<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
January 31, 1997
SI TECHNOLOGIES, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-3381440
------------------------------ ----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
</TABLE>
4611 South 134th Place, Seattle, Washington 98168
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(206) 244-6100
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Registrant's telephone number, including area code
SAME
---------------------------------------------------
(Former name, 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 March 10, 1997.
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JANUARY 31, 1997 JULY 31, 1996
(UNAUDITED)
---------------- -------------
<S> <C> <C>
Current assets:
Cash $ 44,434 $ 57,737
Trade accounts receivable, less allowance for doubtful
accounts of $111,944 and $174,675 respectively 2,298,397 2,068,216
Inventories 1,854,967 1,958,424
Deferred tax asset 316,600 309,300
Other current assets 83,767 125,960
---------- ----------
TOTAL CURRENT ASSETS 4,598,165 4,519,637
Property and equipment, less accumulated depreciation and amortization 842,786 821,529
Other assets:
Intangible assets, net 3,211,625 3,250,289
Other 396,071 255,375
---------- ----------
$9,048,647 $8,846,830
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 100,000 $ 155,938
Put option obligations - current 385,000 -
Trade accounts payable 920,522 964,141
Income taxes payable 37,456 145,420
Accrued liabilities 702,246 709,840
---------- ----------
TOTAL CURRENT LIABILITIES 2,145,224 1,975,339
Long-term debt, less current maturities 1,670,475 1,433,049
Put option obligations - 385,000
Deferred taxes 83,000 83,000
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 357,208 177,702
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 5,149,948 4,970,442
---------- ----------
$9,048,647 $8,846,830
========== ==========
</TABLE>
See notes to consolidated financial statements
2
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SI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED FOR THE SIX MONTH PERIOD ENDED
JANUARY 31 JANUARY 31
--------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $2,835,886 $3,125,013 $5,797,624 $5,826,036
Cost of sales 1,603,031 1,667,941 3,236,922 3,068,632
---------- ---------- ---------- ----------
GROSS PROFIT 1,232,855 1,457,072 2,560,702 2,757,404
Operating expenses:
Selling, service, general and administrative 822,287 841,095 1,722,066 1,626,901
Research, development and engineering 190,343 226,912 403,266 441,607
Amortization of intangibles 27,733 22,596 55,332 45,192
---------- ---------- ---------- ----------
1,040,363 1,090,603 2,180,664 2,113,700
---------- ---------- ---------- ----------
EARNINGS FROM OPERATIONS 192,492 366,469 380,038 643,704
Interest expense (52,833) (17,828) (101,654) (36,205)
Other income, net 1,684 8,117 6,439 36,507
---------- ---------- ---------- ----------
NET EARNINGS BEFORE INCOME TAXES 141,343 356,758 284,823 644,006
Income tax expense (52,305) (133,700) (105,317) (243,700)
========== ========== ========== ==========
NET EARNINGS $ 89,038 223,058 $ 179,506 400,306
========== ========== ========== ==========
NET EARNINGS PER COMMON $ .04 $ .09 $ .07 $ .16
AND COMMON EQUIVALENT SHARE
========== ========== ========== ==========
Weighted average shares outstanding 2,407,457 2,434,236 2,413,118 2,432,725
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
SI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTH PERIOD ENDED
JANUARY 31
----------------------------------
1997 1996
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<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities:
Net earnings $ 179,506 $ 400,306
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization 222,964 154,543
Deferred income taxes (7,300) (81,600)
Changes in operating assets and liabilities:
Increase in trade accounts receivable (230,181) (625,672)
Decrease (increase) in inventories 103,457 (496,656)
Decrease in other current assets 42,193 8,950
Increase (decrease) in trade accounts payable (43,619) 402,875
Increase (decrease) in accrued liabilities (7,594) 143,202
Increase in income taxes payable (107,964) (13,800)
----------- ----------
Net cash provided by (used in) operating activities 151,462 (107,852)
Cash flows from investing activities:
Increase in other assets (16,668) -
Purchase of equipment and software development (329,585) (315,962)
----------- ----------
Net cash used in investing activities (346,253) (315,962)
Cash flows from financing activities:
Borrowings on notes payable to bank 287,426 -
Payments on long term debt (105,938) (114,176)
----------- ----------
Net cash provided by (used in) financing activities 181,488 (114,176)
----------- ----------
Net decrease in cash (13,303) (537,990)
Cash at beginning of period 57,737 540,044
----------- ----------
Cash at end of period $ 44,434 $ 2,054
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 108,581 $ 36,205
Income taxes $ 212,400 $ 339,100
</TABLE>
See notes to consolidated financial statements
4
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SI TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. FINANCIAL STATEMENTS
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, 1997. This form 10-QSB should be
read in conjunction with the Annual Report and form 10-KSB for the year ended
July 31, 1996.
NOTE 2. 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>
JANUARY 31, 1997 JULY 31, 1996
(UNAUDITED)
<S> <C> <C>
Raw Materials $ 873,479 $ 867,912
Work in Progress 415,611 367,629
Finished Goods 810,440 916,400
---------- ----------
2,099,530 2,151,941
Less allowance for obsolescence 244,563 193,517
---------- ----------
$1,854,967 $1,958,424
========== ==========
</TABLE>
NOTE 3. 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.
NOTE 4. ADOPTION OF SFAS 123
The Company adopted, effective August 1, 1996, Statement of Financial Standards
123, Accounting for Stock-Based Compensation (SFAS 123). The Company is
continuing to account for employee stock options under APB 25, Accounting for
Stock Issued to Employees (ABP 25), and will disclose the proforma effects on
net earnings and earnings per share had compensation cost for the plan been
determined based on the market value of the options at the grant dates.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
SI Technologies, Inc. - SI - manufactures mobile and stationary weighing
systems, fleet information systems and force measurement devices. The
company's products are marketed both directly and through dealers to original
equipment manufacturers and industrial users. Key markets served by the
company include: forestry, waste, agriculture, weight enforcement,
construction, mining/quarry, aviation, oil and gas, freight transportation and
municipal services.
Mobile weighing systems, commonly known as "on-board scales," are installed on
trucks and trailers, and material handling equipment to inform operators of
gross vehicle weight, payload, axle and incremental pick-up and delivery
weights as the vehicle is loaded or unloaded. Stationary scales provide the
same information as well as portability.
Fleet information systems, composed of on-board vehicle computers and base
operation hardware and software, develop 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 decreased to $2,835,886 for the quarter ended January 31, 1997
from $3,125,013 for the same period last year. This is a decrease of
$289,127 or 9% from the prior year's second quarter results.
The decreased sales in the quarter are the result of lower sales volume in
the U.S. and Canadian forestry markets which experienced unusually strong
sales last year due to record setting demand in the pulp industry. Sales
in the waste market were also lower in the quarter as compared to last
year's second quarter. During the last twelve months major waste customers
have reduced capital expenditures on new equipment and this has slowed
sales to this market. These decreases were partially offset by incremental
sales resulting from the inclusion of Evergreen Weigh which was acquired in
April 1996.
Management expects the current levels of activity in the forestry and waste
markets to continue for the near term.
Gross Profit
Gross profit for the quarter was $1,232,855 compared to $1,457,072 in the
second quarter last year. This is a decrease of $224,217 or 15% from the
prior quarter's results. Gross profit as a percentage of sales was 43.5%
in this year's second quarter as compared to 46.6% in last year's second
quarter.
The reduced gross margin percentage is the result of increased price
competition on traditional products in existing markets, a shift in product
mix in the quarter to products with lower average margins and reduced
manufacturing utilization rates resulting from lower sales in forestry and
waste markets.
In future periods, management expects gross profit margins will continue to
be pressured by market competition and be impacted by anticipated increased
sales, as a share of total sales, of newly acquired products.
Selling, General and Administrative Expenses
SG & A expenses decreased to $822,287 for the quarter ended January 31,
1997 from $841,095 for the same period last year. This is a decrease of
$18,808 or 2% from the prior year's second quarter. SG & A expenses as a
percentage of revenue increased to 29% as compared to 27% in the same
quarter of last year. The reduced expense level is the result of spending
controls put in place to bring costs in line with the reduced sales.
6
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Research, Development and Engineering Expenses
RD & E expenditures decreased to $190,343 for the quarter ended January 31,
1997 from $226,912 for the same period last year. This is a decrease of
$36,569 or 16% from the prior year's second quarter. RD & E expenses as a
percentage of revenues decreased to 6.7% from 7.3% in the same quarter of
last year. This reduced spending rate reflects a return to more modest
product development investment after several years of accelerated spending.
The company expects future RD & E spending to be at rates lower than those
of recent years.
Intangibles
The amortization of intangibles increased to $27,733 for the quarter ended
January 31, 1997 from $22,596 for the same period last year. This is an
increase of $5,137 or 23% from the prior year's second quarter. This
increase reflects the increased amortization of intangibles associated with
acquisitions made in 1996.
Interest Expense and Other Income
Interest expense increased to $52,833 for the quarter ended January 31,
1997 from $17,828 for the same period last year. This is an increase of
$35,005 or 196% from the prior year's second quarter. The increased
interest expense is the result of increased expense from the debt incurred
in the Evergreen Weigh acquisition and from increased working capital
needs. Other income, net decreased to $1,684 from $8,117 for the same
period last year. This is a decrease of $6,433 or 79% from the prior
year's second quarter.
Income Tax Expense
Income tax expense decreased to $52,305 for the quarter ended January 31,
1997 from $133,700 for the same period last year. This is a decrease of
$81,395 or 61% from the prior year's second quarter. The decreased expense
reflects the lower pretax income recorded in the current quarter. The
effective tax rate for the quarter exceeds the U.S. federal corporate
income tax rate of 34% due to the amortization of intangible assets which
is not deductible for income tax purposes and due to state income taxes.
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 was extended with U.S. Bank of
Washington effective November 30, 1996. The new line of credit was renewed for
$2,000,000 and is for a two year term ending November 1998. As of January 31,
1997 the Company had outstanding borrowings of $845,475 under the line of
credit.
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.
PUT OPTION OBLIGATIONS
The liability associated with the company's agreements to repurchase 77,000
shares of the Company's stock upon exercise of the remaining put options, is
included in the liability section of the Company's balance sheet as of January
31, 1997.
7
<PAGE> 8
PART II. OTHER INFORMATION
ITEM 4
(a) The annual meeting of shareholders was held January 8, 1997 at the
Mayflower Park Hotel, Seattle WA. At the meeting the shareholders elected
the directors as nominated.
<TABLE>
<CAPTION>
Director For Withheld
-------- --- --------
<S> <C> <C>
Edward A. Alkire 1,964,020 500
S. Scott Crump 1,964,020 500
D. Dean Spatz 1,964,020 500
Ralph Crump 1,964,070 450
Heinz Zweipfennig 1,964,020 500
</TABLE>
ITEM 6
Exhibits and reports and Form 8-K
(a) Exhibits to Part II
Exhibit 27 Financial Data Schedule
(a) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter.
The items omitted are either inapplicable or are items to which the answer is
negative.
8
<PAGE> 9
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.
March 14, 1997 /s/ RICK A. BEETS
----------------------------
Rick A. Beets
President, CEO & CFO
(Principal Executive & Financial Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 44,434
<SECURITIES> 0
<RECEIVABLES> 2,298,397
<ALLOWANCES> 111,944
<INVENTORY> 1,854,967
<CURRENT-ASSETS> 4,598,165
<PP&E> 2,320,303
<DEPRECIATION> 1,477,517
<TOTAL-ASSETS> 9,048,647
<CURRENT-LIABILITIES> 2,145,224
<BONDS> 0
0
0
<COMMON> 23,472
<OTHER-SE> 5,126,476
<TOTAL-LIABILITY-AND-EQUITY> 5,149,948
<SALES> 5,797,624
<TOTAL-REVENUES> 5,797,624
<CGS> 3,236,922
<TOTAL-COSTS> 3,236,922
<OTHER-EXPENSES> 2,180,664
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,654
<INCOME-PRETAX> 284,823
<INCOME-TAX> 105,317
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179,506
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
