for financial
reporting purposes in accordance with Generally Accepted Accounting Principals
("GAAP") and, as such, are translated into US currency at the exchange rates
prescribed by GAAP. The Company also sells product throughout the world and,
from time to time, may agree to sell based on the local currencies. The Company
may, from time to time, enter into foreign exchange forward contracts in order
to hedge against currency fluctuations associated with these foreign sales or
anticipated sales. Accordingly, the Company's accounts receivable may be subject
to realized and unrealized foreign exchange gains or losses and are reported in
accordance with GAAP. At March 31, 1998, the Company had no foreign exchange
forward contracts outstanding.
PART II. OTHER INFORMATION.
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held an annual meeting of shareholders on May 20, 1999.
(b) Not required.
(c) Set forth below is a brief description of each matter voted upon at the
meeting, including number of votes cast for, against or withheld, as well as the
number of abstentions and broker non-votes as to each such matter and including
a separate tabulation with respect to each nominee for office:
1. Election of Directors.
NUMBER OF SHARES
----------------------------------
FOR WITHHELD AUTHORITY
--- ------------------
Martin S. Grimnes 4,514,003 12,013
William M. Dubay 4,513,503 12,513
Richard J. Corbin 4,513,153 12,863
Donald R. Hughes 4,513,553 12,463
Max G. Pitcher 4,513,803 12,213
David E. Sharpe 4,513,853 12,163
Peter N. Walmsley 4,513,853 12,163
2. To Ratify the appointment of PricewaterhouseCoopers L.L.P. as
independent auditors of the Company:
NUMBER OF SHARES
----------------
For: 4,504,260
Against: 3,700
Abstain: 18,056
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Data Schedule
14
<PAGE> 15
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.
Brunswick Technologies, Inc.
By: /s/ Alan M. Chesney
--------------------------------------------
Alan M. Chesney
Chief Financial Officer and Treasurer
(Principal financial and accounting officer)
15
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