Back to GetFilings.com




SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K
(Mark One)

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended September 30, 1998 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Ex-
change Act of 1934

For the transition period from to

Commission File Number 1-9789

TECH/OPS SEVCON, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 04-2985631
------------------------------ ----------------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
-----------------------------------------------------
(Address of Principal Executive Offices and Zip Code)

Registrant's Area Code and Telephone Number (617) 523-2030

Securities registered pursuant to Section 12(b) of the Act:

(Name of Exchange
(Title of Each Class) (on Which Registered)
- -------------------------------------- -----------------------
Common stock, par value $.10 Per Share American Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [X]

As of November 25, 1998, 3,107,873 common shares were outstanding, and the
aggregate market value of the common shares (based upon the closing price on
the American Stock Exchange) held by non-affiliates was approximately
$33,500,000.

Documents incorporated by reference: Proxy Statement for Annual Meeting of
Stockholders - January 27, 1999 - Items 10, 11, 12 and 13.
1

INDEX

ITEM
- ----------------------------------------------------------------------------
PART I PAGE
1. BUSINESS
General description ................................................ 3
Marketing and sales ................................................ 3
Patents ............................................................ 3
Backlog ............................................................ 3
Raw materials ...................................................... 3
Competition ........................................................ 3
Research and development ........................................... 4
Environmental regulations .......................................... 4
Employees and labor relations ...................................... 4
2. PROPERTIES ........................................................... 4
3. LEGAL PROCEEDINGS .................................................... 4
4. SUBMISSION OF MATTERS TO A VOLE OF SECURITY HOLDERS .................. 5
EXECUTIVE OFFICERS OF THE REGISTRANT ................................. 5

PART II
5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS . 5
6. SELECTED FINANCIAL DATA .............................................. 5
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ................................................ 6
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........... 8
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Balance Sheets ........................................ 9
Consolidated Statements of Income ................................. 11
Consolidated Statements of Comprehensive Income ................... 11
Consolidated Statements of Stockholders' Investment ............... 12
Consolidated Statements of Cash Flows ............................. 14
Notes to Consolidated Financial Statements ........................ 16
Report of Independent Public Accountants .......................... 25
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE .............................................. 26

PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................. 26
11. EXECUTIVE COMPENSATION ............................................. 26
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ..... 26
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..................... 26

PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Exhibits ......................................................... 26
Financial statements and schedules ............................... 26
Form 8-K ......................................................... 26
Signatures of registrant and directors ........................... 29

SCHEDULES
II RESERVES ............................................................. 31

Schedules other than the one referred to above have been omitted as inappli-
cable or not required, or the information is included elsewhere in financial
statements or the notes thereto.
2

PART I

ITEM 1 BUSINESS

General Description

Tech/Ops Sevcon, Inc. ("Tech/Ops Sevcon" or the "Company"), is a Delaware
corporation organized on December 22, 1987 to carry on the electronic con-
troller business previously performed by Tech/Ops, Inc. (Tech/Ops). Through
wholly-owned subsidiaries located in the United States, England, and France,
the Company designs, manufactures, sells, and services, under the Sevcon
name, solid-state products which control motor speed and acceleration for
battery powered electric vehicles in a number of applications, primarily
electric fork lift trucks, aerial lifts and underground coal-mining equip-
ment. Through another subsidiary located in the United Kingdom, Tech/Ops
Sevcon manufactures special metallized film capacitors for electronics ap-
plications.

Marketing and sales

Sales are made primarily through a small full-time marketing staff. Sales in
the United States were $11,321,000, $10,012,000 and $11,425,000, in 1998,
1997 and 1996, respectively, which accounted for approximately 36%, 37% and
42%, respectively, of total sales. Approximately 51% of sales are made to 10
manufacturers of electric vehicles in the United States, Europe and the Far
East.

Patents

The Company believes that its business is not dependent on patent protection
however, the Company has applied for patents on two new product ranges.
Rather, it is primarily dependent upon the Company's technical competence,
the quality of its products, and its prompt and responsive service perform-
ance. However, the rights to inventions of employees working for Tech/Ops
Sevcon are assigned to the Company.

Backlog

Tech/Ops Sevcon's backlog at September 30, 1998 was $4,441,000 compared to
$4,454,000 in September 1997, and $4,045,000 in September 1996.

Raw materials

Tech/Ops Sevcon's products require a wide variety of components and materi-
als. The Company has many sources for most of such components and materials
and produces certain of these items internally. The Company believes that
its sources and availability of its raw materials are adequate.

Competition

In the United States, the Company competes primarily with a division of the
General Electric Company, which has a significant share of the market and
with Curtis Instruments, Inc., a privately held company. Overseas, Tech/Ops
Sevcon has several international competitors, including General Electric
Company and Curtis Instruments, as well as a number of small competitors
3


that operate only in local markets. In addition, several large manufacturers
of fork lift trucks make their own controllers, although their product is
generally for internal use only. The Company differentiates itself from its
competitors principally by technical innovation and its willingness to cus-
tomize products for specific applications. The Company believes that it is
one of the largest independent suppliers of such devices outside of the
United States.

Research and development

Tech/Ops Sevcon's technological expertise has been an important factor in
its growth. The Company regularly pursues product improvements to maintain
its technical position. Research and development expenditure amounted to
$1,973,000 in 1998 compared to $1,798,000 in 1997 and $1,579,000 in 1996.
Expenditure increased by 10% in 1998.

Environmental regulations

The Company complies, to the best of its knowledge, with federal, state and
local provisions which have been enacted or adopted regulating the discharge
of materials into the environment or otherwise protecting the environment.
This compliance has not had, nor is it expected to have, a material effect
on the capital expenditures, earnings, or competitive position of Tech/Ops
Sevcon.

Employees and labor relations

As of September 30, 1998, the Company employed 281 full-time employees, of
whom 31 were in the United States, 242 were in the United Kingdom, 6 were in
France, and 2 were in the Far East. Tech/Ops Sevcon believes its relations
with its employees are good.


ITEM 2 PROPERTIES

A subsidiary of the Company leases approximately 12,000 square feet in Bur-
lington, Massachusetts, under a lease expiring in 2003, with both parties
able to give 12 months notice to terminate. The building is used for the
manufacture of electronic controllers, together with sales and service of-
fices. The United Kingdom electronic controller business of Tech/Ops Sevcon
is carried on in two adjacent buildings owned by it located in Gateshead,
England, containing 40,000 and 20,000 square feet of space respectively. The
land on which these buildings stand are held on leases expiring in 2068 and
2121 respectively. 5,000 square feet of space is also rented near Paris,
France under a lease expiring in 2000. The capacitor subsidiary of the Com-
pany owns a 9,000 square foot building, built in 1981, in Wrexham, Wales.

The properties and equipment of the Company are in good condition and, in
the opinion of the management, are suitable and adequate for the Company's
operations.


ITEM 3 LEGAL PROCEEDINGS

The Company is involved in various legal proceedings, but believes that
these matters will be resolved without a material effect on its financial
position.
4


ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


EXECUTIVE OFFICERS OF THE REGISTRANT

Name of Officer Age Position
- ----------------------------------------------------------------------------
Matthew Boyle 36 President & Chief Executive Officer

Paul A. McPartlin 53 Vice President & Chief Financial Officer

Paul B. Rosenberg 66 Treasurer
- ----------------------------------------------------------------------------

All officers serve until the next annual meeting and until their successors
are elected and qualified. All officers have served in their present posi-
tions for more than 5 years, except for Mr. Boyle who was appointed Vice
President and Chief Operating Officer on November 5, 1996 and President and
Chief Executive Officer on November 13, 1997. From 1994, until he joined the
Company in November 1996, Mr. Boyle was the General Manager of the Regu-
lateurs Europa business of GEC Alsthom in Colchester, England. Prior to that
Mr. Boyle was General Manager of the Scottish Strategic Business Unit of
Honeywell Control Systems Ltd. Mr. McPartlin has been the Financial Director
of the Company's UK operations for more than five years. Mr. Rosenberg is
President and CEO of Tech/Ops Corporation, a consulting firm.

There are no family relationships between any director or executive officer
and any other director or executive officer of the Company.



PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The Common Stock of the Company is traded on the American Stock Exchange un-
der the symbol TO. A summary of the market prices of, and dividends paid on,
the Company's Common Stock is shown in the table on page 21 of the Company's
Annual Report to Shareholders for 1998 which is incorporated herein by ref-
erence. At November 25, 1998, there were approximately 370 shareholders of
record.


ITEM 6 SELECTED FINANCIAL DATA

A summary of selected financial data for the last ten years is shown on page
1 of the Company's Annual Report to Stockholders accompanying this report on
Form 10-K and incorporated herein by reference.



5

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

A) Results of Operations

1998 compared to 1997

Sales in fiscal 1998 were an all-time record at $31,519,000, an increase of
$4,210,000, or 15% compared to last year. Foreign currency fluctuations had
a minimal impact on reported sales in 1998. Price increases accounted for
approximately $500,000 of the increase in sales, with the remaining 14% due
to higher physical volumes.

Sales in the United States increased by $1,309,000, or 13%, mainly due to
increased shipments to the fork lift truck and aerial lift markets. Market
conditions in the US mining market continued at a low level. In other mar-
kets, mainly Europe and the Far East, which accounted for 64% of revenues,
sales increased by 17% mainly due to better conditions in the fork lift
truck and aerial lift markets. The economic turmoil in the Far East during
1998 had a minimal impact on sales and profits as much of the Company's
business with customers headquartered there was destined for European mar-
kets. The markets served by ICW Ltd., the capacitor business based in the
UK, continued to be difficult, with sales down by 7% compared to 1997.

Gross profit was 39% of sales compared to 35% in 1997, when the Company in-
curred a pretax charge of $600,000, which principally involved product modi-
fication costs and associated warranty expense. On a comparable basis, after
adjusting for the charge in 1997, gross profit increased by $2,084,000, from
37.4% to 39%. The main reason for the improvement in gross profit was im-
proved manufacturing efficiency in both material and labor unit costs. Sell-
ing, general and administrative expenses increased by $648,000, or 10%,
which was lower than the rate of growth in sales of 15%.

Operating income was $5,002,000, or 16% of sales, compared to $2,966,000, or
11% of sales last year. After adjusting for the impact of the $600,000
charge in 1997, operating income increased by $1,436,000, or 40%, compared
to an increase in sales of 15%. Fiscal 1998 was an all-time record for oper-
ating income and the first time that operating income exceeded $5 million.
Income before income taxes was $5,085,000, an increase of 71% compared to
last year. On a comparable basis, after an adjustment for the charge in
1997, income before income taxes increased by 43%. Income taxes were 35.7%
of pretax income compared to 36.2% in 1997. The decrease in the tax rate was
mainly due to lower foreign tax rates.

In fiscal 1998 the Company reported record net income which for the first
time exceeded $1.00 per share. Net income was $3,269,000, an increase of 73%
compared to last year when net income was $1,891,000. On a comparable basis,
after adjusting for the impact of the $600,000 pretax charge in fiscal 1997,
net income increased by 43% compared to a 15% gain in sales. Basic income
per share was $1.05 compared to $.61 last year, an increase of 72%. Fully
diluted income per share was $1.04 per share, compared to $.60 in fiscal
1997.

The Company has considered the anticipated effects of new accounting stan-
dards and concluded that they would not be material. When SFAS #131 and SFAS
#132 are implemented in fiscal 1999, the Company will present revised data
6

on business segments and pensions. The Company does not currently have any
derivative instruments and does not carry out hedging activities, therefore
it does not anticipate any impact arising from SFAS #133.

1997 compared to 1996

Sales of $27,309,000 in 1997 were $112,000 higher than the prior year. For-
eign currency fluctuations resulted in a $200,000 increase in reported sales
and the effect of price increases in fiscal 1997 was approximately $800,000,
or 3%. Physical volumes were $888,000, or 3.3%, lower than 1996. Sales in
the US decreased by $1,413,000, or 12% mainly due to depressed market condi-
tions in the airline ground support, aerial lift, mining and fork lift mar-
kets. In other markets, which accounted for 63% of sales, there was a 10%
sales increase, mainly to customers based in the Far East and to the aerial
lift market in Europe.

Gross profit was 35.2% of sales in 1997 compared to 40.3% in 1996. Gross
profit decreased by $1,332,000 compared to 1996. Foreign currency fluctua-
tions accounted for $640,000, and the remainder of the decrease mainly re-
lated to a charge of $600,000, which principally involved product modifica-
tion costs and associated warranty expense. Selling, general and administra-
tive expenses increased by $272,000, or 4%, in 1997, mainly due to inflation
and foreign currency fluctuations. As a result of lower gross profit and in-
creased operating expense, operating income decreased by $1,604,000, or 35%,
to $2,966,000. Foreign currency fluctuations accounted for $750,000 of the
decrease in operating income, and the charge in the third quarter amounted
to $600,000. The remaining $254,000 decrease in operating income was mainly
due to lower physical volumes.

In fiscal 1997 income before income taxes was 35% lower than the previous
year at $2,968,000. Income taxes were 36% of pretax income compared to 34%
in 1996. Net income decreased by $1,145,000, or 38%. Basic income per share
was $.61 compared to $.97 in 1996, a decrease of 37%.

B) Liquidity and Capital Resources

Cash balances increased by $1,078,000 during fiscal 1998 to $3,439,000. In
addition short-term investments increased by $549,000. Net income was
$3,269,000 and dividends of $1,954,000 amounted to 60% of net income. Spend-
ing on property, plant and equipment was $993,000, principally related to
new products and improved manufacturing facilities. Long term debt which
amounted to $513,000 at September 30, 1997 was fully repaid during fiscal
1998.

The Company has, since January 1990, maintained a program of regular cash
dividends, which currently amounts to $559,000 per quarter. Tech/Ops
Sevcon's resources, in the opinion of management, are adequate for projected
operations and capital spending programs, as well as continuation of the
cash dividend.

C) Year 2000 Issues

The Company is in the process of conducting an ongoing review of both its
state of readiness with respect to Year 2000 issues and that of its key sup-
pliers and customers. This review indicates that the Company's products do
not include date-sensitive technology and therefore do not present a Year
2000 exposure.
7

Preliminary conclusions from this ongoing review of the Company's internal
systems, including Information Technology (IT) and non IT systems, indicated
certain issues related to Year 2000. The Company currently has plans in
place to resolve each of these issues and anticipates full resolution by
March 31, 1999 at a cost of approximately $50,000, of which $5,000 has al-
ready been spent. The Company's circularization of vendors and customers in-
dicates that while the majority of respondents are not currently compliant
that all respondents have plans in place to become compliant.

The Company's contingency planning to date has focused on cash availability
and both raw material and finished goods inventory planning to ensure that
the critical elements of the Company's operations will not be impacted by
any potential short-term disruption which may occur in January 2000.

Due to the nature of the Company's business, and based on the results of the
review performed to date, management does not believe that Year 2000 issues
will have a material effect on its results of operations, liquidity or fi-
nancial condition.

This discussion of Year 2000 issues is based upon management's best esti-
mates of future events and conditions, and actual results could differ mate-
rially from those currently projected. Specific factors that could adversely
affect the Company include failure by significant customers and suppliers to
achieve Year 2000 compliance and external forces that might generally affect
business, such as utility or transportation company Year 2000 compliance
failures.

D) Impact of the Euro on Tech/Ops Sevcon

In January 1999 many European countries in which the Company does business
will adopt the Euro as a common currency replacing the currencies of the in-
dividual countries. There will be a three year transition period during
which the Euro will replace the French Franc as the functional currency of
our French subsidiary. This is not expected to have a material impact on the
Company. Most of the Company's manufacturing activities take place in the UK
which has not announced plans to join the Euro.

In addition, it is anticipated that, as the Euro gains greater acceptance,
certain sales and expenses currently denominated in pound sterling are likely
to switch into Euros which will tend to increase the volatility of the Com-
pany's revenues and income due to changes in foreign exchange rates. At the
appropriate time the Company may undertake hedging activities to mitigate
its potential increased exposure to foreign exchange risk.


ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.







8

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
TECH/OPS SEVCON, INC. AND SUBSIDIARIES


September 30, 1998 and 1997 (in thousands of dollars)
- ----------------------------------------------------------------------------
ASSETS 1998 1997

Current assets:
Cash and cash equivalents $ 3,439 $ 2,361
Short-term investments 549 -
Receivables, net of allowances for doubtful accounts of
$197,000 in 1998 and $158,000 in 1997 6,091 5,637
Inventories 3,060 3,126
- ----------------------------------------------------------------------------
Total current assets 13,139 11,124
- ----------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land and improvements 24 23
Buildings and improvements 2,092 1,966
Equipment 4,836 3,880
- ----------------------------------------------------------------------------
6,952 5,869
Less: accumulated depreciation and amortization 3,742 3,249
- ----------------------------------------------------------------------------
Net property, plant and equipment 3,210 2,620
- ---------------------------------------------------------------------------
Cost of purchased businesses in excess of net assets acquired 1,435 1,435
Other assets - 6
- ----------------------------------------------------------------------------
TOTAL ASSETS $17,784 $15,185
- ----------------------------------------------------------------------------



- ----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities:
Accounts payable 2,166 1,770
Dividend payable 559 463
Accrued compensation and related costs 1,203 954
Other accrued expenses 1,923 1,740
Current portion of long-term debt (note 5) - 235
Accrued and deferred taxes on income 976 482
- ----------------------------------------------------------------------------
Total current liabilities 6,827 5,644
- ----------------------------------------------------------------------------
Long-term debt, net of current portion (note 5) - 278
- ----------------------------------------------------------------------------
Deferred taxes on income 164 156
- ----------------------------------------------------------------------------
Commitments and contingencies (note 6)
- ----------------------------------------------------------------------------
9

STOCKHOLDERS' INVESTMENT
Preferred stock, par value $.10 per share
- authorized - 1,000,000 shares; outstanding - none - -
Common stock, par value $.10 per share
authorized - 8,000,000 shares; outstanding
3,107,873 in 1998 and 3,101,690 in 1997 311 310
Treasury stock, 0 shares in 1998, and 8,458 in 1997 at cost - (85)
Premium paid in on common stock 3,848 3,730
Retained earnings 6,970 5,786
Cumulative translation adjustment (336) (634)
- ----------------------------------------------------------------------------
Total stockholders' investment $10,793 $ 9,107
- ----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $17,784 $15,185
- ----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.














10

CONSOLIDATED STATEMENTS OF INCOME
TECH/OPS SEVCON, INC. AND SUBSIDIARIES


For the Years ended September 30, 1998, 1997, and 1996 (in thousands except
per share data)
1998 1997 1996
- ----------------------------------------------------------------------------

Net sales $31,519 $27,309 $27,197
- ----------------------------------------------------------------------------
Costs and expenses:
Cost of sales 19,219 17,693 16,249
Selling, general and administrative 7,298 6,650 6,378
- ----------------------------------------------------------------------------
26,517 24,343 22,627
- ----------------------------------------------------------------------------
Operating income 5,002 2,966 4,570
Interest expense (39) (44) -
Interest income 104 85 45
Other income (expense), net 18 (39) (45)
- ----------------------------------------------------------------------------
Income before income taxes 5,085 2,968 4,570
Income taxes (1,816) (1,077) (1,534)
- ----------------------------------------------------------------------------
Net income $ 3,269 $ 1,891 $ 3,036
- ----------------------------------------------------------------------------
Basic income per share $ 1.05 $ .61 $ .97
- ----------------------------------------------------------------------------
Fully-diluted income per share $ 1.04 $ .60 $ .96
- ----------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
TECH/OPS SEVCON, INC. AND SUBSIDIARIES


For the Years ended September 30, 1998, 1997 and 1996 (in thousands of dol-
lars)
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------

Net income $ 3,269 $ 1,891 $ 3,036
Foreign currency translation adjustment 298 (54) (86)
- ----------------------------------------------------------------------------
Comprehensive income $ 3,567 $ 1,837 $ 2,950
- ----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.




11

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
TECH/OPS SEVCON, INC. AND SUBSIDIARIES


For the Years ended September 30, 1996, 1997 and 1998 (in thousands of dol-
lars)
- ----------------------------------------------------------------------------
Premium
paid Cumulative Total
in on trans- stock-
Common Treasury common Retained lation holders'
stock stock stock earnings adjustment investment
- ----------------------------------------------------------------------------

Balance Sept 30,
1995 $ 310 $ - $3,383 $4,926 $(494) $8,125

Net income - - - 3,036 - 3,036

Dividends ($.525
per share) - - - (1,610) - (1,610)

Currency transla-
tion adjustment - - - - (86) (86)

Purchase of
treasury stock - (529) - - - (529)

Tax benefit
on exercise of
stock options - - 330 - - 330

Exercise of
stock options - 407 3 (565) - (155)
- ----------------------------------------------------------------------------
Balance Sept 30,
1996 310 (122) 3,716 5,787 (580) 9,111
- ----------------------------------------------------------------------------
Net income - - - 1,891 - 1,891

Dividends ($.60
per share) - - - (1,854) - (1,854)

Currency transla-
tion adjustment - - - - (54) (54)

Tax benefit
on exercise
of stock options - - 17 - - 17

Exercise of
stock options - 37 (3) (38) - (4)
- ----------------------------------------------------------------------------
Balance Sept 30,
1997 310 ( 85) 3,730 5,786 (634) 9,107
- ----------------------------------------------------------------------------

12

Net income - - - 3,269 - 3,269

Dividends ($.63
per share) - - - (1,954) - (1,954)

Currency
translation
adjustment - - - - 298 298



Tax benefit
on exercise of
stock options - - 87 - - 87


Exercise of
stock options 1 85 31 (131) - (14)
- ----------------------------------------------------------------------------
Balance Sept 30,
1998 $ 311 $ - $3,848 $6,970 $(336) $10,793
- ----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.































13

CONSOLIDATED STATEMENTS OF CASH FLOWS
TECH/OPS SEVCON, INC. AND SUBSIDIARIES

For the Years ended September 30, 1998, 1997 and 1996 (in thousands of dol-
lars)
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------

Net cash flow from operating activities:
Net income $3,269 $1,891 $3,036
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 530 354 270
Deferred tax provision 8 (5) (17)
Increase (decrease) in cash resulting from changes
in operating assets and liabilities:
Receivables (454) (251) (899)
Inventories 66 502 (665)
Accounts payable 396 (51) (198)
Accrued compensation and expenses 432 406 439
Accrued and deferred taxes on income 581 (302) 708
Other assets 6 11 38
- ----------------------------------------------------------------------------
Net cash generated from operating activities 4,834 2,555 2,712
- ----------------------------------------------------------------------------

Cash flow used by investing activities:
Acquisition of property, plant and equipment (993) (1,673) (229)
Acquisition of short-term investments (549) - -
- ----------------------------------------------------------------------------
Net cash used by investing activities (1,542) (1,673) (229)
- ----------------------------------------------------------------------------
Cash flow used by financing activities:

Purchase of common stock (106) (31) (1,007)
Exercise of stock options 91 28 323
Proceeds of long-term debt - 704 -
Repayments of long-term debt (513) (201) -
Dividends paid (1,858) (1,854) (1,534)
- ----------------------------------------------------------------------------
Net cash used by financing activities (2,386) (1,354) (2,218)
- ----------------------------------------------------------------------------
Effect of exchange rate changes on cash 172 (53) (71)
- ----------------------------------------------------------------------------
Net increase (decrease) in cash 1,078 (525) 194

Beginning balance - cash and cash equivalents 2,361 2,886 2,692
- ----------------------------------------------------------------------------
Ending balance - cash and cash equivalents $3,439 $2,361 $2,886
- ----------------------------------------------------------------------------
14

Supplemental disclosure of cash flow information:

Cash paid for income taxes $1,281 $1,348 $ 884
Cash paid for interest $ 39 $ 44 $ -
- ----------------------------------------------------------------------------
Supplemental disclosure of non-cash financing activity:

Dividend declared $ 559 $ 463 $ 463
- ----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.





















15



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TECH/OPS SEVCON, INC. AND SUBSIDIARIES

(1) Summary Of Significant Accounting Policies

A. Basis of presentation

The accompanying consolidated financial statements include the accounts of
Tech/Ops Sevcon, Inc. (Tech/Ops Sevcon), Sevcon, Inc., Sevcon Limited and
subsidiaries, and Sevcon SA. All material intercompany transactions have
been eliminated.

The amount by which the cost of purchased businesses included in the accom-
panying financial statements exceeded the fair value of net assets at the
date of acquisition has been charged to "Cost of purchased businesses in ex-
cess of net assets acquired". The Company assesses the carrying value of
this asset whenever events or changes in circumstances indicate that this
value has diminished. The Company considers the future profitability of the
business in assessing the value of this asset. The excess related to acqui-
sitions initiated prior to November 1, 1970 ($1,435,000) is not being amor-
tized, since in the opinion of management there has been no diminution in
the value of the excess related to these acquisitions. The excess related to
subsequent acquisitions has been fully amortized.

SFAS #123 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. The Company has elected to account for its stock based compensation
plans under APB #25 (see Note 3).

In accordance with SFAS #130 the Company has prepared a statement of compre-
hensive income which is set out on page 11. The only item of comprehensive
income in the three years ended September 30, 1998, other than net income,
was the currency translation adjustment arising on the Company's investment
in foreign subsidiaries.

B. Research and development

The cost of research and development programs is charged against income as
incurred and amounted to approximately $1,973,000 in 1998, $1,798,000 in
1997 and $1,579,000 in 1996.

C. Depreciation and maintenance

Plant and equipment are depreciated on a straight-line basis over their es-
timated useful lives, which are primarily fifty years for buildings and
seven years for equipment. Maintenance and repairs are charged to expense
and renewals and betterments are capitalized.

D. Inventories

Inventories are priced at the lower of cost or market. Inventory costs in-
clude materials, direct labor and manufacturing overhead, are relieved from
inventory on a first-in, first-out basis and comprised of:
16



(in thousands of dollars)
- ---------------------------------------------------------------------------
1998 1997

Raw materials $1,702 $1,532
Work-in-process 713 903
Finished goods 645 691
- ---------------------------------------------------------------------------
$3,060 $3,126
- ---------------------------------------------------------------------------

E. Income taxes

Tech/Ops Sevcon files tax returns in the respective countries in which it
operates. The Company accounts for income taxes in accordance with Financial
Accounting Standards Board Statement #109 (SFAS #109). Under SFAS #109, the
financial statements reflect the current and deferred tax consequences of
all events recognized in the financial statements or tax returns.

F. Translation of foreign currencies

Tech/Ops Sevcon translates the assets and liabilities of its foreign sub-
sidiaries at the current rate of exchange, and income statement accounts at
the average exchange rates in effect during the period. Gains or losses from
foreign currency translation are credited or charged to cumulative transla-
tion adjustment included in stockholders' investment in the balance sheet.
Foreign currency transaction gains and losses are included in costs and ex-
penses.

G. Cash equivalents and short-term investments

The Company considers all highly liquid investments with a maturity of 90
days or less to be cash equivalents. Highly liquid investments with matur-
ities greater than 90 days and less than one year are classified as short-
term investments.

Such investments are generally money market funds, bank certificates of de-
posit, US Treasury bills and short-term bank deposits in Europe.

H. Use of estimates in the preparation of financial statements

The presentation of financial statements in conformity with generally ac-
cepted accounting principles requires management to make estimates and as-
sumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of the date of the fi-
nancial statements and the reported amounts of income and expenses during
the reporting periods. Operating results in the future could vary from the
amounts derived from management's estimates and assumptions.

I. Fair value of financial instruments

The Company's financial instruments consist mainly of cash and cash equiva-
lents, short-term investments, accounts receivable and accounts payable. The
carrying amount of these financial instruments as of September 30, 1998, ap-
proximate fair value due to the short term nature of these instruments.
17

(2) CAPITAL STOCK

Tech/Ops Sevcon, Inc. has two classes of capital stock, preferred and com-
mon. There are authorized 1,000,000 shares of preferred stock, $.10 par
value. In January 1996 the number of authorized shares of common stock, $.10
par value was increased from 4,000,000 to 8,000,000.

In the year ended September 30, 1996, the Company purchased 52,500 shares
for treasury stock at a total cost of $529,000. No such shares were pur-
chased in 1997 or 1998.

In connection with the exercise of employee stock options, the Company re-
purchased from employees 25,466 shares in 1996, 2,300 shares in 1997 and
7,511 shares in 1998.

(3) STOCK-BASED COMPENSATION PLANS

There were 109,000 shares reserved under the Company's 1996 Equity Incentive
Plan at September 30, 1998. Options for 20,000 shares were granted in Novem-
ber 1997 at market price on the date of grant.

Recipients of grants or options must execute a standard form of non-
competition agreement. Options granted are exercisable at a price not less
than fair market value on the date of grant. This plan also provides for the
grant of Stock Appreciation Rights (SARs), either separately, or in relation
to options granted, and for the grant of bonus shares. No SARs or bonus
shares have been granted.

In January 1998 the stockholders approved the 1998 Directors Option Plan re-
serving 50,000 shares for issue under the plan. Options for a total of
30,000 shares were granted to 6 directors at market price on January
28,1998.

The Company accounts for these plans under APB Opinion #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 per share data)
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------

Net income As reported $3,269 $1,891 $3,036
Pro forma 3,231 1,881 3,036

Basic net income per share As reported $ 1.05 $ .61 $ .97
Pro forma $ 1.04 $ .61 $ .97

Fully-diluted net income per share As reported $ 1.04 $ .60 $ .96
Pro forma $ 1.03 $ .60 $ .96
- ----------------------------------------------------------------------------

The effects of applying SFAS #123 in this pro forma disclosure are not in-
dicative of future amounts. SFAS #123 does not apply to awards prior to fis-
cal 1996 and additional awards in future years are anticipated.
18

Option transactions under the plans for the three years ended September 30,
1998 were as follows:


- ----------------------------------------------------------------------------
Weighted
Shares average
under exercise
option price
- ----------------------------------------------------------------------------

Outstanding at September 30, 1995 142,952 $ 4.59
Exercised in 1996 (69,975) 4.62
- ----------------------------------------------------------------------------
Outstanding at September 30, 1996 72,977 4.57
Granted in 1997 20,000 14.31
Exercised in 1997 (6,000) 4.63
- ----------------------------------------------------------------------------
Outstanding at September 30, 1997 86,977 6.81
Granted in 1998 50,000 14.61
Exercised in 1998 (22,152) 4.11
- ----------------------------------------------------------------------------
Outstanding at September 30, 1998 114,825 $10.73
Exercisable at September 30, 1998 46,825 $ 5.52
- ----------------------------------------------------------------------------
Weighted average fair value of options granted in 1998 $ 5.85
- ----------------------------------------------------------------------------

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 two grants in 1998: risk-free interest rate of 6%;
expected dividend yield of 4.2%; expected life of 7 years; expected volatil-
ity of 50%. For options outstanding at September 30, 1998 the exercise
prices were between $3.31 and $15.19 with a weighted average remaining con-
tractual life of 7.1 years.

(4) INCOME TAXES

The domestic and foreign components of income before income taxes are as
follows:


(in thousands of dollars)
- ----------------------------------------------------------------------------

1998 1997 1996
Domestic $1,271 $ 493 $1,691
Foreign 3,814 2,475 2,879
- ----------------------------------------------------------------------------
$5,085 $2,968 $4,570
- ----------------------------------------------------------------------------




19

The components of the provision for income taxes for the years ended Septem-
ber 30, 1998, 1997 and 1996 are as follows:


(in thousands of dollars)
- ----------------------------------------------------------------------------
1998 Current Deferred Total
- ----------------------------------------------------------------------------

Federal $ 430 $ 7 $ 437
State 142 2 144
Foreign 1,215 20 1,235
- ----------------------------------------------------------------------------
$1,787 $ 29 $1,816
- ----------------------------------------------------------------------------

1997 Current Deferred Total
- ----------------------------------------------------------------------------
Federal $ 195 $ (18) $ 177
State 87 (6) 81
Foreign 837 (18) 819
- ----------------------------------------------------------------------------
$1,119 $ (42) $1,077
- ----------------------------------------------------------------------------

1996 Current Deferred Total
- ----------------------------------------------------------------------------
Federal $ 578 $(171) $ 407
State 195 (53) 142
Foreign 97 (12) 985
- ----------------------------------------------------------------------------
$1,770 $(236) $1,534
- ----------------------------------------------------------------------------

The provision for income taxes in each period differs from that which would
be computed by applying the statutory US Federal income tax rate to the in-
come before income taxes. The following is a summary of the major items af-
fecting the provision:


(in thousands of dollars)
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------

Statutory Federal income tax rate 34% 34% 34%
Computed tax provision at statutory rate $1,729 $1,009 $1,554
Increases (decreases) resulting from:
Foreign tax rate differentials (35) 4 7
State taxes net of federal tax benefit 95 53 94
Foreign tax credits and other 27 11 (121)
- ----------------------------------------------------------------------------
Income tax provision in the Statement of Income $1,816 $1,077 $1,534
- ----------------------------------------------------------------------------

20

Deferred income taxes result from temporary differences in reporting trans-
actions for financial reporting and tax purposes. The significant items com-
prising the domestic and foreign deferred tax accounts at September 30, 1998
and 1997 are as follows:


- ----------------------------------------------------------------------------
(in thousands of dollars)
- ----------------------------------------------------------------------------
1998
- ----------------------------------------------------------------------------
Domestic Foreign Foreign
current current long-term
- ----------------------------------------------------------------------------

Assets:
Pension accruals $ 240 $ - $ -
Inventory basis differences 32 - -
Warranty reserves 45 - -
Foreign tax credit carry forwards 110 - -
Other (net) 105 45 -
- ----------------------------------------------------------------------------
532 45 -
Liabilities:
Prepaid pension - (65) -
Property basis differences - - (163)
- ----------------------------------------------------------------------------
Net asset (liability) 532 (20) (163)
Valuation allowance (402) - -
Net deferred tax asset (liability) $ 130 $ (20) $(163)
- ----------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------
Domestic Foreign Foreign
Current current long-term
- ----------------------------------------------------------------------------
Assets:
Pension accruals $ 214 $ - $ -
Inventory basis differences 31 - -
Warranty reserves 138 - -
Other (net) 72 27 -
- ----------------------------------------------------------------------------
455 27 -
Liabilities:
Prepaid pension - (62) -
Property basis differences - - (156)
- ----------------------------------------------------------------------------
Net asset (liability) 455 (35) (156)
Valuation allowance (316) - -
- ----------------------------------------------------------------------------
Net deferred tax asset (liability) $ 139 $ (35) $ (156)
- ----------------------------------------------------------------------------

The valuation allowance is provided when it is probable that some portion of
the deferred tax asset will not be realized.

21


(5) LONG-TERM DEBT

Long-term debt at September 30, 1997 consisted of bank debt of $513,000, of
which current maturities were $235,000 and the balance of $278,000 was long-
term. All of this debt was repaid during 1998.

(6) COMMITMENTS AND CONTINGENCIES

Tech/Ops Sevcon is involved in various legal proceedings but believes that
it is only remotely likely that the outcome will be material to operations.

Tech/Ops Sevcon has entered into a consulting agreement, which expires on
December 31, 1999, with a company owned by two of its directors. Under the
terms of the agreement, the annual cost of these services will not exceed
$100,000. This cost covers the provision of the corporate office of the Com-
pany, administrative support services and a payment of $30,000 per year to
Mr. Rosenberg for his services as the Company's Treasurer.

The Company maintains a directors' retirement plan which provides for cer-
tain retirement benefits to non-employee directors. Effective January 1997
the plan was frozen and no further benefits are being accrued. While the
cost of the plan has been fully charged to expense, the plan is not sepa-
rately funded. The maximum liability based on the cost of buying deferred
annuities at September 30, 1998 was $251,000.

Minimum rental commitments under all non-cancelable leases are as follows
for the years ended September 30: 1999 - $62,000; 2000 - $31,000; 2001 -
$21,000; 2002 - $21,000; 2003 - $21,000 and $1,375,000 thereafter. Net rent-
als of certain land, buildings and equipment charged to expense were
$177,000 in 1998, $175,000 in 1997, and $176,000 in 1996.




(7) 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 fol-
lowing table sets forth the estimated funded status of these defined benefit
plans and the amounts recognized by Tech/Ops Sevcon.





22



- ----------------------------------------------------------------------------
(in thousands of dollars)
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------

Actuarial present value of benefit obligations:
Vested benefits $6,803 $5,606
Nonvested benefits 20 12
- ----------------------------------------------------------------------------
Accumulated benefit obligation 6,823 5,618
Effect of projected future compensation levels 841 936
- ----------------------------------------------------------------------------
Projected benefit obligation 7,664 6,554
Plan assets at fair value 7,572 7,011
- ----------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation (92) 457
Unrecognized net gain 364 (209)
Unrecognized transition amount (429) (332)
- ----------------------------------------------------------------------------
Prepaid pension cost $(157) $ (84)
- ----------------------------------------------------------------------------



The Tech/Ops Sevcon net pension cost included the following components as
defined by SFAS #87.

CAPTION>
- ----------------------------------------------------------------------------
(in thousands of dollars)
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------

Service costs/benefits earned during the period $ 438 $ 306 $ 252
Interest cost on projected benefit obligation 450 465 391
Actual return on plan assets (531) (626) (441)
Net amortization and deferred items (41) 72 (43)
- ----------------------------------------------------------------------------
Net pension cost calculated in accordance
with SFAS #87 $ 316 $ 217 $ 159
- ----------------------------------------------------------------------------
Net cost of defined contribution plans $ 17 $ 17 $ 21
- ----------------------------------------------------------------------------

Plan assets include marketable equity securities, corporate and government
debt securities, deferred annuities, cash and other short-term investments.
The average discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit ob-
ligation were 7.9% and 5.9%, respectively, and the expected long-term rate
of return on assets was 8.0% in 1998, 1997 and 1996.

23



(8) SEGMENT INFORMATION AND FOREIGN OPERATIONS

Tech/Ops Sevcon's largest customer accounted for 9.9% of sales in 1998 and
9.4% in 1997 and 1996.

Domestic and foreign revenues are composed of sales to unaffiliated custom-
ers, with intercompany sales eliminated. Pretax net income for US and for-
eign segments is stated before unallocated corporate expense.



- ----------------------------------------------------------------------------
(in thousands of dollars)
- ----------------------------------------------------------------------------
Net Pretax Identifiable
Sales Income Assets
- ----------------------------------------------------------------------------
Geographic Segments
- ----------------------------------------------------------------------------

US 1998 $11,321 $ 1,523 $ 5,568
1997 10,012 851 4,065
1996 11,425 2,269 4,790
- ----------------------------------------------------------------------------
Foreign 1998 20,198 3,838 12,216
1997 17,297 2,497 11,120
1996 15,772 2,893 9,855
- ----------------------------------------------------------------------------
Sub-total 1998 31,519 5,361 17,784
1997 27,309 3,348 15,185
1996 27,197 5,162 14,645
- ----------------------------------------------------------------------------
Unallocated corporate expense 1998 - (276) -
1997 - (380) -
1996 - (592) -
- ----------------------------------------------------------------------------
Total 1998 $31,519 $ 5,085 $17,784
1997 27,309 2,968 15,185
1996 27,197 4,570 14,645
- ----------------------------------------------------------------------------













24

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tech/Ops Sevcon, Inc.:

We have audited the accompanying consolidated balance sheets of Tech/Ops
Sevcon, Inc. (a Delaware Corporation) as of September 30, 1998 and 1997, and
the related consolidated statements of income, stockholders' investment, and
cash flows for each of the three years in the period ended September 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.

We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of ma-
terial misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial state-
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tech/Ops Sevcon, Inc. as
of September 30, 1998 and 1997, and the results of its operations and cash
flows for each of the three years in the period ended September 30, 1998 in
conformity with generally accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic finan-
cial statements taken as a whole. The schedule listed in the index of finan-
cial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures ap-
plied in the audit of the basic financial statements and, in our opinion,
fairly states, in all material respects, the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 3, 1998











25

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FI-
NANCIAL DISCLOSURE

None.

PART III



ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The response to this item is contained in part under the caption "Executive
Officers of the Registrant" in Part I hereof and the remainder is incorpo-
rated by reference from the discussion responsive thereto under the caption
"Election of Directors" in the Company's Proxy Statement for the 1999 Annual
Meeting of Stockholders.

ITEM 11 EXECUTIVE COMPENSATION

This information is incorporated by reference from the information under the
captions "Election of Directors - Director Compensation", "Executive Compen-
sation", "Compensation Committee Report" and "Performance Graph" in the Com-
pany's Proxy Statement relating to the 1999 Annual Meeting of Stockholders.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This information is incorporated by reference from the information under the
captions "Beneficial Ownership of Common Stock" and "Election of Directors"
in the Company's Proxy Statement relating to the 1999 Annual Meeting of
Stockholders.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

This information is incorporated by reference from the information under the
caption "Election of Directors" in the Company's Proxy Statement relating to
the 1999 Annual Meeting of Stockholders.

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Exhibits

The exhibits filed as part of this Form 10-K are listed on the
Exhibit Index below.

(b) Financial statements and schedule

The financial statements and financial statement schedule listed
under Item 8 in the index following the cover page are filed as
part of this Annual Report on Form 10-K.

(c) Form 8-K

None filed during the quarter ended September 30, 1998.

26

INDEX TO EXHIBITS

*(3)(a) Certificate of Incorporation of the registrant (incorporated by
reference to Exhibit (3)(a) to Annual Report for the fiscal year
ended September 30, 1994).

*(3)(b) By-laws of the registrant (incorporated by reference to Exhibit
(3)(b) to Annual Report for the fiscal year ended September 30,
1994).

*(4)(a) Specimen common stock of registrant (incorporated by reference to
Exhibit (4)(a) to Annual Report for the fiscal year ended September
30, 1994).

*(10)(a) Tech/Ops Sevcon, Inc. 1996 Equity Incentive Plan (incorporated by
reference to Exhibit 99.1 to the Registrant's Registration
Statement on form S-8 File No. 333-02113).

*(10)(b) Corporate Services Agreement dated September 22, 1994 between
Tech/Ops Corporation and the registrant (incorporated by reference
to Exhibit (10)(c) to Annual Report for the fiscal year ended Sept-
ember 30, 1994).

*(10)(c) Liability Assumption and Sharing Agreement dated January 4, 1988
among Tech/Ops, Inc., Tech/Ops Landauer, Inc., and the registrant
(incorporated by reference to Exhibit (10)(d) to Annual Report for
the fiscal year ended September 30, 1994).

*(10)(d) Form of Indemnification Agreement dated January 4, 1988 between the
registrant and each of its directors (incorporated by reference to
Exhibit (10)(e) to Annual Report for the fiscal year ended Sept-
ember 30, 1994).

*(10)(e) Board resolution terminating Directors' Retirement Plan (incorp-
orated by reference to Exhibit (10)(e) to Annual Report for the
fiscal year ended September 30, 1997).

*(10)(f) Tech/Ops Sevcon, Inc. 1998 Director Stock Option Plan (incorporated
by reference to Exhibit 10 to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).

(11) Calculation of earnings per share and weighted average shares out-
standing.

(13)(a) Portions of the 1998 Tech/Ops Sevcon, Inc. Annual Report relating
to market prices of, and dividends paid on, registrant's common
stock incorporated by reference into Part 2 of this Form 10-K.

(13)(b) Portions of the 1998 Tech/Ops Sevcon, Inc. Annual Report relating
to selected financial data incorporated by reference into Part 2 of
this Form 10-K.

*(21) Subsidiaries of the registrant (incorporated by reference to
Exhibit (22) to Annual Report for the fiscal year ended September
30, 1993).

(23) Consent of Arthur Andersen LLP.
27

(27) Financial Data Schedule.

*Indicates exhibit previously filed and incorporated by reference. Exhibits
filed with periodic reports were filed under File No. 1-9789.

Executive Compensation Plans and Arrangements:
Exhibits (10)(a), (10)(b), (10)(d), (10)(e) and (10)(f) are management con-
tracts or compensatory plans or arrangements in which the executive officers
or directors of the registrant participate.















































28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Ex-
change 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.

By /s/ Matthew Boyle December 11, 1998
-----------------
Matthew Boyle
President and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the reg-
istrant and in the capacities and on the dates indicated:

Signature Title Date

/s/ Matthew Boyle President, Chief Executive December 11, 1998
- ----------------- Officer and Director
Matthew Boyle (Principal Executive Officer)

/s/ Paul A. McPartlin Vice President and Chief December 11, 1998
- --------------------- Financial Officer
Paul A. McPartlin (Principal Financial and
Accounting Officer)

/s/ Paul B. Rosenberg Director December 11, 1998
- ---------------------
Paul B. Rosenberg

/s/ Herbert Roth, Jr. Director December 11, 1998
- --------------------
Herbert Roth, Jr.

/s/ Marvin G. Schorr Director December 11, 1998
- --------------------
Marvin G. Schorr

/s/ Bernard F. Start Director December 11, 1998
- --------------------
Bernard F. Start

/s/ David Steadman Director December 11, 1998
- ------------------
David Steadman

/s/ C. Vincent Vappi Director December 11, 1998
- --------------------
C. Vincent Vappi


29



QUARTERLY FINANCIAL DATA (UNAUDITED)
TECH/OPS SEVCON, INC. AND SUBSIDIARIES


Selected quarterly financial data for fiscal years 1998 and 1997 is set out
below:
(in thousands except per share data)
- ---------------------------------------------------------------------------
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------
1998 Quarters
- ---------------------------------------------------------------------------

Net sales $ 7,049 $ 8,625 $ 8,472 $ 7,373 $31,519
Gross profit 2,787 3,376 3,321 2,816 12,300
Operating income 959 1,460 1,519 1,064 5,002
Net income 605 930 1,002 732 3,269
Basic income per share $ .20 $ .30 $ .32 $ .24 $ 1.05
Fully-diluted income per share $ .19 $ .30 $ .32 $ .23 $ 1.04
Cash dividends per share $ .15 $ .15 $ .15 $ .18 $ .63
Common stock price per share
- High $ 14.50 $ 15.63 $ 17.75 $ 16.19 $ 17.75
- Low 11.50 12.75 14.75 10.81 10.81
- ---------------------------------------------------------------------------
1997 Quarters
- ---------------------------------------------------------------------------
Net sales $ 6,197 $ 7,133 $ 6,842 $ 7,137 $27,309
Gross profit 2,310 2,657 2,012 2,637 9,616
Operating income 738 955 351 922 2,966
Net income 465 621 205 600 1,891
Net income per share $ .15 $ .20 $ .07 $ .19 $ .61
Fully-diluted income per share $ .15 $ .20 $ .07 $ .19 $ .60
Cash dividends per share $ .15 $ .15 $ .15 $ .15 $ .60
Common stock price per share
- High $ 16.88 $ 15.50 $ 14.00 $ 13.25 $ 16.88
- Low 12.38 12.00 10.00 11.50 10.00
- ---------------------------------------------------------------------------















30


Schedule II
TECH/OPS SEVCON, INC. AND SUBSIDIARIES


Reserves for the three years ended September 30, 1998
(in thousands of dollars)
- ----------------------------------------------------------------------------
Balance Additions
at charged to Deductions Balance
beginning costs & from at close
of year expenses reserves of year
- ----------------------------------------------------------------------------

For the year ended September 30, 1998:
Allowance for doubtful accounts $ 158 $ 43 $ (4)(a) $ 197
- ----------------------------------------------------------------------------
For the year ended September 30, 1997:
Allowance for doubtful accounts $ 150 $ 32 $(24)(b) $ 158
- ----------------------------------------------------------------------------
For the year ended September 30, 1996:
Allowance for doubtful accounts $ 153 $ 4 $ (7)(c) $ 150
- ----------------------------------------------------------------------------

(a) Write off of uncollectible accounts $4
(b) Write off of uncollectible accounts $24
(c) Accounts collected $5, write off of uncollectible accounts $2























31


TECH/OPS SEVCON, INC. EXHIBIT 11

Calculation of Basic and Diluted Earnings Per Share

(In thousands, except for per share amounts)


Quarters ended
----------------------------------- Fiscal
12/28/97 3/29/98 6/29/98 9/30/98 1998
-------- ------- ------- ------- ----

Net income $ 605 $ 930 $1,002 $ 772 $3,269

Basic income per share $ .20 $ .30 $ .32 $ .24 $ 1.05

Average shares outstanding 3,093 3,093 3,103 3,107 3,099

Options outstanding - common
stock equivalents 34 46 44 31 39

Average common and common
equivalent shares outstanding 3,127 3,139 3,147 3,138 3,139

Diluted income per share $ .19 $ .30 $ .32 $ .23 $ 1.04
=== === === === ====



Quarters ended
----------------------------------- Fiscal
12/27/96 3/28/97 6/28/97 9/30/97 1997
-------- ------- ------- ------- ----

Net income $ 465 $ 621 $ 205 $ 600 $1,891

Basic income per share $ .15 $ .20 $ .07 $ .19 $ .61

Average shares outstanding 3,090 3,090 3,090 3,093 3,091

Options outstanding - common
stock equivalents 50 48 45 40 46

Average common and common
equivalent shares outstanding 3,140 3,138 3,135 3,133 3,137

Diluted income per share $ .15 $ .20 $ .07 $ .19 $ .60
=== === === === ====






32


TECH/OPS SEVCON, INC. EXHIBIT 13(a)

Summary of the Market Prices of, and Dividends Paid on,
the Company's Common Stock

The Common Stock of the Company is traded on the American Stock Exchange un-
der the symbol TO. A summary of the market prices of, and dividends paid on,
the Company's common stock is shown in the table below. At November 25,
1998, there were approximately 370 shareholders of record.


First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year

Fiscal 1998
High $14.50 $15.63 $17.75 $16.19 $17.75
Low 11.50 12.75 14.75 10.81 10.81
Dividend $ .15 $ .15 $ .15 $ .18 $ .63



First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
Fiscal 1997
High $16.88 $15.50 $14.00 $13.25 $16.88
Low 12.38 12.00 10.00 11.50 10.00
Dividend $ .15 $ .15 $ .15 $ .15 $ .60
















33

TECH/OPS SEVCON, INC. EXHIBIT 13(b)

Selected Financial Data


A summary of selected financial data for the last five years is shown in the
table below:


For the five years ended September 30: (in 000's except per share data)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----

Net sales $31,519 $27,309 $27,197 $22,431 $15,835
Operating income 5,002 2,966 4,570 3,695 1,985
Net income 3,269 1,891 3,036 2,580 1,350
Basic income per share (a) $ 1.05 $ .61 .97 $ .81 $ .44
Dividends per share (a) (b) .63 .60 .525 .425 .288
Average shares outstanding (a) 3,099 3,091 3,036 3,171 3,102
Stockholders' investment $10,793 $ 9,107 $ 9,111 $ 8,125 $ 6,568
Total assets $17,784 $15,185 $14,645 $12,981 $10,595
Long-term debt $ - $ 278 - - -



(a) Restated to reflect two-for-one stock split effective August 28, 1995.

(b) In September 1998 the Company increased its regular quarterly dividend
by 20% from $.15 per share to $.18 per share. In September 1996, the Company
increased its regular quarterly dividend from $.125 per share to $.15 per
share. In September 1995, the Company increased its regular quarterly divi-
dend from $.10 per share to $.125 per share. In September 1994, the dividend
was raised, on a restated basis, from $.0625 per share to $.10 per share.




34


TECH/OPS SEVCON, INC. EXHIBIT 23



CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorp-
oration of our report included in this Form 10-K, into the Company's previ-
ously filed Registration Statements on Form S-8 (File No. 33-42960
and No. 333-02113.




ARTHUR ANDERSEN LLP



Boston, Massachusetts
December 28, 1998




35