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, 2000
--------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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.)
40 North Avenue, Burlington, Massachusetts, 01803-3391
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(Address of principal executive offices and zip code)
(781) 229-7896
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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, 2000
- ---------------------------- --------------------------
Common stock, par value $.10 3,114,820
1
TECH/OPS SEVCON, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
ASSETS
(in thousands)
<TABLE>
<CAPTION>
Mar 31, Sept 30,
2000 1999
--------- ------------
(unaudited) (derived from
audited
statements)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,644 $ 3,675
Accounts receivable, less allowances
of $225,000 at 3/31/2000
and $174,000 at 9/30/99 7,849 5,566
Inventories:
Raw materials 2,507 2,080
Work-in-process 982 1,112
Finished goods 831 1,020
------- -------
4,320 4,212
------- -------
Total current assets 14,813 13,453
------- -------
Property, plant and equipment, at cost 7,312 7,282
Less: Accumulated depreciation
and amortization 4,091 4,051
------- -------
Net property, plant
and equipment 3,221 3,231
------- -------
Cost of purchased businesses in excess
of net assets acquired 1,435 1,435
------- -------
$19,469 $18,119
======= =======
The accompanying notes are an integral part of these financial statements.
2
TECH/OPS SEVCON, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
(in thousands)
Mar 31, Sept 30,
2000 1999
--------- ------------
(unaudited) (derived from
audited
statements)
Current liabilities:
Accounts payable $ 3,897 $ 2,650
Dividend payable 561 561
Accrued expenses 2,982 2,950
Accrued taxes on income 509 409
------- -------
Total current liabilities 7,949 6,570
------- -------
Deferred taxes on income 134 138
------- -------
Stockholders' investment
Preferred stock - -
Common stock 312 312
Premium paid in on common stock 3,924 3,924
Retained earnings 8,110 7,811
Cumulative translation adjustment (960) (636)
------- -------
Total stockholders' investment $11,386 $11,411
------- -------
$19,469 $18,119
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
TECH/OPS SEVCON, INC.
Consolidated Statements of Income
(Unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ------------------
Mar 31, Apr 3, Mar 31, Apr 3,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 8,138 $ 8,005 $15,485 $16,009
Costs and expenses:
Cost of sales 4,865 4,653 9,323 9,393
Selling, research and
administrative 2,087 1,886 4,053 3,775
------- ------- ------- -------
6,952 6,539 13,376 13,168
------- ------- ------- -------
Operating income 1,186 1,466 2,109 2,841
Other income (expense), net 6 5 25 60
------- ------- ------- -------
Income before income taxes 1,192 1,471 2,134 2,901
Income taxes 386 512 714 1,012
------- ------- ------- -------
Net income $ 806 $ 959 1,420 1,889
======= ======= ======= =======
Basic income per share $ .26 $ .31 $ .46 $ .61
======= ======= ======= =======
Fully diluted income per share $ .26 $ .31 $ .45 $ .60
======= ======= ======= =======
Consolidated Statement of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
------------------ ------------------
Mar 31, Apr 3, Mar 31, Apr 3,
2000 1999 2000 1999
------- ------- ------- -------
Net income $ 806 $ 959 $ 1,420 $ 1,889
Foreign currency
translation adjustment (113) (297) (324) (419)
------- ------- ------- -------
Comprehensive income $ 693 $ 662 $ 1,096 $ 1,470
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
TECH/OPS SEVCON, INC.
Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------
Mar 31, Apr 3,
2000 1999
------- -------
<S> <C> <C>
Net cash flow from operating activities:
Net income $ 1,420 $ 1,889
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 183 253
Deferred tax provision (4) (11)
Increase (decrease) in cash resulting from
changes in operating assets & liabilities:
Receivables (2,283) (850)
Inventories (108) (464)
Accounts payable 1,248 36
Accrued compensation and expenses 32 (174)
Accrued and deferred taxes on income 100 262
------- -------
Net cash generated from operating activities 588 941
Cash flow used by investing activities:
Acquisition of property, plant, and
equipment, net (236) (247)
------- -------
Cash flow (used by) financing activities:
Dividends paid (1,121) (1,118)
Exercise of stock options - 22
Purchase of common stock - (49)
------- -------
Net cash used by financing activities (1,121) (1,145)
Effect of exchange rate changes on cash (264) (232)
------- -------
Net increase (decrease) in cash (1,032) 683
Opening balance - cash and cash equivalents 3,675 3,988
------- -------
Ending balance - cash and cash equivalents $ 2,644 $ 3,305
======= =======
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 592 $ 692
Cash paid for interest - 4
------- -------
Supplemental disclosure of non-cash
financing activity:
Dividend declared $ 561 $ 560
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
TECH/OPS SEVCON, INC.
Notes to Consolidated Financial Statements - March 31, 2000
(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,
2000 and the results of operations and cash flows for the three
months and six months ended March 31, 2000 and April 3, 1999.
The accounting policies followed by Tech/Ops Sevcon are set
forth in Note 1 to the financial statements in the 1999 Tech/Ops
Sevcon, Inc. Annual Report filed on Form 10-K.
The results of operations for the three-month and six-month periods
ended March 31, 2000 and April 3, 1999 are not necessarily indicative
of the results to be expected for the full year.
(2) Cash Dividends
On March 7, 2000, the Company declared a quarterly dividend
of $.18 per share for the second quarter of fiscal 2000, which was
paid on April 6, 2000 to stockholders of record on March 22,
2000. The Company has paid regular quarterly cash dividends since
the first quarter of fiscal 1990.
(3) Calculation of Earnings Per Share and Weighted Average Shares
Outstanding
Basic and fully diluted earnings per share were calculated as
follows:
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Mar 31 Apr 3 Mar 31 Apr 3
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $ 806 $ 959 $1,420 $1,889
Basic income per share $ .26 $ .31 $ .46 $ .61
Average shares outstanding 3,115 3,110 3,115 3,109
Options outstanding - common
stock equivalents 19 32 18 30
Average common and common
equivalent shares outstanding 3,134 3,142 3,133 3,139
Fully diluted income per share $ .26 $ .31 $ .45 $ .60
====== ====== ====== ======
</TABLE>
6
(4) Segment information
The Company has two reportable segments: electronic controls and
capacitors. The electronic controls segment produces control systems
for battery powered vehicles. The capacitor segment produces electronic
components for sale to electronic equipment manufacturers. Each segment
has its own management team, manufacturing facilities and sales force.
The accounting policies of the segments are the same as those
described in note 1 to the 1999 Annual Report filed on Form 10-K.
Inter-segment revenues are accounted for at current market prices. The
Company evaluates the performance of each segment principally based
on operating income. The Company does not allocate income taxes,
interest income and expense or foreign currency translation gains
and losses to segments. Information concerning operations of these
businesses is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
(in thousands)
Three months ended March 31, 2000
Controls Capacitors Corporate Total
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to external customers $ 7,616 $ 522 - $ 8,138
Inter-segment revenues - 98 - 98
Operating income 1,081 145 (40) 1,186
Identifiable assets 15,978 1,404 2,087 19,469
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Three months ended April 3, 1999
Controls Capacitors Corporate Total
- ---------------------------------------------------------------------
Sales to external customers $ 7,599 $ 406 - $ 8,005
Inter-segment revenues - 48 - 48
Operating income 1,427 63 (24) 1,466
Identifiable assets 13,160 1,234 3,725 18,119
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Six months ended March 31, 2000
Controls Capacitors Corporate Total
- ---------------------------------------------------------------------
Sales to external customers $14,495 $ 990 - $15,485
Inter-segment revenues - 170 - 170
Operating income 1,981 230 (102) 2,109
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Six months ended April 3, 1999
Controls Capacitors Corporate Total
- ---------------------------------------------------------------------
Sales to external customers $15,197 $ 812 - $16,009
Inter-segment revenues - 89 - 89
Operating income 2,822 100 (81) 2,841
- ---------------------------------------------------------------------
</TABLE>
7
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, 2000 and April 3, 1999
Sales in the second fiscal quarter ended March 31, 2000 were
$8,138,000 compared to $8,005,000 in the same quarter of the previous
year, an increase of $133,000, or 2%. Second quarter volumes were 5%
ahead of last year, but, foreign currency fluctuations reduced
reported sales by $260,000, or 3%. Revenues in the U.S. Controller
business increased by 3% mainly due to increased demand in the aerial
lift market, partially offset by a decrease in the fork lift truck
market. Sales in the European Controller markets were in line with last
year. Capacitor sales were 29% higher than last year due to a continuation
of the recovery from the difficult conditions in the European capacitor
market during the past two years.
Gross profit was $79,000 lower than last year. Gross profit was 40.2%
compared to 41.9% in the second quarter of fiscal 1999. The decrease in gross
profit percentage was attributable to foreign currency fluctuations and
adverse sales mix. The second quarter gross profit was 0.9% higher than the
39.3% reported in the first quarter of fiscal 2000.
Selling, research and administrative expenses for the quarter
increased by $201,000, or 11%, compared to fiscal 1999. Research and
development expenditure increased by $100,000 due to higher spending on
new products. In the controller business the plan to reorganize and
refocus manufacturing facilities on their core competencies, reduce
manufacturing costs, improve quality, expand our worldwide sales presence
and increase new product introduction and development resources is ongoing.
Implementation of this plan resulted in additional operating expenses of
$30,000 during the second quarter of fiscal 2000. The company took a $50,000
charge against receivables in the second quarter to reflect the bankruptcy
filing of a US fork lift truck manufacturer.
Operating income was $1,186,000, a decrease of $280,000, or 19%,
compared to the second quarter of last year. $120,000 (8%) of this decrease
was the result foreign currency fluctuation.
For the second quarter operating income in the capacitor business
segment increased by $82,000, or 130%, mainly due to increased volumes. The
offsetting decrease in controller business operating income was mainly due
to adverse sales mix and increased operating expense.
Income before income taxes was $1,192,000, compared to $1,471,000
last year, a decrease of $279,000, or 19%. Other income was $6,000
compared to $5,000 in fiscal 1999. Income taxes were 33.4% of pre-tax
income compared to 34.8% in the same quarter last year. This decrease in
the tax rate was due to lower foreign income tax rates. Net income was
$806,000 compared to $959,000 last year, a decrease of 16%. Basic and
fully diluted income per share decreased by 16%, from $.31 in the second
quarter of fiscal 1999 to $.26 in the current year.
8
Six months ended March 31, 2000 and April 3, 1999
Sales in the first six months of fiscal 2000 were $15,485,000, compared
to $16,009,000 in the same period last year, a decrease of $524,000, or
3%. Foreign currency fluctuations accounted for a $575,000 decrease in
reported sales. Revenues in the US increased by $275,000, or 5%, mainly
due to increased demand in the aerial lift market. Controller sales in
foreign markets decreased by $977,000, or 11%, mainly due to foreign
currency fluctuations and lower sales to the European fork lift truck
market. Capacitor sales increased by $178,000, or 22% compared to the
first half of last year.
Gross profit was 39.8% of sales compared to 41.3% in 1999. Gross
profit decreased by $454,000 compared to the first six months of last
year. The lower gross profit was mainly attributable to foreign currency
fluctuations and adverse sales mix.
Operating expenses for the six-month period were $4,053,000 compared
to $3,775,000 last year, an increase of 7%. Research and development
expenses increased by $186,000. As mentioned above the Company took a
charge of $50,000 relating to a customer seeking protection under
Chapter 11. Implementation of our plan to refocus the company resulted
in increased overhead costs of $80,000 for the six-month period.
Operating income for the first half year was $2,109,000, a decrease
of $732,000, or 26% compared to last year. Operating income for the
controller business decreased by 30% to $1,981,000. Lower volumes, foreign
currency fluctuations and increased research and development spending were
the most significant reasons for this decrease in operating income. In the
capacitor business segment operating income increased by 130% to $230,000,
mainly due to increased volumes.
Income before income taxes was $2,134,000, compared to $2,901,000 last
year, a decrease of $767,000, or 26%. Other income was $25,000 compared to
$60,000 in the first half of fiscal 1999. This decrease in other income was
mainly due to foreign currency transaction losses. Income taxes were 33.5%
of pre-tax income, compared to 34.9% last year, mainly due to lower foreign
tax rates. Net income was $1,420,000, a decrease of $469,000, or 25%,
compared to the same period last year. Basic income per share was 25% lower
than last year at $.46 per share compared to $.61 per share in 1999. Fully
diluted net income was $.45 per share, a decrease of 25% compared to 1999.
Financial Condition
The Company has, since January 1990, maintained a program of regular
cash dividends, which, for the most recent quarter, amounted to $561,000.
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.
9
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 26, 2000, the
shareholders voted to re-elect as directors for three year terms the
following persons: Paul B. Rosenberg and Bernard F. Start. Mr.
Rosenberg received 2,695,746 votes for and 13,574 withheld, and Mr.
Start received 2,695,946 votes for and 13,774 withheld. There were
no abstentions or broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
(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 15, 2000 By: /s/ Paul A. McPartlin
---------------------
Paul A. McPartlin
Chief Financial and Accounting
Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,644
<SECURITIES> 0
<RECEIVABLES> 8,074
<ALLOWANCES> 225
<INVENTORY> 4,320
<CURRENT-ASSETS> 14,813
<PP&E> 7,312
<DEPRECIATION> 4,091
<TOTAL-ASSETS> 19,469
<CURRENT-LIABILITIES> 7,949
<BONDS> 0
0
0
<COMMON> 312
<OTHER-SE> 11,074
<TOTAL-LIABILITY-AND-EQUITY> 19,469
<SALES> 15,485
<TOTAL-REVENUES> 15,485
<CGS> 9,323
<TOTAL-COSTS> 9,323
<OTHER-EXPENSES> 4,053
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,134
<INCOME-TAX> 714
<INCOME-CONTINUING> 1,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,420
<EPS-BASIC> .46
<EPS-DILUTED> .45
</TABLE>
