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 July 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 August 16, 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)
July 3, Sept 30,
2004 2003
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(unaudited) (derived from
audited
statements)
Current assets:
Cash and cash equivalents $ 562 $ 524
Accounts receivable, less allowances
of $328 at 6/30/2004
and $295 at 9/30/2003 5,552 4,088
Inventories:
Raw materials 2,194 1,963
Work-in-process 291 207
Finished goods 1,617 1,829
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4,102 3,999
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Prepaid expenses and other current
assets 879 762
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Total current assets 11,095 9,373
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Property, plant and equipment, at cost 9,286 8,100
Less: Accumulated depreciation
and amortization 6,045 5,174
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Net property, plant and equipment 3,241 2,926
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Goodwill 1,435 1,435
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$15,771 $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)
July 3, Sept 30,
2004 2003
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(unaudited) (derived from
audited
statements)
Current liabilities:
Accounts payable 2,463 1,490
Dividend payable 94 94
Accrued expenses 2,527 2,273
Accrued taxes on income 246 152
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Total current liabilities 5,330 4,009
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Deferred taxes on income 82 77
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Stockholders' investment
Preferred stock - -
Common stock 313 313
Premium paid in on common stock 4,047 4,047
Retained earnings 5,942 5,897
Cumulative other comprehensive
income (loss) 57 (609)
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Total stockholders' investment $10,359 $ 9,648
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$15,771 $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 Nine Months Ended
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July 3, June 30, July 3, June 30,
2004 2003 2004 2003
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Net sales $ 7,486 $ 5,961 $21,225 $17,744
Costs and expenses:
Cost of sales 4,525 3,614 12,670 10,854
Selling, research and
Administrative 2,840 2,186 7,981 6,412
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7,365 5,800 20,651 17,266
------- ------- ------- -------
Operating income 121 161 574 478
Other income (expense), net 36 (11) (73) 6
------- ------- ------- -------
Income before income taxes 157 150 501 484
Income taxes (54) (52) (175) (169)
------- ------- ------- -------
Net income $ 103 $ 98 326 315
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Basic income per share $ .03 $ .03 $ .10 $ .10
======= ======= ======= =======
Fully diluted income per share $ .03 $ .03 $ .10 $ .10
======= ======= ======= =======
Consolidated Statement of Comprehensive Income
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
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July 3, June 30, July 3, June 30,
2004 2003 2004 2003
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Net income $ 103 $ 98 $ 326 $ 315
Foreign currency
translation adjustment 27 381 646 467
Change in fair market value
of cash flow hedge 21 16 20 (3)
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Comprehensive income $ 151 $ 495 $ 992 $ 779
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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)
Nine Months Ended
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July 3, June 30,
2004 2003
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Net cash flow from operating activities:
Net income $ 326 $ 315
Adjustments to reconcile net income to net cash
generated from operating activities:
Depreciation and amortization 470 456
Deferred tax provision 5 -
Increase (decrease) in cash resulting from
changes in operating assets & liabilities:
Receivables (1,464) (535)
Inventories (103) (399)
Pre-paid expenses and other current assets (91) (199)
Accounts payable 973 568
Accrued compensation and expenses 254 10
Accrued taxes on income 94 (24)
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Net cash generated from operating activities 458 192
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Cash flow used by investing activities:
Acquisition of property, plant, and
equipment, net (479) (466)
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Net cash used by investing activities (479) (466)
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Cash flow used by financing activities:
Dividends paid (281) (281)
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Effect of exchange rate changes on cash 340 322
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Net increase (decrease)in cash 38 (233)
Opening balance - cash and cash equivalents 524 695
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Ending balance - cash and cash equivalents $ 562 $ 462
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Supplemental disclosure of cash flow information
Cash paid for income taxes $ 43 $ 251
Cash paid for interest 24 52
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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 - July 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 July 3, 2004 and the results of
operations and cash flows for the three months and nine months ended July 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 nine-month periods
ended July 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 Nine Months Ended
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July 3 June 30 July 3 June 30
2004 2003 2004 2003
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Net income As reported $ 103 $ 98 $ 326 $ 315
Pro forma effect of expensing stock
options (net of income tax) (17) (17) (51) (45)
Net income Pro forma $ 86 $ 81 $ 275 $ 270
Income per share:
Basic As reported $ .03 $ .03 $ .10 $ .10
Basic Pro forma $ .03 $ .03 $ .09 $ .09
Diluted As reported $ .03 $ .03 $ .10 $ .10
Diluted Pro forma $ .03 $ .03 $ .09 $ .09
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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 nine months of fiscal
2004.
(4) Cash Dividends
On June 14, 2004, the Company declared a quarterly dividend of $.03
per share for the third quarter of fiscal 2004, which was paid on July 10,
2004 to stockholders of record on June 26, 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 Nine Months Ended
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July 3 June 30 July 3 June 30
2004 2003 2004 2003
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Net income $ 103 $ 98 $ 326 $ 315
Basic income per share $ .03 $ .03 $ .10 $ .10
Average shares outstanding 3,125 3,125 3,125 3,125
Options outstanding - common
stock equivalents 23 - 22 -
Average common and common
equivalent shares outstanding 3,148 3,125 3,147 3,125
Fully diluted income per share $ .03 $ .03 $ .10 $ .10
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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 July 3, 2004
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Controls Capacitors Corporate Total
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Sales to external customers $ 6,953 $ 533 - $ 7,486
Inter-segment revenues - 63 - 63
Operating income 208 69 (156) 121
Identifiable assets 13,915 1,383 473 15,771
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Three months ended June 30, 2003
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Controls Capacitors Corporate Total
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Sales to external customers $ 5,420 $ 541 - $ 5,961
Inter-segment revenues - 47 - 47
Operating income 126 76 (41) 161
Identifiable assets 13,076 1,166 334 14,576
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Nine months ended July 3, 2004
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Controls Capacitors Corporate Total
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Sales to external customers $19,754 $ 1,471 - $21,225
Inter-segment revenues - 138 - 138
Operating income 711 163 (300) 574
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Nine months ended June 30, 2003
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Controls Capacitors Corporate Total
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Sales to external customers $15,975 $ 1,769 - $17,744
Inter-segment revenues - 307 - 307
Operating income 303 353 (178) 478
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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 Nine Months Ended
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July 3 June 30 July 3 June 30
2004 2003 2004 2003
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Research and Development expense $1,103 $807 $3,097 $2,154
Percentage of sales 14.7% 13.5% 14.6% 12.1%
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Research and development expense increased by $296,000, or 37%,
compared to the third quarter of last fiscal year and by $943,000, or 44%
for the nine 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 Nine Months Ended
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July 3 June 30 July 3 June 30
2004 2003 2004 2003
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Components of net periodic benefit cost:
Service cost $ 118 $ 110 $ 351 $ 323
Interest cost $ 215 196 640 578
Expected return on plan assets $ (218) (197) (649) (581)
Amortization of transition obligation $ - - - -
Amortization of prior service cost $ 13 12 38 36
Recognized net actuarial gain (loss) $ - - - -
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Net periodic benefit cost $ 128 $ 121 $ 380 $ 356
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Net cost of defined contribution plans $ 8 $ 7 $ 23 $ 21
Tech/Ops Sevcon contributed $434,000 to its pension plans in the
nine months ended July 3, 2004 and presently anticipates contributing a
further $72,000 to fund its plans in the remainder of fiscal 2004, for a
total contribution of $506,000.
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, airport ground support vehicles and railway
signaling equipment. These markets are cyclical and some 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, sub-assemblies 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 THIRD QUARTER AND FIRST NINE MONTHS
In the third quarter of fiscal 2004 net income was $103,000, or $.03
per diluted share, which was in line with last year's results for the same
period when the Company had net income of $98,000, or $.03 per diluted share.
Revenues for the third quarter were $7,486,000, an increase of $1,525,000, or
26%, compared to the prior year's $5,961,000. Foreign currency fluctuations
accounted for an increase of $435,000, or 7%, in reported sales but had an
insignificant impact on operating income. Volumes increased by 19% compared to
the third quarter of last year mainly due to gains in the controls business.
Engineering expense, mainly on advanced new products, was $296,000 higher than
the third quarter of last year. Operating income for the third quarter was
$121,000 compared to $161,000 in the same quarter last year.
For the nine month period net income was $326,000, or $.10 per diluted share,
compared to $315,000, also $.10 per diluted share, last year. Revenues in the
first nine months of this year were $21,255,000, an increase of $3,481,000,
or 20%, compared to last year. Foreign currency fluctuations accounted for
an increase of $1,635,000, or 9%, in reported sales. Volumes were 11% higher
than the prior year period. The gross profit percentage increased to 40.3%
of sales compared to 38.8% in the same period last year. Higher operating
expenses, mainly related to new product engineering, sales and marketing and
adverse foreign currency affects increased operating expenses by $1,569,000
compared to the same period last year. Operating income for the nine months
was $574,000 compared to $478,000 in the first nine months of fiscal 2003.
The increase in operating income was mainly due to increased volumes and
foreign currency fluctuations, partially offset by the higher operating
expense mainly related to new products.
Cash balances increased by $355,000 in the third quarter of fiscal 2004 to
$562,000. In the first nine months of this year cash balances increased by
$38,000. Operating activities generated cash of $458,000, capital
expenditure used cash of $479,000 and dividend payments amounted to $281,000.
Exchange rate changes increased cash by $340,000.
Results of Operations
Three months ended July 3, 2004
Sales in the third fiscal quarter ended July 3, 2004 were $7,486,000
compared to $5,961,000 in the third quarter of last year, an increase
of $1,525,000, or 26%. Foreign currency fluctuations, principally the weakness
of the US dollar compared to the Euro and the British pound, accounted for
an increase of $435,000, or 7%, in revenues. Shipment volumes were 19% ahead
of the third quarter of last year. Volumes in the U.S. Controller business
increased by 44% 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 grew by 10%
compared to the third quarter of fiscal 2003, mainly due to strong growth in
shipments to the aerial lift market. Shipment volumes to the foreign fork lift
truck and airport ground support markets were moderately ahead of the same
period last year. Capacitor revenues were 34% lower than last year. Capacitor
sales were marginally lower than last year at $533,000 compared to $541,000 in
the third quarter of fiscal 2003. An 11% decrease in capacitor volumes mainly
in the audio capacitor market was partially offset by the impact of foreign
currency fluctuations resulting in a 10% increase in reported sales of
capacitors.
Third quarter gross profit was 39.6% of sales, an increase of 0.2% from
39.4% in the same quarter of fiscal 2003. Gross profit of $2,961,000 was
$614,000 higher than last year. The increase in gross profit was mainly due to
higher volumes and to foreign currency fluctuations which caused a $220,000
increase in gross profit in the third quarter. In the third quarter of fiscal
2004 one of the Company's smaller sub-contractors became insolvent and ceased
operations disrupting the Company's output for a period of a few weeks and
causing increased costs of approximately $40,000 in the third quarter. The
sub-assemblies provided by this sub-contractor have now been successfully
transferred to other sub-contractors with no long-term adverse impacts on the
Company's business.
Selling, research and administrative expenses were $4,525,000, an
increase of $911,000, or 25%, compared to last year's third quarter. Foreign
currency fluctuations increased these expenses by $225,000, or 6%. In the
third quarter of fiscal 2004, engineering and R&D expense increased by
$296,000 compared to the same period last year. This was mainly due to higher
engineering consulting expense and additional internal resources to accelerate
the development of new high quality products. Management expects that
engineering consulting expense will diminish over the next few quarters as the
new products come on line. Foreign currency fluctuations increased the
reported engineering and R&D expense by $90,000. In addition sales and
marketing expense was 24% higher that the same quarter last year, mainly due to
an increase in number of sales employees and additional marketing expense
related to forthcoming new product introductions.
In the third quarter there was operating income of $121,000 compared
to $161,000 in the third quarter last year, a decrease in operating income
of $40,000. Foreign currency fluctuations decreased reported operating income
by $5,000. Operating income in the controller business of $208,000 was $82,000
higher than in the third quarter of last year. The increase in controller
business operating income was mainly due to higher volumes partially offset by
additional spending on engineering and marketing of new products. Operating
income in the capacitor business segment decreased by $7,000 to $69,000,
mainly due to lower volumes. Unallocated corporate expenses were $156,000 in
the current year compared to $41,000 in the third quarter of last year.
Other income in the third quarter of this year was $36,000 compared
to other expense of $11,000 in the same quarter last year, a difference of
$47,000. This was mainly due to foreign currency gains in the third quarter
of fiscal 2004 compared to losses last year.
Income before income taxes of $157,000 was in line with last year when
pre-tax income was $150,000. Income taxes were 34.4% of pre-tax income
compared to 34.7% in the same quarter last year. Net income was $103,000
compared to $98,000 in the same quarter last year, an increase of $5,000.
Basic and fully diluted income per share were unchanged from the prior year
at $.03 per share.
Nine months ended July 3, 2004
Sales in the first nine months of fiscal 2004 were $21,225,000, compared
to $17,744,000 in the prior year, an increase of $3,481,000, or 20%. Foreign
currency fluctuations accounted for a $1,635,000, or 9%, increase in reported
sales. Volumes were $1,846,000, or 11%, ahead of last year. Volumes in the
controller business were 14% better than last year, with strong gains in the
aerial lift, mining and airport ground support markets. In the capacitor
business sales decreased by $298,000 compared to the same period last year.
Capacitor volumes were down by $456,000, or 26%, compared to the first nine
months of last year. Foreign currency fluctuations accounted for a $158,000,
or 9%, increase in reported sales of the capacitor business segment.
Revenues in the US controller business increased by 20%. This was
mainly due to significantly higher sales into the US aerial lift market.
Higher domestic volumes were also recorded in the mining, airport ground
support, and other electric vehicle markets, partially offset by decreased
sales into the fork lift truck market. Controller volumes in foreign markets
grew by 11%, mainly due to increased demand in the European aerial lift
market. All other market segments in the foreign controller business
reported increased volumes.
Gross profit was 40.3% of sales in the first nine months of fiscal 2004
compared to 38.8% in the comparable period last year. Gross profit increased
by $1,655,000 compared to the first nine months of last year mainly due to
increased volumes and foreign currency fluctuations. Higher margins on new
products also contributed to the improvement in gross profit.
Selling, research and administrative expenses were $7,981,000, an
increase of $1,569,000, or 24%, compared to the comparable period last year.
Foreign currency fluctuations increased reported operating expenses by
$640,000, or 10%. In the first nine months of the current year, and excluding
the impact of foreign currency fluctuations, engineering and R&D expense
increased by $664,000 mainly due to increased consulting expense and
additional internal resources to accelerate the development of new high
quality products.
Operating income for the first nine months was $574,000, an increase
of $96,000, or 20% compared to the first nine months of last year. Foreign
currency fluctuations resulted in a $135,000 increase in reported operating
income. Operating income for the controller business increased by $408,000 to
$711,000. The main causes of this increase in operating income were higher
volumes partially offset by increased engineering and marketing expense. In the
capacitor business segment operating income decreased by $190,000 to $163,000,
mainly due to lower volumes, partially offset by a positive impact of foreign
currency fluctuations.
Other expense was $73,000 compared to other income of $6,000 in the
same period last year, an adverse change of $79,000. This was mainly due
to foreign currency losses in the current year compared to gains last year.
Income before income taxes of $326,000 was in line with last year when
pre-tax income was $315,000. Income taxes were 35% of pre-tax income, in both
the current and prior year periods. Net income was for the first nine months of
fiscal 2004 was $326,000, an increase of $11,000 compared to the same period
last year. Basic and fully diluted income per share was $.10 per share in
first nine months of both the current and prior fiscal years.
Financial Condition
The Company has, since January 1990, maintained a program of regular
cash dividends, which, for the quarter ended July 3, 2004, amounted to
$94,000. Cash balances at the end of the third quarter of 2004 were $562,000
compared to $524,000 in September 2003, an improvement of $38,000. In the
third quarter cash balances increased by $355,000, mainly due to better
working capital management. Third quarter net income of $103,000 covered
the dividend payment of $94,000.
In the first nine months of fiscal 2004 net income was $326,000, and
operating activities generated $458,000 of cash. There was an increase of
$1,464,000 in receivables due to both higher volumes and foreign currency
fluctuations. The number of days sales in receivables decreased in the first
nine months of fiscal 2004 from 70 days to 61 days. Dividend payments for the
first nine months of fiscal 2004 amounted to $281,000. Capital expenditures
were $479,000 compared to depreciation of $470,000.
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 July 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 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 August 4, 2004 (Item 12).
The report contained information announcing Tech/Ops Sevcon, Inc.'s earnings
release issued on August 4, 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: August 16, 2004 By: /s/ Paul A. McPartlin
---------------------
Paul A. McPartlin
Chief Financial Officer(Principal
financial and chief accounting officer)
Exhibit Index
Exhibit Description
- ------- -----------
(3)(a) Certificate of Incorporation of the registrant. Filed herewith
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 (3) (a)
CERTIFICATE OF INCORPORATION
OF
TECH/OPS SEVCON, INC.
I, the undersigned, for the purpose of forming a corporation under the
laws of the State of Delaware, hereby certify as follows:
FIRST: The name of the corporation is Tech/Ops Sevcon, Inc.
SECOND: The address of the corporation's registered office in the State of
Delaware is 229 South State Street, City of Dover, County of Kent. The name
of its registered agent at such address is the Prentice-Hall Corporation
System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is eleven million (11,000,000), of
which one million (1,000,000) shares without par value are to be of a class
designated "Preferred Stock" and ten million (10,000,000) shares without par
value are to be of a class designated "Common Stock".
Preferred Stock
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article Fourth, to provide by resolution
for the issuance of the shares of Preferred Stock in one or more series, and
by filing a certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included
in each such series, and to fix the designations, powers, preferences and
rights of the shares of each such series and the qualifications, limitations
or restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of the
series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the outstanding shares of Common Stock
with respect to the same dividend period.
If upon any voluntary or involuntary liquidation, dissolution or winding
up of the corporation, the assets available for distribution to holders of
shares of Preferred Stock of all series shall be insufficient to pay such
holders the full preferential amount to which they are entitled, then such
assets shall be distributed ratably among the shares of all series of
Preferred Stock in accordance with the respective preferential amounts
(including unpaid cumulative dividends, if any) payable with respect thereto.
Common Stock
The Common Stock is subject to the rights and preferences of the
Preferred Stock as hereinbefore set forth or authorized.
Subject to the provisions of any applicable law or of the by-laws of the
corporation, as front time to time amended, with respect to the fixing of a
record date for the determination of stockholders entitled to vote, and
except as otherwise provided by law or by the resolution or resolutions
providing for the issue of any series of Preferred Stock, the holders of
outstanding shares of Common Stock shall have exclusive voting rights for the
election of directors and for all other purposes, each holder of record of
shares of Common Stock being entitled to one vote for each share of Common
Stock standing in his name on the books of the corporation.
Subject to the rights of any one or more series of Preferred Stock, the
holders of Common Stock shall be entitled to receive such dividends as from
time to time may be declared by the Board of Directors out of any funds of
the corporation legally available for the payment of such dividends.
In the event of the liquidation, dissolution, or winding up of the
corporation, whether voluntary or involuntary, after payment shall have been
made to the holders of the Preferred Stock of the full amount to which they
are entitled, the holders of Common Stock shall be entitled to share, ratably
according to the number of shares of Common Stock held by them, in all
remaining assets of the corporation available for distribution to its
stockholders.
Issuance
Subject to the provisions of this Certificate of Incorporation and
except as otherwise provided by law, the shares of stock of the corporation,
regardless of class, may be issued for such consideration and for such
corporate purposes as the Board of Directors may from time to time determine.
FIFTH: The name and mailing address of the incorporator are as follows:
Name Mailing Address
---- ---------------
Marvin G. Schorr One Beacon Street
Boston, Massachusetts 02108
SIXTH: The Board of Directors shall consist of not less than three nor
more than fifteen directors, the exact number to be determined from time to
time by resolution adopted by the affirmative vote of a majority of the
directors then in office. The directors shall be divided into three classes,
as nearly equal in number as the then total number of directors constituting
the entire Board permits, with the term of office of one class expiring each
year. The initial directors of the first class shall be elected to hold
office for a term expiring at the next succeeding annual meeting, the initial
directors of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and the initial directors of
the third class shall be elected to hold office for a term expiring at the
third succeeding annual meeting. At each succeeding annual meeting of
stockholders beginning in 1989, successors to the class of directors whose
term expires at that meeting shall be elected for a three year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional directors of any class elected
to fill a vacancy resulting from an increase in the size of such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no event will a decrease in the number of directors shorten the
term of any incumbent director. Any vacancies in the Board of Directors for
any reason, and any directorships resulting from any increase in the number
of directors, may be filled by the Board of Directors, acting by a majority
of the directors then in office, although less than a quorum, and any
directors so chosen shall hold office until the next election of the class
for which such directors shall have been chosen. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of
any one or more series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the corporation, the
election, terms of office and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation and certificates
of designation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article Sixth unless expressly provided
by such terms. Subject to the foregoing, at each annual meeting of
stockholders the successors to the class of directors whose terms shall then
expire shall be elected to held office for a term expiring at the annual
meeting for the year in which their term expires and until their successors
shall be elected and qualified, subject to prior death, resignation,
retirement or removal.
SEVENTH: The Board of Directors is expressly authorized to exercise all
powers granted to the directors by law except insofar as such powers are
limited or denied herein or in the by-laws of the corporation. In
furtherance of such powers, the Board of Directors shall have the right to
adopt, amend or repeal the by-laws of the corporation, but the stockholders
may adopt additional by-laws and may amend or repeal any by-law whether
adopted by them or otherwise.
EIGHTH: Election of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
NINTH: No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the corporation may be taken by
written consent without a meeting, and the power of stockholders to consent
in writing, without a meeting, to the taking of any action is specifically
denied.
This Article Ninth may not be amended, revised or revoked, in
whole or in part, except by the affirmative vote of the holders of 80% of the
shares of all classes of stock of the corporation entitled to vote for the
election of directors, considered for the purposes of this Article Ninth as
one class of stock.
TENTH: (i) Except as set forth in part (ii) of this Article Tenth, the
affirmative vote of the holders of 80% of the shares of all classes of stock
of the corporation entitled to vote for the election of directors, considered
for the purposes of this Article as one class, shall be required (a) for the
adoption of any agreement for the merger or consolidation of the corporation
or any Subsidiary (as hereinafter defined) with or into any Other Corporation
(as hereinafter defined), (b) to authorize any sale, lease, exchange,
mortgage, pledge or other disposition of all or substantially all of the
assets of the corporation or any Subsidiary to any Other Corporation, (c) to
authorize the issuance or transfer by the corporation of any Substantial
Amount (as hereinafter defined) of securities of the corporation in exchange
for the securities or assets of any Other Corporation, or (d) to engage in
any other transaction the effect of which is to combine the assets and
business of the corporation or any Subsidiary with any Other Corporation.
Such affirmative vote shall be in addition to the vote of the holders of the
stock of the corporation otherwise required by law, the Certificate of
Incorporation of the corporation or any agreement or contract to which the
corporation is a party.
(ii) The provisions of part (i) of this Article Tenth shall not
be applicable to any transaction described herein if such transaction is
approved by a resolution of the Board of Directors of the corporation,
provided that the directors voting in favor of such resolution consist of a
majority of the persons who were duly elected and acting members of the Board
of Directors prior to the time any such Other Corporation became a Beneficial
Owner (as hereinafter defined) of 5% or more of the shares of stock of the
corporation entitled to vote for the election of directors (a "Continuing
Director"), including any successor of a Continuing Director who is not an
affiliate or an associate or a representative of such Other Corporation and
is recommended or elected to succeed such Continuing Director by a majority
of Continuing Directors. In considering such transaction, the Board of
Directors shall give due consideration to all relevant factors, including
without limitation the social and economic effects on the employees,
customers, suppliers and other constituents of the corporation and its
Subsidiaries and on the communities in which the corporation and its
Subsidiaries operate or are located.
(iii) The Board of Directors shall have the power and duty to
determine for the purposes of this Article Tenth, on the basis of information
known to such Board, if and when any Other Corporation is the Beneficial
Owner of 5% or more of the outstanding shares of stock of the corporation
entitled to vote for the election of directors. Any such determination, if
made in good faith, shall be conclusive and binding for all purposes of this
Article Tenth.
(iv) As used in this Article Tenth, the following terms shall
have the meanings indicated:
"Other Corporation" means any person, firm, corporation or other
entity, other than a Subsidiary of the corporation, which is the Beneficial
Owner of 5% or more of the shares of stock of the corporation entitled to
vote in the election of directors.
"Subsidiary" means any corporation in which the corporation
owns, directly or indirectly, more than 50% of the voting securities.
"Substantial Amount" means any securities of the corporation
having a then fair market value of more than $500,000.
An Other Corporation (as defined above) shall be deemed to be
the "Beneficial Owner" of stock if such Other Corporation or any "affiliate"
or "associate" of such Other Corporation (as those terms are defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934 (15 U.S.C. 78 aaa
et seq.), as amended from time to time), directly or indirectly, controls the
voting of such stock or has any options, warrants, conversion or other rights
to acquire such stock.
(v) This Article Tenth may not be amended, revised or revoked,
in whole or in part, except by the affirmative vote of the holders of 80% of
the shares of all classes of stock of the corporation entitled to vote for
the election of directors, considered for the purposes of this Article Tenth
as one class of stock.
ELEVENTH: No director shall be personally liable to the
corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director. Notwithstanding the foregoing
sentence, a director shall be liable to the extent provided by applicable law
(i) for breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article Eleventh shall apply to or have any
effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
TWELFTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation,
Signed this 23 day of November, 1987.
/s/ Marvin G. Schorr
-----------------------------
Marvin G. Schorr, Incorporator
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TECH/OPS SEVCON, INC.
Tech/Ops Sevcon, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of Tech/Ops Sevcon, Inc.,
a resolution was duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and directing that it be considered at the next annual meeting
of the stockholders of said corporation. The resolution setting forth the
proposed amendment is as follows:
Resolved that this corporation's Certificate of Incorporation be amended
by changing the first paragraph of Article FOURTH to read as follows:
The total number of shares of all classes of stock which the corporation
shall have authority to issue is five million (5,000,000), of which one
million (1,000,000) shares $.10 par value, are to be of a class designated
"Preferred Stock" and four million (4,000,000) shares, $.10 par value, are to
be of a class designated "Common Stock".
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said corporation was duly called
and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Tech/Ops Sevcon, Inc. has caused this certificate to
be signed by Bernard F. Start, its President, and Robert P. Moncreiff, its
Secretary, this twenty-seventh day of January 1993.
BY: /s/ Bernard F. Start
---------------------------
Bernard F. Start, President
ATTEST: /s/ Robert P. Moncreiff
-----------------------------
Robert P. Moncreiff, Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TECH/OPS SEVCON, INC.
Tech/Ops Sevcon, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of Tech/Ops Sevcon,
Inc., a resolution was duty adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and directing that it be considered at the next annual meeting
of the stockholders of said corporation. The resolution setting forth the
proposed amendment is as follows:
Resolved that this corporation's Certificate of Incorporation be amended
by changing the first paragraph of Article FOURTH to read as follows:
The total number of shares of all classes of stock which the corporation
shall have authority to issue is nine million (9,000,000), of which one
million (1,000,000) shares, $.10 par value, are to be of a class designated
"Preferred Stock" and eight million (8,000,000) shares, $.10 par value, are
to be designated "Common Stock".
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of the stockholders of said corporation was
duly called and held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Tech/Ops Sevcon, Inc. has caused this
certificate to be signed by Bernard F. Start, its President, and David R.
Pokross, Jr., its Secretary, this thirty-first day of January 1996.
BY: /s/ Bernard F. Start
---------------------------
Bernard F. Start, President
ATTEST: /s/ David R. Pokross, Jr.
-------------------------
David R. Pokross, Jr., Secretary
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: August 16, 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: August 16, 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 July 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: August 16, 2004 /s/ Matthew Boyle
-----------------------
Matthew Boyle
Chief Executive Officer
Dated: August 16, 2004 /s/ Paul A. McPartlin
-----------------------
Paul A. McPartlin
Chief Financial Officer
1