11-K 1 0001.txt FORM 11-K MTI SAVINGS & RETIREMENT PLAN 12/31/99 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K (x) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the fiscal year end December 31, 1999 OR { } TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission file number 0-6890 Mechanical Technology Incorporated MTI Savings and Retirement Plan (Title of Plan) Mechanical Technology Incorporated (Issuer of Securities) 30 South Pearl Street Albany, New York 12207 (Address of Principal Executive Office) Item 4: Page Financial Statements ____________________ Mechanical Technology Incorporated MTI Savings and Retirement Plan Report of Independent Accountants 4 Statements of net assets available for benefits at December 31, 1999 and 1998 5 Statements of changes in net assets available for benefits for the years ended December 31, 1999 and 1998 6 Notes to financial statements 7-16 Supplemental schedule of assets held for investment purposes at end of year 17 Exhibits ________ Consent of Independent Accountants 18 REQUIRED INFORMATION Mechanical Technology Incorporated MTI Savings and Retirement Plan (the "Plan") is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"). Therefore, in lieu of the requirements of Items 1-3 of Form 11-K, the financial statements and schedules of the Plan for the two fiscal years ended December 31, 1999 and 1998, which have been prepared in accordance with the financial reporting requirements of ERISA, are attached hereto as Item 4 and incorporated herein by this reference. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Mechanical Technology Incorporated MTI Savings and Retirement Plan DATE: June 27, 2000 BY: s/Cynthia A. Scheuer ________________ ________________________________ Cynthia A. Scheuer Employer, as Plan Sponsor and Plan Representative Report of Independent Accountants To the Participants and Administrator of Mechanical Technology Incorporated MTI Savings and Retirement Plan In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of Mechanical Technology Incorporated MTI Savings and Retirement (the "Plan") at December 31, 1999 and 1998 and, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PricewaterhouseCoopers L.L.P. Albany, New York June 23, 2000 MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS AND RETIREMENT PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS December 31, 1999 and December 31, 1998 DECEMBER 31, 1999 1998 ASSETS ____ ____ Investments in MTI stock fund, at fair value $ 98,979 $ 327 Investments in registered investment companies, at fair value 14,343,170 15,940,420 Participant notes receivable 22,165 92,352 _____________ ___________ Total investments 14,464,314 16,033,099 Contributions receivable - employer 2,392 5,191 Contributions receivable - participants 6,056 11,997 _____________ ___________ Total assets 14,472,762 16,050,287 _____________ ___________ NET ASSETS AVAILABLE FOR BENEFITS $ 14,472,762 $ 16,050,287 ============= =========== The accompanying notes are an integral part of the financial statements. MECHANICAL TECHNOLOGY INCORPORTED MTI SAVINGS AND RETIREMENT PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS Years Ended December 31, 1999 and December 31, 1998 DECEMBER 31, 1999 1998 ____ ____ Additions to net assets attributed to: Investment income: Interest $ 766,345 $ 809,753 Net (depreciation) appreciation in fair value of MTI stock fund (21,924) 13 Net appreciation in fair value of registered investment companies 2,193,983 1,969,978 _____________ ___________ 2,938,404 2,779,744 Less investment expenses - 22,914 _____________ ___________ Net investment income 2,938,404 2,756,830 _____________ ___________ Contributions: Employer 143,230 201,996 Participant 345,008 391,950 Rollovers 41,261 - _____________ ___________ 529,499 593,946 _____________ ___________ Total additions 3,467,903 3,350,776 _____________ ___________ Deductions from net assets attributed to: Benefits paid to participants 5,014,302 4,804,745 Employee forfeitures 31,126 13,968 _____________ ___________ Total deductions 5,045,428 4,818,713 _____________ ___________ Net decrease (1,577,525) (1,467,937) _____________ ___________ Net assets available for benefits: Beginning of year 16,050,287 17,518,224 _____________ ___________ End of year $ 14,472,762 $ 16,050,287 ============= =========== The accompanying notes are an integral part of the financial statements. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS AND RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF PLAN The following brief description of the Mechanical Technology Incorporated MTI Savings and Retirement Plan (Plan) provides only general information. Participants should refer to the Plan agreement for more complete information. A. General The Plan is a defined contribution plan covering substantially all employees of Mechanical Technology Incorporated (Plan Sponsor). Effective July 1, 1998, employees are eligible to participate in the Plan after completing 6 months of service and attaining the age of 21. Prior to July 1, 1998, employees were eligible to participate upon the first day of the month following completion of at least one thousand hours of service during any consecutive twelve-month period commencing with the employee's date of hire and the attainment of age 21. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended. B. Contributions Participant contributions: The Plan permits pre-tax (basic) participant contributions through compensation deferrals not to exceed the greater of 15% of compensation or the maximum permitted by the Internal Revenue Code. Such contributions are excluded from the participant's taxable income for federal income tax purposes until received as a withdrawal or distribution from the Plan. Participants may also elect to make after-tax (voluntary) contributions to the Plan not exceeding 9% of compensation. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans. Plan Sponsor contributions: The Plan Sponsor matches, on a discretionary basis, participant basic contributions. Matching contributions have, in the past, been as much as 4% of credited compensation, as defined in the Plan agreement. The Plan Sponsor may also make additional discretionary profit sharing contributions for the benefit of plan participants employed on the last day of the Plan's fiscal year. Profit sharing contributions, if any, are allocated to plan participants based on the ratio of participant compensation to the total compensation of all eligible plan participants. C. Participant Accounts Each participant's account is credited with the participant's contribution and allocations of (a) the Plan Sponsor's contribution and, (b) Plan earnings, and may be charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued D. Vesting Participants are immediately vested in their contributions plus actual earnings thereon. As of July 1, 1998, a participant is fully vested in the Plan Sponsor matching and discretionary contribution portion of their accounts plus actual earnings thereon upon the earliest of completing five years of credited service, previously seven years; the event of death, disability or retirement; MTI terminates or freezes the Plan. E. Investment Options Participants may direct the investment of contributions in multiples of 5% in any of the investment options identified below, as selected by the Plan's trustees. Changes to the investment fund designations may be made daily through the Plan's third party record-keeper. The fund's investment strategies are subject to change and future performance cannot be guaranteed. Number of Participants Investment Options Available as of July 1998 as of December 31, 1999 ____________________________________________ _______________________ MTI Stock Fund 7 MFS/F&C International Growth Fund 8 MFS Global Growth Fund 48 MFS Emerging Growth Fund 69 MFS Total Return Fund 66 MFS Bond Fund 53 MFS Fixed Fund 129 Massachusetts Investors Growth Stock Fund 86 Massachusetts Investors Trust Fund 45 MTI Stock Fund The fund is a unitized fund which invests in Mechanical Technology Incorporated common stock and maintains a portion of the fund in money market investments. MFS/F&C International Growth Fund The fund's foreign growth securities may include securities of more-established companies which represent opportunities for long-term growth. The fund invests at least 65% of its total assets in foreign (including emerging market) securities. The fund may also invest in derivative securities. MFS Global Growth Fund The fund invests primarily in securities in three market sectors: U.S. emerging growth companies, foreign growth companies, and emerging market securities. The fund invests, under normal market conditions, at least 65% of its total assets in common stocks and related equity securities. The fund may also invest in derivative securities. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued MFS Emerging Growth Fund The fund invests primarily in emerging growth companies that display the potential to become major enterprises or are major enterprises whose rates of earnings growth are expected to accelerate. The fund may invest, under normal market conditions, at least 65% of its total assets in common stocks or related securities. The fund may also invest in foreign securities (including emerging market securities) and may have exposure to foreign currencies. The fund may also invest in debt and derivative securities. MFS Total Return Fund The fund is a "balanced" fund and invests in a combination of equity and fixed income securities. Under normal market conditions, the fund invests at least 25% of its net assets in non-convertible fixed-income securities, and at least 40% but no more than 75% of net assets in common stocks and related securities. The fund may also invest in derivative securities. MFS Bond Fund The fund invests, under normal market conditions, at least 65% of its total assets in fixed income securities including, corporate bonds (domestic and foreign (including emerging market)), U.S. government securities and mortgage-backed and asset-backed securities. The fund may also invest in derivative securities. MFS Fixed Fund The fund strives to maintain a stable $1 unit value by investing primarily in stable-value investment contracts issued by major insurance companies, and major banks. Massachusetts Investors Growth Stock Fund The fund emphasis is placed on companies that the fund advisor believes offers better than average prospects for long-term growth. The fund may invest in foreign securities through which it may have exposure to foreign currencies. The fund invests its assets in common stocks and securities convertible into common stocks of companies. The fund may also invest in derivative securities. Massachusetts Investors Trust Fund The fund invests, under normal market conditions, at least 65% of its total assets in common stocks and related securities. The fund generally focuses on companies with larger capitalizations that its fund advisor believes have sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The fund will also seek to provide income equal to approximately 90% of the dividend yield on the Standard & Poor's 500 Index. The fund may invest in foreign securities through which it may have exposure to foreign currencies. The fund may also invest in derivative securities. Investment Options Available Through June 1998 ______________________________________________ Fidelity Asset Manager The fund was diversified among domestic and foreign stocks, bonds, and short-term and money market instruments, seeking a high total return with reduced risk over the long term. Fidelity Magellan The fund invested in securities convertible into common stock of domestic, foreign, and multinational issuers of all sizes to increase the value of the fund's shares over the long term. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued MassMutual Government Reserve The fund invested primarily in cash, United States Treasury or Agency securities, and other investments that are issued or guaranteed by the United States Government, its agencies and instrumentalities. MassMutual Destiny Conservative The fund invested primarily in common stocks, publicly traded bonds and short-term interest bearing investments with a primary focus on income and capital preservation. MassMutual Destiny Moderate The fund invested primarily in common stocks, publicly traded bonds and short-term interest bearing investments with a primary focus on achieving growth through a balance of income and capital appreciation. MassMutual Destiny Aggressive The fund invested primarily in common stocks, publicly traded bonds and short-term interest bearing investments with a primary focus on capital appreciation. MassMutual Destiny Equity The fund invested primarily in foreign and domestic common stocks, including small capitalization common stocks. MassMutual International Equity The fund invested primarily in common stocks of companies domiciled in foreign countries with no more than 25% of its assets invested in common stock of the United States and Canada. Guaranteed Investment Contracts Investments in a Government Separate Account that had its underlying investments in a portfolio of Government Securities. It was a separate pool of investments independent from the general assets of Mass Mutual. Investments in guaranteed investment contracts issued by insurance companies. Fidelity Equity Income II The fund had the flexibility to invest the balance in all types of domestic and foreign securities, including bonds. The fund also considered the potential for capital appreciation. Fidelity Blue Chip The fund invested primarily in a diversified portfolio of common stocks of well-known and established companies. Fidelity Contrafund The fund invested mainly in equity securities of companies where value is not fully recognized by the public. The issuing company may be unpopular but have promising improvements on the horizon such as new products or a change in management. The fund could also invest in any type of security that might produce capital appreciation. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued F. Participant notes receivable Plan participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their account balance. Loan transactions are treated as a transfer to (from) the investment funds from (to) the participant notes fund. Loan terms range from 1 to 5 years. The loans are collateralized by the balance in the participant's account and bear interest at the Prime interest rate plus 2 percent on the date the loan is made. Interest rates range from 8 to 10.5 percent. Principal and interest is paid ratably through monthly payroll deductions. G. Payment of benefits Normal retirement age is 65. The Plan permits early retirement at age 55 with five years of service. Upon retirement, disability or death, a participant or beneficiary may elect to receive his or her vested individual account balance of more than $5,000 in the form of an annuity, a lump-sum payment or monthly installments over the recipient's life expectancy, not exceeding ten years. A participant or beneficiary with a vested individual account balance under $5,000 will receive a lump-sum payment. A terminated participant is entitled to a lump-sum payment of the vested interest in his or her account. A terminated participant with five or less years of service forfeits the right to receive a portion of the accumulated benefit attributable to Plan Sponsor contributions. H. Forfeited Accounts At December 31, 1999, forfeited non-vested accounts totaling $103,222 were available to the Plan Sponsor and were excluded from plan assets. These amounts will be used to first pay Plan administrative expenses, then to reduce future employer contributions. Plan administrative expenses paid from the forfeiture account in 1999 totaled $11,644. I. Plan Administrative Costs The Company pays both the annual trustee fees and annual audit fees of the Plan. 2. SIGNIFICANT ACCOUNTING POLICIES A. Basis of preparation The financial statements of the Plan are prepared on the accrual basis of accounting. B. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. C. Risks and Uncertainties The Plan provides for various investment options in any combination of stocks, fixed income securities, mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participant's account balances and the amounts reported in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued D. Investment Valuation and Income Recognition The Plan's investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices, which represent the net asset value of shares, or units held by the Plan at year-end. Participant notes receivable are valued at cost, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Gains or losses on sales of securities are based on average cost. Interest income is recorded on the accrual basis. The Plan presents in the Statements of Changes in Net Assets Available for Benefits the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses (computed on average cost) and the unrealized appreciation (depreciation) on those investments. E. Payments of Benefits Benefits are recorded when paid. 3. RECLASSIFICATION Certain calendar year 1998 amounts have been reclassified to conform with the calendar year 1999 presentation. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued 4. INVESTMENTS The Plan's investments are held by an investment company. The following table presents the fair values of investments, which includes investments that represent 5 percent or more of total plan assets. DECEMBER 31, 1999 Number Net Asset Value of Shares Per Share Cost Fair Value _________ _______________ _________ ______________ Investments at Fair Value as Determined by Quoted Market Prices MTI Stock Fund 8,987 $11.01 $ 98,965 $ 98,979 ========== ============== Registered investment companies: MFS/F&C International Growth Fund 894 $20.59 $ 21,119 $ 18,410 MFS Global Growth Fund 12,866 29.76 396,244 382,889 MFS Emerging Growth Fund 61,324 66.59 3,155,094 4,083,557 MFS Total Return Fund 37,566 13.88 2,513,874 521,414 MFS Bond Fund 12,955 12.18 163,807 157,790 MFS Fixed Fund 5,461,800 1.00 5,461,800 5,461,800 Massachusetts Investors Growth Stock Fund 145,024 20.33 2,513,874 2,948,330 Massachusetts Investors Trust Fund 36,705 20.95 739,726 768,980 __________ ______________ $14,965,538 $ 14,343,170 ========== ============== Investments at Estimated Fair Value Participant notes receivable $ 22,165 $ 22,165 ========== ============== Total $15,086,668 $ 14,464,314 ========== ============== Year Ended Net (depreciation) appreciation in fair December 31, 1999 value of investments: _________________ Investments at fair value as determined by quoted market prices: MTI stock fund $ (21,924) Registered investment companies 2,193,983 ________________ $ 2,172,059 ================ MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued DECEMBER 31, 1998 Number Net Asset Value Cost/Contract of Shares Per Share Value Fair Value _________ _______________ _____________ ____________ Investments at Fair Value as Determined by Quoted Market Prices MTI Stock Fund 29 $11.28 $ 314 $ 327 ============ =========== Registered investment companies: MFS/F&C International Growth Fund 2,564 $15.55 $ 42,580 $ 39,873 MFS Global Growth Fund 13,910 19.41 282,910 269,994 MFS Emerging Growth Fund 87,517 44.60 2,974,778 3,903,270 MFS Total Return Fund 46,825 14.96 763,688 700,505 MFS Bond Fund 21,291 13.29 288,977 282,965 MFS Fixed Fund 7,401,375 1.00 7,401,375 7,401,375 Massachusetts Investors Growth Stock Fund 154,862 15.91 2,029,414 2,463,857 Massachusetts Investors Trust Fund 43,387 20.25 849,332 878,581 ____________ ___________ $ 14,633,054 $ 15,940,420 ============ =========== Investments at Estimated Fair Value Participant notes receivable $ 92,352 $ 92,352 ============ =========== Total $ 14,725,720 $ 16,033,099 ============ =========== Year Ended Net (depreciation) appreciation in fair value of investments: December 31, 1998 Investments at fair value as determined _________________ by quoted market prices: MTI stock fund $ 13 Pooled separate accounts 142,515 Registered investment companies 2,818,366 ________________ 2,960,894 Investments at contract value: Guaranteed investment contracts (990,903) ________________ $ 1,969,991 ================ MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued 5. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES The Plan entered into investment contracts with insurance companies (the Companies). The Companies maintained the contributions in a pooled account. The account was credited with actual earnings on the underlying investments (principally bank certificates of deposit) and charged for Plan withdrawals and administration expenses charged by the Companies. These contracts provided a liquidity guarantee by financially responsible third parties of principal and previously accrued interest for liquidations, transfers, loans, or hardship withdrawals initiated by plan participants exercising their rights to withdraw, borrow or transfer funds under the terms of the on-going Plan. The average yield on their contracts was 4.03% for the year ended December 31, 1998. These contracts were terminated during 1998. 6. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become fully vested in their accounts. 7. INCOME TAX STATUS The Internal Revenue Service has determined and informed the Plan Sponsor by a letter dated February 7, 2000, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code. The Plan was amended and restated in 1998, when the Plan changed record-keepers and trustees. 8. PLAN AMENDMENT AND RESTATEMENT Effective July 1, 1998, the Plan changed its record-keeper to MFS Retirement Services, Inc. and its trustee to Reliance Trust Company. In connection with this change, the plan was amended and restated. Significant Plan changes include: a. Vesting over a five year period. b. Forfeitures are used first to pay the Plan's administrative expenses and excess may be used to reduce matching contribution. MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS - Continued 9. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: December 31, 1999 _________________ Net assets available for benefits per the financial statements $ 14,472,762 Amounts allocated to participant notes receivable 33,509 ________________ Net assets available for benefits per Form 5500 $ 14,506,271 ================ The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: December 31, 1999 _________________ Benefits paid to participants per the financial statements $ 5,014,302 Less: Amounts allocated to participant notes receivable (33,509) ________________ Net assets available for benefits per Form 5500 $ 4,980,793 ================ MECHANICAL TECHNOLOGY INCORPORATED MTI SAVINGS & RETIREMENT PLAN Line 4i - Schedule of Assets Held for Investment Purposes At End of Year (a) (b)Identity of issue, (c)Description of investment (d)Cost * (e)Current borrower, lessor, including maturity date, value or similar party rate of interest, collateral, par, or maturity value Mechanical Technology Incorporated Common Stock $ 98,979 MFS F&C International Growth Fund 18,410 MFS Global Growth Fund 382,889 MFS Emerging Growth Fund 4,083,557 MFS MA Investors Growth Fund 2,948,330 MFS MA Investors Trust Fund 768,980 MFS Total Return Fund 521,414 MFS Bond Fund 157,790 MFS Fixed Fund 5,461,800 Participant Notes 8 - 10.5% 22,165 __________ Total investments $14,464,314 ========== * Column (d) has been omitted, as the Plan is 100% participant directed.