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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 December 31, 1994
/ / 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
(Address of principal executive offices) (Zip Code)
(518) 785-2211
Registrant's telephone number, including area code
NOT APPLICABLE
(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 DECEMBER 31, 1994
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 - December 31, 1994
and September 30, 1994 3 - 4
Consolidated Statements of Income -
Three months ended December 31, 1994
and January 1, 1994 5
Consolidated Statements of Cash Flows -
Three months ended December 31, 1994
and January 1, 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
Part II Other Information 13
Signature 14
<PAGE>
PART I FINANCIAL INFORMATION
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
As of December 31, 1994 (Unaudited) and
September 30, 1994 (Derived from audited financial statements)
(Dollars in Thousands)
<TABLE>
<CAPTION>
DEC. 31, SEPT. 30,
1994 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 11 $ 1,820
Trade accounts 7,449 11,632
Other receivables 318 94
------- -------
Gross receivables 7,767 11,726
Allowance for doubtful accounts (82) (101)
------- -------
Net receivables 7,685 11,625
Income taxes receivable 353 122
INVENTORIES:
Raw materials and components 1,675 3,640
Work in process 1,704 2,231
Finished Goods 40 197
------- -------
Total inventories 3,419 6,068
Deferred income taxes 69 306
Prepaid expenses & other
current assets 198 214
------- -------
Total Current Assets 11,735 20,155
Other Assets:
Excess of cost over net assets of
acquired companies, net 1,708 1,726
Other 900 227
Property, Plant and Equipment:
Cost 18,708 20,629
Accumulated depreciation (15,905) (17,420)
------- -------
Net Property, Plant and Equipment 2,803 3,209
------- -------
TOTAL ASSETS $ 17,146 $ 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 December 31, 1994 (Unaudited) and
September 30, 1994 (Derived from audited financial statements)
(Dollars in thousands)
<TABLE>
<CAPTION>
Dec. 31, SEPT.30,
1994 1994
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line-of-credit $ 1,164 $ 4,000
Note Payable 3,000 3,000
Current installments on long-term debt 3,048 9,038
Accounts payable 1,883 3,684
Accrued expenses 3,334 5,998
Net liabilities of discontinued operations 2,756 2,756
Payroll and other taxes withheld
and accrued 369 267
------- -------
Total Current Liabilities 15,554 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 7,158 (24,378)
Stock Grants (26) (18)
Foreign currency translation adjustment (28) (31)
------- -------
TOTAL SHAREHOLDERS' EQUITY 744 (6,418)
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 17,146 $ 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
DEC. 31, JAN. 1,
1994 1994
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<S> <C> <C>
Product Sales $ 7,079 $ 5,953
Research & Development revenue 2,514 2,331
------ ------
Total Revenues $ 9,593 $ 8,284
Product cost of sales 4,023 3,625
Research & Development contract costs 2,088 1,983
Selling, general and administrative
expenses 2,153 2,197
Product development costs and research 474 751
------ ------
Operating income (loss)
from continuing operations $ 855 $ (272)
Interest expense (361) (283)
Gain on sale of subsidiary, ProQuip 6,779 -
Gain on sale of assets - 1,856
Other income (expense), net (47) (42)
------ ------
Income (loss) from continuing
operations before income taxes $ 7,226 $ 1,259
Income tax expense (benefit) 68 525
------ ------
Income (loss) from continuing operations $ 7,158 $ 734
Loss from discontinued operation 0 (401)
------ ------
Net income $ 7,158 $ 333
====== ======
Earnings (loss) per share:
Continuing operations $ 2.02 $ .21
Discontinued operations .00 (.12)
------ ------
Earnings per share $ 2.02 $ .09
====== ======
</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>
THREE MONTHS ENDED
DEC. 31, JAN. 1,
1994 1994
OPERATING ACTIVITIES -------- --------
<S> <C> <C>
Net income from continuing operations $ 7,158 $ 734
Adjustments to reconcile net income to net
cash provided (used) by continuing operations:
Depreciation and amortization 213 356
Gain on sale of assets 0 (1,856)
Gain on sale of subsidiary (6,779) 0
Provision for deferred income taxes 0 307
Foreign currency translation 3 (14)
Other 1 2
Changes in operating assets and liabilities
net of effects of discontinued operations:
Accounts receivable 719 976
Inventories (165) 81
Prepaid expenses and other current assets 2 142
Accounts payable (52) (1,387)
Income taxes 28 282
Accrued liabilities (1,042) (811)
------- -------
Net cash provided (used) by continuing operations $ 86 $ (1,188)
------- -------
Discontinued operations:
(Loss) from discontinued operations $ 0 $ (401)
Change in net assets/liabilities of
discontinued operations 0 (1,732)
------- -------
Net cash (used) by discontinued operations $ 0 $ (2,133)
------- -------
Net cash provided (used) by operations $ 86 $ (3,321)
------- -------
INVESTING ACTIVITIES
Purchases of property, plant & equipment $ (184) $ (131)
Proceeds from sale of subsidiary, ProQuip,
net of cash balance and expenses 9,125 0
Proceeds on sale of assets 0 1,959
------- -------
Net cash provided (used) in investing activities $ 8,941 $ 1,828
------- -------
FINANCING ACTIVITIES
Net borrowing under line-of-credit and
notes payable agreements $ (2,836) $ 3,056
Principal payments of long-term debt (8,000) (1,775)
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Net cash provided in financing activities $(10,836) $ 1,281
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Increase in cash and cash equivalents $ (1,809) $ (212)
Cash and cash equivalents - beginning of period 1,820 675
------- -------
Cash and cash equivalents - end of period $ 11 $ 463
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<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 December 31, 1994 and results of operations and
changes in financial position for the three months then ended.
2. The results of operations for the three-month period ended December 31,
1994 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 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 refer-
ence).
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.
RESULTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
SALES
Three Months Ended
--------------------
BUSINESS SEGMENT: 12/31/94 1/1/94 Change
- - - ----------------- -------- -------- -------
<S> <C> <C> <C>
Technology $ 2,848 $ 2,376 $ 472
Test & Measurement 6,745 5,908 837
------ ------ ------
TOTAL $ 9,593 $ 8,284 $ 1,309
====== ====== ======
OPERATING
INCOME
Three Months Ended
--------------------
BUSINESS SEGMENT: 12/31/94 1/1/94 Change
- - - ----------------- -------- -------- ------
Technology $ (217) $ (585) $ 368
Test & Measurement 1,072 313 759
------ ------ ------
TOTAL $ 855 $ (272) $ 1,127
====== ====== ======
</TABLE>
Sales and profitability from operations for the first three months of
fiscal year 1995 versus the same period of fiscal year 1994 have increased.
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 increases in both sales and operating
profit compared to the corresponding period last year. Sales recorded in the
first quarter of fiscal 1995 versus the prior year reflect an improvement of
approximately 20%. The $368 thousand reduction in the operating loss was due
to the sales increase and to reductions in selling, general & administrative
and product development expenses.
The Technology Division continues to strive towards its goal to achieve
profitability. Management believes this goal is achievable if certain major
orders are received as now anticipated. A major program which was expected
in early fiscal year 1995 has been delayed and is now expected to be received
in the third quarter of the fiscal year. In addition, two customers have
notified the Division that recent government orders to them will result in
major orders to the Technology Division as a subcontractor . This business
is related to further extending new bearing technology developed by the
Division. It is anticipated the orders, noted above, and others, will result
in higher sales levels as the fiscal year progresses, with a resulting
improvement in profitability.
TEST AND MEASUREMENT
The Test & Measurement segment reported a 14% increase in revenues and
a 242% increase in operating income compared to the same period last year.
Ling Electronics, Inc. ("Ling"), the LAB Division ("LAB") and ProQuip, Inc.
("ProQuip") all contributed to the increase in both sales and profitability.
The Advanced Products Division ("Advanced Products") reported slight
decreases in both sales and operating profit versus the same period last
year. A discussion of each business unit in this segment follows.
The results of the segment include ProQuip which was sold by the Company
in November 1994. (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).
ProQuip recorded sales of $2,584 thousand and $2,271 thousand for the first
quarter of fiscal year 1995 and the first quarter of fiscal year 1994,
respectively, and accounted for $714 thousand of operating profit during the
first quarter of 1995 and $382 thousand for the corresponding period of the
prior year.
Ling's sales for the first quarter of 1995 were $416 thousand or 16%
higher than 1994's similar period. Operating profit for 1995 was $343
thousand higher than 1994, reflecting the higher sales, improved margins and
lower expenses. Ling experienced improvements in orders and backlog levels
for the past several months, and expects to continue to record improvements
in 1995 over 1994 results.
Sales at LAB were $183 thousand higher than the comparable period for
the prior year. Operating income increased by $89 thousand, reflecting the
higher sales. A new Transportation Simulator product was introduced at a
major trade show during the first fiscal quarter and initial sales are
expected in the third quarter. It is expected this year will continue to
compare favorably to the prior year.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TEST AND MEASUREMENT (continued)
The Advanced Products Division reported sales and operating profits
slightly lower than the same period of the prior year. MICROTRAK 7000, a
new laser triangulation sensor product, was introduced last fall and the
initial sales will be recorded in the second fiscal quarter. Advanced
Products expects the new product will contribute to another profitable year
for the Division.
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 $3.0
million at December 31, 1994. (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 $4.8 million improvement from September 30,
1994 to a negative $3.8 million at December 31, 1994. The working capital
position remains a deficiency due mainly to a $3.0 million note payable due
in May 1995 and the $3.0 million term debt noted above due in October 1995.
The maturity of these debts during the next ten months 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 December 31, 1994 cash and cash equivalents were $11 thousand versus
$1,820 thousand at September 30, 1994. As shown by the Consolidated
Statement of Cash Flow for the three months ended December 31, 1994, cash and
cash equivalents were used to reduce, among other things, current liabili-
ties, 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) The registrant filed a Current Report on Form 8-K, November 23, 1994,
regarding the sale of a wholly owned subsidiary, ProQuip, Inc.
<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
2-13-95 /s/ R. WAYNE DIESEL
- - - --------- ------------------------------------
(Date) R. Wayne Diesel
President & Chief Executive Officer
2-13-95 /s/ GEORGE HATHAWAY
- - - --------- ------------------------------------
(Date) George Hathaway
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 7,767
<ALLOWANCES> 82
<INVENTORY> 3,419
<CURRENT-ASSETS> 11,735
<PP&E> 18,708
<DEPRECIATION> 15,905
<TOTAL-ASSETS> 17,146
<CURRENT-LIABILITIES> 15,554
<BONDS> 0
<COMMON> 3,569
0
0
<OTHER-SE> (2,825)
<TOTAL-LIABILITY-AND-EQUITY> 17,146
<SALES> 9,593
<TOTAL-REVENUES> 9,593
<CGS> 6,111
<TOTAL-COSTS> 8,738
<OTHER-EXPENSES> 47
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361
<INCOME-PRETAX> 7,226
<INCOME-TAX> 68
<INCOME-CONTINUING> 7,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,158
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
</TABLE>
