<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, 1997
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
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(206) 244-6100
--------------------------------------------------
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 June 9, 1997.
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
APRIL 30, JULY 31,
1997 1996
(UNAUDITED)
---------------- ------------
<S> <C> <C>
Current assets:
Cash $ 107,281 $ 57,737
Trade accounts receivable, less allowance for
doubtful accounts of $106,166 and $174,675 1,973,699 2,068,216
respectively
Inventories 2,007,590 1,958,424
Deferred tax asset 289,000 309,300
Other current assets 314,007 125,960
-------------------------------
TOTAL CURRENT ASSETS 4,691,577 4,519,637
Property and equipment, less accumulated 829,814 821,529
depreciation and amortization
Other assets:
Intangible assets, net 3,187,605 3,250,289
Other 428,944 255,375
-------------------------------
$ 9,137,940 $ 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 1,046,235 964,141
Income taxes payable - 145,420
Accrued liabilities 545,682 709,840
-------------------------------
TOTAL CURRENT LIABILITIES 2,076,917 1,975,339
Long-term debt, less current maturities 1,788,090 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 397,193 177,702
-------------------------------
TOTAL STOCKHOLDERS' EQUITY 5,189,933 4,970,442
===============================
$ 9,137,940 $ 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 FOR THE NINE MONTH
PERIOD ENDED PERIOD ENDED
APRIL 30 APRIL 30
--------------------------------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 2,459,363 $ 2,538,065 $ 8,256,987 $ 8,364,100
Cost of sales 1,384,546 1,275,033 4,621,468 4,343,665
-------------------------- -------------------------
GROSS PROFIT 1,074,817 1,263,032 3,635,519 4,020,435
Operating expenses:
Selling, service, general 796,747 805,671 2,518,813 2,432,572
and administrative
Research, development and 126,219 205,033 529,484 646,640
engineering
Amortization of intangibles 27,841 24,154 83,173 69,346
-------------------------- -------------------------
950,807 1,034,858 3,131,470 3,148,558
-------------------------- -------------------------
EARNINGS FROM OPERATIONS 124,010 228,174 504,049 871,877
Interest expense (53,272) (24,182) (154,926) (60,387)
Other income (expense), net (7,163) 16,544 (725) 53,051
-------------------------- -------------------------
NET EARNINGS BEFORE 63,575 220,536 348,398 864,541
INCOME TAXES
Income tax expense (23,590) (81,116) (128,907) (324,816)
-------------------------- -------------------------
NET EARNINGS $ 39,985 139,420 219,491 539,725
========================== =========================
NET EARNINGS PER COMMON $ .02 $ .06 $ .09 $ .22
AND COMMON EQUIVALENT SHARE ========================== =========================
Weighted average shares 2,411,714 2,430,597 2,440,501 2,431,411
outstanding ========================== =========================
</TABLE>
See notes to consolidated financial statements
3
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SI TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
ENDED APRIL 30
---------------------------
1997 1996
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities:
Net earnings $ 219,491 $ 539,725
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 342,997 248,525
Deferred income taxes 20,300 (73,600)
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts 94,517 (378,496)
receivable
Increase in inventories (49,166) (646,523)
Increase in other current assets (153,491) (27,431)
Increase in trade accounts payable 82,094 400,154
Decrease in accrued liabilities (164,158) (46,513)
Increase (decrease) in income taxes (179,976) 56,709
payable
---------------------------
Net cash provided by operating activities 212,608 72,550
Cash flows from investing activities:
Decrease (increase) in other assets (20,489) 487
Purchase of equipment and software development (441,678) (551,377)
Acquisition of subsidiary - (997,819)
---------------------------
Net cash used in investing activities (462,167) (1,548,709)
Cash flows from financing activities:
Borrowings on notes payable to bank 430,041 210,077
Payments on long term debt (130,938) (191,186)
Proceeds from long term debt
- 1,156,348
---------------------------
Net cash provided by financing activities 299,103 1,018,891
---------------------------
Net increase (decrease) in cash 49,544 (457,268)
Cash at beginning of period 57,737 540,044
---------------------------
Cash at end of period $ 107,281 $ 82,776
===========================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 161,831 $ 60,387
Income taxes $ 283,895 $ 341,706
</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:
APRIL 30, 1997 JULY 31, 1996
(UNAUDITED)
Raw Materials $ 855,535 $ 867,912
Work in Progres 492,061 367,629
Finished Goods 939,316 916,400
----------------------------------------
2,286,912 2,151,941
Less allowance for 279,322 193,517
obsolescence
========================================
$2,007,590 $1,958,424
========================================
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 $2,459,363 for the quarter ended April 30, 1997 from
$2,538,065 for the same period last year. This is a decrease of $78,702 or 3%
from the prior year's third quarter results. Net sales for the nine month
period ending April 30, 1997 were $8,256,987 compared to $8,364,100 in the
same period of fiscal 1996. This is a decrease of $107,113 or 1% from the
prior year's first nine months.
The decreased sales in the quarter are the result of lower sales volume in
the U.S. and Canadian forestry markets and the U.S. waste market as compared
to last year's third quarter. The reduced sales activity in the U.S. and
Canadian markets reflects continuing industry weakness among customers in the
pulp industry and reduced capital spending in the waste industry. 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 $1,074,817 compared to $1,263,032 in the
third quarter last year. This is a decrease of $188,215 or 15% from the prior
year's third quarter results. Gross profit for the nine month period ending
April 30, 1997 was $3,635,519 compared to $4,020,435 in the same period of
fiscal 1996. This is a decrease of $384,916 or 10% from the prior year's
first nine months.
Gross profit as a percentage of sales was 44% in this
year's third quarter as compared to 50% in last year's third quarter. For the
nine month period ending April 30, 1997 gross profit as a percentage of sales
was 44% as compared to 48% recorded in the first nine months of last year.
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.
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 $796,747 for the quarter ended April 30, 1997
from $805,671 for the same period last year. This is a decrease of $8,924 or
1% from the prior year's third quarter. SG &
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A expense as a percentage of revenue was 32% in both this year's third
quarter and the third quarter of last year. SG & A expenses for the nine
month period ending April 30, 1997 were $2,518,813 as compared to $2,432,572
in the same period of fiscal 1996. This is an increase of $86,241 or 4%. For
the nine month period of 1997 SG & A expenses were 31% as a percentage of
revenue as compared to 29% during the first nine months of fiscal 1996. The
reduced expense level in the quarter is the result of a reimbursement of
professional service fees and spending controls put in place to bring costs
in line with the reduced sales.
Research, Development and Engineering Expenses
RD & E expenditures decreased to $126,219 for the quarter ended April 30,
1997 from $205,033 for the same period last year. This is a decrease of
$78,814 or 38% from the prior year's third quarter. RD & E expenses as a
percentage of revenues decreased to 5.1% from 8.1% in the same quarter of
last year. RD & E expenditures were $529,484 for the nine month period ending
April 30, 1997 as compared to $646,640 in the same period of 1996. This is a
decrease of $117,156 or 18% from the same period of fiscal 1996. 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 $27,841 for the quarter ended
April 30, 1997 from $24,154 for the same period last year. This is an
increase of $3,687 or 15% from the prior year's third quarter. For the nine
month period ending April 30, 1997, amortization of intangibles was $83,173
as compared to $69,346 in the same period of last fiscal year. This is an
increase of $13,827 or 20% from the prior year's nine month period. This
increase reflects the amortization of intangibles associated with
acquisitions made in 1996.
Interest Expense and Other Income/Expense,(net)
Interest expense increased to $53,272 for the quarter ended April 30, 1997
from $24,182 for the same period last year. This is an increase of $29,090 or
120% from the prior year's third quarter. For the nine month period ending
April 30, 1997 interest expense was $154,926 as compared to $60,387 in the
same period of last fiscal year. This is an increase of $94,539 or 157% from
the prior year's nine month period. 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 expense, net was $7,163 in the third quarter as compared to Other
income, net of $16,544 in last year's third quarter. This is an income
decrease of $23,707 from the prior year's third quarter. Other expense, net
for the nine month period ending April 30, 1997 was $725 as compared to
income of $53,051 in the same period of last fiscal period. The reduced
income in this year's third quarter is the result of receiving a one time
benefit from a bad debt settlement in last year's quarter and a reduced
volume of vendor discounts on purchases made by the Company in this year's
third quarter.
Income Tax Expense
Income tax expense decreased to $23,590 for the quarter ended April 30, 1997
from $81,116 for the same period last year. This is a decrease of $57,526 or
71% from the prior year's third quarter. For the nine month period ended
April 30, 1997 income tax expense was $128,907 as compared to $324,816 in the
same period of last year. This is a decrease of $195,909 or 60%. 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 April 30,
1997, the Company had outstanding borrowings of $988,090 under the line of
credit.
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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 April 30,
1997.
PART II. OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
In July 1996 the Company initiated a lawsuit in U.S. district court against a
competitor to overturn a patent that the Company believed to be unenforceable.
The competitor answered the claim and counter-claimed for patent infringement
seeking unspecified monetary damages and injunctive relief.
In June 1997 both of these actions were withdrawn. The Company and the
competitor reached a mutually agreeable settlement which includes the awarding
to the Company the right to make, use and sell products covered by the patent
which was the subject of the legal action.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits to Part II
Exhibit 27 Financial Data Schedule
(b) 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
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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 12, 1997 /S/ Rick A. Beets
---------------------------------
Rick A. Beets
President, CEO & CFO
(Principal Executive & Financial Officer)
9
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Exhibit Index
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> APR-30-1997
<CASH> 107,281
<SECURITIES> 0
<RECEIVABLES> 1,973,699
<ALLOWANCES> 106,166
<INVENTORY> 2,007,590
<CURRENT-ASSETS> 4,691,577
<PP&E> 2,387,533
<DEPRECIATION> 1,557,719
<TOTAL-ASSETS> 9,137,940
<CURRENT-LIABILITIES> 2,076,917
<BONDS> 0
0
0
<COMMON> 23,472
<OTHER-SE> 5,166,461
<TOTAL-LIABILITY-AND-EQUITY> 9,137,940
<SALES> 8,265,987
<TOTAL-REVENUES> 8,265,987
<CGS> 4,621,468
<TOTAL-COSTS> 4,621,468
<OTHER-EXPENSES> 3,131,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,926
<INCOME-PRETAX> 348,398
<INCOME-TAX> 128,907
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 219,491
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
