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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 29, 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
(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 29, 1995
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 29, 1995
and September 30, 1995 3 - 4
Consolidated Statements of Income -
Three months ended December 29, 1995
and December 31, 1994 5
Consolidated Statements of Cash Flows -
Three months ended December 29, 1995
and December 31, 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 December 29, 1995 (Unaudited) and
September 30, 1995 (Derived from audited financial statements)
(Dollars in thousands)
<TABLE>
<CAPTION>
Dec. 29, Sept. 30,
1995 1995
-------- --------
<S>
ASSETS <C> <C>
Current Assets:
Cash and cash equivalents $ 292 $ 78
Trade accounts 6,608 6,896
Other receivables (1) 17
------- -------
Gross receivables 6,607 6,913
Allowance for doubtful accounts (109) (120)
------- -------
Net receivables 6,498 6,793
Inventories:
Raw materials and components 1,910 2,116
Work in process 1,665 1,119
Finished goods 220 249
------- -------
Total inventories 3,795 3,484
Escrow deposit - 750
Prepaid expenses & other
current assets 217 461
------- -------
Total Current Assets 10,802 11,566
Other Assets:
Excess of cost over net assets of
acquired companies, net 58 59
Other 41 60
Property, Plant and Equipment:
Cost 19,166 19,115
Accumulated depreciation (16,450) (16,317)
------- -------
Net Property, Plant and Equipment 2,716 2,798
------- -------
TOTAL ASSETS $ 13,617 $ 14,483
======= =======
</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 29, 1995 (Unaudited) and
September 30, 1995 (Derived from audited financial statements)
(Dollars in thousands)
<TABLE>
<CAPTION>
Dec. 29, Sept.30,
1995 1995
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line-of-Credit $ 531 $ 1,446
Current installments on long-term debt 804 738
Income taxes payable 13 13
Accounts payable 1,844 2,290
Accrued liabilities 3,730 3,342
Net liabilities of discontinued operations 2,756 2,756
Payroll and other taxes withheld
and accrued 291 387
------- -------
Total Current Liabilities 9,969 10,972
Line-of-Credit, net of current portion 1,962 1,962
Note Payable 3,000 3,000
Long-term debt, net of current maturities 1,159 1,260
Deferred income taxes and other credits 779 779
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Total Liabilities 16,869 17,973
Shareholders' Equity:
Common stock 3,569 3,569
Paid-in capital 12,856 12,856
Retained earnings - beginning of year (19,837) (22,759)
- current year 240 2,922
Foreign currency translation adjustment (23) (20)
Treasury stock (29) (29)
Restricted stock grants (28) (29)
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Total Shareholders' Equity (3,252) (3,490)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 13,617 $ 14,483
======= =======
</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. 29, Dec. 31,
1995 1994
------- -------
<S> <C> <C>
Product revenue $ 5,397 $ 7,079
Research & development revenue 2,004 2,514
------ ------
Total revenue $ 7,401 $ 9,593
Product cost of sales 3,349 4,023
Research & development contract costs 1,409 2,088
Selling, general and administrative
expenses 1,898 2,153
Product development and research costs 191 474
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Operating income $ 554 $ 855
Interest expense (263) (361)
Gain on sale of subsidiary, ProQuip - 6,779
Other (expense) income, net (44) (47)
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Income before income taxes $ 247 $ 7,226
Income tax expense 7 68
------ ------
Net income $ 240 $ 7,158
====== ======
Earnings per share $ .07 $ 2.02
====== ======
</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. 29, Dec. 31,
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 240 $ 7,158
Adjustments to reconcile net income to net
cash provided (used):
Depreciation and amortization 166 213
Gain on sale of subsidiary 0 (6,779)
Foreign currency translation (3) 3
Other (10) 1
Changes in operating assets and liabilities:
Accounts receivable 306 719
Inventories (311) (165)
Escrow deposit 750 -
Prepaid expenses and other current assets 244 2
Accounts payable (446) (52)
Income taxes - 28
Accrued liabilities 292 (1,042)
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Net cash provided by operations $ 1,228 $ 86
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INVESTING ACTIVITIES
Purchases of property, plant & equipment $ (64) $ (184)
Proceeds from sale of subsidiary, ProQuip,
net of cash balance and expenses - 9,125
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Net cash (used) provided in investing activities $ (64) $ 8,941
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FINANCING ACTIVITIES
Net payments under line-of-credit agreement $ (915) $ (2,836)
Principal payments of long-term debt (35) (8,000)
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Net cash used in financing activities $ (950) $(10,836)
------- -------
Increase (decrease) in cash and cash equivalents $ 214 $ (1,809)
Cash and cash equivalents - beginning of period 78 1,820
------- -------
Cash and cash equivalents - end of period $ 292 $ 11
======= =======
</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 December 29, 1995 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 29,
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, 1995.
<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 that the final liquidation of UTE and related court approval will
occur during calendar year 1996. At that time any final adjustments will be
made. (For further information on this bankruptcy see the discussion in Item
7: Management's Discussion and Analysis of 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, 1995 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. Prior year
information contains ProQuip, Inc. ("ProQuip") results through its sale date
(November 22, 1994) and the $6.8 million gain on the sale. (For further
information on this sale transaction, see the discussion under the caption
"Results of Operations:1995 in Comparison with 1994", in Item 7: Management's
Discussion and Analysis of 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, 1995 which are incorporated
herein by reference).
RESULTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
SALES
Three months ended
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BUSINESS SEGMENT: 12/29/95 12/31/94 Change
- ----------------- -------- -------- ------
<S> <C> <C> <C>
Technology $ 2,004 $ 2,848 $ (844)
Test & Measurement 5,397 6,745 (1,348)
------ ------ ------
TOTAL $ 7,401 $ 9,593 $(2,192)
====== ====== ======
OPERATING
INCOME
Three months ended
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BUSINESS SEGMENT: 12/29/95 12/31/94 Change
- ----------------- -------- -------- ------
Technology $ 118 $ (217) $ 335
Test & Measurement 436 1,072 (636)
------ ------ ------
TOTAL $ 554 $ 855 $ (301)
====== ====== ======
</TABLE>
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales and operating income for the first three months of fiscal year
1996 versus the same period of fiscal year 1995 have decreased. However,
excluding ProQuip, sales and operating income for the first three months have
increased. The effect each business segment had on this change is outlined
in the above table and discussed below.
TECHNOLOGY
The Technology segment experienced a decrease in sales, but an increase
in profitability compared to the corresponding period last year. The 30%
decline in sales was due to an expected lower level of activity in the
Technology division, combined with a planned reduction of its turbine
generator sales, parts, and service business. Despite the decline in sales,
the segment managed to generate an operating income of $118 thousand, as
compared to an operating loss of $217 thousand for the first three months of
the previous fiscal year. Reduced overhead and decreases in administrative
and product development expenses contributed to improved profitability.
Continued improvement will depend on success in procuring and fulfilling
orders within fiscal year 1996.
TEST AND MEASUREMENT
The Test and Measurement segment reported a 20% decline in revenues and
a 59% reduction in operating income compared to the same period last year.
These decreases are entirely attributable to the sale of ProQuip, a
subsidiary which was sold by the Company in November 1994. ProQuip recorded
sales of $2,584 thousand during the first quarter of fiscal year 1995 and
accounted for $714 thousand of operating profit during that period. Excluding
ProQuip, sales increased $1,236 thousand, or 30%, compared to the first
quarter of fiscal year 1995 and operating income increased $78 thousand, or
22%. Ling Electronics ("Ling"), the Advanced Products Division, and the LAB
Division all exceeded their sales levels of the same period last year and
each recorded an operating profit for the first quarter. The operating
results benefitted from a higher level of sales and lower product development
spending, which were partially offset by higher selling and administrative
expenses. While management is cautiously optimistic, challenges remain to be
met within this business segment, especially at Ling, to sustain this level
of results.
<PAGE>
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Working capital of $833 thousand at December 29, 1995 reflects a $239
thousand improvement from September 30, 1995.
At December 29, 1995 cash and cash equivalents were $292 thousand versus
$78 thousand at September 30, 1995. Net cash provided by operations for the
first quarter of fiscal 1996 amounted to $1,228,000, as compared to $86,000
in the prior year. The net cash provided in the current fiscal quarter
resulted principally from the purchaser of ProQuip releasing the funds held
in escrow and paying tax monies due the Company, both totaling approximately
$1,021,000, combined with the Company generating income from operations. The
net cash flow provided was used to reduce, among other things, the line-of-
credit and long-term debt. The Company anticipates that it will be able to
meet the liquidity needs of its operations from cash flow generated by those
operations and borrowing under its existing line of credit, including
sufficient cash flow to make all payments due on its indebtedness during
fiscal 1996. However, the Company's ability to achieve these objectives is
dependent upon an orderly liquidation of its United Telecontrol Electronics,
Inc. subsidiary and attaining overall profitability and positive cash flow.
There is no assurance that the Company will be able to achieve these
objectives. (For further information, see the discussion under the caption
"Liquidity and Capital Resources", in Item 7: Management's Discussion and
Analysis of Financial Conditions and Results of Operations, and Note 13 to
the Consolidated Financial Statements, in the Company's Form 10-K Report for
the fiscal year ended September 30, 1995).
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None.
<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
2-09-96 /s/ R. WAYNE DIESEL
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(Date) R. Wayne Diesel
President & Chief Executive Officer
2-09-96 /s/ STEPHEN T. WILSON
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(Date) Stephen T. Wilson
Chief Financial Officer
