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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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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 April 1, 1995
/ / Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the period from to
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COMMISSION FILE NUMBER 0-6890
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MECHANICAL TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
NEW YORK 14-1462255
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 ALBANY-SHAKER RD., LATHAM, NEW YORK 12110
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(Address of principal executive offices) (Zip Code)
(518) 785-2211
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Registrant's telephone number, including area code
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
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
--- ---
CLASS OUTSTANDING AT APRIL 1, 1995
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COMMON STOCK, $1.00 PAR VALUE 3,568,868 SHARES
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<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED
INDEX
Part I Financial Information Page No.
--------
Consolidated Balance Sheets - April 1, 1995
and September 30, 1994 3 - 4
Consolidated Statements of Income -
Three months and six months ended
April 1, 1995 and April 2, 1994 5
Consolidated Statements of Cash Flows -
Six months ended April 1, 1995
and April 2, 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
Part II Other Information 11
Signature 12
<PAGE>
PART I FINANCIAL INFORMATION
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
As of April 1, 1995 (Unaudited) and
September 30, 1994 (Derived from audited financial statements)
(Dollars in Thousands)
<TABLE>
<CAPTION>
APRIL 1, SEPT. 30,
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17 $ 1,820
Trade accounts 6,311 11,632
Other receivables 310 94
------- -------
Gross receivables 6,621 11,726
Allowance for doubtful accounts (80) (101)
------- -------
Net receivables 6,541 11,625
Income taxes receivable 353 122
INVENTORIES:
Raw materials and components 2,068 3,640
Work in process 1,740 2,231
Finished Goods 89 197
------- -------
Total inventories 3,897 6,068
Deferred income taxes 69 306
Prepaid expenses & other
current assets 282 214
------- -------
Total Current Assets 11,159 20,155
Other Assets:
Excess of cost over net assets of
acquired companies, net 1,689 1,726
Other 871 227
Property, Plant and Equipment:
Cost 18,861 20,629
Accumulated depreciation (16,054) (17,420)
------- -------
Net Property, Plant and Equipment 2,807 3,209
------- -------
TOTAL ASSETS $ 16,526 $ 25,317
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
As of April 1, 1995 (Unaudited) and
September 30, 1994 (Derived from audited financial statements)
(Dollars in thousands)
<TABLE>
<CAPTION>
APRIL 1, SEPT.30,
1995 1994
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line-of-credit $ 2,136 $ 4,000
Note Payable 3,000 3,000
Current installments on long-term debt 2,548 9,038
Accounts payable 1,404 3,684
Accrued expenses 3,296 5,998
Net liabilities of discontinued operations 2,756 2,756
Payroll and other taxes withheld
and accrued 304 267
------- -------
Total Current Liabilities 15,444 28,743
Long-term debt, net of current maturities - 2,144
Deferred income taxes and other credits 848 848
Shareholders' Equity:
Common stock 3,569 3,546
Treasury Stock - (100)
Paid-in capital 12,830 12,944
Retained earnings - beginning of year (22,759) 1,619
- current year 6,637 (24,378)
Stock Grants (25) (18)
Foreign currency translation adjustment (18) (31)
------- -------
TOTAL SHAREHOLDERS' EQUITY 234 (6,418)
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 16,526 $ 25,317
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 1, APRIL 2, APRIL 1, APRIL 2,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Product Sales $ 4,316 $ 6,287 $ 11,395 $ 12,240
Research & Development revenue 2,063 2,786 4,577 5,117
------- ------- ------- -------
Total Revenues $ 6,379 $ 9,073 $ 15,972 $ 17,357
Product cost of sales 2,651 3,891 6,674 7,516
Research & Development contract costs 1,887 1,965 3,975 3,948
Selling, general and administrative
expenses 1,806 2,236 3,959 4,433
Product development costs
and research 268 777 742 1,528
------- ------- ------- -------
Operating (loss) income
from continuing operations $ (233) $ 204 $ 622 $ (68)
Interest expense (222) (235) (583) (518)
Gain on sale of subsidiary, ProQuip - - 6,779 -
Gain on sale of assets - - - 1,856
Other income (expense), net (66) (49) (113) (91)
------- ------- ------- -------
(Loss) income from continuing
operations before income taxes $ (521) $ (80) $ 6,705 $ 1,179
Income tax (benefit) expense - (38) 68 487
------- ------- ------- -------
(Loss) income from continuing
operations $ (521) $ (42) $ 6,637 $ 692
Loss from discontinued operation - (18,816) - (19,217)
------- ------- ------- -------
Net (loss) income $ (521) $(18,858) $ 6,637 $(18,525)
======= ======= ======= =======
(Loss) earnings per share:
Continuing operations $ (.15) $ (.01) $ 1.87 $ .20
Discontinued operations .00 (5.34) - (5.46)
------- ------- ------- -------
(Loss) earnings per share $ (.15) $ (5.35) $ 1.87 $ (5.26)
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 1, APRIL 2,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES -------- --------
Net income from continuing operations $ 6,637 $ 692
Adjustments to reconcile net income to net
cash (used) provided by continuing operations:
Depreciation and amortization 411 538
Gain on sale of assets - (1,856)
Gain on sale of subsidiary (6,779) -
Provision for deferred income taxes - 307
Foreign currency translation 13 (31)
Other 1 6
Changes in operating assets and liabilities
net of effects of discontinued operations:
Accounts receivable 1,863 1,436
Inventories (643) (762)
Prepaid expenses and other current assets (82) 200
Accounts payable (531) 454
Income taxes 28 (953)
Accrued liabilities (1,145) 536
------- -------
Net cash (used) provided by continuing operations $ (227) $ 567
------- -------
Discontinued operations:
(Loss) from discontinued operations $ - $(19,217)
Adjustments to reconcile (loss) to net cash
(used) by discontinued operations
Write down of assets to net realizable value - 9,488
Change in net assets/liabilities of
discontinued operations - 5,293
------- -------
Net cash (used) by discontinued operations $ - $ (4,436)
------- -------
Net cash (used) by operations $ (227) $ (3,869)
------- -------
INVESTING ACTIVITIES
Purchases of property, plant & equipment $ (337) $ (325)
Proceeds from sale of subsidiary, ProQuip,
net of cash balance and expenses 9,125 -
Proceeds on sale of assets - 1,959
------- -------
Net cash provided in investing activities $ 8,788 $ 1,634
------- -------
FINANCING ACTIVITIES
Net borrowing under line-of-credit and
notes payable agreements $ (1,864) $ 4,000
Principal payments of long-term debt (8,500) (2,011)
------- -------
Net cash (used) provided in financing activities $(10,364) $ 1,989
------- -------
Decrease in cash and cash equivalents $ (1,803) $ (246)
Cash and cash equivalents - beginning of period 1,820 675
------- -------
Cash and cash equivalents - end of period $ 17 $ 429
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The management of the Company believes the accompanying unaudited
consolidated financial statements contain all adjustments (consisting
primarily of normal recurring accruals) necessary to fairly present the
financial position as of April 1, 1995 and results of operations and changes
in financial position for the six months then ended.
2. The results of operations for the six-month period ended April 1, 1995 are
not necessarily indicative of the results to be expected for the full year.
3. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K
Report for the fiscal year ended September 30, 1994.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's United Telecontrol Electronics, Inc. ("UTE") subsidiary filed
for voluntary bankruptcy under Chapter 11 of the Federal Bankruptcy Code in
April 1994 and commenced an orderly liquidation in October 1994. The Company
expects the final liquidation of UTE and related court approval will occur
during calendar year 1995. At that time any final adjustments will be made.
Accordingly, the Company no longer includes Defense/Aerospace amongst its
reportable business segments and UTE has been classified as "discontinued
operations" in the Consolidated Financial Statements; prior year information
has been restated to conform to this treatment. (For further information on
this bankruptcy see the discussion under the caption "Results of Operations:
1994 in Comparison with 1993", in Item 7: Management's Discussion and
Analysis of the Financial Condition and Results of Operations and Note 16 to
the Consolidated Financial Statements, in the Company's Form 10-K Report for
the fiscal year ended September 30, 1994 which are incorporated herein by
reference).
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods
included in the accompanying consolidated statements of income. This
discussion relates only to the Company's continuing operations, which
included ProQuip Inc. prior to its sale in November 1994.
RESULTS OF OPERATIONS
- ---------------------
(Dollars in thousands)
SALES
Six Months Ended
--------------------
BUSINESS SEGMENT: 4/1/95 4/2/94 Change
- ----------------- -------- -------- ------
Technology $ 4,887 $ 5,261 $ (374)
Test & Measurement 11,085 12,096 (1,011)
------ ------ ------
TOTAL $15,972 $17,357 $(1,385)
====== ====== ======
OPERATING
INCOME
Six Months Ended
--------------------
BUSINESS SEGMENT: 4/1/95 4/2/94 Change
- ----------------- -------- -------- ------
Technology $ (934) $ (638) $ (296)
Test & Measurement 1,556 570 986
------ ------ ------
TOTAL $ 622 $ (68) $ 690
====== ====== ======
Sales for the first six months of fiscal year 1995 versus the same
period of fiscal year 1994 have decreased while operating income for the same
period reflects an increase. The effect each business segment had on this
change is outlined in the above table and discussed below.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TECHNOLOGY
- ----------
The Technology segment reported decreases in sales and operating profit
compared to the corresponding period last year. The segment's performance
for the first half of fiscal year 1995 was negatively impacted by the failure
to obtain a major order that had been expected. In anticipation of
successfully securing funding, the Company incurred costs on this program
which resulted in a write-off of inventory of approximately $150 thousand
during the second quarter of the current fiscal year. Additional negative
impacts to the Technology segment's results for the first half of the 1995
fiscal year were the margin reversal of approximately $42 thousand as the
result of a customer bankruptcy and a contract overrun resulting in a
negative margin of approximately $186 thousand.
The Technology Division has been successful in the first half of the
year in receiving awards for new business in advanced bearing development,
fuel cell and flywheel energy storage system development, and expects to
continue to move toward focusing its resources on markets offering the
strongest potential for future growth: advanced turbomachinery components;
power and energy systems; monitoring and diagnostics systems; and engineering
services.
TEST AND MEASUREMENT
- --------------------
The Test & Measurement segment reported an 8% decrease in revenues and
a 173% increase in operating income compared to the same period last year.
The decrease in sales was entirely attributable to the sale of ProQuip, noted
below.
The results of the segment include ProQuip Inc. ("ProQuip") which was
sold by the Company in November 1994 resulting in a gain on the sale of
$6,779 thousand during the first half of the 1995 fiscal year. (For further
information on this sale transaction see the discussion under the caption
"Results of Operations: 1994 in Comparison with 1993, in Item 7:
Management's Discussion and Analysis of the Financial Condition and Results
of Operations" and Note 17 to the Consolidated Financial Statements, in the
Company's Form 10-K Report for the fiscal year ended September 30, 1994 which
are incorporated herein by reference). Sales attributable to ProQuip during
the period covered by this Form 10-Q were $2,584 thousand and $4,795 thousand
for fiscal year 1995 and fiscal year 1994, respectively. ProQuip also
accounted for $714 thousand of operating profit during the first half of 1995
and $689 thousand for the corresponding period of the prior year.
The remainder of the Test and Measurement segment, which includes Ling
Electronics, Inc. ("Ling"), the L.A.B. Division and the Advanced Products
Division, reported sales for the first half of 1995 of $8,501 thousand, which
was 16% higher than 1994's comparable period. Operating profit for 1995,
which was $961 thousand higher than 1994, reflects higher sales, improved
margins and lower expenses. Export license restrictions, imposed during the
first quarter of the fiscal year on certain of Ling's products, have begun
to cause delays in shipments and may negatively impact sales levels during
the second half of the fiscal year.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TEST AND MEASUREMENT (continued)
- --------------------
Management believes that sustainable growth of this segment will come
from new products for existing and new niche markets. During the current
fiscal year, the MICROTRAK 7000 (TM), a new laser triangulation sensor product,
for Advanced Products and the Transportation Simulator for L.A.B. are examples
of recent new product introductions.
FINANCIAL CONDITION
- -------------------
During the first quarter of fiscal 1995, the Company sold its ProQuip
subsidiary for approximately $13.3 million. The sale resulted in a gain of
approximately $6.8 million. Approximately $8.0 million of the net proceeds
were applied to the Company's term debt. The balance of this debt was $2.5
million at April 1, 1995 which is payable in full by October 31, 1995. (For
further information on this transaction see Note 17: "Subsequent Event" to
the Consolidated Financial Statements in the Company's Form 10-K Report for
the fiscal year ended September 30, 1994 which is incorporated herein by
reference).
Working capital reflects a $4.3 million improvement from September 30,
1994, but remains in a significantly negative position of $4.3 million at
April 1, 1995. The working capital deficiency was mainly due to a $3.0
million note payable, the $2.5 million term debt noted above, and
approximately $2.8 million net liabilities of discontinued operation, which
resulted from the bankruptcy and subsequent pending liquidation of the
Company's United Telecontrol Electronics, Inc. subsidiary; see Management's
Discussion and Analysis of Financial Condition and Results of Operations on
page 8 of this Form 10-Q and the discussion under the caption "Results of
Operations: 1994 in Comparison with 1993", in Item 7: Management's
Discussion and Analysis of the Financial Condition and Results of Operations
and Note 16 to the Consolidated Financial Statements, in the Company's Form
10-K Report for the fiscal year ended September 30, 1994 which are
incorporated herein by reference. Discussions with the lender of the $3.0
million note payable, which is due on May 31, 1995, to renegotiate the terms
of this note are currently underway. If the Company is not successful with
these negotiations, it would be unable to meet this obligation at that time.
The maturity of the Company's line-of-credit and term debt on October 31,
1995 will require the Company to secure alternative financing or make other
arrangements to satisfy its obligations as they become due; see the
discussion under the caption "Liquidity and Capital Resources" in Item 7:
Management's Discussion and Analysis of the Financial Condition and Results
of Operations, in the Company's Form 10-K Report for the fiscal year ended
September 30, 1994 which is incorporated herein by reference.
At April 1, 1995 cash and cash equivalents were $17 thousand versus
$1,820 thousand at September 30, 1994. As shown by the Consolidated
Statement of Cash Flow for the six months ended April 1, 1995, cash and cash
equivalents were used to reduce, among other things, current liabilities, the
line-of-credit, and long-term debt.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None.
(b) No Reports on Form 8-K were filed by the registrant during the quarter
for which this Report is filed.
<PAGE>
SIGNATURE
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.
MECHANICAL TECHNOLOGY INCORPORATED
5-15-95 /s/ R. WAYNE DIESEL
- --------- ------------------------------------
(Date) R. Wayne Diesel
President & Chief Executive Officer
5-15-95 /s/ STEPHEN T. WILSON
- --------- ------------------------------------
(Date) Stephen T. Wilson
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> APR-01-1995
<CASH> 17
<SECURITIES> 0
<RECEIVABLES> 6,621
<ALLOWANCES> 80
<INVENTORY> 3,897
<CURRENT-ASSETS> 11,159
<PP&E> 18,861
<DEPRECIATION> 16,054
<TOTAL-ASSETS> 16,526
<CURRENT-LIABILITIES> 15,444
<BONDS> 0
<COMMON> 3,569
0
0
<OTHER-SE> (3,335)
<TOTAL-LIABILITY-AND-EQUITY> 16,526
<SALES> 15,972
<TOTAL-REVENUES> 15,972
<CGS> 10,649
<TOTAL-COSTS> 15,350
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 583
<INCOME-PRETAX> 6,705
<INCOME-TAX> 68
<INCOME-CONTINUING> 6,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,637
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
</TABLE>
