<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
FOR THE QUARTER ENDED COMMISSION FILE NUMBER 0-12370
APRIL 30, 2000
</TABLE>
------------------------
SI TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-3381440
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
14192 FRANKLIN AVENUE, TUSTIN, CALIFORNIA 92780
(Address of principal executive offices) (Zip Code)
</TABLE>
(714) 505-6483
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 practical date. 3,547,123 shares of Common Stock,
par value $.01 on June 12, 2000.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
SI TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, JULY 31,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash...................................................... $ 259,135 $ 32,042
Trade accounts receivable, less allowance for doubtful
accounts of $355,800 and $339,714 respectively.......... 8,098,000 8,635,695
Unbilled revenues......................................... 67,400 126,859
Inventories............................................... 8,848,000 10,087,125
Deferred tax asset........................................ 862,400 1,423,900
Income taxes receivable................................... -- 85,894
Other current assets...................................... 611,215 508,961
----------- -----------
Total current assets.................................. 18,746,150 20,900,476
Property and equipment, less accumulated depreciation and
amortization.............................................. 5,979,045 6,516,834
Other assets:
Intangible assets, net.................................... 9,532,900 9,977,856
Other..................................................... 214,845 272,596
----------- -----------
$34,472,940 $37,667,762
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to bank..................................... $ 1,042,100 $ 4,767,128
Current maturities of long-term debt...................... 8,154,028 1,039,018
Trade accounts payable.................................... 3,318,344 3,559,770
Customer advances......................................... 21,900 109,140
Income taxes payable...................................... 17,686 --
Accrued liabilities....................................... 1,975,331 3,950,579
----------- -----------
Total current liabilities............................. 14,529,389 13,425,635
Long term debt, less current maturities..................... 6,921,314 11,418,485
Other liabilities........................................... 867,068 1,021,265
Deferred taxes.............................................. 445,100 401,600
Stockholders' equity
Preferred stock, par value $0.01 per share; Authorized
2,000,000 shares; none outstanding......................
Common stock, par value $.01 per share. Authorized
10,000,000 shares; issued and outstanding, 3,547,123.... 35,471 35,471
Additional paid-in capital................................ 10,294,071 10,294,071
Retained earnings......................................... 1,494,081 1,108,637
Accumulated other comprehensive income.................... (113,554) (37,402)
----------- -----------
Total stockholders' equity............................ 11,710,069 11,400,777
----------- -----------
$34,472,940 $37,667,762
=========== ===========
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD FOR THE NINE MONTH PERIOD
ENDED APRIL 30 ENDED APRIL 30
--------------------------- -------------------------
2000 1999 2000 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................. $11,309,029 $10,257,792 $31,767,805 $32,442,258
Cost of sales............................. 7,290,582 6,249,355 20,315,584 19,784,425
----------- ----------- ----------- -----------
Gross profit.......................... 4,018,447 4,008,437 11,452,221 12,657,833
Operating expenses:
Selling, general and administrative..... 2,498,904 2,864,018 7,442,580 8,326,179
Research, development and engineering... 476,406 720,197 1,467,148 2,148,244
Amortization of intangibles............. 120,387 119,161 350,320 349,052
Restructuring costs..................... -- 850,000 -- 850,000
----------- ----------- ----------- -----------
3,095,697 4,553,376 9,260,048 11,673,475
----------- ----------- ----------- -----------
Earnings (Loss) from operations....... 922,750 (544,939) 2,192,173 984,358
Interest expense.......................... (497,459) (383,493) (1,421,762) (1,247,643)
Other income (expense), net............... 16,044 13,773 30,523 (718)
----------- ----------- ----------- -----------
Net earnings (loss) before income
taxes............................... 441,335 (914,659) 800,934 (264,003)
Income tax (expense) benefit.............. (177,610) 250,005 (415,490) (66,135)
----------- ----------- ----------- -----------
NET INCOME (LOSS)..................... $ 263,725 $ (664,654) $ 385,444 $ (330,138)
=========== =========== =========== ===========
Earnings (loss) per common share--basic... $ 0.07 $ (0.19) $ 0.11 $ (0.09)
=========== =========== =========== ===========
Earnings (loss) per common
share--diluted.......................... $ 0.07 $ (0.18) $ 0.11 $ (0.09)
=========== =========== =========== ===========
Average shares outstanding--basic......... 3,547,123 3,547,123 3,547,123 3,547,123
=========== =========== =========== ===========
Average shares outstanding--diluted....... 3,595,595 3,666,273 3,627,453 3,689,942
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
ENDED APRIL 30
--------------------------
2000 1999
------------ -----------
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities:
Net earnings (loss)....................................... $ 385,444 $ (330,138)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 1,253,500 1,616,392
Deferred income taxes................................... 605,000 (5,706)
Changes in operating assets and liabilities:
Accounts receivable................................... 537,695 732,347
Unbilled revenues..................................... 59,459 --
Inventories........................................... 1,239,125 (560,322)
Refundable income taxes............................... 85,894 --
Other current assets.................................. (102,254) (76,384)
Accounts payable...................................... (241,426) (880,377)
Customer advances..................................... (87,240) 149,932
Accrued liabilities................................... (1,800,248) 3,307
Income taxes payable.................................. 17,686 (656,048)
Other liabilities..................................... (154,197) (153,682)
----------- ----------
Net cash provided by (used in) operating
activities........................................ 1,798,438 (160,679)
Cash flows from investing activities:
Increase/decrease in other assets......................... (36,904) --
Purchase of property and equipment........................ (351,100) (354,881)
Proceeds from sale of property and equipment.............. -- 45,732
Acquisition expenses...................................... -- (232,819)
----------- ----------
Net cash used in investing activities............... (388,004) (541,968)
Cash flows from financing activities:
Proceeds from line of credit, net......................... 409,199 1,230,975
Payments on notes payable................................. (725,028) --
Payments on long-term debt................................ (791,360) (929,240)
Cost associated with equity financing..................... -- (26,694)
----------- ----------
Net cash (used in) provided by financing
activities........................................ (1,107,189) 275,041
Foreign currency translation adjustment..................... (76,152) (83,167)
Net increase (decrease) in cash............................. 227,093 (510,773)
Cash at beginning of period................................. 32,042 573,863
----------- ----------
Cash at end of period....................................... $ 259,135 $ 63,090
=========== ==========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. FINANCIAL STATEMENTS
The 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, 2000. This form 10-QSB should be read in
conjunction with the Annual Report and form 10-KSB for the year ended July 31,
1999.
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>
APRIL 30, 2000 JULY 31, 1999
--------------- --------------
(UNAUDITED)
<S> <C> <C>
Raw Materials...................................... $3,532,729 $ 4,987,726
Work in Progress................................... 747,248 1,536,066
Finished Goods..................................... 4,568,023 3,563,333
---------- -----------
$8,848,000 $10,087,125
========== ===========
</TABLE>
NOTE 3. BASIC NET EARNINGS AND DILUTED NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE
Basic net earnings per share and diluted net earnings per share are based on
the following computations.
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD
ENDED APRIL 30, 2000
---------------------------------------
PER SHARE
EARNINGS/(LOSS) SHARES AMOUNT
--------------- --------- ---------
<S> <C> <C> <C>
BASIC NET EARNINGS PER SHARE
Income available to common shareholders... $263,725 3,547,123 $0.07
EFFECT OF DILUTIVE SECURITIES
Stock options............................. 48,472
---------
DILUTED EPS
Income available to common shareholders
plus assumed conversions................ $263,725 3,595,595 $0.07
======== ========= =====
</TABLE>
5
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3. BASIC NET EARNINGS AND DILUTED NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD
ENDED APRIL 30, 1999
---------------------------------
PER SHARE
INCOME SHARES AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
BASIC NET LOSS PER SHARE
Income available to common shareholders...... $(664,654) 3,547,123 $(0.19)
EFFECT OF DILUTIVE SECURITIES
Stock options................................ 119,150
---------
DILUTED EPS
Income available to common shareholders plus
assumed conversions........................ $(664,654) 3,666,273 $(0.18)
========= ========= ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
ENDED APRIL 30, 2000
--------------------------------
PER SHARE
INCOME SHARES AMOUNT
-------- --------- ---------
<S> <C> <C> <C>
BASIC NET EARNINGS PER SHARE
Income available to common shareholders....... $385,444 3,547,123 $0.11
EFFECT OF DILUTIVE SECURITIES
Stock options................................. 80,330
---------
DILUTED EPS
Income available to common shareholders plus
assumed conversions......................... $385,444 3,627,453 $0.11
======== ========= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD
ENDED APRIL 30, 1999
---------------------------------
PER SHARE
INCOME SHARES AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
BASIC NET LOSS PER SHARE
Income available to common shareholders...... $(330,138) 3,547,123 $(0.09)
EFFECT OF DILUTIVE SECURITIES
Stock options................................ 142,819
---------
DILUTED EPS
Income available to common shareholders plus
assumed conversions........................ $(330,138) 3,689,942 $(0.09)
========= ========= ======
</TABLE>
NOTE 4. SEGMENT INFORMATION
The Company operates in two reportable business segments--(1) industrial
measurement, and (2) industrial automation. The Company's reportable segments
are strategic business units that offer different products. They are managed
separately based on the fundamental differences in their operations.
6
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4. SEGMENT INFORMATION (CONTINUED)
Included in the industrial measurement segment are industrial sensors and
controls products consisting of a wide range of NTEP and OIML approved, EX,
Factory Mutual and IP rated load cells, transducers, translators and sensors.
When matched with microprocessor-controlled digital electronics, they measure
forces such as pressure, weight, mass and torque. Also included in the
industrial measurement segment are weighing system products. These products
constitute the combination of load cells and microprocessor-controlled digital
electronics that in combination provide for an integrated system providing
weight data in both dynamic and static industrial weighing applications.
The industrial automation segment consists of load handling, moving and
positioning equipment and systems for applications in manufacturing,
construction and other environments in which heavy bulky materials are being
transported and positioned.
<TABLE>
<CAPTION>
INDUSTRIAL INDUSTRIAL
SEGMENT INFORMATION MEASUREMENT AUTOMATION SI CONSOLIDATED
------------------- ----------- ---------- ---------------
<S> <C> <C> <C>
Three months ended April 30, 2000:
Net sales............................. $ 8,702,029 $2,607,000 $11,309,029
Cost of sales......................... 5,943,582 1,347,000 7,290,582
----------- ---------- -----------
Gross profit.......................... 2,758,447 1,260,000 4,018,447
Gross profit %........................ 32% 48% 36%
Operating expenses.................... 2,224,397 871,300 3,095,697
----------- ---------- -----------
Operating profit...................... 534,050 388,700 922,750
Interest expense...................... (497,459)
Other income, net..................... 16,044
-----------
Net earnings before income taxes...... 441,335
Income tax expense.................... (177,610)
-----------
Net earnings.......................... $ 263,725
===========
Assets................................ $30,287,440 $4,185,500 $34,472,940
=========== ========== ===========
</TABLE>
7
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
INDUSTRIAL INDUSTRIAL
SEGMENT INFORMATION MEASUREMENT AUTOMATION SI CONSOLIDATED
------------------- ----------- ---------- ---------------
<S> <C> <C> <C>
Three months ended April 30, 1999:
Net sales............................. $ 7,864,592 $2,393,200 $10,257,792
Cost of sales......................... 4,853,455 1,395,900 6,249,355
----------- ---------- -----------
Gross profit.......................... 3,011,137 997,300 4,008,437
Gross profit %........................ 38% 42% 39%
Operating expenses.................... 3,707,176 846,200 4,553,376
----------- ---------- -----------
Operating profit (loss)............... (696,039) 151,100 (544,939)
Interest expense...................... (383,493)
Other expense, net.................... 13,773
-----------
Net loss before income taxes.......... (914,659)
Income tax benefit.................... 250,005
-----------
Net loss.............................. $ (664,654)
===========
Assets................................ $34,652,435 $4,185,500 $38,837,935
=========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
INDUSTRIAL INDUSTRIAL
SEGMENT INFORMATION MEASUREMENT AUTOMATION SI CONSOLIDATED
------------------- ----------- ---------- ---------------
<S> <C> <C> <C>
Nine months ended April 30, 2000:
Net sales............................. $24,303,700 $7,464,105 $31,767,805
Cost of sales......................... 16,242,800 4,072,784 20,315,584
----------- ---------- -----------
Gross profit.......................... 8,060,900 3,391,321 11,452,221
Gross profit %........................ 33% 45% 36%
Operating expenses.................... 6,745,100 2,514,948 9,260,048
----------- ---------- -----------
Operating profit...................... 1,315,800 876,373 2,192,173
Interest expense...................... (1,421,762)
Other income, net..................... 30,523
-----------
Net earnings before income taxes...... 800,934
Income tax expense.................... (415,490)
-----------
Net earnings.......................... $ 385,444
===========
Assets................................ $27,496,000 $6,976,940 $34,472,940
=========== ========== ===========
</TABLE>
8
<PAGE>
SI TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 4. SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
INDUSTRIAL INDUSTRIAL
SEGMENT INFORMATION MEASUREMENT AUTOMATION SI CONSOLIDATED
------------------- ----------- ---------- ---------------
<S> <C> <C> <C>
Nine months ended April 30, 1999:
Net sales............................. $26,483,358 $5,958,900 $32,442,258
Cost of sales......................... 16,370,625 3,413,800 19,784,425
----------- ---------- -----------
Gross profit.......................... 10,112,733 2,545,100 12,657,833
Gross profit %........................ 38% 43% 39%
Operating expenses.................... 9,384,275 2,289,200 11,673,475
----------- ---------- -----------
Operating profit...................... 728,458 255,900 984,358
Interest expense...................... (1,247,643)
Other income, net..................... (718)
-----------
Net loss before income taxes.......... (264,003)
Income tax expense.................... (66,135)
-----------
Net loss.............................. $ (330,138)
===========
Assets................................ $34,652,435 $4,185,500 $38,837,935
=========== ========== ===========
</TABLE>
NOTE 5. RESTRUCTURING CHARGE
In fiscal 1999, the Company announced a plan to consolidate its two
industrial scale businesses, the Weighing Systems Division and Allegany
Technology, and to consolidate its two load cell/sensor business units, Revere
Transducers and NV Technology. These reorganizations included the planned
closure of the Company's manufacturing facility that housed the Weighing Systems
Division in Tukwila, Washington. In conjunction with this reorganization, the
Company established a restructuring reserve of $850,000. This recorded charge
was for the closure and lease costs of the vacated facility, employee severance
costs and the write-down of assets related to products to be discontinued.
As of April 30, 2000, the balance of the restructuring reserve was
approximately $56,300. This balance is primarily being used for the ongoing
lease and upkeep costs of the closed Tukwila, Washington manufacturing facility.
The Company is actively seeking to sublet this facility.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
SI Technologies, Inc. and Subsidiaries ("SI" or the "Company") is a growing
designer, manufacturer and marketer of high-performance industrial sensors,
weighing and factory automation systems, and related products. Acquisitions in
previous years have diversified the Company's revenue base and positioned SI
Technologies as an integrator of technologies, products and companies that are
enabling SI to become a leading global provider of devices, equipment and
systems that handle, measure and inspect goods and materials. SI products are
used throughout the world in a wide variety of industries, including aerospace,
agriculture, aviation, food processing and packaging, forestry, manufacturing,
mining, transportation/distribution and waste management.
PRODUCTS AND SERVICES
INDUSTRIAL MEASUREMENT
The Company's industrial sensor and control products consist of a wide range
of NTEP and OIML approved, EX, Factory Mutual and IP rated load cells,
transducers, translators and sensors. These devices, representing a core SI
technology, are electromechanical components that convert a physical force to an
electrical signal. When matched with microprocessor-controlled digital
electronics, they measure forces such as pressure, weight, mass and torque.
Commercially, the products are used for measurement, inspection and control. SI
sensor and control products are principally used in electronic weighing
equipment; batching, blending, mixing, fill-by-weight and product inspection
operations and, machinery operation and control systems. SI
controls/instrumentation is normally designed as an integral part of a complete
weighing system. In recent years, SI instrumentation has been expanded to
provide users with the ability to acquire, record in memory and download to
management information systems operational information other than weight
information. In this expanded capacity, SI instrumentation becomes a critical
link between operations and management information systems.
SI designs and manufactures dynamic and static electronic weighing equipment
and systems for use in a wide array of industrial applications. As a result of
the uniqueness of the Company's combined sensor, weighing and automation system
technologies, SI is one of the few manufacturers in the industry who design and
manufacture all three of the primary components of an electronic scale. These
components are the load-handling structure, sensors and instrumentation. Many
manufacturers of conventional scale systems manufacture only load-handling
structures, outsourcing to industry suppliers their sensor and instrumentation
requirements. The Company utilizes its expertise and manufacturing know-how in
each of these critical components to competitive advantage and believes its
broad expertise can be exploited through its acquisition/integration growth
strategy.
INDUSTRIAL AUTOMATION
SI's industrial automation products consist of load handling, moving and
positioning equipment and systems. These products often utilize highly
specialized air-bearing movement systems to move loads of any weight efficiently
and with extreme precision. Air bearings are air-cushion devices that are used
to "float" heavy loads on a thin film of air. Additionally, the Company
manufactures systems utilizing water bearings for use in large outdoor
applications where water is used as the flotation medium rather than air. These
products, marketed under the trade names AEROCASTER, AEROGO, AEROPALLETS,
AEROPLANKS and AIRSHUTTLE are the world leaders in practical and efficient
methods of movement, transfer, location, rotation and alignment of materials and
products weighing from several hundred pounds to more than 6,000 tons.
The Company's industrial automation product line comprises two distinct
categories. The first is a standard product line of rugged, industrial,
off-the-shelf air-cushion devices that allow a single person to easily and
safely move loads weighing from a few hundred pounds to many tons. Standard
products
10
<PAGE>
routinely move manufacturing fixtures, printing press bulky paper rolls, jet
engines, and other heavy loads. The other category of the product line consists
of engineered products. Engineered products and specialized systems designed and
manufactured by the Company in recent years are currently moving 100,000-pound
dies, launching ships, moving 4,500-ton stadium sections, transporting aerospace
booster rockets and moving large assemblies in and out of assembly line
operations in numerous heavy equipment manufacturing facilities.
RESULTS OF OPERATIONS
SALES
Net sales were $11,309,029 for the quarter ended April 30, 2000 as compared
to $10,257,792 for the same period last year. This is an increase of $1,051,237
or 10% from the prior year's third quarter results. Net sales for the nine-month
period ending April 30, 2000 were $31,767,805 compared to $32,442,258 in the
same period of fiscal 1999. This is a decrease of $674,453 or 2% from the prior
year's first nine months.
The industrial measurement and automation segments produced increased sales
of 11% and 9% respectively, in the current quarter in comparison to the same
period last year. The 2% decrease in nine month sales year to date in comparison
to the same period last year, is a result of initial production problems
experienced with the restructuring and consolidation of business units in the
second quarter (November 1, 1999 through January 31, 2000) this year.
GROSS PROFIT
Gross profit for the quarter was $4,018,447 compared to $4,008,437 in the
third quarter last year. Gross profit for the nine-month period ending
April 30, 2000 was $11,452,221 compared to $12,657,833 in the same period of
fiscal 1999. This is a decrease of $1,205,612 or 10% from the prior year's first
nine months.
Gross profit as a percentage of sales was 36% for both the quarter and the
nine-month period ended April 30, 2000. This compares to 39% for the comparable
periods of last year. The lower gross profit percentage for the quarter is due
primarily to higher manufacturing costs associated with the start up of
production in the consolidated manufacturing locations. The results for the nine
month period were likewise impacted and the year to year comparison was also
influenced by delivery of a large order in the prior year at gross profit
margins higher than usual.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased to $2,498,904 for the
quarter ended April 30, 2000 from $2,864,018 for the same period last year. This
is a decrease of $365,114 or 13% from the prior year's third quarter. Selling,
general and administrative expenses as a percentage of revenue were 22% in this
year's third quarter and 28% in the third quarter last year. Selling, general
and administrative expenses for the nine-month period ending April 30, 2000 were
$7,442,580 as compared to $8,326,179 in the same period of fiscal 1999. This is
a decrease of $883,599 or 11%. For the first nine months of fiscal 2000,
selling, general and administrative expenses were 23% of revenue as compared to
26% during the first nine months of fiscal 1999.
Reduced S,G & A expenses are a direct result of the consolidation of its two
industrial scale businesses and implementation of a new sales model. The new
sales model is more efficient than the Company's prior sales model. S,G & A
spending is likely to increase somewhat in future quarters as the Company begins
to invest in the new sales organization and model in an effort to improve
internal revenue growth in future periods.
11
<PAGE>
RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES
Research, development and engineering expenditures decreased to $476,406 for
the quarter ended April 30, 2000 from $720,197 for the same period last year.
This is a decrease of $243,791 or 34% from the prior year's third quarter.
Research, development and engineering expenditures as a percentage of revenue
decreased to 4% from 7% in the same quarter of last year. Research, development
and engineering expenditures were $1,467,148 for the nine-month period ending
April 30, 2000 as compared to $2,148,244 in the same period of 1999. This is a
decrease of $681,096 or 32% from the same period of fiscal 1999. Expenditures as
a percentage of revenue were 5% in the nine month period ended April 30, 2000 as
compared to 7% in the same period of last year.
R, D & E expenses were lower due to lower staffing levels and reduced
overhead resulting from the combining of the Company's specialty weighing
businesses and sensor businesses.
INTANGIBLES
The amortization of intangibles was $120,387 for the quarter ended
April 30, 2000 as compared to $119,161 for the same period last year. For the
nine-month period ending April 30, 2000, amortization of intangibles was
$350,320 as compared to $349,052 in the same period of last fiscal year.
INTEREST EXPENSE AND OTHER INCOME (EXPENSE), (NET)
Interest expense increased to $497,459 for the quarter ended April 30, 2000
from $383,493 for the same period last year. This is an increase of $113,966 or
30% from the prior year's third quarter. For the nine-month period ending
April 30, 2000, interest expense was $1,421,762 as compared to $1,247,643 in the
same period of last fiscal year. This is an increase of $174,119 or 14% from the
prior year's nine-month period.
The increased interest expense is the result of higher market interest rates
this year as compared to last year and additional fees incurred on the
refinancing of its $3,000,000 note.
INCOME TAX EXPENSE
Income tax expense increased to $177,610 for the quarter ended April 30,
2000 from a $250,005 tax benefit for the same period last year. This is an
increase of $427,615 from the prior year's third quarter. For the nine-month
period ended April 30, 2000 income tax expense was $415,490 as compared to
$66,135 in the same period of last year. This is an increase of $349,355.
The effective tax rate for the quarter and the nine month period exceeds the
U.S. federal corporate income tax rate of 34% primarily due to the amortization
of intangible assets which is not deductible for income tax purposes and due to
state income taxes. The significant increase in the current quarter and the year
to date tax expense is a result of higher pretax earnings in the current year in
comparison to pretax losses in the same periods last fiscal year.
INFLATION
Historically, the impact of inflation has been negligible, as the Company
has been able to offset the effects through efficiency and price adjustments.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2000 the Company's cash position was $259,135 compared to
$32,042 at July 31, 1999. Cash available in excess of that required for general
corporate purposes is used to reduce borrowings under the Company's line of
credit.
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The Company's existing capital resources consist of cash balances, cash
provided by operating activities and funds available under its lines of credit.
Cash generated by operations during the nine months ended April 30, 2000 was
$1,798,438. During the same period of the prior year, cash used by operations
was $160,679.
The Company's cash requirements consist of its general working capital
needs, capital expenditures, obligations under its leases, notes payable and
capital required for future acquisitions. Working capital requirements include
the salary costs of employees and related overhead and the purchase of material
and components. The Company anticipates capital expenditures of approximately
$400,000 in fiscal 2000 as compared to $536,869 in 1999.
The Company's principal credit facility is made up of the following: a
working capital line of credit in the amount of $8,000.000, a note in the amount
of $3,000,000, due in May 2001, a seven-year note due in July 2005 with a
balance outstanding of $3,750,000 and a second seven-year note, due in
July 2004, with a balance of $1,153,571 as of April 30, 2000. The Company's
$8,000,000 line of credit, maturing November 2000, continues to be extended as
requested. As of April 30, 2000, the Company had borrowings of $7,163,748 under
the line of credit.
In addition to its principal credit agreement, the Company maintains a
second line of credit to support the working capital requirements of its
European operations. This line of credit amounts to $3,250,000. As of April 30,
2000, the Company had borrowings of $1,042,100 under the line of credit.
The Company's credit facility contains covenants requiring the Company to
maintain certain levels of working capital, stockholders' equity, debt leverage
and fixed charge coverage. As of April 30, 2000, the Company was in full
compliance of all covenants.
YEAR 2000 INITIATIVES
The Company encountered no meaningful disruption of business activity as a
result of Y2K related issues in either its own operations or the operations of
its vendors and customers.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements other than statements of
historical facts included in the preceding discussion regarding the Company's
financial position, business strategy and plans of management for future
operations are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct.
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PART II. OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) There were no matters presented to shareholders for a vote.
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 8K filed during the quarter
The items omitted are either inapplicable or are items to which the answer is
negative.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this to be signed on its
behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
SI TECHNOLOGIES, INC.
June 14, 2000 /s/ RICK A. BEETS
---------------------------------------------
Rick A. Beets
PRESIDENT, CEO & CFO
</TABLE>
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