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 March 31, 1996
--------------
/ / 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 1-9789
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TECH/OPS SEVCON, INC.
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(Exact name of registrant as specified in its charter)
Delaware 04-2985631
- ------------------------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Beacon Street, Boston, Massachusetts, 02108
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(Address of principal executive offices and zip code)
(617) 523-2030
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(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
--- ---
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 May 1, 1996
- ----------------------------- -------------------------------
Common stock, par value $.10 3,048,330
1
<PAGE>
TECH/OPS SEVCON, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
(in thousands)
ASSETS
<TABLE>
<CAPTION>
Mar 31, Sept 30,
1996 1995
--------- ------------
(unaudited) (derived from
audited
statements)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,433 $ 2,692
Accounts receivable, less allowances
of $134,000 at 3/31/96
and $153,000 at 9/30/95 6,217 4,487
Inventories:
Raw materials 1,915 1,643
Work-in-process 1,079 779
Finished goods 700 541
----- -----
3,694 2,963
----- -----
Total current assets 11,344 10,142
----- ------
Property, plant and equipment, at cost 4,051 4,013
Less: Accumulated depreciation
and amortization 2,734 2,664
----- -----
Net property, plant
and equipment 1,317 1,349
----- -----
Cost of purchased businesses in excess
of net assets acquired 1,435 1,435
Other assets 39 55
----- ------
$14,135 $12,981
====== ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
2
<PAGE>
TECH/OPS SEVCON, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
(in thousands)
<TABLE>
<CAPTION>
Mar 31, Sept 30,
1996 1995
-------- ------------
(unaudited) (derived from
audited
statements)
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,933 $ 2,019
Dividend payable 381 387
Accrued expenses 1,685 1,849
Accrued taxes on income 715 423
----- -----
Total current liabilities 5,714 4,678
----- -----
Deferred taxes on income 173 178
----- -----
Stockholders' investment (Note 2)
Preferred stock - -
Common stock 310 310
Premium paid in on common stock 3,388 3,383
Retained earnings 5,701 4,926
Treasury stock, at cost (529) -
Cumulative translation adjustment (622) (494)
------ ------
Total stockholders' investment $ 8,248 $ 8,125
------ ------
$14,135 $12,981
====== ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
TECH/OPS SEVCON, INC.
Consolidated Statement of Income
(Unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31
------------------ ----------------
1996 1995 1996 1995
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net sales $ 7,481 $ 6,165 $13,279 $10,939
Costs and expenses:
Cost of sales 4,439 3,588 7,871 6,400
Selling, general and
administrative 1,617 1,488 3,076 2,678
----- ----- ----- -----
6,056 5,076 10,947 9,078
----- ----- ----- -----
Operating income 1,425 1,089 2,332 1,861
Other income/(expense), net ( 14) 47 0 66
---- ---- ----- ---
Income before income taxes 1,411 1,136 2,332 1,927
Income taxes 467 359 772 597
----- --- ----- ---
Net income $ 944 $ 777 $1,560 $1,330
===== === ===== =====
Net income per share $ .30 $ .25 $ .50 $ .42
=== === === ===
Average common and common
equivalent shares outstanding 3,135 3,138 3,144 3,138
===== ===== ===== =====
Cash dividends per share $ .125 $ .10 $ .25 $ .20
==== === === ===
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
TECH/OPS SEVCON, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------
Mar 31, Mar 31,
(in thousands) 1996 1995
-------- --------
<S> <C> <C>
Net cash flow from operating activities:
Net income $1,560 $1,330
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 150 113
Deferred tax provision ( 5) 6
Increase (decrease) in cash resulting
from changes in operating assets
and liabilities:
Receivables (1,730) (1,251)
Inventories (731) (815)
Accounts payable 914 862
Accrued compensation and expenses (154) (357)
Accrued and deferred taxes on income 282 264
Other assets 16 ( 3)
---- ---
Net cash generated from
operating activities 302 149
Cash flow used by investing activities:
Acquisition of property, plant, and
equipment, net (159) (244)
--- ---
Cash flow used by financing activities:
Exercise of stock options ( 22) -
Purchase of common stock (529) -
Dividends paid (768) (609)
----- ---
Net cash used by financing activities (1,176) (609)
Effect of exchange rate changes on cash ( 83) 142
--- ----
Net increase (decrease) in cash (1,259) (562)
Opening balance - cash and cash equivalents 2,692 2,336
----- -----
Ending balance - cash and cash equivalents $1,433 $1,774
===== =====
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 473 $ 247
--- ---
Supplemental disclosure of non-cash
financing activity:
Dividend declared $ 381 $ 305
=== ===
</TABLE>
The accompanying notes are an integral part of these financial
statements. 5
<PAGE>
TECH/OPS SEVCON, INC.
Notes to Consolidated Financial Statements - March 31, 1996
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(consisting of only normally recurring accruals) necessary to present
fairly the financial position of Tech/Ops Sevcon as of March 31, 1996
and the results of operations and cash flows for the three months and
six months ended March 31, 1996 and 1995.
The accounting policies followed by Tech/Ops Sevcon are set
forth in Note 1 to the financial statements in the 1995 Tech/Ops
Sevcon, Inc. Annual Report on Form 10-K.
The results of operations for the three-month and six-month
periods ended March 31, 1996 and 1995 are not necessarily indicative
of the results to be expected for the full year.
(2) Stock Split
On July 27, 1995, the Company declared a two-for-one stock split
in the form of a 100% stock dividend payable on August 28, 1995 to
shareholders of record on August 11, 1995. Per share information for
the quarter and six months ended March 31, 1995 has been restated to
reflect the stock split.
6
<PAGE>
TECH/OPS SEVCON, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Three months ended March 31
Sales in the second fiscal quarter ended March 31, 1996 were
$7,481,000, compared to $6,165,000 in the same quarter of the
previous year, an increase of 21%. Two thirds of the revenue
increase in this quarter was due to gains in business to new
customers and shipments of new products, with the balance mainly due
to higher world-wide demand for fork lift truck controllers for
aerial lift controllers.
The gross profit percentage was lower than last year(40.7%
compared to 41.8% )principally due to additional costs relating to
new products and warranty costs, but as a result of higher revenues,
the gross profit increased by $465,000. Operating expenses for the
quarter were 9% higher than 1995, mainly due to higher volumes.
There was an unfavorable swing in net other income / (expense) of
$61,000, mainly due to adverse currency fluctuations.
Income before income taxes was $1,411,000, compared to
$1,136,000 last year, an increase of 24%. Income taxes were 33% of
pre-tax income compared to 32% in 1995, due to higher foreign tax
rates and lower tax credits.
Mainly due to increased sales, net income increased by 21% to
$944,000 compared to $777,000 last year. Income per share was $.30
compared to $.25 in the second quarter of fiscal 1995, on a post-
split basis. This was a record quarter for the Company surpassing
the previous record which had been set in the second quarter of
fiscal 1995.
Six months ended March 31
For the first six months of fiscal 1996 sales were $13,279,000
compared to $10,939,000 last year, an increase of 21%.
Approximately 60% of the revenue increase in the half year was due to
gains in business to new customers and shipments of new products,
with the balance mainly due to higher world-wide demand for fork lift
truck controllers for aerial lift controllers.
The gross profit percentage was lower than last year(40.7%
compared to 41.5%) principally due to additional costs relating to
new products and warranty costs, but as a result of higher revenues,
the gross profit increased by $869,000. Operating income for the six
month period was $2,332,000, an increase of 25% compared to the same
period last year. The increase in operating income was mainly due to
higher sales. Other income was $66,000 lower than last year mainly
due to adverse currency fluctuations.
7
<PAGE>
TECH/OPS SEVCON, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Results of Operations (continued)
Income before income taxes was $2,332,000, an increase of 21%
compared to the first six months of 1995. Income taxes were 33% of
pre-tax income, an increase of 2% compared to last year, due to
higher foreign taxes. Mainly as a result of higher volumes, net
income was $1,560,000 compared to $1,330,000 last year, an increase
of 17%. Income per share was $.50 compared to $.42 last year, an
increase of 19%.
Financial Condition
The Company has, since January 1990, maintained a program of
regular cash dividends, which, for the most recent quarter, amounted
to $381,000. Tech/Ops Sevcon's resources, in the opinion of
management, are adequate for projected operations and capital
spending programs, as well as continuation of the cash dividend.
8
<PAGE>
TECH/OPS SEVCON, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting held on January 31, 1996, the
shareholders voted to re-elect as directors for three year terms the
following persons: Milton C. Lauenstein and C. Vincent Vappi. Mr.
Lauenstein received 2,708,723 votes for and 18,967 withheld, and Mr.
Vappi received 2,707,907 votes for and 19,783 withheld. The
shareholders also voted to approve an increase in the number of
authorized common shares from 4,000,000 to 8,000,000 by a vote of
2,641,463 shares for, 73,247 shares against, and 12,980 shares
abstaining. The shareholders also voted to approve the Company's
1996 Equity Incentive Plan by a vote of 2,638,071 shares for, 60,289
shares against, and 29,330 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
(10) 1996 Equity Incentive Plan (filed as Exhibit 99.1
to Registration Statement on Form S-8 No. 333-02113
and incorporated herein by reference)
(11) Calculation of earnings per share
(27) Financial Data Schedule (EDGAR Filing only)
(b) Reports on Form 8-K - There were no reports on Form 8-K
during the quarter for which this report is filed.
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.
TECH/OPS SEVCON, INC.
Date: May 10, 1996 By: /s/ Paul A. McPartlin
---------------------
Paul A. McPartlin
Chief Financial and Accounting
Officer
9
<PAGE>
TECH/OPS SEVCON, INC.
Exhibit Index
Page
(10) 1996 Equity Incentive Plan (filed as Exhibit 99.1
to Registration Statement on Form S-8 No. 333-02113
and incorporated herein by reference)
(11) Calculation of earnings per share 11
(27) Financial Data Schedule (EDGAR Filing only)
10
<PAGE>
EXHIBIT 11
TECH/OPS SEVCON, INC.
Calculation of Earnings Per Share and Weighted Average Shares
Outstanding
(In thousands, except for per share amounts)
<TABLE>
<CAPTION>
Quarter ended Six months ended
March 31 March 31
---------- ----------
Primary 1996 1995 1996 1995
------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares outstanding 3,048 3,045 3,059 3,045
Net effect of dilutive stock options-
based on the treasury stock method
using average market price for the
period 87 92 85 93
----- ----- ----- -----
Total 3,135 3,138 3,144 3,138
Net income $ 944 $ 777 $1,560 $1,330
Net income per share $ .30 $ .25 $ .50 $ .42
Quarter ended Six months ended
March 31 March 31
---------- ----------
Fully Diluted 1996 1995 1996 1995
------------- ---- ---- ---- ----
Average shares outstanding 3,048 3,045 3,059 3,045
Net effect of dilutive stock options-
based on the treasury stock method
using the quarter end market price
for the period, if higher than the
average market price 91 92 92 93
----- ----- ----- -----
Total 3,139 3,138 3,151 3,138
Net income $ 944 $ 777 $1,560 $1,330
Net income per share $ .30 $ .25 $ .50 $ .42
11
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,443
<SECURITIES> 0
<RECEIVABLES> 6,217
<ALLOWANCES> (134)
<INVENTORY> 3,694
<CURRENT-ASSETS> 11,344
<PP&E> 4,051
<DEPRECIATION> (2,734)
<TOTAL-ASSETS> 14,135
<CURRENT-LIABILITIES> 5,714
<BONDS> 0
0
0
<COMMON> 310
<OTHER-SE> 7,938
<TOTAL-LIABILITY-AND-EQUITY> 14,135
<SALES> 13,279
<TOTAL-REVENUES> 13,279
<CGS> 7,871
<TOTAL-COSTS> 7,871
<OTHER-EXPENSES> 3,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,332
<INCOME-TAX> (772)
<INCOME-CONTINUING> 1,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,560
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
