SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter ended December 30, 1995.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 1-10573
THERMO POWER CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2891371
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Class Outstanding at January 26, 1996
---------------------------- -------------------------------
Common Stock, $.10 par value 12,453,768
PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
PART I - Financial Information
Item 1 - Financial Statements
(a) Consolidated Balance Sheet - Assets as of December 30, 1995 and
September 30, 1995 (In thousands) (Unaudited)
December 30, September 30,
1995 1995
------------ -------------
Current Assets:
Cash and cash equivalents $ 23,277 $ 23,504
Available-for-sale investments, at quoted
market value (amortized cost of $10,475 and
$10,624) (includes $426 and $429 of related
party investments) 10,523 10,666
Accounts receivable, less allowances of $481
and $530 18,234 18,203
Unbilled contract costs and fees 7,266 6,228
Inventories:
Raw materials and supplies 16,661 17,453
Work in process and finished goods 2,150 4,796
Prepaid income taxes 3,329 3,213
Other current assets 292 752
-------- --------
81,732 84,815
-------- --------
Rental Assets, at Cost 10,092 7,391
Less: Accumulated depreciation and amortization 1,228 985
-------- --------
8,864 6,406
-------- --------
Property, Plant and Equipment, at Cost 16,240 15,232
Less: Accumulated depreciation and amortization 7,687 6,765
-------- --------
8,553 8,467
-------- --------
Long-term Available-for-sale Investments, at
Quoted Market Value (amortized cost of $453 and
$471) (includes $339 invested in parent company
common stock in fiscal 1995) 184 733
-------- --------
Other Assets 366 223
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 7,720 7,773
-------- --------
$107,419 $108,417
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
2PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
(a) Consolidated Balance Sheet - Liabilities and Shareholders' Investment
as of December 30, 1995 and September 30, 1995 (In thousands except
share amounts) (Unaudited)
December 30, September 30,
1995 1995
------------ -------------
Current Liabilities:
Accounts payable $ 10,466 $ 13,262
Accrued payroll and employee benefits 2,589 2,732
Customer advances 1,181 971
Accrued warranty costs 1,922 2,100
Accrued income taxes 1,416 1,368
Other accrued expenses 4,353 4,242
Due to Thermo Electron Corporation
and affiliated companies 1,360 -
-------- --------
23,287 24,675
-------- --------
Deferred Income Taxes 28 118
-------- --------
Long-term Obligations 350 364
-------- --------
Common Stock of Subsidiary Subject to
Redemption ($18,450 redemption value) 17,513 17,435
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 30,000,000
shares authorized; 12,478,544 shares issued 1,248 1,248
Capital in excess of par value 53,920 53,898
Retained earnings 11,399 10,822
Treasury stock at cost, 26,187 and
49,758 shares (182) (341)
Net unrealized gain (loss) on
available-for-sale investments (144) 198
-------- --------
66,241 65,825
-------- --------
$107,419 $108,417
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
(b) Consolidated Statement of Income for the three months ended
December 30, 1995 and December 31, 1994 (In thousands except per
share amounts) (Unaudited)
Three Months Ended
---------------------------
December 30, December 31,
1995 1994
------------ ------------
Revenues $27,452 $22,314
------- -------
Costs and Operating Expenses:
Cost of revenues 22,665 17,048
Selling, general and administrative expenses 3,737 3,721
Research and development expenses 738 530
------- -------
27,140 21,299
------- -------
Operating Income 312 1,015
Interest Income 437 300
Interest Expense (11) (5)
Gain (Loss) on Sale of Investments, Net (includes
$344 from sale of related party investments in
fiscal 1996) (Note 2) 326 (38)
------- -------
Income Before Provision for Income Taxes and
Minority Interest 1,064 1,272
Provision for Income Taxes 409 485
Minority Interest Expense 78 -
------- -------
Net Income $ 577 $ 787
======= =======
Earnings per Share $ .05 $ .06
======= =======
Weighted Average Shares 12,444 12,327
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
(c) Consolidated Statement of Cash Flows for the three months ended
December 30, 1995 and December 31, 1994 (In thousands) (Unaudited)
Three Months Ended
---------------------------
December 30, December 31,
1995 1994
------------ ------------
Operating Activities:
Net income $ 577 $ 787
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 636 432
Provision for losses on accounts receivable (55) 20
(Gain) loss on sale of investments, net (Note 2) (326) 38
Minority interest expense 78 -
Changes in current accounts, excluding the
effects of acquisition:
Accounts receivable 447 2,472
Inventories and unbilled contract
costs and fees 607 (270)
Other current assets 455 38
Accounts payable (2,796) (874)
Other current liabilities 334 (778)
------- -------
Net cash provided by (used in) operating
activities (43) 1,865
------- -------
Investing Activities:
Proceeds from sale and maturities of
available-for-sale investments - 1,387
(Increase) decrease in rental assets (315) 78
Purchases of property, plant and equipment (385) (361)
Proceeds from sale of parent company common
stock (Note 2) 362 -
Issuance of notes receivable (165) -
Other 152 317
------- -------
Net cash provided by (used in) investing
activities (351) 1,421
------- -------
Financing Activities:
Net proceeds from issuance of Company
common stock 181 255
Repayment of long-term obligations (14) (10)
------- -------
Net cash provided by financing activities $ 167 $ 245
------- -------
5PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
(c) Consolidated Statement of Cash Flows for the three months ended
December 30, 1995 and December 31, 1994 (In thousands) (Unaudited)
(continued)
Three Months Ended
--------------------------
December 30, December 31,
1995 1994
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents $ (227) $ 3,531
Cash and Cash Equivalents at Beginning
of Period 23,504 7,474
------- -------
Cash and Cash Equivalents at End of Period $23,277 $11,005
======= =======
Cash Paid For:
Interest $ 11 $ 5
Income taxes $ 384 $ 609
The accompanying notes are an integral part of these consolidated financial
statements.
6PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
(d) Notes to Consolidated Financial Statements - December 30, 1995
1. General
The interim consolidated financial statements have been prepared by
Thermo Power Corporation (the Company) without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary
for a fair statement of (a) the results of operations for the three-month
periods ended December 30, 1995 and December 31, 1994, (b) the financial
position at December 30, 1995, and (c) the cash flows for the three-month
periods ended December 30, 1995 and December 31, 1994. Interim results are
not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of September 30, 1995, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial statements
and notes included herein should be read in conjunction with the financial
statements and notes included in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1995, filed with the Securities and
Exchange Commission.
2. Sale of Parent Company Common Stock
In December 1995, the Company sold 7,313 shares of Thermo Electron
Corporation common stock for net proceeds of $362,000, which resulted in a
gain of $344,000.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Description of Business
Industrial Refrigeration Systems
--------------------------------
The Company's FES division supplies standard and custom-designed
refrigeration systems used primarily by the food-processing, petrochemical,
and pharmaceutical industries. NuTemp, Inc. (NuTemp) is a supplier of both
remanufactured and new industrial refrigeration and commercial cooling
equipment for sale or rental. NuTemp's industrial refrigeration equipment
is used primarily in the food-processing, petrochemical, and pharmaceutical
industries, and its commercial cooling equipment is used primarily in
institutions and commercial buildings, as well as by service contractors.
The demand for NuTemp's equipment is typically highest in the summer
period.
7PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Description of Business (continued)
Engines
-------
The Company's Crusader Engines (Crusader) division manufactures
gasoline engines for recreational boats; natural gas engines for vehicular,
cooling, pumping, refrigeration, and other industrial applications; and LPG
(liquefied petroleum gas) and gasoline engines for lift trucks.
Cooling and Cogeneration Systems
--------------------------------
The Company's Tecogen division designs, develops, markets, and
services packaged cooling and cogeneration systems fueled principally by
natural gas for sale to a wide range of commercial, institutional,
industrial, and multi-unit residential users. Certain large-capacity
cooling systems are manufactured by FES, and the cogeneration systems are
manufactured by Crusader. Tecogen also conducts research and development on
applications of thermal energy.
The Company's ThermoLyte Corporation (ThermoLyte) subsidiary is
developing a family of propane-powered flashlights, emergency lights, area
lights, and other lighting products.
The Company's revenues by industry segment for the three-month periods
ended December 30, 1995 and December 31, 1994, are shown in the following
table.
Three Months Ended
--------------------------
December 30, December 31,
(In thousands) 1995 1994
--------------------------------------------------------------------------
Industrial Refrigeration Systems $17,071 $14,178
Engines 7,253 5,155
Cooling and Cogeneration Systems 3,610 3,380
Intersegment sales elimination (482) (399)
------- -------
$27,452 $22,314
======= =======
8PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
First Quarter Fiscal 1996 Compared With First Quarter Fiscal 1995
-----------------------------------------------------------------
Total revenues increased 23% to $27,452,000 in the first quarter of
fiscal 1996 from $22,314,000 in the first quarter of fiscal 1995.
Industrial Refrigeration Systems segment revenues increased 20% to
$17,071,000 in 1996 from $14,178,000 in 1995. Revenues at FES increased in
1996 primarily due to greater demand for custom-designed refrigeration
packages, offset in part by lower prices for refrigeration packages due to
increased competition in the refrigeration industry and lower demand for
screw compressor packages. Revenues at NuTemp decreased by $405,000 due to
generally lower temperatures in fiscal 1996 compared with fiscal 1995,
which resulted in lower demand for rental equipment and remanufactured
equipment. Engines segment revenues increased 41% to $7,253,000 in 1996
from $5,155,000 in 1995 primarily due to increased demand for gasoline and
natural gas TecoDrive engines and the inclusion of revenues from lift-truck
engines, offset in part by a decrease of $908,000 in revenues from
marine-engine related products. Cooling and Cogeneration Systems segment
revenues increased 7% to $3,610,000 in 1996 from $3,380,000 in 1995
primarily due to an increase in revenues from gas-fueled cooling systems
and, to a lesser extent, packaged cogeneration systems. Results for the
Cooling and Cogeneration Systems segment in 1995 include an $875,000 fee
received from one of the Company's distributors of packaged cogeneration
systems to satisfy the financial obligations under a minimum purchase
contract.
The gross profit margin decreased to 17% in the first quarter of
fiscal 1996 from 24% in the first quarter of fiscal 1995. The gross profit
margin for the Industrial Refrigeration Systems segment decreased to 21% in
1996 from 25% in 1994. The decrease is primarily due to lower prices at FES
resulting from increased competition in the refrigeration industry, higher
warranty expenses at FES in 1996 compared with unusually low warranty
expenses in 1995 and, to a lesser extent, lower revenues at NuTemp. In the
second quarter of fiscal 1996, a cost increase in one of the major
components of the Company's industrial refrigeration packages will take
effect. The gross profit margin for the Engines segment decreased to 5% in
1996 from 12% in 1995 primarily due to higher warranty expenses in 1996
compared with 1995 and, to a lesser extent, startup costs associated with
the introduction of lift-truck engines. This higher level of warranty
expense is expected to continue into the second quarter of fiscal 1996. The
gross profit margin for the Cooling and Cogeneration Systems segment
decreased to 24% in 1996 from 32% in 1995 primarily due to the inclusion in
1995 of a fee received from one of the Company's distributors of packaged
cogeneration systems discussed above.
9PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
First Quarter Fiscal 1996 Compared With First Quarter Fiscal 1995
-----------------------------------------------------------------
Selling, general and administrative expenses as a percentage of
revenues decreased to 14% in the first quarter of fiscal 1996 from 17% in
the first quarter of fiscal 1995 primarily due to an increase in total
revenues. Research and development expenses increased to $738,000 in 1996
from $530,000 in 1995 primarily due to development costs associated with
gas-fueled lighting products and, to a lesser extent, natural gas-engine
products.
Interest income increased to $437,000 in the first quarter of fiscal
1996 from $300,000 in the first quarter of fiscal 1995, reflecting interest
income earned on the proceeds from ThermoLyte's March 1995 private
placement. The Company holds certain investments in companies affiliated
with Thermo Electron Corporation (Thermo Electron) and has sold, from time
to time, a portion of these investments for a gain to the Company. Gain on
sale of investments, net, in 1996 primarily represents a gain of $344,000
relating to the sale of the Company's remaining investment in Thermo
Electron common stock (Note 2). As of December 30, 1995, the Company owned
$426,000 of 6.5% subordinated convertible debentures due 1997 issued by
Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) that were
purchased for $365,000. Thermo TerraTech Inc. is a majority-owned
subsidiary of Thermo Electron. The Company may sell these investments from
time to time in the future.
The effective tax rate was 38% in the first quarters of fiscal 1996
and 1995. This rate exceeded the statutory federal income tax rate
primarily due to the impact of state income taxes.
Financial Condition
Liquidity and Capital Resources
-------------------------------
Working capital was $58,445,000 at December 30, 1995, compared with
$60,140,000 at September 30, 1995. Included in working capital are cash,
cash equivalents, and available-for-sale investments of $33,800,000 at
December 30, 1995, compared with $34,170,000 at September 30, 1995. Of the
$33,800,000 balance at December 30, 1995, $17,337,000 was held by
ThermoLyte and the remainder was held by the Company and its wholly owned
subsidiaries. During the first three months of fiscal 1996, $43,000 of cash
was used in operating activities primarily due to a decrease in accounts
payable. During the first quarter of fiscal 1996, the Company acquired the
thermoelectrics cooling module business of ThermoTrex Corporation, a
majority-owned subsidiary of Thermo Electron. The purchase price has not
10PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
-------------------------------
yet been finalized, but will be equal to the net book value of the assets
transferred, currently estimated to be approximately $800,000. During the
remainder of fiscal 1996, the Company expects to make capital expenditures
of approximately $4,100,000, of which approximately $1,700,000 is expected
to be used to expand and upgrade the manufacturing facilities at FES. The
Company believes its current resources are sufficient to meet the capital
requirements of its existing operations for the foreseeable future.
PART II - Other Information
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
11PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
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 as of the 6th day of February
1996.
THERMO POWER CORPORATION
Paul F. Kelleher
--------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
--------------------------
John N. Hatsopoulos
Chief Financial Officer
12PAGE
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FORM 10-Q
December 30, 1995
THERMO POWER CORPORATION
EXHIBIT INDEX
-------------
Exhibit
Number Description of Exhibit Page
------- ---------------------------------------------------- ----
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
POWER CORP.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 23,277
<SECURITIES> 10,523
<RECEIVABLES> 18,715
<ALLOWANCES> 481
<INVENTORY> 18,811
<CURRENT-ASSETS> 81,732
<PP&E> 16,240
<DEPRECIATION> 7,687
<TOTAL-ASSETS> 107,419
<CURRENT-LIABILITIES> 23,287
<BONDS> 350
<COMMON> 1,248
0
0
<OTHER-SE> 64,993
<TOTAL-LIABILITY-AND-EQUITY> 107,419
<SALES> 27,452
<TOTAL-REVENUES> 27,452
<CGS> 22,665
<TOTAL-COSTS> 22,665
<OTHER-EXPENSES> 738
<LOSS-PROVISION> (55)
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 1,064
<INCOME-TAX> 409
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 577
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
