Mail Stop 0306
January 31, 2005
VIA U.S. MAIL AND FAX (508) 281-5341
Mr. Paul A. McPartlin
Chief Financial Officer
Tech/Ops Sevcon, Inc.
155 Northboro Road
Southborough, Massachusetts 01772
Re: Tech/Ops Sevcon, Inc.
Form 10-K for the year ended September 30, 2004
Dear Mr. McPartlin:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
documents
in future filings response to these comments. If you disagree, we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the year ended September 30, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Estimates
1. In future filings please revise the discussion of the bad debts
and inventories discussions, to identify the estimates used and to
describe the methodology used to determine the bad debt and
inventory
obsolescence reserves. Explain how changes in these estimates
could
impact the provisions recorded in each period.
Results of Operations
2. In future filings, consider presenting a tabular comparison of
your results in different periods by operating segment, with
percentage changes, followed by your narrative discussion and
analysis of the reasons for material changes and their
implications.
Refer to SEC Release No. 34-48960.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk
3. In future filings please expand your discussion of foreign
currency exchange rate market risk to include quantitative
information in accordance with one of the three disclosure
alternatives outlined in Item 305 of Regulation S-K.
4. In addition, we note your reference to Note (1) J., and refer
you
to General Instruction No. 6 to paragraph 305(a) and 305 (b) of
Regulation S-K which clearly states that you should present all
the
information called for by the item outside of the financial
statements. Please confirm that you will comply with that
guidance
in all future filings.
Consolidated Balance Sheet
5. We noted that other accrued expenses represent approximately
26%
of total current liabilities. Supplementally, and in future
filings,
please state separately, in the balance sheet or in a note, any
item
included in accrued liabilities which is in excess of 5 percent of
total current liabilities in accordance with Regulation S-X
Article
5-02(20).
Note 1. Summary of Significant Accounting Policies
B. Revenue Recognition
6. We noted that the company provides warranties for customers.
Please revise future filings to provide the disclosures required
by
paragraph 14 of FIN 45.
E. Stock-Based Compensation Plans
7. In future filings please ensure your pro forma table is
presented
in accordance with paragraph 2(e)(c) of SFAS 148. Your current
presentation does not show the stock based employee compensation
cost
included in the determination of net income as reported or the
stock
based employee compensation cost that would have been included in
the
determination of net income if the fair value based method had
been
applied to all awards.
8. In future filings expand your disclosure of the significant
assumptions used to estimate the fair value of options and
disclose
the information for each year in which an income statement is
presented. We note that you only disclosed the assumptions used
for
fiscal 2003 but not for fiscal 2004 or 2002. See paragraph 47 of
SFAS 123.
G. Inventories
9. Revise the note in future filings to disclose your policy for
inventory obsolescence. Describe the methodology you use to
determine the amounts written down in the reported periods. Your
policy should reflect compliance with SAB Topic 5-BB.
I. Translation of Foreign Currencies
10. In future filings please disclose the aggregate transaction
gain
or loss included in determining net income for the period in the
financial statements or the notes thereto. See paragraph 30 of
SFAF
52.
J. Derivative Instruments and Hedging
11. Tell us supplementally and in future filings disclose the
amount
of the net gain or loss recognized in earnings during the
reporting
period. In addition, provide a description of the transactions
that
will result in the reclassification into earnings of gains or
losses
that are reported in other comprehensive income. See paragraphs 44
and 45 of SFAS 133 as amended.
Note 2. Capital Stock
12. We noted that the company repurchased 18,569 `mature` shares
from
employees in fiscal 2002.
a) Please tell us what you mean by `mature` shares.
b) Tell us the terms of the repurchase, including the price paid
to
repurchase the shares, the amount of any premium paid for the
shares,
the amount of stock compensation expense recorded, when the
related
options exercised, and how much time elapsed between the exercise
of
the stock options and the company`s repurchase.
c) Cite the accounting literature upon which you relied.
Note 7. Segment Information
13. In future filings report revenues for each product or each
group
of similar products. This would be especially beneficial to
investors
with regards to the Electronic Controls segment since it is 93% of
your revenues. See paragraph 37 of SFAS 131.
Item 9A. Controls and Procedures
14. Amend your filing to disclose management`s conclusion
regarding
the effectiveness, not the design, of the registrant`s disclosure
controls and procedures as of the end of the period covered by the
report. See Item 307 of Regulation S-K and Exchange Act Rule 13a-
15(b).
* * * *
As appropriate, please amend your 10-K for the year ending
September 30, 2004 and respond to these comments within 10
business
days or tell us when you will provide us with a response. You may
wish to provide us with marked copies of the amendment to expedite
our review. Please furnish a cover letter that keys your
responses
to our comments and provides any requested supplemental
information.
Detailed cover letters greatly facilitate our review. Please file
your cover letter on EDGAR. Please understand that we may have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
? the company is responsible for the adequacy and accuracy of
the
disclosure in the filings;
? staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
? the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Julie Sherman, Staff Accountant, at (202)
824-
5506 or me at (202) 942-1984 if you have questions.
Sincerely,
Martin James
Senior Assistant Chief
Accountant
Mr. Paul A. McPartlin
Tech/Ops Sevcon, Inc.
January 31, 2005
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