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 April 3, 2004
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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
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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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
155 Northboro Road, Southborough, Massachusetts, 01772
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(Address of principal executive offices and zip code)
(508) 281 5510
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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
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Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
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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 14, 2004
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Common stock, par value $.10 3,125,051
TECH/OPS SEVCON, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
ASSETS
(in thousands)
April 3, Sept 30,
2004 2003
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(unaudited) (derived from
audited
statements)
Current assets:
Cash and cash equivalents $ 207 $ 524
Accounts receivable, less allowances
of $325 at 4/3/2004
and $295 at 9/30/2003 5,206 4,088
Inventories:
Raw materials 2,136 1,963
Work-in-process 312 207
Finished goods 1,600 1,829
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4,048 3,999
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Prepaid expenses and other current
assets 904 762
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Total current assets 10,365 9,373
------- -------
Property, plant and equipment, at cost 9,131 8,100
Less: Accumulated depreciation
and amortization 5,879 5,174
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Net property, plant and equipment 3,252 2,926
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Goodwill 1,435 1,435
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$15,052 $13,734
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The accompanying notes are an integral part of these financial
statements.
TECH/OPS SEVCON, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' INVESTMENT
(in thousands)
April 3, Sept 30,
2004 2003
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(unaudited) (derived from
audited
statements)
Current liabilities:
Accounts payable 1,911 1,490
Dividend payable 94 94
Accrued expenses 2,426 2,273
Accrued taxes on income 238 152
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Total current liabilities 4,669 4,009
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Deferred taxes on income 82 77
------- -------
Stockholders' investment
Preferred stock - -
Common stock 313 313
Premium paid in on common stock 4,047 4,047
Retained earnings 5,932 5,897
Cumulative other comprehensive
income (loss) 9 (609)
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Total stockholders' investment $10,301 $ 9,648
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$15,052 $13,734
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The accompanying notes are an integral part of these financial
statements.
TECH/OPS SEVCON, INC.
Consolidated Statements of Income
(Unaudited)
(in thousands except per share data)
Three Months Ended Six Months Ended
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April 3, Mar 31, April 3, Mar 31,
2004 2003 2004 2003
------- ------- ------- -------
Net sales $ 7,273 $ 6,138 $13,739 $11,783
Costs and expenses:
Cost of sales 4,288 3,722 8,145 7,240
Selling, research and
Administrative 2,705 2,113 5,141 4,226
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6,993 5,835 13,286 11,466
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Operating income 280 303 453 317
Other income (expense), net (60) 22 (109) 17
------- ------- ------- -------
Income before income taxes 220 325 344 334
Income taxes (78) (114) (121) (117)
------- ------- ------- -------
Net income $ 142 $ 211 223 217
======= ======= ======= =======
Basic income per share $ .05 $ .07 $ .07 $ .07
======= ======= ======= =======
Fully diluted income per share $ .05 $ .07 $ .07 $ .07
======= ======= ======= =======
Consolidated Statement of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
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April 3, Mar 31, April 3, Mar 31,
2004 2003 2004 2003
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Net income $ 142 $ 211 $ 223 $ 217
Foreign currency
translation adjustment 92 (97) 619 86
Change in fair market value
of cash flow hedge 8 (24) (1) (19)
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Comprehensive income $ 242 $ 90 $ 841 $ 284
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The accompanying notes are an integral part of these financial statements.
TECH/OPS SEVCON, INC.
Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended
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April 3, Mar 31,
2004 2003
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Net cash flow from operating activities:
Net income $ 223 $ 217
Adjustments to reconcile net income to net cash
(used by)generated from operating activities:
Depreciation and amortization 312 300
Deferred tax provision 5 (3)
Increase (decrease) in cash resulting from
changes in operating assets & liabilities:
Receivables (1,118) (780)
Inventories (49) 36
Pre-paid expenses and other current assets (140) (377)
Accounts payable 421 132
Accrued compensation and expenses 153 (178)
Accrued and deferred taxes on income 83 9
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Net cash used by operating activities (110) (644)
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Cash flow (used by) generated from investing
activities:
Acquisition of property, plant, and
equipment, net (370) (386)
Increase in short-term borrowing - 725
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Net cash (used by) generated from
investing activities (370) 339
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Cash flow used by financing activities:
Dividends paid (188) (187)
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Effect of exchange rate changes on cash 351 77
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Net decrease in cash (317) (415)
Opening balance - cash and cash equivalents 524 695
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Ending balance - cash and cash equivalents $ 207 $ 280
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Supplemental disclosure of cash flow information
Cash paid for income taxes $ 24 $ 244
Cash paid for interest 6 37
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Supplemental disclosure of non-cash
financing activity:
Dividend declared $ 94 $ 94
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The accompanying notes are an integral part of these financial statements.
TECH/OPS SEVCON, INC.
Notes to Consolidated Financial Statements - April 3, 2004
(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 April 3, 2004 and the results of
operations and cash flows for the three months and six months ended April
3, 2004.
The significant accounting policies followed by Tech/Ops Sevcon are set
forth in Note 1 to the financial statements in the 2003 Tech/Ops Sevcon, Inc.
Annual Report filed on Form 10-K.
The results of operations for the three-month and six-month periods
ended April 3, 2004 are not necessarily indicative of the results to be
expected for the full year.
(2) New Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board issued SFAS
#132R, "Employers' Disclosures about Pensions and Other Postretirement
Benefits". This Statement revises employers' disclosures about pension plans
and other postretirement benefit plans. It does not change the measurement or
recognition of those plans required by FASB Statements #87, "Employers'
Accounting for Pensions", #88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits",
and #106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions". This Statement retains the disclosure requirements contained in
FASB Statement #132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", which it replaces. It requires additional
disclosures to those in the original Statement #132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The Company
adopted the provisions of SFAS #132R on January 1, 2004. The adoption of
this pronouncement did not have a material effect on the Company's
financial position, results from operations or cash flows.
(3) Stock-Based Compensation Plans
SFAS #123 "Accounting for Stock-Based Compensation" as amended by SFAS
#148 "Accounting for Stock-Based Compensation - Transition and Disclosure"
defines a fair value based method of accounting for employee stock options
or similar equity instruments and encourages all entities to adopt that
method of accounting. However, it also allows an entity to continue to
measure compensation costs using the method of accounting proscribed by
APB #25 "Accounting for Stock Issued to Employees". The Company is evaluating
the transition options under SFAS #148 and continues to account for its stock-
based compensation plans under APB #25, under which no compensation cost has
been recognized. Had compensation cost for these plans been determined
consistent with SFAS #123 the Company's net income and earnings per share
would have equaled the following pro forma amounts:
(in thousands of dollars, except for per share amounts)
Three Months Ended Six Months Ended
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Apr 3 Mar 31 Apr 3 Mar 31
2004 2003 2004 2003
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Net income As reported $ 142 $ 211 $ 223 $ 217
Pro forma effect of expensing stock
options (net of income tax) (17) (14) (34) (28)
Net income Pro forma $ 125 $ 197 $ 189 $ 189
Income per share:
Basic As reported $ .05 $ .07 $ .07 $ .07
Basic Pro forma $ .04 $ .06 $ .06 $ .06
Diluted As reported $ .05 $ .07 $ .07 $ .07
Diluted Pro forma $ .04 $ .06 $ .06 $ .06
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The effects of applying SFAS #123 in this pro forma disclosure are not
indicative of future amounts. SFAS #123 does not apply to awards prior to
fiscal 1996 and additional awards in future years are anticipated.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for the grants in 2003: risk-free interest rate of
6%; expected dividend yield of 2.4%; expected life of 7 years; expected
volatility of 47%. No options were granted in the first six months of fiscal
2004.
(4) Cash Dividends
On March 9, 2004, the Company declared a quarterly dividend of $.03
per share for the second quarter of fiscal 2004, which was paid on April 8,
2004 to stockholders of record on March 24, 2004. The Company has paid
regular quarterly cash dividends since the first quarter of fiscal 1990.
(5) Calculation of Earnings Per Share and Weighted Average Shares
Outstanding
Basic and fully diluted earnings per share were calculated as follows:
(in thousands, except for per share amounts)
Three Months Ended Six Months Ended
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April 3 Mar 31 April 3 Mar 31
2004 2003 2004 2003
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Net income $ 142 $ 211 $ 223 $ 217
Basic income per share $ .05 $ .07 $ .07 $ .07
Average shares outstanding 3,125 3,125 3,125 3,125
Options outstanding - common
stock equivalents 24 - 21 -
Average common and common
equivalent shares outstanding 3,149 3,125 3,146 3,125
Fully diluted income per share $ .05 $ .07 $ .07 $ .07
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(6) Segment information
The Company has two reportable segments: electronic controls and
capacitors. The electronic controls segment produces control systems for
battery powered vehicles. The capacitor segment produces electronic
components for sale to electronic equipment manufacturers. Each segment
has its own management team, manufacturing facilities and sales force.
The significant accounting policies of the segments are the same as
those described in note(1) to the 2003 Annual Report filed on Form 10-K.
Inter-segment revenues are accounted for at current market prices. The
Company evaluates the performance of each segment principally based on
operating income. The Company does not allocate income taxes, interest
income and expense or foreign currency translation gains and losses to
segments. Information concerning operations of these businesses is as
follows:
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(in thousands)
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Three months ended April 3, 2004
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Controls Capacitors Corporate Total
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Sales to external customers $ 6,766 $ 507 $ - $ 7,273
Inter-segment revenues - 50 - 50
Operating income 274 85 (79) 280
Identifiable assets 13,119 1,353 580 15,052
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(in thousands)
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Three months ended March 31, 2003
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Controls Capacitors Corporate Total
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Sales to external customers $ 5,371 $ 767 $ - $ 6,138
Inter-segment revenues - 88 - 88
Operating income 173 207 (77) 303
Identifiable assets 12,227 1,606 478 14,311
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Six months ended April 3, 2004
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Controls Capacitors Corporate Total
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Sales to external customers $12,801 $ 938 $ - $13,739
Inter-segment revenues - 75 - 75
Operating income 503 94 (144) 453
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Six months ended March 31, 2003
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Controls Capacitors Corporate Total
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Sales to external customers $10,555 $ 1,228 - $11,783
Inter-segment revenues - 260 - 260
Operating income 177 277 (137) 317
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(7) Research and Development
The cost of research and development programs is charged against
income as incurred and was as follows.
(in thousands of dollars)
Three Months Ended Six Months Ended
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Apr 3 Mar 31 Apr 3 Mar 31
2004 2003 2004 2003
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Research and Development expense $1,066 $ 680 $1,994 $1,347
Percentage of sales 14.7% 11.1% 14.5% 11.4%
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Research and development expense increased by $386,000, or 57%,
compared to the second quarter of last fiscal year and by $647,000, or 48%
for the six month period. This increase was principally due to consultancy
costs on advanced new product development, recruitment of additional
internal engineering resources and currency fluctuations.
(8) Employee Benefit Plans
Tech/Ops Sevcon has defined benefit plans covering the majority of its
US and UK employees. There is also a small defined contribution plan. The
following table sets forth the components of the net pension cost as defined
by SFAS #132R.
(in thousands of dollars)
Three Months Ended Six Months Ended
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Apr 3 Mar 31 Apr 3 Mar 31
2004 2003 2004 2003
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Components of net periodic benefit cost:
Service cost $ 119 $107 $233 $213
Interest cost $ 218 192 425 382
Expected return on plan assets $ (221) (193) (431) (384)
Amortization of transition obligation $ - - - -
Amortization of prior service cost $ 13 12 25 24
Recognized net actuarial gain (loss) $ - - - -
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Net periodic benefit cost $ 129 $118 $252 $235
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Net cost of defined contribution plans $ 8 $ 7 $ 15 $ 14
Tech/Ops Sevcon contributed $315,000 to its pension plans in the
six months ended April 3, 2004 and presently anticipates contributing a
further $252,000 to fund its plans in the remainder of fiscal 2004, for a
total contribution of $567,000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FORWARD LOOKING STATEMENTS
Statements in this discussion and analysis about the Company's
anticipated financial results and growth, as well as those about the
development of its products and markets, are forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those projected. These include the risks discussed under
'Risk Factors' below and throughout this Item 2.
NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted the following new accounting pronouncement in
fiscal 2004. See Notes to Consolidated Financial Statements (2) for a more
detailed description of this new accounting pronouncement.
SFAS #132R, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" - Adoption on January 1, 2004 did not have a
material effect on consolidated financial statements.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes from the disclosures regarding
critical accounting policies and estimates contained in the Form 10-K for
fiscal 2003.
RISK FACTORS
In addition to the market risk factors relating to foreign currency and
interest rate risk set out below, the Company believes that the following
represent the most significant risk factors for the Company:
Capital Goods Markets
The Company's customers are mainly manufacturers of capital goods such
as fork lift trucks, aerial lifts and railway signaling equipment. These
markets are cyclical and are currently depressed. Demand in these markets
could decrease further or customers could decide to purchase alternative
products. In this event the Company's sales could decrease below its current
break even point and there is no certainty that the Company would be able to
decrease overhead expenses to enable it to operate profitably.
Materials and subcontractors
The Company relies on certain suppliers and subcontractors for all of its
requirements for certain components, subassemblies and finished products. In
the event that such suppliers and subcontractors are unable or unwilling to
continue supplying the Company, or to meet the Company's cost and quality
targets or needs for timely delivery, there is no certainty that the Company
would be able to establish alternative sources of supply in time to meet
customer demand.
Buildings and Insurance
In the controller business the majority of product is produced in a
single plant in England. The capacitor business is located in a single plant
in Wales. In the event that either of these plants was to be damaged or
destroyed there is no certainty that the Company would be able to establish
alternative facilities in time to meet customer demand. The Company does carry
property damage and business interruption insurance but this may not cover
certain lost business due to the long-term nature of the relationships with
many customers.
Litigation Risk
In fiscal 2002 the Company received a demand for repayment of an alleged
preference payment of $180,000 received from a customer in the 90 days prior
to their filing for protection under Chapter 11 during fiscal 2000. At the
time this customer filed for Chapter 11 protection it owed the Company $50,000
and this amount was fully reserved in the fiscal 2000 financial statements.
The Company is vigorously contesting this demand and believes that it has a
good defense and that its reserves for doubtful accounts are adequate to cover
its estimated exposure to this customer.
OVERVIEW OF SECOND QUARTER AND FIRST SIX MONTHS
In the second quarter net income was $142,000, or $.05 per diluted
share, compared to last year's results when the Company had net income of
$211,000, or $.07 per diluted share. Revenues for the second quarter were
$7,273,000, an increase of $1,135,000, or 18%, compared to the prior year's
$6,138,000. Foreign currency fluctuations resulted in a $645,000 increase in
reported sales. Second quarter volumes were 8% higher than last year, mainly
due to gains in the controls business. Engineering expense, mainly on
advanced new products, was $386,000 higher than the second quarter of last
year. Operating income for the second quarter was $280,000 compared to
$303,000 in the same quarter last year. Foreign currency changes compared to
last year resulted in a decrease of $20,000 in second quarter operating income.
For the six month period, net income was $223,000, or $.07 per diluted
share, compared to $217,000, or $.07 per diluted share last year. Revenues in
the first six months of fiscal 2004 were $13,739,000, an increase of
$1,956,000, or 17%, compared to last year. Foreign currency fluctuations
resulted in a $1,200,000 increase in reported sales. Volumes were 6% ahead of
the prior year. Higher spending on new products resulted in an increase in
engineering expense of $647,000, equivalent to $.13 per share. Operating
income for the six-month period was $453,000, compared to $317,000, in the
first half of the prior year. Foreign currency fluctuations increased year-to-
date reported operating income by $140,000 compared to the same period last
year.
Results of Operations
Three months ended April 3, 2004
Sales in the second fiscal quarter ended April 3, 2004 were $7,273,000
compared to $6,138,000 in the same quarter of the previous year, an increase
of $1,135,000, or 18%. Foreign currency fluctuations, principally the weakness
of the US dollar compared to the Euro and the British pound, accounted for
$645,000, or 11%, of the increase in revenues. Shipment volumes were 8% ahead
of the second quarter of last year. Volumes in the U.S. Controller business
increased by 21% with gains in shipments to the aerial lift, airport ground
support and mining markets partially offset by lower demand in the US fork
lift truck market. Volumes in the foreign controller markets were 11% higher
than last year, mainly due to growth in shipments to the aerial lift market.
Shipment volumes to the foreign fork lift truck and airport ground support
markets were in line with the same period last year. Capacitor revenues were
34% lower than last year. Capacitor volumes were 42% down on the prior year
with foreign currency fluctuations resulting in a $63,000 increase in reported
sales of capacitors. The volume decrease in the second quarter was due to
lower demand in the European markets for railway signaling capacitors and
audio capacitors.
Second quarter gross profit was 41.1% of sales, an increase of 1.7% from
39.4% in the same quarter of fiscal 2003. Gross profit of $2,986,000 was
$480,000 higher than last year. The increase in gross profit percentage was
due to both higher volumes and to foreign currency fluctuations which caused
a $285,000 increase in gross profit in the second quarter.
Selling, research and administrative expenses were $2,705,000, an
increase of $592,000, or 28%, compared to last year's second quarter. Foreign
currency fluctuations increased these expenses by $305,000, or 14%. In the
second quarter of fiscal 2004, engineering and R&D expense increased by at
total of $386,000. This was mainly due to increased consulting expense and
additional internal resources to accelerate the development of new high
quality products. Foreign currency fluctuations increased the reported
engineering and R&D expense by $112,000.
In the second quarter there was operating income of $280,000 compared
to $303,000 in the same quarter last year, a decrease in operating income
of $22,000. Foreign currency fluctuations decreased reported operating income
by $20,000. Operating income in the capacitor business segment decreased by
$122,000 to $85,000, mainly due to lower volumes. Operating income in the
controller business of $274,000 was $101,000 higher than in the second
quarter of last year. The increase in controller business operating income
was mainly due to higher volumes. This was partially offset by higher
engineering and R&D expense. Unallocated corporate expenses were $79,000 in
the current year compared to $77,000 in the second quarter of last year.
Other expense in the second quarter of fiscal 2004 was $60,000 compared
to other income of $22,000 in the same quarter last year, a difference of
$82,000. This was mainly due to foreign currency losses in the second quarter
of fiscal 2004 compared to gains last year.
Income before income taxes was $220,000, compared to $325,000 in the
same quarter last year, a decrease of $105,000. Income taxes were 35% of pre-
tax income, in line with the same quarter last year. Net income was $142,000
compared to $211,000 in the same quarter last year, a decrease of $69,000.
Basic and fully diluted income per share decreased from $.07 in the second
quarter of fiscal 2003, to $.05 in the second quarter of fiscal 2004.
Six months ended April 3, 2004
Sales in the first six months of fiscal 2004 were $13,739,000, compared
to $11,783,000 in the same period last year, an increase of $1,956,000, or 17%.
Foreign currency fluctuations accounted for a $1,200,000, or 10%, increase in
reported sales. Volumes were 6% ahead last year. Volumes in the controller
business were 11% better than last year. In the capacitor business sales
decreased by $290,000 compared to the same period last year. Volumes were
down by $396,000, or 32%, compared to the first six months of last year.
Foreign currency fluctuations accounted for a $106,000 increase in reported
sales.
Revenues in the US controller business increased by 9%. This was
mainly due to decreased demand in the aerial lift, airport ground support,
and mining markets, partially offset by decreased sales into the fork lift
truck market. Controller volumes in foreign markets grew by 12%, mainly due
to increased demand in the European aerial lift market.
Gross profit was 40.7% of sales in the first half of fiscal 2004
compared to 38.6% in 2003. Gross profit increased by $1,051,000 compared to
the first six months of last year. Higher volumes caused a $310,000 increase
in gross profit. Foreign currency fluctuations increased reported gross
profit by $610,000. Higher margins on new products and improved manufacturing
efficiency were the main cause of the remaining $131,000 improvement in gross
profit.
Selling, research and administrative expenses were $5,141,000, an
increase of $915,000, or 22%, compared to the same period last year. In the
first six months of the current year, and excluding the impact of foreign
currency fluctuations, engineering and R&D expense increased by $647,000
mainly due to increased consulting expense and additional internal resources
to accelerate the development of new high quality products. Foreign currency
fluctuations increased reported operating expenses by $470,000, or 11%.
Operating income for the first half year was $453,000, an increase
of $136,000 compared to the first six months of last year. Foreign currency
fluctuations resulted in a $140,000 increase in reported operating income.
Operating income for the controller business increased by $326,000 to
$503,000. The main causes of this increase in operating income were higher
volumes partially offset by increased engineering and R&D expense. In the
capacitor business segment operating income decreased by $183,000 to $94,000,
mainly due to lower volumes, partially offset by a positive impact of foreign
currency fluctuations.
Other expense was $109,000 compared to other income of $17,000 in the
first half of last year, an adverse change of $126,000. This was mainly due
to foreign currency losses in the current year compared to gains last year.
Income before income taxes was $344,000, compared to $334,000 last
year, an increase of $10,000. Income taxes were 35% of pre-tax income, in
line with the first half of last year. Net income was for the first half of
fiscal 2004 was $223,000, an increase of $6,000 compared to the same period
last year. Basic and fully diluted income per share was $.07 per share which
was in line with the first half of fiscal 2003.
Financial Condition
The Company has, since January 1990, maintained a program of regular
cash dividends, which, for the quarter ended April 3, 2004, amounted to
$94,000. Cash balances at the end of the second quarter of 2004 were $207,000
compared to $524,000 in September 2003, a decrease of $317,000.
In the first six months of fiscal 2004 net income was $223,000, and
operating activities used $110,000 of cash. There was an increase of
$1,118,000 in receivables due to both higher volumes and foreign currency
fluctuations. The number of days sales in receivables decreased in the first
six months of fiscal 2004 from 70 days to 62 days. Dividend payments for the
first six months of fiscal 2004 amounted to $188,000. Capital expenditures
were $370,000 compared to depreciation of $312,000.
The Company has no long-term debt and has overdraft facilities in the
UK of $1,815,000 and of $379,000 in France. The UK overdraft facilities are
secured by all of the Company's assets in the UK and the French overdraft
facilities are unsecured.
Tech/Ops Sevcon's capital resources, in the opinion of management, are
adequate for projected operations and capital spending programs.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
The primary market risks for the Company are foreign currency risk and
interest rate risk. There have been no material changes in our exposure as
described in the Form 10-K for fiscal 2003.
Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. The Company's
principal executive officer and principal financial officer, after evaluating
the effectiveness of the "disclosure controls and procedures" (as defined
in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15-d-15(e))have
concluded that, as of April 3, 2004, the disclosure controls and procedures
were effective and designed to ensure that the information required to be
disclosed in the reports filed or submitted by the Company under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the requisite time periods.
(b) Changes in internal control over financial reporting. Our principal
executive officer and principal financial officer have identified no change
in our "internal control over financial reporting" (as defined in Securities
Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f)) that occurred during the
period covered by this Quarterly Report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting held on January 27, 2004, the
shareholders approved the election of directors and the amendments to the
1996 equity incentive plan as follows:
A) To re-elect as directors for three year terms the following persons:
Maarten D. Hemsley, David R. A. Steadman and Marvin G. Schorr. Mr. Hemsley
received 2,851,140 votes for and 23,005 withheld, Mr. Steadman received
2,803,459 votes for and 70,686 withheld and Dr. Schorr received 2,752,669
votes for and 121,746 withheld. There were no abstentions or broker non-votes.
B) To amend the 1996 Equity Incentive Plan. There were 1,757,148 votes
for the proposal, 386,173 votes against, 93,673 abstentions and 637,151
broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report.
See Exhibit Index immediately preceding the exhibits.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was furnished on April 28, 2004 (Item 12).
The report contained information announcing Tech/Ops Sevcon, Inc.'s earnings
release issued on April 27, 2004.
The description of this Form 8-K in this Item 6 is for informational
purposes only and the news release furnished thereon shall not be deemed
"filed" with the Commission.
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 14, 2004 By: /s/ Paul A. McPartlin
---------------------
Paul A. McPartlin
Chief Financial Officer(Principal
financial and chief accounting officer)
Exhibit Index
Exhibit Description
- ------- -----------
31.1 Certification of Principal Executive Officer pursuant to
section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
31.2 Certification of Principal Financial Officer pursuant to
section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
32.1 Certification of Principal Executive Officer and Principal
Financial Officer pursuant to section 906 of the
Sarbanes-Oxley Act of 2002. Furnished herewith.
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Boyle, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Tech/Ops Sevcon,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 14, 2004 /s/ Matthew Boyle
---------------------
Matthew Boyle
President and
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul A. McPartlin, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Tech/Ops Sevcon,
Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 14, 2004 /s/ Paul A. McPartlin
---------------------
Paul A. McPartlin
Chief Financial and
Accounting Officer
EXHIBIT 32.1
Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350
Each of the undersigned officers of Tech/Ops Sevcon, Inc. (the
"Company") certifies, under the standards set forth in and solely for the
purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of
the Company for the quarter ended April 3, 2004 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and information contained in that Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
Dated: May 14, 2004 /s/ Matthew Boyle
-----------------------
Matthew Boyle
Chief Executive Officer
Dated: May 14, 2004 /s/ Paul A. McPartlin
-----------------------
Paul A. McPartlin
Chief Financial Officer