<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
F O R M 10 - QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the Quarter Ended Commission File Number 0-12370
April 30, 1996
SI TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 95-3381440
- -------------------------------- -------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
4611 South 134th Place, Seattle, Washington 98168
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(Address of principal executive offices) (Zip Code)
(206) 244-6100
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Registrant's telephone number, including area code
SAME
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(Former name if changed since last report.)
SAME
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(Former address and former fiscal year, if changed since last report.)
Check 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
---- ----
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date. 2,347,240 shares of
Common Stock, par value $.01 on June 7, 1996.
1
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SI TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II. OTHER INFORMATION
Exhibits and Reports on Form 8-K 9
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS APRIL 30, 1996 July 31, 1995
(UNAUDITED)
---------------------------------------
<S> <C> <C>
Current assets:
Cash $ 82,776 $ 540,044
Trade accounts receivable, less allowance for doubtful 2,192,744 1,404,791
accounts of $239,933 and $154,454 respectively
Inventories 2,064,599 926,088
Deferred tax asset 392,500 318,900
Other current assets 120,754 72,255
---------- -----------
Total current assets 4,853,373 3,262,078
Property and equipment, less accumulated depreciation and amortization 865,467 550,559
Other assets:
Intangible assets, net 3,273,016 2,874,881
Other 179,868 59,550
---------- -----------
TOTAL ASSETS $9,171,724 $ 6,747,068
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 219,907 $ 257,364
Put option obligation - current 325,000 --
Trade accounts payable 994,398 496,225
Income taxes payable 316,689 260,991
Accrued liabilities 975,556 882,306
---------- -----------
Total current liabilities 2,831,550 1,896,886
Long-term debt, less current maturities 1,328,995 53,729
Put option liability, less current maturities 60,000 385,000
Deferred taxes 22,200 22,200
Stockholders' Equity:
Common stock, par value $.01 per share; authorized, 5,000,000
shares; issued and outstanding, 2,347,240 shares 23,472 23,472
Additional paid-in capital 4,769,268 4,769,268
Retained earnings (deficit) 136,239 (403,487)
---------- -----------
Total stockholders' equity 4,928,979 4,389,253
---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,171,724 $ 6,747,068
========== ===========
</TABLE>
See notes to consolidated financial statements
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3
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SI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED For the nine months ended
APRIL 30 April 30
1996 1995 1996 1995
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net sales $ 2,538,065 $ 2,364,859 $ 8,364,100 $ 7,446,932
Cost of sales 1,275,033 1,155,635 4,343,665 3,764,533
----------- ----------- ----------- -----------
Gross profit 1,263,032 1,209,224 4,020,435 3,682,399
Operating expenses:
Selling, service, general and administrative 805,671 744,619 2,432,572 2,363,398
Research, development and engineering 205,033 254,905 646,640 608,003
Amortization of intangibles 24,154 32,611 69,346 107,847
----------- ----------- ----------- -----------
Total operating expenses 1,034,858 1,032,135 3,148,558 3,079,248
Earnings from operations 228,174 177,089 871,877 603,151
Interest expense (24,182) (24,843) (60,387) (98,398)
Other income, net 16,544 17,516 53,051 15,008
----------- ----------- ----------- -----------
Net earnings before income taxes 220,536 169,762 864,541 519,761
Income tax expense (81,116) (53,000) (324,816) (126,600)
----------- ----------- ----------- -----------
Net earnings $ 139,420 $ 116,762 $ 539,725 $ 393,161
=========== =========== =========== ===========
Net earnings per common and $ 0.06 $ 0.05 $ 0.22 $ 0.16
=========== =========== =========== ===========
common equivalent shares
Weighted average shares outstanding 2,430,597 2,410,273 2,431,411 2,438,955
</TABLE>
See notes to consolidated financial statements
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SI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
APRIL 30
1996 1995
----------------------------------
<S> <C> <C>
Increase (Decrease) in Cash Cash flows
from operating activities:
Net earnings $ 539,725 $ 393,161
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 248,525 221,690
Deferred income taxes (73,600) (115,000)
Changes in operating assets and liabilities:
Trade accounts receivable (378,496) (302,573)
Inventories (646,523) 140,959
Other current assets (27,431) 44,373
Trade accounts payable 400,154 65,346
Accrued liabilities (46,513) 410,736
Income taxes payable 56,709 216,200
----------- -----------
Net cash provided (used) by operating activities 72,550 1,074,892
Cash flows from investing activities:
Proceeds from sale of equipment 487 3,209
Purchase of equipment (551,377) (106,076)
Acquisition of subsidiary (net of $2,181 cash acquired) (997,819) --
----------- -----------
Net cash used in investing activities (1,548,709) (102,867)
Cash flows from financing activities:
Payments on notes payable to bank (137,457) (544,147)
Proceeds from (payments on) long term debt 1,156,348 8,924
Payments on put option obligations -- (209,700)
Purchase of common stock -- (159,500)
----------- -----------
Net cash provided (used) in financing activities 1,018,891 (904,423)
----------- -----------
Net increase (decrease) in cash (457,268) 67,602
Cash at beginning of period 540,044 17,341
----------- -----------
Cash at end of period $ 82,776 $ 84,943
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest $ 60,387 $ 205,000
Income taxes 341,706 25,400
</TABLE>
See notes to consolidated financial statements
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5
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SI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. FINANCIAL STATEMENTS
In February 1996 the company changed its name to SI Technologies, Inc. from
Structural Instrumentation, Inc.
The following unaudited consolidated financial statements of the Company and its
subsidiaries have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for the entire fiscal year ending July 31, 1996. This
form 10-QSB should be read in conjunction with the Annual Report and form 10-KSB
for the year ended July 31, 1995.
NOTE 2. ACQUISITION
In April 1996 the company acquired 100% of the common stock of Evergreen Weigh,
Inc. in exchange for $1,000,000 in cash.. The acquisition was accounted for
under the purchase method of accounting and accordingly, the purchase price was
allocated to the underlying acquired assets and assumed liabilities at their
estimated fair market values at April 1, 1996. The results of Evergreen Weigh,
Inc. operations have been included in the Consolidated Statement of Earnings
from April 1, 1996. The unaudited pro forma results of operations of SI
Technologies, Inc. as if the acquisition had been consummated on August 1, 1994
are as follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
APRIL 30 APRIL 30
(UNAUDITED) (UNAUDITED)
1996 1995 1996 1995
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales $2,948,106 $3,057,267 $9,850,123 $9,055,031
Net income $ 129,372 $ 170,847 $ 527,149 $ 454,661
Net income per share $ .05 $ .07 $ .22 $ .19
</TABLE>
The unaudited pro forma results of operations are presented for informational
purposes only and do not purport to be indicative of the operating results that
actually would have occurred if the acquisition had been consummated on August
1, 1994, nor which may result from future operations. The pro forma adjustments
are made based on available information and certain assumptions that the company
believes are reasonable.
NOTE 3. INVENTORIES
Inventories are stated at the lower of cost (on a first-in, first-out basis) or
market and consisted of the following at:
<TABLE>
<CAPTION>
APRIL 30, 1996 JULY 31, 1995
(UNAUDITED)
<S> <C> <C>
Raw Materials $ 933,132 $ 413,052
Work in Progress 423,827 192,292
Finished Goods 921,340 455,174
----------------------------
2,278,299 1,060,518
Less allowance for obsolescence 213,700 134,430
----------------------------
$2,064,599 $ 926,088
============================
</TABLE>
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NOTE 4. EARNINGS PER SHARE
Net earnings per share of common stock is based on the weighted average number
of common shares and common stock equivalents outstanding during the period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
SI Technologies, Inc. (formerly Structural Instrumentation, Inc.) - SI -
manufactures mobile and stationary weighing systems for the transportation,
waste, construction, and mining industries, vehicle fleet information systems
and force measurement devices.
The three general types of electronic weighing systems include: on-board
weighing systems installed in the frame or suspension system of a vehicle,
semi-permanent industrial axle scales, and portable platform scales used both by
weight enforcement agencies and general transportation companies.
Fleet information systems are made up of on-board vehicle and base operation
computer hardware and software that collect and report operating information
used to manage and improve the performance of fleet operations. Specific
benefits from system utilization include increased driver and truck efficiency,
reduced maintenance costs, better safety records, reduced manual report
generation and improved customer service.
Force measurement devices are electromechanical components that convert a
physical force to an electrical signal. When matched with microprocessor
controlled digital electronics, force measurement devices measure forces such as
pressure, weight, mass and torque. Commercially, force measurement devices are
used in electronic scales and a wide range of machinery and equipment.
RESULTS OF OPERATIONS
Sales
Net sales increased to $2,538,065 for the quarter ended April 30, 1996 from
$2,364,859 for the same period last year. This is an increase of $173,206
or 7% over the prior year's third quarter results. Net sales for the nine
month period ending April 30, 1996 were $8,364,100 compared to $7,446,932
in the same period of fiscal 1995. This is an increase of $917,168 or 12%
over the prior year's first nine months.
The third quarter sales increase is the result of strong sales gains in
international markets outside of Canada and the acquisition of Evergreen
Weigh, Inc. effective April 1, 1996. European and Australian markets
generated the largest overseas sales increases. Excluding the revenue of
Evergreen Weigh, sales in US and Canadian markets were lower as compared
to the third quarter of last year. The reduced activity in the U.S. and
Canada reflects reduced capital spending in the waste industry and
continued weakness in the pulp industry after a period of very rapid
growth.
Gross Profit
Gross profit for the quarter was $1,263,032 compared to $1,209,224 in the
third quarter last year. This is an increase of $53,808 or 4%. Gross profit
for the nine month period ending April 30, 1996 was $4,020,435 compared to
$3,682,399 in the same period of fiscal 1995. This is an increase of
$338,036 or 9%. Gross profit as a percentage of sales decreased in the
third quarter to 50% compared to 51% in the third quarter last year. For
the nine month period ending April 30, 1996 gross profit as a percentage of
sales was 48% as compared to 49% recorded in the first nine months of last
year.
The third quarter variation in gross margin percentage results from
varying product mixes between quarters and the addition of sales from
Evergreen Weigh which overall have lower gross profit margins than other
products sold by the company. The variation in gross margin percentage for
the nine month period reflects product mix differences between time
periods and increased costs associated with manufacturing startup expenses
incurred for new products introduced during the second quarter of fiscal
1996 and reduced selling margins related to entry into new markets.
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7
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Selling, General and Administrative Expenses
SG & A expenses increased to $805,671 for the quarter ended April 30, 1996
from $744,619 for the same period last year. This is an increase of $61,052
or 8% over the prior year's third quarter. SG & A expenses as a percentage
of revenue remained at 32% for both the third quarters of 1996 and 1995. SG
& A expenses for the nine month period ending April 30, 1996 were
$2,432,572 as compared to $2,363,398 in the same period of fiscal 1995.
This is an increase of $69,174, a change of 3% from the same nine months of
fiscal 1995. For the nine month period of 1996, SG & A expenses were 29% as
a percentage of revenue as compared to 32% during the first nine months of
last fiscal year.
The changes in SG & A expenses reflect higher expenditures relating to
additions to the company's sales force and the addition of Evergreen Weigh
which have been offset by lower fees for professional services.
Research and Development and Engineering Expenses
RD & E expenditures were $205,033 for the quarter ended April 30, 1996 as
compared to $254,905 for the same period last year. This is a decrease of
$49,872 or 20% from the prior year's third quarter. RD & E expenses as a
percentage of revenues were 8% in the third quarter of 1996 as compared to
11% in the third quarter of 1995. The reduced spending in the 1996 third
quarter resulted from lower expenditures for engineering product
prototypes. RD & E expenditures were $646,640 for the nine month period
ending April 30, 1996 as compared to $608,003 in the same period of fiscal
1995. This is an increase of $38,637 or 6% over the prior year's nine month
period. The increased year to date spending reflects a higher rate of
investment in new product development as well as increased product
extensions for existing product lines. The Company expects to continue its
aggressive product development program into the near term.
Intangibles
The amortization of intangibles decreased to $24,154 for the quarter ended
April 30, 1996 from $32,611 for the same period last year. This is a
decrease of $8,457 or 26% from the prior year's third quarter. For the nine
month period ending April 30, 1996 amortization of intangibles was $69,346
as compared to $107,847 in the same period of last fiscal year. This is a
decrease of $38,501 or 36% from the prior year's nine month period. The
lower expense reflects the completion of amortization for non-compete
agreements associated with the 1990 acquisition of LODEC.
Interest Expense and Other Income/Expense
Interest expense was $24,182 for the quarter ended April 30, 1996 as
compared to $24,843 for the same period last year. For the nine month
period ending April 30, 1996 interest expense was $60,387 as compared to
$98,398 in the same period of last fiscal year. This is a decrease of
$38,011 or 39% from the prior year's nine month period. The lower interest
expense is the direct result of reduced borrowings by the company.
Other income was $16,544 for the quarter ended April 30, 1996 as compared
to $17,516 recorded in the third quarter of last year. Other income for the
nine month period ending April 30, 1996 was $53,051 as compared to $15,008
in the same period of last fiscal year.
Income Tax Expense
Income tax expense increased to $81,116 for the quarter ended April 30,
1996 from $53,000 for the same period last year. This is an increase of
$28,116 from the prior year's third quarter. For the nine month period
ending April 30, 1996 income tax expense was $324,816 as compared to
$126,600 in the same period of last fiscal year. This is an increase of
$198,216. The increased expense reflects the higher pretax income recorded
in the current year and a higher effective tax rate.
The effective tax rate for the third quarter and nine month period ended
April 30, 1996 increased from the same periods last year due to the full
utilization of tax credits now consumed. The effective tax rate for the
quarter and nine month period exceeds the U.S. federal corporate income tax
rate of 34% due to the amortization of intangible assets which expenses are
not deductible for income tax purposes and due to state income taxes.
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8
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INFLATION
Historically, the impact of inflation has been negligible, as the Company has
been able to offset the effects through efficiency and price increases.
LIQUIDITY AND CAPITAL RESOURCES
The company's line of credit of $2,000,000 that matured November 29, 1995, was
renewed with U.S. Bank of Washington effective November 1995. The new line of
credit was renewed for $2,000,000 and is for a two year term. The new agreement
included more favorable terms for the company than the prior agreement. As of
April 30, 1996 the company had borrowings of $428,995 under the line of credit.
In April 1996 the company entered into a $1,000,000 term loan agreement with
U.S. Bank of Washington for the purpose of financing the acquisition of
Evergreen Weigh, Inc. This loan is for a term of ten years.
The Company believes cash flow from operations and the funds available under its
bank facility will be sufficient to meet the Company's working capital needs and
company obligations under outstanding put options.
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits to Part II
Exhibit 2.1* Acquisition Agreement and Plan of Merger
dated April 12, 1996 among SI Technologies, Inc., SI Acquisition
Corporation, Evergreen Weigh, Inc., Carl R. Harris and Ruth Harris.
Exhibit 27 Financial Data Schedule
* Incorporated by reference to the same exhibit number as the Report on
Form 8-K dated April 12, 1996.
(b) Reports on Form 8-K
The company filed a Current Report on Form 8-K dated April 12, 1996
announcing the acquisition of Evergreen Weigh, Inc. by the company and
containing the related acquisition agreement and plan of merger and
unaudited pro forma financial information.
The items omitted are either inapplicable or are items to which the answer is
negative.
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9
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SI TECHNOLOGIES, INC.
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.
SI TECHNOLOGIES, INC.
June 13, 1996 \S\ Rick A. Beets
---------------------------------------
Rick A. Beets
President, CEO & CFO
(Principal Executive & Financial Officer)
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10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 82,776
<SECURITIES> 0
<RECEIVABLES> 2,192,744
<ALLOWANCES> 239,933
<INVENTORY> 2,064,599
<CURRENT-ASSETS> 4,853,373
<PP&E> 2,364,567
<DEPRECIATION> 1,499,100
<TOTAL-ASSETS> 9,171,724
<CURRENT-LIABILITIES> 2,831,550
<BONDS> 0
0
0
<COMMON> 23,472
<OTHER-SE> 4,905,507
<TOTAL-LIABILITY-AND-EQUITY> 9,171,724
<SALES> 8,364,100
<TOTAL-REVENUES> 8,364,100
<CGS> 4,343,665
<TOTAL-COSTS> 4,343,665
<OTHER-EXPENSES> 3,148,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,387
<INCOME-PRETAX> 864,541
<INCOME-TAX> 324,816
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 539,725
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
