-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T9MTYy+F8z9TL60mMhxMjgSfxs9zksdzfahbk+WpO2xBfM4bNv/uCFddWVPgfvEh 4/FLokRGRxQOW7Ei1nEKvQ== 0001012555-97-000004.txt : 19970506 0001012555-97-000004.hdr.sgml : 19970506 ACCESSION NUMBER: 0001012555-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970505 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO POWER CORP CENTRAL INDEX KEY: 0000813895 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 042891371 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10573 FILM NUMBER: 97595602 BUSINESS ADDRESS: STREET 1: 81 WYMAN ST STREET 2: PO BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02254-9046 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 FORMER COMPANY: FORMER CONFORMED NAME: TECOGEN INC DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------------------ FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended March 29, 1997. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-10573 THERMO POWER CORPORATION (Exact name of Registrant as specified in its charter) Massachusetts 04-2891371 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02254-9046 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 622-1000 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 April 25, 1997 ---------------------------- ----------------------------- Common Stock, $.10 par value 11,982,447 PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements THERMO POWER CORPORATION Consolidated Balance Sheet (Unaudited) Assets March 29, September 28, (In thousands) 1997 1996 ------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 36,768 $ 29,852 Available-for-sale investments, at quoted market value (amortized cost of $6,022 in fiscal 1996) - 6,028 Accounts receivable, less allowance of $571 and $589 19,194 18,054 Unbilled contract costs and fees 7,035 7,110 Inventories: Raw materials and supplies 14,816 16,233 Work in process and finished goods 1,678 2,404 Prepaid income taxes 3,303 2,921 Other current assets 276 324 -------- -------- 83,070 82,926 -------- -------- Rental Assets, at Cost 11,984 12,358 Less: Accumulated depreciation and amortization 2,660 2,378 -------- -------- 9,324 9,980 -------- -------- Property, Plant, and Equipment, at Cost 19,045 17,580 Less: Accumulated depreciation and amortization 8,571 7,813 -------- -------- 10,474 9,767 -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $210) 315 184 -------- -------- Other Assets 272 345 -------- -------- Cost in Excess of Net Assets of Acquired Companies 7,365 7,509 -------- -------- $110,820 $110,711 ======== ======== 2PAGE THERMO POWER CORPORATION Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment March 29, September 28, (In thousands except share amounts) 1997 1996 ------------------------------------------------------------------------- Current Liabilities: Accounts payable $ 14,520 $ 14,005 Accrued payroll and employee benefits 2,770 2,832 Accrued warranty costs 2,551 2,323 Other accrued expenses 6,281 5,536 Due to Thermo Electron Corporation and affiliated companies 537 511 -------- -------- 26,659 25,207 -------- -------- Deferred Income Taxes 114 84 -------- -------- Long-term Obligations 278 305 -------- -------- Common Stock of Subsidiary Subject to Redemption ($18,450 redemption value) 17,904 17,747 -------- -------- Shareholders' Investment: Common stock, $.10 par value, 30,000,000 shares authorized; 12,493,371 and 12,487,149 shares issued 1,249 1,249 Capital in excess of par value 54,519 54,448 Retained earnings 12,086 11,707 Treasury stock at cost, 314,024 and 2,724 shares (2,057) (23) Net unrealized gain (loss) on available- for-sale investments 68 (13) -------- -------- 65,865 67,368 -------- -------- $110,820 $110,711 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE THERMO POWER CORPORATION Consolidated Statement of Income (Unaudited) Three Months Ended ------------------------- March 29, March 30, (In thousands except per share amounts) 1997 1996 ------------------------------------------------------------------------- Revenues $ 28,825 $ 29,756 -------- -------- Costs and Operating Expenses: Cost of revenues 23,331 25,095 Selling, general, and administrative expenses 4,433 4,231 Research and development expenses 627 791 -------- -------- 28,391 30,117 -------- -------- Operating Income (Loss) 434 (361) Interest Income 472 437 Interest Expense (4) (5) Gain on Sale of Investments (includes $125 from sale of related-party investments in fiscal 1996) - 125 -------- -------- Income Before Provision for Income Taxes and Minority Interest 902 196 Provision for Income Taxes 449 75 Minority Interest Expense 78 78 -------- -------- Net Income $ 375 $ 43 ======== ======== Earnings per Share $ .03 $ - ======== ======== Weighted Average Shares 12,467 12,463 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 4PAGE THERMO POWER CORPORATION Consolidated Statement of Income (Unaudited) Six Months Ended ------------------------ March 29, March 30, (In thousands except per share amounts) 1997 1996 ------------------------------------------------------------------------- Revenues $ 57,611 $ 57,208 -------- -------- Costs and Operating Expenses: Cost of revenues 47,864 47,760 Selling, general, and administrative expenses 8,213 7,968 Research and development expenses 1,271 1,529 -------- -------- 57,348 57,257 -------- -------- Operating Income (Loss) 263 (49) Interest Income 923 874 Interest Expense (9) (16) Gain on Sale of Investments, Net (includes $469 from sale of related-party investments in fiscal 1996) - 451 -------- -------- Income Before Provision for Income Taxes and Minority Interest 1,177 1,260 Provision for Income Taxes 642 484 Minority Interest Expense 156 156 -------- -------- Net Income $ 379 $ 620 ======== ======== Earnings per Share $ .03 $ .05 ======== ======== Weighted Average Shares 12,478 12,453 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5PAGE THERMO POWER CORPORATION Consolidated Statement of Cash Flows (Unaudited) Six Months Ended ------------------------ March 29, March 30, (In thousands) 1997 1996 ------------------------------------------------------------------------- Operating Activities: Net income $ 379 $ 620 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,257 1,231 Provision for losses on accounts receivable 9 5 Gain on sale of investments, net - (451) Minority interest expense 156 156 Other noncash items 30 - Changes in current accounts: Accounts receivable (1,149) (1,470) Inventories and unbilled contract costs and fees 2,218 1,235 Other current assets (351) 439 Accounts payable 515 (1,681) Other current liabilities 976 1,093 -------- -------- Net cash provided by operating activities 4,040 1,177 -------- -------- Investing Activities: Proceeds from sale and maturities of available- for-sale investments 6,000 4,981 Proceeds from sale of related-party investments - 852 Increase in rental assets (570) (1,308) Proceeds from sale of rental assets 944 962 Purchases of property, plant, and equipment (1,508) (890) Other - (17) -------- -------- Net cash provided by investing activities 4,866 4,580 -------- -------- Financing Activities: Purchase of Company common stock (2,034) - Net proceeds from issuance of Company common stock 71 282 Repayment of long-term obligations (27) (25) -------- -------- Net cash provided by (used in) financing activities (1,990) 257 -------- -------- Increase in Cash and Cash Equivalents 6,916 6,014 Cash and Cash Equivalents at Beginning of Period 29,852 23,504 -------- -------- Cash and Cash Equivalents at End of Period $ 36,768 $ 29,518 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 6PAGE THERMO POWER CORPORATION Notes to Consolidated Financial Statements 1. General The interim consolidated financial statements have been prepared by Thermo Power Corporation (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at March 29, 1997, the results of operations for the three- and six-month periods ended March 29, 1997, and March 30, 1996, and the cash flows for the six-month periods ended March 29, 1997, and March 30, 1996. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of September 28, 1996, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1996, filed with the Securities and Exchange Commission. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the caption "Forward-looking Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal year ended September 28, 1996, filed with the Securities and Exchange Commission. Overview The Company's business is divided into three segments: Industrial Refrigeration Systems, Engines, and Cooling and Cogeneration Systems. Through the Company's FES division, the Industrial Refrigeration Systems segment supplies standard and custom-designed industrial refrigeration systems used primarily by the food-processing, petrochemical, and pharmaceutical industries. NuTemp, Inc. (NuTemp) is a supplier of both remanufactured and new industrial refrigeration and commercial cooling equipment for sale or rental. NuTemp's industrial refrigeration equipment 7PAGE THERMO POWER CORPORATION Overview (continued) is used primarily in the food-processing, petrochemical, and pharmaceutical industries, and its commercial cooling equipment is used primarily in institutions and commercial buildings, as well as by service contractors. The demand for NuTemp's equipment is typically highest in the summer months. Cool summer weather can adversely affect the Company's NuTemp business because the Company's cooling systems are used primarily to reduce temperatures below ambient air temperatures. Within the Engines segment, the Company's Crusader Engines division (Crusader) manufactures gasoline engines for recreational boats; propane and gasoline engines for lift trucks; and natural gas engines for vehicular, cooling, pumping, refrigeration, and other industrial applications. The Cooling and Cogeneration Systems segment consists of the Company's Tecogen division and the Company's ThermoLyte Corporation (ThermoLyte) subsidiary, formed in March 1995. Tecogen designs, develops, markets, and services packaged cooling and cogeneration systems fueled principally by natural gas for sale to a wide range of commercial, institutional, industrial, and multi-unit residential users. Certain large-capacity cooling systems are manufactured by FES, and the cogeneration systems are manufactured by Crusader. Tecogen also conducts research and development of natural gas-engine technology and on applications of thermal energy. ThermoLyte is developing and commercializing a family of gas-powered lighting products. The Company's revenues by industry segment are shown in the following table: Three Months Ended Six Months Ended -------------------- -------------------- March 29, March 30, March 29, March 30, (In thousands) 1997 1996 1997 1996 ----------------------------------------------------------------------- Industrial Refrigeration Systems $15,639 $15,962 $34,785 $33,033 Engines 7,916 8,304 13,323 15,557 Cooling and Cogeneration Systems 5,948 5,913 10,564 9,523 Intersegment sales elimination (678) (423) (1,061) (905) ------- ------- ------- ------- $28,825 $29,756 $57,611 $57,208 ======= ======= ======= ======= 8PAGE THERMO POWER CORPORATION Results of Operations Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996 Total revenues were $28,825,000 in the second quarter of fiscal 1997 and $29,756,000 in the second quarter of fiscal 1996. Industrial Refrigeration Systems segment revenues decreased to $15,639,000 in 1997 from $15,962,000 in 1996, primarily due to lower demand for rental equipment and decreased shipments of remanufactured commercial cooling equipment at NuTemp. Engines segment revenues decreased 5% to $7,916,000 in 1997 from $8,304,000 in 1996, primarily due to the inclusion in 1996 of a large shipment of TecoDrive(R) natural gas engines to one customer, offset in part by an increase in lift truck engine sales. Cooling and Cogeneration Systems segment revenues were relatively unchanged at $5,948,000 in 1997, compared with $5,913,000 in 1996. Increased revenues from gas-fueled cooling systems and product services were offset in part by decreased revenues from sponsored research and development and the inclusion of a large shipment of thermoelectric devices in 1996. The decrease in sponsored research and development resulted from a reduction in funding. The Company expects that revenues from sponsored research and development will continue to decrease as compared with revenues recorded in fiscal 1996. The gross profit margin increased to 19% in the second quarter of fiscal 1997 from 16% in the second quarter of fiscal 1996. The gross profit margin for the Industrial Refrigeration Systems segment increased to 21% in 1997 from 17% in 1996, primarily due to higher margins at FES resulting from lower warranty expenses and manufacturing efficiencies, and higher margins at NuTemp due to the inclusion in 1996 of lower-margin revenues from two large contracts. The Company experienced a cost increase in one of the major components of its industrial refrigeration packages in fiscal 1996, for which the Company has identified an additional supplier at a lower cost. Margins within this segment were favorably affected by the resulting lower costs for this component in the second quarter of fiscal 1997. The gross profit margin for the Engines segment increased to 10% in 1997 from 3% in 1996, primarily due to a reduction in warranty expenses and to lower overhead expenses resulting from the consolidation of two manufacturing facilities at Crusader. The gross profit margin for the Cooling and Cogeneration Systems segment decreased to 20% in 1997 from 28% in 1996, primarily due to a decrease in revenues from thermoelectric devices that have relatively higher margins and from the shipment in 1996 of two packaged cogeneration systems with substantially higher margins. Selling, general, and administrative expenses as a percentage of revenues increased to 15% in the second quarter of fiscal 1997 from 14% in the second quarter of fiscal 1996 principally due to higher sales commissions at FES. Research and development expenses decreased to $627,000 in 1997 from $791,000 in 1996, primarily due to a decrease in spending on natural gas-engine products and gas-powered lighting products, primarily due to the completion of development efforts for these products. 9PAGE THERMO POWER CORPORATION Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996 (continued) Gain on sale of investments in the second quarter of fiscal 1996 represents a gain relating to the sale of the Company's remaining investment in 6.5% subordinated convertible debentures issued by Thermo TerraTech Inc., a majority-owned subsidiary of Thermo Electron Corporation. The effective tax rate was 50% in the second quarter of fiscal 1997 and 38% in the second quarter of fiscal 1996. The effective tax rate exceeded the statutory federal income tax rate, primarily due to an increase in 1997 in the valuation allowance for net operating loss carryforwards and other tax assets of the Company's ThermoLyte subsidiary, and the impact of state income taxes in fiscal 1997 and 1996. First Six Months Fiscal 1997 Compared With First Six Months Fiscal 1996 Total revenues were $57,611,000 in the first six months of fiscal 1997 and $57,208,000 in the first six months of fiscal 1996. Industrial Refrigeration Systems segment revenues increased 5% to $34,785,000 in 1997 from $33,033,000 in 1996, primarily due to greater demand for custom-designed industrial refrigeration packages and product services at FES. Engines segment revenues decreased 14% to $13,323,000 in 1997 from $15,557,000 in 1996, primarily due to the inclusion in 1996 of a large shipment of TecoDrive(R) natural gas engines to one customer and a decrease in marine-engine related products, offset in part by an increase in lift-truck engine sales. Revenues from marine-engine related products declined primarily due to increased competition and a decrease in demand. These trends are expected to continue. Cooling and Cogeneration Systems segment revenues increased 11% to $10,564,000 in 1997 from $9,523,000 in 1996. Increased revenues from gas-fueled cooling systems and product services were offset in part by decreased revenues from sponsored research and development, packaged cogeneration systems, and thermoelectric devices. The gross profit margin was unchanged at 17% in the first six months of fiscal 1997 and 1996. The gross profit margin for the Industrial Refrigeration Systems segment was unchanged at 19% in 1997 and 1996. Improved margins at FES resulting from lower warranty expenses and improved manufacturing efficiencies were offset by lower margins at NuTemp resulting primarily from a decrease in rental revenues. The gross profit margin for the Engines segment increased to 7% in 1997 from 4% in 1996, primarily due to a reduction in warranty expenses and to lower overhead expenses resulting from the consolidation of two manufacturing facilities at Crusader. The gross profit margin for the Cooling and Cogeneration Systems segment decreased to 20% in 1997 from 27% in 1996, primarily due to the reasons discussed in the results of operations for the second quarter. Selling, general, and administrative expenses as a percentage of revenues remained unchanged at 14% in the first six months of fiscal 1997 and 1996. Research and development expenses decreased to $1,271,000 in 1997 from $1,529,000 in 1996. An increase in spending on gas-powered lighting products was more than offset by a decrease in spending on natural gas-engine products. 10PAGE THERMO POWER CORPORATION First Six Months Fiscal 1997 Compared With First Six Months Fiscal 1996 (continued) Net gain on sale of investments in the first six months of fiscal 1996 primarily represents a gain of $344,000 relating to the sale of the Company's remaining investment in Thermo Electron common stock and a gain of $125,000 relating to the sale of the Company's remaining investment in 6.5% subordinated convertible debentures issued by Thermo TerraTech Inc., a majority-owned subsidiary of Thermo Electron. The effective tax rate was 55% in the first six months of fiscal 1997 and 38% in the first six months of fiscal 1996. The effective tax rate exceeded the statutory federal income tax rate for the reasons discussed in the results of operations for the second quarter. Liquidity and Capital Resources Consolidated working capital was $56,411,000 at March 29, 1997, compared with $57,719,000 at September 28, 1996. Included in working capital are cash, cash equivalents, and available-for-sale investments of $36,768,000 at March 29, 1997, compared with $35,880,000 at September 28, 1996. Of the $36,768,000 balance at March 29, 1997, $15,912,000 was held by ThermoLyte and the remainder was held by the Company and its wholly owned subsidiaries. During the first six months of fiscal 1997, $4,040,000 of cash was provided by operating activities. Cash provided by operating results was increased by a reduction in inventories of $2,143,000, primarily due to reduced stock levels resulting from a reduction in lead time by a supplier, offset in part by an increase in accounts receivable of $1,149,000, resulting principally from the timing of cash collections. During the first six months of fiscal 1997, the Company's primary investing activities, excluding sale and maturities of available-for-sale investments, included capital expenditures and the sale of rental assets. During the first six months of fiscal 1997, the Company expended $2,078,000 for purchases of rental assets and property, plant, and equipment and recorded $944,000 in proceeds from the sale of rental assets. The Company's financing activities used $1,990,000 of cash in the first six months of fiscal 1997, primarily due to $2,034,000 of cash expended for the purchase of Company common stock. The Company's Board of Directors has authorized the repurchase, through March 17, 1998, of up to $5,000,000 of its own securities. Any such purchases would be funded from working capital. Through March 29, 1997, the Company has expended $2,034,000 under this authorization. During the remainder of fiscal 1997, the Company expects to make capital expenditures of approximately $2,000,000. The Company believes its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future. 11PAGE THERMO POWER CORPORATION PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders On March 21, 1997, at the Annual Meeting of Shareholders, the shareholders elected seven incumbent directors to a one-year term expiring in 1998. The directors reelected at the meeting were: Marshall J. Armstrong, J. Timothy Corcoran, Peter O. Crisp, John N. Hatsopoulos, Robert C. Howard, Donald E. Noble, and Arvin H. Smith. Mr. Armstrong and Mr. Crisp each received 11,572,357 shares voted in favor of his election and 52,259 shares voted against; Mr. Corcoran received 11,573,557 shares voted in favor of his election and 51,059 shares voted against; and Mr. Hatsopoulos, Mr. Howard, Mr. Noble, and Mr. Smith each received 11,572,657 shares voted in favor of his election and 51,959 shares voted against. No abstentions or broker nonvotes were recorded on the election of directors. The shareholders also approved a proposal to extend the term of the Company's employees' stock purchase program to November 2, 2006, as follows: 11,568,996 shares voted in favor, 37,785 shares voted against, and 17,835 shares abstained. No broker nonvotes were recorded on the proposal. 12PAGE THERMO POWER CORPORATION 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 as of the 5th day of May 1997. THERMO POWER CORPORATION Paul F. Kelleher ---------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos ---------------------- John N. Hatsopoulos Vice President and Chief Financial Officer 13PAGE THERMO POWER CORPORATION EXHIBIT INDEX Exhibit Number Description of Exhibit ------------------------------------------------------------------------ 27 Financial Data Schedule. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO POWER CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-03-1998 MAR-29-1997 36,768 0 19,765 571 16,494 83,070 19,045 8,571 110,820 26,659 278 0 0 1,249 64,616 110,820 57,611 57,611 47,864 47,864 1,271 9 9 1,177 642 379 0 0 0 379 .03 0
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