UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended August 31, 1997
Commission File No. 0-3362
SI HANDLING SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact Name Of Registrant As Specified In Its Charter)
Pennsylvania 22-1643428
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
600 Kuebler Road, Easton, PA 18040
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 610-252-7321
Indicate by checkmark 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
----- -----
Number of shares of common stock, par value $1.00 per share, outstanding
as of August 31, 1997: 2,474,514.
---------
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------ --------------------
SI Handling Systems, Inc.
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August March
Assets 31, 1997 2, 1997
- ------ ----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents, principally
time deposits $ 1,264 1,852
Short-term investments - 3,741
------ ------
Total cash, cash equivalents, and
short-term investments 1,264 5,593
------ ------
Receivables:
Trade 6,405 3,900
Notes and other receivables 196 719
------ ------
Total receivables 6,601 4,619
------ ------
Costs and estimated earnings in excess
of billings 5,362 1,640
Inventories:
Raw materials 694 814
Finished goods and work-in-process 1,350 1,151
------ ------
Total inventories 2,044 1,965
------ ------
Deferred income tax benefits 372 372
Prepaid expenses and other current assets 242 173
------ ------
Total current assets 15,885 14,362
------ ------
Property, plant and equipment, at cost:
Land 27 27
Buildings and improvements 3,358 3,358
Machinery and equipment 4,015 3,717
------ ------
7,400 7,102
Less: accumulated depreciation 5,974 5,801
------ ------
Net property, plant and equipment 1,426 1,301
------ ------
Deferred income tax benefits 214 214
Investment in joint venture 887 606
Other assets, at cost less accumulated
amortization of $72 in 1998 and $67
in 1997 64 64
------ ------
Total assets $18,476 16,547
====== ======
</TABLE>
See accompanying notes to financial statements.
- 2 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------ --------------------
SI Handling Systems, Inc.
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August March
Liabilities and Stockholders' Equity 31, 1997 2, 1997
- ------------------------------------ ---------- ---------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 12 12
Accounts payable 2,752 2,056
Customers' deposits and billings in excess
of costs and estimated earnings 2,726 2,752
Accrued salaries, wages, and commissions 909 778
Income taxes payable 934 442
Accrued royalties payable 209 427
Accrued other liabilities 726 870
------ ------
Total current liabilities 8,268 7,337
------ ------
Long-term liabilities:
Long-term debt, excluding current installments:
Mortgages payable 27 35
------ ------
Total long-term debt 27 35
Deferred compensation 142 132
------ ------
Total long-term liabilities 169 167
------ ------
Stockholders' equity:
Common stock, $1 par value; authorized
20,000,000 shares; issued 2,474,514
shares in 1998 and 2,460,306 shares
in 1997 2,475 2,460
Additional paid-in capital 3,883 3,752
Retained earnings 3,681 2,831
------ ------
Total stockholders' equity 10,039 9,043
------ ------
Total liabilities and stockholders' equity $18,476 16,547
====== ======
</TABLE>
See accompanying notes to financial statements.
- 3 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------ --------------------
SI Handling Systems, Inc.
Statements of Operations
(In Thousands, Except Share And Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- --------------------
August September August September
31, 1997 1, 1996 31, 1997 1, 1996
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales $ 10,407 5,422 19,949 11,053
Cost of sales 8,147 3,900 15,469 7,841
------ ------ ------ ------
Gross profit on sales 2,260 1,522 4,480 3,212
------ ------ ------ ------
Selling, general and
administrative
expenses 1,585 1,268 3,072 2,598
Product development
costs 26 26 108 106
Interest expense 3 2 5 5
Interest income (25) (50) (92) (95)
Equity in income of
joint venture (177) (47) (281) (77)
Other income, net (185) (37) (278) (101)
------ ------ ------ ------
1,227 1,162 2,534 2,436
------ ------ ------ ------
Earnings before
income taxes 1,033 360 1,946 776
Income tax expense 404 27 761 58
------ ------ ------ ------
Net earnings $ 629 333 1,185 718
====== ====== ====== ======
Net earnings per common
share and common
share equivalents* $ .25 .13 .47 .29
====== ====== ====== ======
Dividends per share $ - - .10 .10
======== ======== ====== ======
<FN>
* Net earnings per share are based on the weighted average number of shares
outstanding and equivalent shares from dilutive stock options, which were
2,498,000 and 2,459,000 at August 31, 1997 and September 1, 1996,
respectively.
</FN>
</TABLE>
See accompanying notes to financial statements.
- 4 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------ --------------------
SI Handling Systems, Inc.
Statements of Cash Flows
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
August September
31, 1997 1, 1996
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,185 718
Adjustments to reconcile net earnings
to net cash provided (used)
by operating activities:
Depreciation of plant and equipment 173 159
Amortization of intangibles 5 5
Equity in income of joint venture (281) (77)
Change in operating assets and liabilities:
Receivables (1,982) (721)
Costs and estimated earnings in
excess of billings (3,722) 1,006
Inventories (79) (41)
Deferred income tax benefits - 15
Prepaid expenses and other
current assets (69) (7)
Other noncurrent assets (5) 2
Accounts payable 696 (156)
Customers' deposits and billings
in excess of costs and estimated
earnings (26) 516
Accrued salaries, wages, and
commissions 131 (270)
Income taxes payable 492 4
Accrued royalties payable (218) (266)
Accrued other liabilities (144) 155
Deferred compensation 10 -
------ ------
Net cash provided (used) by
operating activities (3,834) 1,042
------ ------
Cash flows from investing activities:
Sales of short-term investments 5,213 1,914
Purchase of short-term investments (1,472) -
Additions to property, plant and equipment (298) (163)
------ ------
Net cash provided by investing activities 3,443 1,751
------ ------
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------ --------------------
SI Handling Systems, Inc.
Statements of Cash Flows (Continued)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
August September
31, 1997 1, 1996
-------- ---------
<S> <C> <C>
Cash flows from financing activities:
Sale of common shares in connection
with employee incentive stock
option plan 58 12
Repayment of long-term debt ( 8) (11)
Dividends paid on common stock (247) (244)
------ ------
Net cash used by financing
activities (197) (243)
------ ------
Increase (decrease) in cash and
cash equivalents (588) 2,550
Cash and cash equivalents, beginning
of period 1,852 1,335
------ ------
Cash and cash equivalents, end of
period $ 1,264 3,885
====== ======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 2 2
====== ======
Income taxes $ 269 39
====== ======
Supplemental disclosures of noncash
financing activities:
Issuance of 12,150 common shares
in exchange for 5,376 common shares
delivered to the Company by officers
in connection with the employee
incentive stock option plan $ 88 -
====== ======
Issuance of 10,603 common shares in
exchange for 3,865 common shares
delivered to the Company by officers
in connection with the employee
incentive stock option plan $ - 30
====== ======
</TABLE>
See accompanying notes to financial statements.
- 6 -
<PAGE>
Item 1. Financial Statements (Continued)
- ------ --------------------
SI Handling Systems, Inc.
Notes To Financial Statements
Six Months Ended August 31, 1997 and September 1, 1996
(1) The information contained in this 10-Q report is unaudited and is subject
to year-end adjustments and audit. However, in the opinion of management,
the interim financial statements furnished reflect all adjustments and
accruals which are necessary to a fair statement of results for the interim
periods presented.
SI Handling Systems, Inc. ("SI" or the "Company") and Automated
Prescription Systems, Inc. ("APS") are co-venturers in a joint venture named
SI/BAKER, INC. ("SI/BAKER" or the "joint venture"). The joint venture draws upon
the automated materials handling systems experience of SI and the automated pill
counting and dispensing products of APS to provide automated pharmacy systems.
Each member company contributed $100,000 in capital to fund the joint venture.
The joint venture designs and installs computer controlled, fully
automated, integrated systems for managed care pharmacy operations. The joint
venture's systems are viewed as labor saving devices which address the issues of
improved productivity and cost reduction. Systems can be expanded as customers'
operations grow and they may be integrated with a wide variety of components to
meet specific customer needs.
Schedule A contains the SI/BAKER, INC. financial statements. The
information contained in the SI/BAKER, INC. financial statements is unaudited
and is subject to year-end adjustments and audit. However, in the opinion of
management, the interim financial statements furnished reflect all adjustments
and accruals which are necessary to a fair statement of results for the interim
periods presented.
Item 2. Management's Discussion and Analysis of Financial
- ------ -------------------------------------------------
Condition and Results of Operations
-----------------------------------
Liquidity And Capital Resources
- -------------------------------
The Company's cash and cash equivalents decreased to $1,264,000 during the
first six months of fiscal 1998 from $1,852,000 at the end of fiscal 1997. The
decrease resulted from cash used by operating activities totaling $3,834,000,
repayments of long-term debt of $8,000, purchases of capital equipment of
$298,000, and the payment of $247,000 in cash dividends to shareholders.
Offsetting the decrease in cash and cash equivalents from these uses were net
sales of short-term investments of $3,741,000 and proceeds of $58,000 from the
sale of common stock in connection with the employee incentive stock option
plan. Funds provided by operating activities during the first six months of
fiscal 1997 were $1,042,000.
- 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
- ------ -------------------------------------------------
Condition and Results of Operations
-----------------------------------
Liquidity And Capital Resources (Continued)
- -------------------------------
The Company has a $5,000,000 committed revolving credit facility which is
secured by a lien position on accounts receivable, land, and buildings and
contains various restrictive covenants relating to additional indebtedness,
asset acquisitions or dispositions, and maintenance of certain financial ratios.
The Company was in compliance with all covenants during the first six months of
fiscal 1998. Currently, the committed revolving credit facility has an
expiration date of August 31, 1999. During the first six months of fiscal 1998,
the Company did not have any borrowings under the committed revolving credit
facility.
On March 4, 1996, SI/BAKER established a $2,500,000 Line of Credit Facility
(the "Facility") with its principal bank (the "Bank"). Under terms of the
Facility, SI/BAKER's parent companies, SI Handling Systems, Inc. and Automated
Prescription Systems, Inc., have each provided a limited guarantee and surety in
an amount not to exceed $1,000,000 for a combined guarantee of $2,000,000 to the
Bank for the payment and performance of the related note, including any further
renewals or modifications of the Facility. As of August 31, 1997, SI/BAKER did
not have any debt outstanding under the Facility. The Facility has an expiration
date of October 31, 1997.
On October 14, 1997, the Board of Directors of the Company declared a
three-for-two stock split to be distributed on November 10, 1997 to the
shareholders of record on October 27, 1997. The purpose of the stock split was
to increase the number of outstanding shares and broaden ownership and
availability of the Company's common stock.
The Company anticipates that its financial resources consisting of its
current assets, anticipated cash flow, and the available revolving credit
facility will adequately finance its operating requirements in the foreseeable
future.
The Company plans to consider expansion opportunities as they arise,
although ongoing operating results of the Company, the economics of the
expansion, and the circumstances justifying the expansion will be key factors in
determining the amount of resources the Company will devote to further
expansion. At this time, the Company does not have any material capital
commitments.
Results Of Operations
- ---------------------
(a) Six Months Ended August 31, 1997 versus Six Months Ended
--------------------------------------------------------
September 1, 1996
-----------------
The Company's net earnings for the first six months of fiscal 1998 were
$1,185,000 compared to net earnings of $718,000 for the first six months of
fiscal 1997.
Backlog at the end of the first half of fiscal 1998 was $31,078,000 with
the majority of the backlog pertaining to Switch-Cart and Dispen-SI-matic
contracts. During the first half of fiscal 1998, the Company was the recipient
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
SI Handling Systems, Inc.
(a) Six Months Ended August 31, 1997 versus Six Months Ended
--------------------------------------------------------
September 1, 1996 (Continued)
-----------------
of orders totaling approximately $20 million with the largest order taken by the
Company's Production & Assembly Systems Business Unit. The Defense Logistics
Agency of the United States government procured an addition of $6.7 million to
the prime mechanization contract it awarded the Company in September 1996. The
contract options were exercised to expand the scope of the material handling and
storage system at the Distribution Operations Center of the Defense Distribution
Depot located in Red River, Texas. The contract is the largest in the Company's
history and totals approximately $23.4 million.
Net sales of $19,949,000 for the first six months of fiscal 1998 increased
80.5% compared to net sales of $11,053,000 for the first six months of fiscal
1997. The sales increase in the first six months of fiscal 1998 is attributed
primarily to a larger backlog of orders entering fiscal 1998 ($31,029,000 versus
a $10,488,000 backlog beginning fiscal 1997). The largest increases in sales
occurred in the Switch-Cart and Order Selection product lines. The increase in
the Switch-Cart product line was primarily attributable to progress made on the
contract with the Defense Logistics Agency of the United States government. The
increase experienced in the Company's Order Selection product line during the
first six months of fiscal 1998 was primarily attributable to a significant
amount of progress relating to several large contracts received prior to the
start of fiscal 1998. Contributing to the lower backlog at the beginning of
fiscal 1997, and hence sales in the first six months of fiscal 1997, were delays
by prospective customers, particularly those interested in Order Selection
Systems, in signing contracts due to expanding project scope and to merger and
acquisition interference occurring in a targeted market.
Gross profit as a percentage of sales was 22.5% for the first six months of
fiscal 1998 compared to 29.1% for the first six months of fiscal 1997. The
decrease in the gross profit percentage for the first six months of fiscal 1998
was primarily attributable to a higher content in contracts currently in
progress of ancillary products with lower margins than contracts containing a
high degree of proprietary products. The attainment of the elevated gross profit
percentage during the first six months of fiscal 1997 was primarily attributable
to the favorable performance on several contracts initiated in prior fiscal
years that were completed during the first six months of fiscal 1997 as well as
to a higher content in contracts then in progress of proprietary product.
Selling, general, and administrative expenses of $3,072,000 were higher by
$474,000 in the first six months of fiscal 1998 than in the comparable fiscal
1997 period. The increase in selling, general, and administrative expenses is
attributable to inflationary trends and to higher charges for those
- 9 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
- ------ -------------------------------------------------
Condition and Results of Operations
-----------------------------------
SI Handling Systems, Inc.
(a) Six Months Ended August 31, 1997 versus Six Months Ended
--------------------------------------------------------
September 1, 1996 (Continued)
-----------------
expenses based on revenue and profit performance, including expenses related to
the Company's incentive-based compensation plan which provides for gain sharing
as a means of promoting performance excellence.
Product development costs for the first six months of fiscal 1998 were
relatively the same as costs for the comparable fiscal 1997 period. Development
programs in the first six months of fiscal 1998 included efforts directed at
improvements across various product lines, and to efforts associated with the
introduction of the Henke light-duty overhead transportation product, for which
the Company is in the process of becoming an exclusive North American
distributor. Development programs in the first six months of fiscal 1997
included enhancements to the Company's product controls and features and
improvements to the Sortation and Order Selection product lines, with particular
emphasis aimed at Dispen-SI-matic and Pick-to-Light Systems.
Interest income of $92,000 was lower by $3,000 in the first six months of
fiscal 1998 than in the comparable fiscal 1997 period. The decrease in interest
income is primarily attributable to the lower level of funds available for
short-term investments during the first six months of fiscal 1998.
Equity in income of joint venture represented the Company's proportionate
share of its investment in SI/BAKER, which is being accounted for under the
equity method. The favorable variance for the first six months of fiscal 1998 in
the equity in income of joint venture was attributable to SI/BAKER's growth in
revenues, as compared to the comparable fiscal 1997 period, as well as to
reductions in product development costs and selling, general, and administrative
expenses. The substantial increase in revenues is primarily attributable to
SI/BAKER's larger backlog of orders entering fiscal 1998 and customer
requirements for job completion during the early part of the third quarter of
fiscal 1998. Based upon SI/BAKER's current backlog position and the pace, size,
and timing of potential new orders expected to be received during the remainder
of the current fiscal year, the company believes that the rate of revenue
recognition for the second half of fiscal 1998 may decrease. SI/BAKER's fiscal
1997 comparable period product development costs were associated with the BK2000
automated pharmacy system product line, while selling, general, and
administrative expenses were impacted unfavorably by legal costs associated with
the since settled patent infringement litigation. Partially offsetting the
favorable variance was increased revenue based royalty costs due to the parent
companies and an increase in interest expense related to bank borrowings to fund
short-term working capital requirements.
The favorable variance in other income, net, is primarily attributable to
an increase in royalty income related to the SI/BAKER joint venture, income
- 10 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
SI Handling Systems, Inc.
(a) Six Months Ended August 31, 1997 versus Six Months Ended
--------------------------------------------------------
September 1, 1996 (Continued)
-----------------
from foreign exchange transactions, and an increase in purchase discounts earned
by the Company due to increased purchasing requirements. In addition, the second
quarter of fiscal 1997 contained a charge in connection with the write-off of
the balance of a customer receivable due to its filing for bankruptcy
protection.
The Company incurred income tax expense of $761,000 during the first six
months of fiscal 1998 compared to income tax expense of $58,000 in the
comparable fiscal 1997 period. Income tax expense for the first six months of
fiscal 1998 was recorded at the statutory federal and state tax rates expected
to apply for the current fiscal year. Income tax expense for the first six
months of fiscal 1997 was less than statutory rates due to the recognition of
previously unrecognized deferred tax assets which are anticipated to be
realizable due to the current and projected profitability of the Company.
(b) Three Months Ended August 31, 1997 versus Three Months
------------------------------------------------------
Ended September 1, 1996
-----------------------
Changes in the second quarter of the current fiscal year compared to prior
year were consistent with those previously noted above for the six month-period.
Cautionary Statement
- --------------------
Certain statements contained herein are not based on historical fact and
are "forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995). Among other things, they regard the Company's
earnings, liquidity, financial condition, and certain operational matters. Words
or phrases denoting the anticipated results of future events, such as
"anticipate," "believe," "estimate," "expect," "may," "will likely," "are
expected to," "continues," "projects" and similar expressions that denote
uncertainty, are intended to identify such forward-looking statements. Actual
results may differ materially: (1) as a result of risks and uncertainties
identified in connection with those forward-looking statements, including those
factors identified herein, and in the Company's other publicly filed reports;
(2) as a result of factors over which the Company has no control, including the
strength of domestic and foreign economies, sales growth competition, and
certain cost increases; or (3) if the factors on which the Company's conclusions
are based do not conform to the Company's expectations.
- 11 -
<PAGE>
SI Handling Systems, Inc.
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
The Company's Annual Meeting of Shareholders was held on July 16,
1997 with the following items being submitted to a vote by shareholders:
1. The election of five directors.
2. The approval of the amendment to the Company's Articles to increase the
amount of the Company's authorized Common Stock, par value, $1.00 per
share, from 5,000,000 to 20,000,000 shares.
3. The approval of the 1997 Equity Compensation Plan.
Details of the proposals noted above were provided to shareholders in the
form of a Notice of Annual Meeting and Proxy Statement dated June 13, 1997 and
mailed on June 17, 1997, with such solicitation being in accordance with
Regulation 14 of the Securities and Exchange Act of 1934.
There was no solicitation in opposition to the management's nominees listed
in the Proxy Statement, and all management's nominees were elected.
Furthermore, Proposal Number 2 for the approval of the amendment to the
Company's Articles to increase the amount of the Company's authorized Common
Stock, par value, $1.00 per share, from 5,000,000 to 20,000,000 shares and
Proposal Number 3 for the approval of the 1997 Equity Compensation Plan were
duly approved by the shareholders.
The voting results on the three matters noted above are set forth as
follows:
1. Election of Directors:
Name of Nominee Votes For Votes Withheld Non-Voting
--------------- --------- -------------- ----------
L. Jack Bradt 2,059,099 17,154 389,425
Edward J. Fahey 2,059,728 16,525 389,425
Elmer D. Gates 1,952,982 123,271 389,425
Michael J. Gausling 1,952,982 123,271 389,425
Leonard S. Yurkovic 2,059,728 16,525 389,425
2. Approval of the amendment to the Company's Articles to increase the
amount of the Company's authorized Common Stock, par value, $1.00 per
share, from 5,000,000 to 20,000,000 shares:
Votes For Votes Against Abstentions Non-Voting
--------- ------------- ----------- ----------
1,685,445 381,510 9,298 389,425
3. Approval of the 1997 Equity Compensation Plan:
Votes For Votes Against Abstentions Non-Voting
--------- ------------- ----------- ----------
1,292,994 233,886 9,597 929,201
- 12 -
<PAGE>
SI Handling Systems, Inc.
PART II - OTHER INFORMATION (Continued)
---------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibit 3.1 - Amended and Restated Articles of SI Handling
Systems, Inc.
Exhibit 10.4 - 1992 Incentive Stock Option Plan, Amended and
Restated, Effective as of July 16, 1997.
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
August 31, 1997.
- 13 -
<PAGE>
SI Handling Systems, Inc.
SIGNATURE
---------
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 HANDLING SYSTEMS, INC.
/s/ Barry V. Mack
Barry V. Mack
Vice President - Finance
Dated: October 15, 1997
----------------
- 14 -
<PAGE>
Schedule A
----------
SI/BAKER, INC.
Financial Statements
August 31, 1997
- 15 -
<PAGE>
SI/BAKER, INC.
Balance Sheets
August 31, 1997 and February 28, 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August February
31, 1997 28, 1997
--------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, principally
time deposits $ 658 484
Receivables:
Trade 1,740 1,618
Other receivables - 122
------ ------
Total receivables 1,740 1,740
------ ------
Costs and estimated earnings in
excess of billings 4,768 4,111
Inventories 13 36
Deferred income tax benefits 367 367
Prepaid expenses and other current
assets 69 87
------ ------
Total current assets 7,615 6,825
------ ------
Machinery and equipment, at cost 121 106
Less: accumulated depreciation 51 41
------ ------
Net machinery and equipment 70 65
------ ------
Equipment leased to customer 487 487
Less: accumulated depreciation 188 127
------ ------
Net equipment leased to customer 299 360
------ ------
Deferred income tax benefits 6 6
------ ------
Total assets $ 7,990 7,256
====== ======
</TABLE>
- 16 -
<PAGE>
SI/BAKER, INC.
Balance Sheets
August 31, 1997 and February 28, 1997
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August February
31, 1997 28, 1997
--------- --------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Note payable to bank $ - 1,750
Accounts payable:
Trade 2,991 1,920
Affiliated companies 8 356
------ ------
Total accounts payable 2,999 2,276
------ ------
Customers' deposits and billings in
excess of costs and estimated
earnings 1,828 779
Accrued salaries, wages, and
commissions 280 307
Income taxes payable 45 -
Accrued royalties payable 616 319
Accrued product warranties 409 463
Accrued other liabilities 39 151
------ ------
Total current liabilities 6,216 6,045
------ ------
Stockholders' equity:
Common stock, $1 par value; authorized
1,000 shares; issued 200 shares - -
Additional paid-in capital 200 200
Retained earnings 1,574 1,011
------ ------
Total stockholders' equity 1,774 1,211
------ ------
Total liabilities and stockholders'
equity $ 7,990 7,256
====== ======
</TABLE>
- 17 -
<PAGE>
SI/BAKER, INC.
Statements of Operations
Six Months Ended August 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- --------------------
August August August August
31, 1997 31, 1996 31, 1997 31, 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 8,019 3,457 12,723 7,127
Cost of sales 6,818 2,872 10,714 5,841
------ ------ ------ ------
Gross profit on sales 1,201 585 2,009 1,286
------ ------ ------ ------
Selling, general and
administrative
expenses 265 290 526 604
Product development
costs - 14 3 150
Royalty expense
to parent companies 323 126 511 273
Interest income (8) (5) (15) (11)
Interest expense 27 1 60 8
Other expense
(income), net (6) (1) (26) 2
------ ------ ------ ------
601 425 1,059 1,026
------ ------ ------ ------
Earnings before
income taxes 600 160 950 260
Income tax expense 245 65 387 105
------ ------ ------ ------
Net earnings $ 355 95 563 155
====== ====== ====== ======
</TABLE>
- 18 -
<PAGE>
SI/BAKER, INC.
Statements of Cash Flows
Six Months Ended August 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
August August
31, 1997 31, 1996
--------- --------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 563 155
Adjustments to reconcile net earnings
to net cash provided (used) by
operating activities:
Depreciation of machinery and
equipment and leased equipment 71 75
Changes in operating assets and
liabilities:
Receivables - (33)
Costs and estimated earnings
in excess of billings (657) 2,160
Inventories 23 (105)
Prepaid income taxes - (157)
Prepaid expenses and other
current assets 18 (119)
Accounts payable 723 (1,056)
Customers' deposits and
billings in excess of costs
and estimated earnings 1,049 1,362
Accrued salaries, wages, and
commissions (27) 1
Income taxes payable 45 (194)
Accrued royalties payable 297 4
Accrued product warranties (54) -
Accrued other liabilities (112) 269
------ ------
Net cash provided by operating
activities 1,939 2,362
------ ------
Cash flows used in investing activities:
Additions to machinery and equipment (15) (22)
Equipment leased to customer - (9)
------ ------
Net cash used by investing activities (15) (31)
------ ------
Cash flows used by financing activities:
Repayment of note payable to bank (1,750) -
------- ------
</TABLE>
- 19 -
<PAGE>
SI/BAKER, INC.
Statements of Cash Flows (Continued)
Six Months Ended August 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
August August
31, 1997 31, 1996
--------- --------
<S> <C> <C>
Increase in cash and cash equivalents 174 2,331
Cash and cash equivalents,
beginning of period 484 327
------ ------
Cash and cash equivalents, end of period $ 658 2,658
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 342 457
====== ======
Interest $ 64 8
====== ======
</TABLE>
- 20 -
<PAGE>
SI HANDLING SYSTEMS, INC.
FORM 10-Q
EXHIBIT INDEX
-------------
Exhibit No.
- ----------
3.1 Amended and Restated Articles of SI Handling Systems, Inc.
10.4 SI Handling Systems, Inc. 1992 Incentive Stock Option Plan,
Amended and Restated, Effective as of July 16, 1997.
27 Financial Data Schedule.
- 21 -
Exhibit 3.1
-----------
AMENDED AND RESTATED
ARTICLES
OF
SI HANDLING SYSTEMS, INC.
(A Pennsylvania Registered Corporation)
...o0O0o...
1. The name of the corporation is:
SI HANDLING SYSTEMS, INC.
2. The address of its registered office in this Commonwealth is:
600 Kuebler Road
Easton, Northampton County, Pennsylvania 18040
3. The corporation was incorporated under the Business
Corporation Law of 1933.
4. The authorized capital stock of this corporation shall be twenty
million shares of common stock par value $1.00 per share.
5. The shareholders of the corporation shall not have the right to
cumulate their votes for the election of directors.
Exhibit 10.4
------------
SI HANDLING SYSTEMS, INC.
1992 INCENTIVE STOCK OPTION PLAN
Amended and Restated Effective as of July 16, 1997
Section 1. Purpose. The purpose of the 1992 Incentive Stock Option Plan
--------- -------
(the "Plan") of SI Handling Systems, Inc. (the "Corporation") is to assist the
Corporation and its subsidiaries in attracting and retaining employees of
outstanding competence by providing an incentive which permits those employees
responsible for the Corporation's growth to share directly in that growth and to
further the identity of their interests with those of the stockholders of the
Corporation. No additional grants shall be made under the Plan after the
effective date of this amendment and restatement of the Plan.
Section 2. Administration of the Plan. The Plan shall be administered
--------- ---------------------------
by a committee (the "Committee") appointed by the Board of Directors (the
"Board") of the Corporation. The Committee members shall consist of Board
members who are not employees of the Corporation or its subsidiaries, and may
consist of "non-employee directors" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"). The Board shall appoint
the Chairman of the Committee. Notwithstanding the foregoing, the Board may take
any administrative actions under the Plan, in which case all references in the
Plan to the "Committee" shall be deemed to include the Board.
The Committee shall have authority in its discretion, but subject to
the provisions of the Plan and the restrictions of the Internal Revenue Code,
and regulations promulgated thereunder regarding incentive stock options, (a) to
determine the terms of all options granted under the Plan including, without
limitation: (i) the purchase price of the common stock covered by each option,
(ii) the employees to whom, and the time or times at which, options shall be
granted, (iii) when an option can be exercised and whether in whole or in
installments, and (iv) the number of shares covered by each option, and (b) to
interpret the Plan and to make all other determinations deemed necessary or
advisable for the administration of the Plan. The Committee's determination on
the foregoing matters shall be conclusive. All determinations of the Committee
shall be made by not less than a majority of its members. The Committee may
designate the Secretary or any employee of the Corporation to assist the
Committee in the administration of the Plan.
- 1 -
<PAGE>
Section 3. Stock Available. The stock subject to the Plan shall be
--------- ----------------
authorized but unissued shares or treasury shares of common stock of the
Corporation. The amount of such common stock which is hereby reserved for
issuance and authorized to be issued pursuant to the Plan is 75,000 shares. The
number of such shares shall be subject to adjustment in accordance with Section
11 of this Plan. Except as provided in Section 9 hereof, if any option granted
under this Plan shall expire, terminate or be canceled, for any reason, without
having been exercised in full, the corresponding number of unpurchased shares
which were reserved for issuance upon exercise thereof shall again be available
for purpose of this Plan.
Section 4. Time of Granting of Options. The effective date of the
--------- ---------------------------
granting of an option (the "Granting Date") shall be the date specified by the
Committee in its determination or designation relating to the award of such
option, whereupon a written option agreement shall promptly be executed and
delivered by or on behalf of the Corporation and the grantee, provided that such
grant of an option shall expire if a written option agreement is not signed by
such grantee and returned to the Corporation within 30 days from the Granting
Date.
Section 5. Eligibility. Options may be granted only to key employees
--------- -----------
(which term shall be deemed to include officers but not directors who are not
employees) who on the Granting Date are in the employ of the Corporation or any
of its present and future subsidiary companies, as defined in Section 425 of the
Internal Revenue Code as the same shall be amended from time to time. Options
may be granted to eligible employees whether or not they hold or have held
options under the Plan or under previously adopted plans. However, no option may
be granted under this Plan to an otherwise eligible employee if, at the time the
option would have been granted but for this provision, such employee owns stock
of the Corporation possessing more than ten (10%) per cent of the total combined
voting power of all classes of stock of the Corporation or its subsidiaries
unless the price per share of such option is not less than one hundred ten
(110%) percent of the fair market value of the Corporation's common stock on the
Granting Date and, the provisions of Section 8(a) hereof notwithstanding, the
term thereof shall be no greater than five (5) years after the Granting Date.
Section 6. Option Prices. The option price or prices per share to be
--------- -------------
specified in each option agreement will be determined by the Committee, but
shall not be less than the fair market value of the Corporation's common stock
on the Granting Date, as determined by the Committee in accordance with Internal
Revenue Code provisions and regulations from time to time in effect with respect
to incentive stock options under Section 422 of the Internal Revenue Code.
- 2 -
<PAGE>
Section 7. Limitations on Incentive Stock Options. If the aggregate
--------- --------------------------------------
fair market value of the stock on the date of the grant with respect to which
incentive stock options are exercisable for the first time by a grantee during
any calendar year, under the Plan or any other stock option plan of the
Corporation or a parent or subsidiary, exceeds $100,000, then the options, as to
the excess, shall be treated as nonqualified stock options.
Section 8. Terms of Options.
--------- ----------------
(a) Required Provisions. Each option granted under the Plan shall be
--------------------
nontransferable other than by will or under the laws of descent and
distribution, may be exercised during the lifetime of the grantee only by the
grantee and (except in the event of death or disability) may be exercised only
after six months from the Granting Date and (except in the event of death,
disability or retirement) while the optionee remains in the employ of the
Corporation or a subsidiary. Each option shall expire at the earliest of (i) ten
years after the Granting Date, (ii) three months after the retirement of the
grantee, or (iii) one year after death or disability of the grantee.
(b) Other Provisions. Each option agreement (and amendments thereof)
-----------------
may contain such terms and provisions consistent with the requirements of this
Plan, as the Committee in its discretion shall determine, including vesting
provisions and such terms and provisions as shall be requisite to cause the
options to qualify as incentive stock options under Section 422 of the Internal
Revenue Code. Option agreements need not be identical.
Section 9. Purchases of Options by the Corporation. With the approval
--------- ---------------------------------------
of the Board, and in accordance with the recommendation of the Committee, any
option agreement may provide that the holder thereof shall have the right after
the expiration of six months following the Granting Date (except that in the
event of death or disability of the grantee this six month limitation shall not
apply), subject to the consent of the Committee given at its discretion after
the holder's exercise of such right, to require the Corporation to purchase for
cancellation all or a part of the option (to the extent specified in the option
agreement and consented to by the Committee) at a cash price or in common stock
(or any combination of cash or common stock as the Committee in its discretion
shall determine) equal in value to the excess of the fair market value of such
share of common stock covered by the option or portion thereof purchased (such
fair market value to be determined as of the date of such written notice) over
the option price; provided, however, that such purchase obligation shall always
be subject to the condition that the purchase shall not violate the terms of any
agreement to which the Corporation is or may hereafter become a party and shall
be permitted by law. Shares of common stock reserved for issuance upon exercise
of options so purchased shall not again be available for the purposes of the
Plan.
- 3 -
<PAGE>
Section 10. Medium of Payment. The option price specified in the Plan
---------- -----------------
shall be payable either in United States dollars or, with the consent of the
Committee, with stock of the Corporation.
Section 11. Adjustments Upon Changes in Capitalization. Notwithstand-
---------- ------------------------------------------
ing any other provision of the Plan, the option agreements may contain such
provision as the Committee shall determine to be appropriate for the adjustment
of the number and class of shares subject to each outstanding option and the
option prices in the event of changes in the outstanding common stock of the
Corporation by reason of stock dividends, stock splits, recapitalization,
mergers, consolidations, combinations or exchanges of shares, split-ups,
split-offs, spin-offs, liquidations or other similar changes in capitalization,
or any distribution to common stockholders other than cash dividends, and in the
event of any such change in the outstanding common stock of the Corporation, the
aggregate number and class of shares available under the Plan shall be
appropriately adjusted by the Committee.
Section 12. Change of Control. As used herein, a "Change of Control"
---------- -----------------
shall be deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d- 3 under
the Exchange Act), directly or indirectly, of securities of the Corporation
representing more than 50% of the voting power of the then outstanding
securities of the Corporation;
(b) The shareholders of the Corporation approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for (i) the
merger or consolidation of the Corporation with another corporation where the
shareholders of the Corporation, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to more than 50% of all votes
to which all shareholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (ii) the sale or other disposition
of all or substantially all of the assets of the Corporation, or (iii) a
liquidation or dissolution of the Corporation; or
(c) After the date the amended and restated Plan is adopted, directors
are elected such that a majority of the members of the Board shall have been
members of the Board for less than two years, unless the election or nomination
for election of each new director who was not a director at the beginning of
such two-year period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period.
- 4 -
<PAGE>
Section 13. Consequences of a Change of Control.
---------- -----------------------------------
(a) Upon a Change of Control, unless the Committee determines
otherwise, (i) the Corporation shall provide each grantee who holds outstanding
options written notice of the Change of Control and (ii) all outstanding options
shall automatically become fully exercisable.
(b) Upon a Change of Control where the Corporation is not the surviving
corporation (or survives only as a subsidiary of another corporation), the
Committee may determine that all outstanding options that are not exercised
shall be assumed by, or replaced with comparable options by, the surviving
corporation. The assumption or replacement shall comply with Section 424(a) of
the Internal Revenue Code.
(c) Notwithstanding anything in the Plan to the contrary, in the event
of a Change of Control, the Committee shall not have the right to take any
actions described in the Plan that would make the Change of Control ineligible
for pooling of interests accounting treatment or that would make the Change of
Control ineligible for desired tax treatment if, in the absence of such right,
the Change of Control would qualify for such treatment and the Corporation
intends to use such treatment with respect to the Change of Control.
Section 14. Termination and Amendment. The Plan shall terminate on, and
---------- -------------------------
no option shall be granted thereunder after, July 8, 2002. The Board may also
terminate the Plan or make such modifications or amendments thereof as it shall
deem advisable, including such modifications or amendments as it shall deem
advisable in order to cause certain stock options to qualify as incentive stock
options under Section 422 of the Internal Revenue Code or to conform to any
change in any law or regulation applicable thereto; provided, however, that the
Board may not, without further approval by the holders of a majority of the
outstanding stock of the Corporation having general voting power: (a) increase
the maximum number of shares for which options may be granted under the Plan in
the aggregate, (b) change the provisions of the Plan regarding the option price
to be specified in each option agreement, (c) lengthen the period during which
options may be granted or remain outstanding, or (d) enlarge the requirements as
to the class of employees eligible to receive options. Nothing herein contained
shall, however, be deemed to prevent the Committee from authorizing amendments
of outstanding options, including the reduction of the option prices (or the
granting of new options at lower prices upon cancellation of outstanding
options), so long as all options granted outstanding at any one time shall not
call for issuance of more shares of common stock than those provided for in
Section 3 and so long as the provisions of any amended option would have been
permissible under the Plan if such option had been originally granted as of the
date of such amendment. No termination, modification, or amendments of the Plan
may,
- 5 -
<PAGE>
without the consent of the employee, adversely affect the rights of such
employee under an option previously granted to him.
Section 15. Government and other Regulations and Restrictions. The
---------- -------------------------------------------------
obligation of the Corporation to issue common stock upon execution of an option
agreement shall be subject to all applicable laws, rules and regulations and to
such approvals by governmental agencies as may be required. Shares of common
stock acquired pursuant to the Plan shall not be sold, transferred or otherwise
disposed of unless and until either (a) such shares shall have been registered
by the Corporation under the Securities Act of 1933, as amended (the "Securities
Act"), (b) the Corporation shall have received either a "no action" letter from
the Securities and Exchange Commission or an opinion of counsel acceptable to
the Corporation to the effect that such sale, transfer or disposition of the
shares is made pursuant to Rule 144 of the General Rules and Regulations
promulgated under the Securities Act, as the same may from time to time be in
effect, and the Corporation shall have received an opinion of counsel acceptable
to the Corporation to such effect. In the event that at the time an option is
exercised there shall not be on file with the Securities and Exchange Commission
an effective Registration Statement under the Securities Act covering the shares
of common stock to be issued pursuant thereto, the Corporation's obligation to
deliver the shares are subject to the further condition that the employee will
execute and deliver to the Corporation an undertaking in form and substance
satisfactory to the Corporation that (i) it is the employee's intention to
acquire and hold such shares for investment and not for the resale or
distribution thereof, (ii) the shares will not be sold without registration or
exemption from the requirement of registration under the Securities Act, and
(iii) the employee will indemnify the Corporation for any costs, liabilities and
expenses which it may sustain by reason of any violation of the Securities Act,
or any other law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may require that
any certificate or certificates evidencing shares issued pursuant to the Plan
bear a restrictive legend intended to effect compliance with the Securities Act
or any other applicable regulatory measures, and stop transfer instructions with
respect to the certificates representing the shares may be given to the transfer
agent.
Section 16. Registration of Shares. The Corporation may but shall be
---------- -----------------------
under no obligation to register any shares of common stock under the Securities
Act. However, an option agreement may make appropriate and reasonable provision
for the registration of common stock acquired thereunder. The Corporation, at
its election, may undertake to pay all fees and expenses of each such
registration, other than an underwriter's commission, if any.
Section 17. No Rights in Common Stock. No employee shall have any
---------- -------------------------
interest in or be entitled to any voting rights or dividends or other rights or
- 6 -
<PAGE>
privileges of stockholders of the Corporation with respect to any shares of
common stock unless, and until, shares of common stock are actually issued to
such employee following exercise of an option and then only from the date the
employee becomes the record owner thereof.
Section 18. Successors. The provisions of the Plan shall be binding
---------- ----------
upon and inure to the benefit of all successors of any person receiving common
stock of the Corporation pursuant to the Plan, including, without limitation,
the estate of such person and the executors, administrators or trustees thereof,
the heirs and legatees of such person, and any receiver, trustee in bankruptcy
or representative of creditors of such person.
Section 19. Corporation's Right to Terminate Employment. Nothing
----------- -----------------------------------------------
contained in the Plan or in any option agreement shall confer upon any employee
a right to continue in the employ of the Corporation or any of its subsidiaries
or interfere in any way with the right of the Corporation or any of its
subsidiaries to terminate the employment of any employee at any time, with or
without cause.
Section 20. Action by Corporation and the Board. Neither the adoption
---------- -----------------------------------
of the Plan by the shareholders nor the issuance of common stock pursuant
thereto shall impair the right of the Corporation, its shareholders or the Board
to make or effect any adjustments, recapitalizations or other change in the
common stock referred to in Section 11, any change in the Corporation's
business, any issuance of debt obligations or stock by the Corporation or any
grant of options on stock of the Corporation, or any other incentive
compensation arrangement.
Section 21. Reliance on Reports. Each member of the Board and of the
---------- -------------------
Committee shall be fully justified in relying or acting in good faith upon any
reports or other information furnished in connection with the Plan by any person
or persons. In no event shall any person who is or shall have been a member of
the Board or of the Committee be liable for any determination made or other
action taken or any omission to act in reliance upon any such report or
information or for any action taken or failure to act, if in good faith.
Section 22. Pronouns. Masculine pronouns and other words of
---------- --------
masculine gender shall refer to both men and women.
Section 23. Effective Date of Plan. The Plan originally became
----------- ----------------------
effective on the date the Plan was adopted by the shareholders of the
Corporation, but not sooner than July 8, 1992. The amendment and restatement of
the Plan shall be effective as of July 16, 1997.
- 7 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM FORM 10-Q FOR
THE QUARTER ENDED AUGUST 31,
1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000090045
<NAME> SI HANDLING SYSTEMS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-01-1998
<PERIOD-END> AUG-31-1997
<CASH> 1,264
<SECURITIES> 0
<RECEIVABLES> 6,405
<ALLOWANCES> 0
<INVENTORY> 2,044
<CURRENT-ASSETS> 15,885
<PP&E> 7,400
<DEPRECIATION> 5,974
<TOTAL-ASSETS> 18,476
<CURRENT-LIABILITIES> 8,268
<BONDS> 27
0
0
<COMMON> 2,475
<OTHER-SE> 7,564
<TOTAL-LIABILITY-AND-EQUITY> 18,476
<SALES> 19,949
<TOTAL-REVENUES> 19,949
<CGS> 15,469
<TOTAL-COSTS> 15,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 1,946
<INCOME-TAX> 761
<INCOME-CONTINUING> 1,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,185
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
