0000064463-95-000005.txt : 19950817 0000064463-95-000005.hdr.sgml : 19950817 ACCESSION NUMBER: 0000064463-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950816 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MECHANICAL TECHNOLOGY INC CENTRAL INDEX KEY: 0000064463 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 141462255 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06890 FILM NUMBER: 95564614 BUSINESS ADDRESS: STREET 1: 968 ALBANY-SHAKER RD CITY: LATHAM STATE: NY ZIP: 12110 BUSINESS PHONE: 5187852211 MAIL ADDRESS: STREET 2: 968 ALBANY SHAKER RD CITY: LATHAM STATE: NY ZIP: 12110 10-Q 1 QUARTERLY REPORT FOR QUARTER ENDING 7/1/95 ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- 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 July 1, 1995 / / Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the period from to ----------------------- COMMISSION FILE NUMBER 0-6890 ----------------------- MECHANICAL TECHNOLOGY INCORPORATED (Exact name of registrant as specified in its charter) NEW YORK 14-1462255 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 968 ALBANY-SHAKER RD., LATHAM, NEW YORK 12110 ---------------------------------------- ----------- (Address of principal executive offices) (Zip Code) (518) 785-2211 -------------- Registrant's telephone number, including area code NOT APPLICABLE -------------- (Former name, former address and former fiscal year, if changed since last report) 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 --- --- CLASS OUTSTANDING AT July 1, 1995 ----------------------------- ---------------------------- COMMON STOCK, $1.00 PAR VALUE 3,565,868 SHARES ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES INDEX Part I Financial Information Page No. -------- Consolidated Balance Sheets - July 1, 1995 and September 30, 1994 3 - 4 Consolidated Statements of Income - Three months and nine months ended July 1, 1995 and July 2, 1994 5 Consolidated Statements of Cash Flows - Nine months ended July 1, 1995 and July 2, 1994 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 11 Part II Other Information 12 Signature 13 PART I FINANCIAL INFORMATION MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of July 1, 1995 (Unaudited) and September 30, 1994 (Derived from audited financial statements) (Dollars in Thousands)
JULY 1, SEPT. 30, 1995 1994 -------- -------- ASSETS Current Assets: Cash and cash equivalents $ 206 $ 1,820 Trade accounts 6,193 11,632 Other receivables 222 94 ------- ------- Gross receivables 6,415 11,726 Allowance for doubtful accounts (93) (101) ------- ------- Net receivables 6,322 11,625 Income taxes receivable 55 122 INVENTORIES: Raw materials and components 1,781 3,640 Work in process 2,230 2,231 Finished Goods 306 197 ------- ------- Total inventories 4,317 6,068 Deferred income taxes 69 306 Prepaid expenses & other current assets 234 214 ------- ------- Total Current Assets 11,203 20,155 Other Assets: Excess of cost over net assets of acquired companies, net 1,667 1,726 Other 837 227 Property, Plant and Equipment: Cost 19,032 20,629 Accumulated depreciation (16,145) (17,420) ------- ------- Net Property, Plant and Equipment 2,887 3,209 ------- ------- TOTAL ASSETS $ 16,594 $ 25,317 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of July 1, 1995 (Unaudited) and September 30, 1994 (Derived from audited financial statements) (Dollars in thousands)
JULY 1, SEPT.30, 1995 1994 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Line-of-credit $ 2,582 $ 4,000 Note Payable 3,000 3,000 Current installments on long-term debt 2,298 9,038 Accounts payable 2,072 3,684 Accrued expenses 2,848 5,998 Net liabilities of discontinued operations 2,756 2,756 Payroll and other taxes withheld and accrued 330 267 ------- ------- Total Current Liabilities 15,886 28,743 Long-term debt, net of current maturities - 2,144 Deferred income taxes and other credits 848 848 Shareholders' Equity: Common stock 3,569 3,546 Treasury Stock (29) (100) Paid-in capital 12,856 12,944 Retained earnings - beginning of year (22,759) 1,619 - current year 6,277 (24,378) Stock Grants (30) (18) Foreign currency translation adjustment (24) (31) ------- ------- TOTAL SHAREHOLDERS' EQUITY (140) (6,418) ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,594 $ 25,317 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share)
THREE MONTHS ENDED NINE MONTHS ENDED JULY 1, JULY 2, JULY 1, JULY 2, 1995 1994 1995 1994 -------- -------- -------- -------- Product Sales $ 3,411 $ 5,433 $ 14,806 $ 17,673 Research & Development revenue 3,247 2,574 7,824 7,691 ------- ------- ------- ------- Total Revenues 6,658 8,007 22,630 25,364 Product cost of sales 2,437 3,454 9,111 10,970 Research & Development contract costs 2,355 1,948 6,330 5,896 Selling, general and administrative expenses 1,678 2,294 5,637 6,727 Product development costs and research 264 915 1,006 2,443 ------- ------- ------- ------- Operating (loss) income from continuing operations (76) (604) 546 (672) Interest expense (231) (302) (814) (820) Gain on sale of subsidiary, ProQuip - - 6,779 - Gain on sale of assets - - - 1,856 Other income (expense), net (42) (46) (155) (137) ------- ------- ------- ------- (Loss) income from continuing operations before income taxes (349) (952) 6,356 227 Income tax (benefit) expense 11 (296) 79 191 ------- ------- ------- ------- (Loss) income from continuing operations (360) (656) 6,277 36 Loss from discontinued operation - (961) - (20,178) ------- ------- ------- ------- Net (loss) income $ (360) $ (1,617) $ 6,277 $(20,142) ======= ======= ======= ======= (Loss) earnings per share: Continuing operations $ (.10) $ (.19) $ 1.76 $ .01 Discontinued operations .00 (.27) - (5.72) ------- ------- ------- ------- (Loss) earnings per share $ (.10) $ (.46) $ 1.76 $ (5.71) ======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
NINE MONTHS ENDED JULY 1, JULY 2, 1995 1994 OPERATING ACTIVITIES -------- -------- Net income from continuing operations $ 6,277 $ 36 Adjustments to reconcile net income to net cash (used) provided by continuing operations: Depreciation and amortization 548 754 Gain on sale of assets - (1,856) Gain on sale of subsidiary (6,779) - Provision for deferred income taxes 1 307 Foreign currency translation 7 3 Other 12 63 Changes in operating assets and liabilities net of effects of discontinued operations: Accounts receivable 2,082 1,530 Inventories (1,063) (1,749) Prepaid expenses and other current assets (34) 259 Accounts payable 137 697 Income taxes 326 (910) Accrued liabilities (1,501) 2,261 ------- ------- Net cash provided by continuing operations 13 1,395 ------- ------- Discontinued operations: (Loss) from discontinued operations - (20,178) Adjustments to reconcile (loss) to net cash (used) by discontinued operations Write down of assets to net realizable value - 9,488 Change in net assets/liabilities of discontinued operations - 5,885 ------- ------- Net cash (used) by discontinued operations - (4,805) ------- ------- Net cash provided (used) by operations 13 (3,410) ------- ------- INVESTING ACTIVITIES Purchases of property, plant & equipment (584) (456) Proceeds from sale of subsidiary, ProQuip, net of cash balance and expenses 9,125 - Proceeds on sale of assets - 1,959 ------- ------- Net cash provided in investing activities 8,541 1,503 ------- ------- FINANCING ACTIVITIES Net borrowing under line-of-credit and notes payable agreements (1,418) 4,091 Principal payments of long-term debt (8,750) (2,011) ------- ------- Net cash (used) provided in financing activities (10,168) 2,080 ------- ------- (Decrease) increase in cash and cash equivalents (1,614) 173 Cash and cash equivalents - beginning of period 1,820 675 ------- ------- Cash and cash equivalents - end of period $ 206 $ 848 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The management of the Company believes the accompanying unaudited consolidated financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to fairly present the financial position as of July 1, 1995 and results of operations and changes in financial position for the nine months then ended. 2. The results of operations for the nine-month period ended July 1, 1995 are not necessarily indicative of the results to be expected for the full year. 3. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K Report for the fiscal year ended September 30, 1994. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's United Telecontrol Electronics, Inc. ("UTE") subsidiary filed for voluntary bankruptcy under Chapter 11 of the Federal Bankruptcy Code in April 1994 and commenced an orderly liquidation in October 1994. Accordingly, the Company no longer includes Defense/Aerospace amongst its reportable business segments and UTE has been classified as "discontinued operations" in the Consolidated Financial Statements; prior year information has been restated to conform to this treatment. (For further information on this bankruptcy see the discussion under the caption "Results of Operations: 1994 in Comparison with 1993", in Item 7: Management's Discussion and Analysis of the Financial Condition and Results of Operations and Note 16 to the Consolidated Financial Statements, in the Company's Form 10-K Report for the fiscal year ended September 30, 1994 which are incorporated herein by reference). UTE has recently signed settlement agreements with various parties which resolve outstanding disputes and claims with the United States Government related to the Maverick, AMRAAM and Stinger missile programs. Under the terms of these agreements, the Company would be released from performance guarantees it had provided, and all claims against it associated therewith. The Company and UTE in turn would release the government from all claims for equitable adjustments under these contracts. This settlement is subject to notification of the creditors and the entry of a formal order of the bankruptcy court. The Company and UTE are also party to a settlement agreement, which was reached with the official committee of unsecured creditors of UTE in a hearing before the bankruptcy court. This settlement is also subject to the entry of a formal order of the bankruptcy court. (For further information, see Note 16 to the Consolidated Financial Statements,in the Company's Form 10-K Report for the fiscal year ended September 30, 1994 which are incorporated herein by reference). The Company expects the final liquidation of UTE (including resolution of fines to be assessed in the UTE criminal proceeding and all required court approvals) will occur during calendar year 1995. At that time any final adjustments to the Company's financial statements as a result of the UTE bankruptcy will be made. (For further information, see Note 11 and 16 to the Consolidated Financial Statements, in the Company's Form 10-K Report for the fiscal year ended September30, 1994 which are incorporated herein by reference). The following is management's discussion and analysis of certain significant factors which have affected the Company's earnings during the periods included in the accompanying consolidated statements of income. This discussion relates only to the Company's continuing operations, which included ProQuip Inc. prior to its sale in November 1994. RESULTS OF OPERATIONS (Dollars in thousands) --------------------- SALES Nine Months Ended -------------------- BUSINESS SEGMENT: 7/1/95 7/2/94 Change ----------------- -------- -------- ------ Technology $ 8,163 $ 8,029 $ 134 Test & Measurement 14,467 17,335 (2,868) ------ ------ ------ TOTAL $22,630 $25,364 $(2,734) ====== ====== ====== MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (Dollars in thousands) --------------------- (continued) OPERATING INCOME Nine Months Ended -------------------- BUSINESS SEGMENT: 7/1/95 7/2/94 Change ----------------- -------- -------- ------ Technology $ (528) $ (859) $ 331 Test & Measurement 1,074 187 887 ------ ------ ------ TOTAL $ 546 $ (672) $ 1,218 ====== ====== ====== Sales for the first nine months of fiscal year 1995 versus the same period of fiscal year 1994 have decreased while operating income for the same period increased. The effect each business segment had on this change is outlined in the above table and discussed below. TECHNOLOGY ---------- The Technology segment reported increases in sales and operating profit compared to the corresponding period last year. The segment's performance for the first nine months of fiscal year 1995 were favorably impacted by work completed on a new major order along with lower product development and selling expenses. The write-off of inventory of approximately $150 thousand on the unsuccessful funding of an anticipated project, the margin reversal of approximately $42 thousand as the result of a customer bankruptcy and a contract overrun resulting in a negative margin of approximately $186 thousand were the major negative factors affecting the Technology segment's results for the first nine months of the 1995. The Technology Division has been successful in the first nine months of the year in receiving orders for new business in advanced bearing development, fuel cell and flywheel energy storage system development, and expects to continue to move toward focusing its resources on markets offering the strongest potential for future growth: advanced turbomachinery components; power and energy systems; monitoring and diagnostics systems; and engineering services. TEST AND MEASUREMENT -------------------- The Test & Measurement segment reported a 17% decrease in revenues and a 474% increase in operating income compared to the same period last year. The decrease in sales was entirely attributable to the sale of ProQuip, noted below, while most of the increase in operating income occurred at the other continuing business units in this segment. The results of the segment include ProQuip Inc. ("ProQuip") which was sold by the Company in November 1994 resulting in a gain on the sale of $6,779 thousand during the first nine months of the 1995 fiscal year. (For further information on this sale transaction see the discussion under the caption "Results of Operations: 1994 in Comparison with 1993, in Item 7: Management's Discussion and Analysis of the Financial Condition and Results of Operations" and Note 17 to the Consolidated Financial Statements, in the Company's Form 10-K Report for the fiscal year ended September 30, 1994 which are incorporated herein by reference). MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS TEST AND MEASUREMENT (continued) -------------------- Sales attributable to ProQuip during the period covered by this Form 10-Q were $2,584 thousand and $7,027 thousand for fiscal year 1995 and fiscal year 1994, respectively. ProQuip also accounted for $705 thousand of operating profit during the first nine months of 1995 and $596 thousand for the corresponding period of the prior year. The remainder of the Test and Measurement segment, which includes Ling Electronics, Inc. ("Ling"), the L.A.B. Division and the Advanced Products Division, reported sales for the first nine months of 1995 of $11,883 thousand, which was 15% higher than 1994's comparable period. Operating profit for 1995, which was $778 thousand higher than 1994, reflects higher sales, improved margins and lower expenses. Export license restrictions, imposed during the first quarter of the fiscal year on certain of Ling's products, are continuing to cause delays in shipments and to negatively impact Ling's sales and profits. Management believes that sustainable growth of this segment will come from new products for existing and new niche markets. During the current fiscal year, the MICROTRAK 7000 (tm), a new laser triangulation sensor product, for Advanced Products and the Transportation Simulator for L.A.B. are examples of recent new product introductions. FINANCIAL CONDITION ------------------- During the first quarter of fiscal 1995, the Company sold its ProQuip subsidiary for approximately $13.3 million. The sale resulted in a gain of approximately $6.8 million. Approximately $8.0 million of the net proceeds were applied to the Company's term debt. The balance of this term debt was $2.3 million at July 1, 1995 which is payable in full by October 31, 1995. (For further information on this transaction see Note 17: "Subsequent Event" to the Consolidated Financial Statements in the Company's Form 10-K Report for the fiscal year ended September 30, 1994 which is incorporated herein by reference). Working capital reflects a $3.9 million improvement from September 30, 1994, but remains in a significantly negative position of $4.7 million at July 1, 1995. The working capital deficiency was mainly due to a $3.0 million note payable, the $2.3 million term debt noted above, and approximately $2.8 million net liabilities of discontinued operation, which resulted from the bankruptcy and subsequent pending liquidation of the Company's United Telecontrol Electronics, Inc. subsidiary; see Management's Discussion and Analysis of Financial Condition and Results of Operations on page 8 of this Form 10-Q and the discussion under the caption "Results of Operations: 1994 in Comparison with 1993", in Item 7: Management's Discussion and Analysis of the Financial Condition and Results of Operations and Note 16 to the Consolidated Financial Statements, in the Company's Form 10-K Report for the fiscal year ended September 30, 1994 which are incorporated herein by reference. The lender of the $3.0 million note payable, which was due on May 31, 1995, granted a due date extension until September 30, 1995. The maturity of the Company's line-of-credit and term debt on October 31, 1995, along with the note payable due on September 30, 1995, will require the Company to secure alternative financing or make other arrangements to satisfy its obligations as they become due; see the discussion under the caption "Liquidity and Capital Resources" in Item 7: Management's Discussion and Analysis of the Financial Condition and Results of Operations, in the Company's Form 10-K Report for the fiscal year ended September 30, 1994 which is incorporated herein by reference. MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION (continued) ------------------- At July 1, 1995 cash and cash equivalents were $206 thousand versus $1,820 thousand at September 30, 1994. As shown by the Consolidated Statement of Cash Flow for the nine months ended July 1, 1995, cash and cash equivalents were used to reduce, among other things, current liabilities, the line-of-credit, and long-term debt. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on May 9, 1995. The following members were elected to the Company's Board of Directors to hold office for the ensuing year. Nominee In Favor Withheld Harry Apkarian 2,147,904 916,507 R. Wayne Diesel 2,128,451 935,960 Stanley I. Landgraf 2,149,300 915,111 Albert W. Lawrence 2,081,772 982,639 E. Dennis O'Connor 2,148,700 915,711 Lawrence A. Shore 2,144,536 919,875 The results of the voting on the proposal to approve the reappointment of Coopers & Lybrand as the Company's auditors were as follows: In Favor Opposed Abstained 3,058,801 2,860 2,750 Item 6. Exhibits and Reports on Form 8-K (a) None. (b) No Reports on Form 8-K were filed by the registrant during the quarter for which this Report is filed. SIGNATURE 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. MECHANICAL TECHNOLOGY INCORPORATED 8-14-95 /s/ R. WAYNE DIESEL --------- ------------------------------------ (Date) R. Wayne Diesel President & Chief Executive Officer 8-14-95 /s/ STEPHEN T. WILSON --------- ------------------------------------ (Date) Stephen T. Wilson Chief Financial Officer EX-27 2 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1000 9-MOS SEP-30-1995 JUL-01-1995 206 0 6,415 93 4,317 11,203 19,032 16,145 16,594 15,886 0 3,569 0 0 (3,709) 16,594 22,630 22,630 15,441 22,084 155 0 814 6,356 79 6,277 0 0 0 6,277 1.76 1.76