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 30, 1997
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/ / 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, 1997
- ----------------------------- -------------------------------
Common stock, par value $.10 3,089,532
1
TECH/OPS SEVCON, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
ASSETS
(in thousands)
March 30, Sept 30,
1997 1996
--------- ------------
(unaudited) (derived from
audited
statements)
Current assets:
Cash and cash equivalents $ 1,702 $ 2,886
Accounts receivable, less allowances
of $144 at 3/30/97
and $150 at 9/30/96 6,172 5,386
Inventories:
Raw materials 1,793 1,706
Work-in-process 1,263 1,060
Finished goods 564 862
----- -----
3,620 3,628
----- -----
Total current assets 11,494 11,900
----- ------
Property, plant and equipment, at cost 5,776 4,154
Less: Accumulated depreciation
and amortization 3,160 2,861
----- -----
Net property, plant
and equipment 2,616 1,293
----- -----
Cost of purchased businesses in excess
of net assets acquired 1,435 1,435
Other assets 5 17
----- - ------
$15,550 $14,645
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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)
March 30, Sept 30,
1997 1996
-------- ------------
(unaudited) (derived from
audited
statements)
Current liabilities:
Current portion of long-term debt $ 228 $ -
Accounts payable 1,945 1,821
Dividend payable 464 463
Accrued expenses 2,262 2,288
Accrued taxes on income 778 801
----- -----
Total current liabilities 5,677 5,373
----- -----
Long-term debt, less current portion 399 -
Deferred taxes on income 170 161
----- -----
Stockholders' investment (Note 2)
Preferred stock - -
Common stock 310 310
Treasury stock, at cost (122) (122)
Premium paid in on common stock 3,716 3,716
Retained earnings 5,946 5,787
Cumulative translation adjustment (546) (580)
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Total stockholders' investment $ 9,304 $ 9,111
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$15,550 $14,645
====== ======
The accompanying notes are an integral part of these financial
statements.
3
TECH/OPS SEVCON, INC.
Consolidated Statement of Income
(Unaudited)
(in thousands except per share data)
Three Months Ended Six Months Ended
------------------ ----------------
March 30 March 31 March 30 March 31
1997 1996 1997 1996
------- ------ ------- ------
Net sales $ 7,133 $ 7,481 $13,330 $13,279
Costs and expenses:
Cost of sales 4,476 4,439 8,363 7,871
Selling, general and
administrative 1,702 1,617 3,274 3,076
----- ----- ----- -----
6,178 6,056 11,637 10,947
----- ----- ----- -----
Operating income 955 1,425 1,693 2,332
Other income/(expense), net ( 9) ( 14) ( 30) 0
---- ---- ----- ---
Income before income taxes 946 1,411 1,663 2,332
Income taxes 325 467 577 772
----- --- ----- ---
Net income $ 621 $ 944 $1,086 $1,560
===== === ===== =====
Net income per share $ .20 $ .30 $ .35 $ .50
=== === === ===
Average common and common
equivalent shares outstanding 3,090 3,135 3,090 3,144
===== ===== ===== =====
Cash dividends per share $ .15 $ .125 $ .30 $ .25
==== === === ===
The accompanying notes are an integral part of these financial
statements.
4
TECH/OPS SEVCON, INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
---------------------
Mar 30, Mar 31,
(in thousands) 1997 1996
-------- --------
Net cash flow from operating activities:
Net income $1,086 $1,560
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 210 150
Deferred tax provision 9 ( 5)
Increase (decrease) in cash resulting
from changes in operating assets
and liabilities:
Receivables (786) (1,730)
Inventories 8 (731)
Accounts payable 124 914
Accrued compensation and expenses ( 26) (154)
Accrued and deferred taxes on income ( 23) 282
Other assets 12 16
---- ---
Net cash generated from
operating activities 614 302
Cash flow used by investing activities:
Acquisition of property, plant, and
equipment, net (1,498) (159)
----- ---
Cash flow used by financing activities:
Long-term debt incurred on purchase of building 627 -
Exercise of stock options - ( 22)
Purchase of common stock - (529)
Dividends paid (926) (768)
----- -----
Net cash used by financing activities ( 299) (1,319)
Effect of exchange rate changes on cash ( 1) ( 83)
----- -----
Net (decrease) in cash (1,184) (1,259)
Opening balance - cash and cash equivalents 2,886 2,692
----- -----
Ending balance - cash and cash equivalents $1,702 $1,433
===== =====
Supplemental disclosure of cash flow information
Cash paid for income taxes $ 604 $ 473
--- ---
Supplemental disclosure of non-cash
financing activity:
Dividend declared $ 464 $ 381
=== ===
The accompanying notes are an integral part of these financial
statements. 5
TECH/OPS SEVCON, INC.
Notes to Consolidated Financial Statements - March 30, 1997
(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 30, 1997
and the results of operations and cash flows for the three months and
six months ended March 30, 1997 and March 31, 1996.
The accounting policies followed by Tech/Ops Sevcon are set
forth in Note 1 to the financial statements in the 1996 Tech/Ops
Sevcon, Inc. Annual Report on Form 10-K.
The results of operations for the three-month and six-month
periods ended March 30, 1997 and March 31, 1996 are not necessarily
indicative of the results to be expected for the full year.
(2) Cash Dividends
On March 5, 1997, the Company declared a quarterly dividend of
$.15 per share for the second quarter of fiscal 1997, which was paid
on April 3, 1997 to stockholders of record on March 20, 1997. The
Company has paid regular quarterly cash dividends since the first
quarter of fiscal 1990.
6
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 30,1997
Sales in the second fiscal quarter ended March 30, 1997 were
$7,133,000, compared to $7,481,000 in the same quarter of the
previous year, a decrease of 5%. Revenues in the US declined by 22%
mainly due to slow conditions in the aerial lift and airport ground
support markets. Volumes in foreign markets increased slightly,
despite a sharp decline in sales of the capacitor business. Currency
fluctuations caused a 2% increase in reported sales.
Gross profit decreased by $385,000, or 13%. The gross profit
percentage was lower than last year (37.2% compared to 40.5%)
principally due to the negative impact of currency fluctuations on
margins, adverse sales mix, lower volumes and increased warranty
costs. The decrease due to currency fluctuations was mainly because
most of the Company's products are manufactured in the United Kingdom
and the pound sterling has strengthened against the other currencies
in which the Company's products are sold. Operating expenses for the
quarter were 6% higher than 1996, mainly due to inflation and
currency translation.
Operating income for the second quarter was $955,000 compared to
$1,425,000 last year, a decrease of 33%. The decrease was a result
of lower gross profits and higher operating expenses.
Income before income taxes was $946,000, compared to $1,411,000
last year, a decrease of 33%. Income taxes were 34% of pre-tax
income in 1997 compared to 33% in 1996 due to lower foreign tax
credits. Mainly due to lower gross profit, net income decreased by
34% to $621,000 compared to $944,000 last year. Income per share was
$.20 compared to $.30 in the second quarter of fiscal 1996.
Six months ended March 30,1997
For the first six months of fiscal 1997, sales were $13,330,000
compared to $13,279,000 last year, an increase of $51,000. Currency
fluctuations caused a 2% increase in reported sales, therefore
physical volumes were marginally lower than last year. Revenues in
the US declined by 16% mainly due to slow conditions in the aerial
lift and airport ground support markets, while shipments in foreign
markets increased by 12%.
Gross profit decreased by $441,000, or 8%, and the gross profit
percentage was lower than last year (37.3% compared to 40.7%).
Foreign currency fluctuations accounted for 1.5% of the decrease in
the gross profit percentage. Adverse sales mix and higher warranty
costs also had a negative impact on gross profit.
7
TECH/OPS SEVCON, INC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Results of Operations (continued)
Operating expenses were 6% higher than last year due to both
inflation and currency fluctuations.
Operating income for the six month period was $1,693,000, a
decrease of 27% compared to the same period last year. The decrease
in operating income was mainly due to lower gross profit. Other
expense (net), mainly currency translation losses, was $30,000
compared to none in 1996.
Income before income taxes was $1,663,000, a decrease of 29%
compared to the first six months of 1996. Income taxes were 35% of
pre-tax income, an increase of 2% compared to last year, mainly due
to lower foreign tax credits. Principally as a result of lower gross
profit, net income was $1,086,000 compared to $1,560,000 last year, a
decrease of 30%. Income per share was $.35 compared to $.50 last
year.
Financial Condition
The Company has, since January 1990, maintained a program of
regular cash dividends, which, for the most recent quarter, amounted
to $464,000. Tech/Ops Sevcon's resources, in the opinion of
management, are adequate for projected operations and capital
spending programs. In October 1996 , the Company purchased a new
manufacturing building in the U. K. for $1.2 million. In connection
with this purchase, the Company obtained a three-year mortgage loan
in the amount of $708,000.
8
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 22, 1997, the
shareholders voted to re-elect as directors for three year terms the
following persons: Paul B. Rosenberg, Herbert Roth, Jr., and Bernard
F. Start. Mr. Rosenberg received 2,615,772 votes for and 2,671
withheld, Mr. Roth received 2,615,872 votes for and 2,571 withheld
and Mr. Start received 2,615,892 votes for and 2,551 withheld. The
shareholders also voted to elect David R. Steadman as a director for
a one-year term. Mr. Steadman received 2,614,692 votes for and 3,751
withheld.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
(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 8, 1997 By: /s/ Paul A. McPartlin
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Paul A. McPartlin
Chief Financial and Accounting
Officer
9
EXHIBIT 11
TECH/OPS SEVCON, INC.
Calculation of Earnings Per Share and Weighted Average Shares
Outstanding
(In thousands, except for per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
Mar 30 Mar 31 Mar 30 Mar 31
Primary 1997 1996 1997 1996
------- ------ ------- ------
Average shares outstanding 3,090 3,135 3,090 3,144
Net income $ 621 $ 944 $1,086 $1,560
Net income per share $ .20 $ .30 $ .35 $ .50
A calculation of fully diluted shares outstanding for the three month
and six months ended March 30, 1997 and March 31, 1996 indicates a
difference of less than one-tenth of one percent and is not material.
10