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 30, 1998
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 30, 1998: 3,728,550.
---------
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------------------------------
SI Handling Systems, Inc.
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August March
30, 1998 1, 1998
-------- --------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents, principally
time deposits $ 2,899 752
Short-term investments - -
------ ------
Total cash, cash equivalents, and
short-term investments 2,899 752
------ ------
Receivables:
Trade 5,103 8,830
Notes and other receivables 106 51
------ ------
Total receivables 5,209 8,881
------ ------
Costs and estimated earnings in excess
of billings 5,511 6,774
Inventories:
Raw materials 1,045 920
Finished goods and work-in-process 1,576 1,578
------ ------
Total inventories 2,621 2,498
------ ------
Deferred income tax benefits 435 435
Prepaid expenses and other current assets 203 162
------ ------
Total current assets 16,878 19,502
------ ------
Property, plant and equipment, at cost:
Land 27 27
Buildings and improvements 3,387 3,387
Machinery and equipment 4,418 4,180
------ ------
7,832 7,594
Less: accumulated depreciation 6,332 6,131
------ ------
Net property, plant and equipment 1,500 1,463
------ ------
Deferred income tax benefits 175 175
Investment in joint venture 1,038 1,027
Other assets, at cost less accumulated
amortization of $83 in 1999 and $78
in 1998 47 52
------ ------
Total assets $19,638 22,219
======= ======
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
Item 1. Financial Statements (Continued)
- ------ --------------------
SI Handling Systems, Inc.
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August March
30, 1998 1, 1998
-------- -------
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Revolving credit loan payable to bank $ - 1,000
Current installments of long-term debt 9 8
Accounts payable 2,982 4,044
Customers' deposits and billings in excess
of costs and estimated earnings 2,233 2,218
Accrued salaries, wages, and commissions 671 1,495
Income taxes payable 306 380
Accrued royalties payable 215 432
Accrued other liabilities 1,088 960
------ ------
Total current liabilities 7,504 10,537
------ ------
Long-term liabilities:
Long-term debt, excluding current installments:
Mortgage payable 21 26
------ ------
Total long-term debt 21 26
Deferred compensation 209 190
------ ------
Total long-term liabilities 230 216
------ ------
Stockholders' equity:
Common stock, $1 par value; authorized
20,000,000 shares; issued 3,728,550
shares in 1999 and 3,711,826 shares
in 1988 3,729 3,712
Additional paid-in capital 2,747 2,645
Retained earnings 5,428 5,109
------ ------
Total stockholders' equity 11,904 11,466
------ ------
Total liabilities and stockholders' equity $19,638 22,219
====== ======
</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 August August August
30, 1998 31, 1997 30, 1998 31, 1997
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 9,942 10,407 18,742 19,949
Cost of sales 7,662 8,147 14,149 15,469
--------- --------- --------- ---------
Gross profit on sales 2,280 2,260 4,593 4,480
--------- --------- --------- ---------
Selling, general and
administrative expenses 1,594 1,585 3,262 3,072
Product development costs 127 26 246 108
Interest expense 2 3 4 5
Interest income (35) (25) (80) (92)
Equity in income
of joint venture (1) (177) (11) (281)
Other income, net (38) (185) (71) (278)
--------- --------- --------- ---------
1,649 1,227 3,350 2,534
--------- --------- --------- ---------
Earnings before
income taxes 631 1,033 1,243 1,946
Income tax expense 243 404 478 761
--------- --------- --------- ---------
Net earnings $ 388 629 765 1,185
========= ========= ========= =========
Basic earnings per
share* $ .10 .17 .21 .32
========= ========= ========= =========
Diluted earnings
per share* $ .10 .17 .20 .32
========= ========= ========= =========
Cash dividends
per share** $ - - .10 .07
========= ========= ========= =========
Average shares
outstanding 3,721,061 3,700,244 3,721,061 3,700,244
Dilutive effect of
stock options 31,604 46,351 31,604 46,351
Dilutive effect of
phantom stock units 10,111 6,105 10,111 6,105
--------- --------- --------- ---------
Average shares
outstanding
assuming dilution 3,762,776 3,752,700 3,762,776 3,752,700
========= ========= ========= =========
<FN>
* On October 14, 1997, the Board of Directors declared a three-for-two stock
split that was distributed on November 10, 1997 to shareholders of record on
October 27, 1997. Basic earnings per share for all periods presented reflect
the three-for-two stock split and are based on the weighted average number
of shares outstanding. Diluted earnings per share for all periods presented
reflect the three-for-two stock split and are based on the weighted average
number of shares outstanding and equivalent shares from dilutive stock
options and phantom stock units.
** Dividends per share for the six months ended August 31, 1997 were adjusted
for the three-for-two stock split that was distributed on November 10, 1997
to shareholders of record on October 27, 1997.
</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 August
30, 1998 31, 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 765 1,185
Adjustments to reconcile net earnings
to net cash provided (used)
by operating activities:
Depreciation of plant and equipment 201 173
Amortization of intangibles 5 5
Equity in income of joint venture (11) (281)
Change in operating assets and liabilities:
Receivables 3,672 (1,982)
Costs and estimated earnings in
excess of billings 1,263 (3,722)
Inventories (123) (79)
Prepaid expenses and other
current assets (41) (69)
Other noncurrent assets - (5)
Accounts payable (1,062) 696
Customers' deposits and billings
in excess of costs and estimated
earnings 15 (26)
Accrued salaries, wages, and
commissions (824) 131
Income taxes payable (74) 492
Accrued royalties payable (217) (218)
Accrued other liabilities 128 (144)
Deferred compensation 19 10
------ ------
Net cash provided (used) by
operating activities 3,716 (3,834)
------ ------
Cash flows from investing activities:
Sales of short-term investments - 5,213
Purchase of short-term investments - (1,472)
Additions to property, plant and equipment (238) (298)
------ ------
Net cash provided (used) by
investing activities (238) 3,443
------ ------
</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 August
30, 1998 31, 1997
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Sale of common shares in connection
with employee incentive stock
option plan 45 58
Repayment of long-term debt (4) (8)
Dividends paid on common stock (372) (247)
Repayment of revolving credit
loan payable to bank (1,000) -
------ ------
Net cash used by financing activities (1,331) (197)
------ ------
Increase (decrease) in cash and
cash equivalents 2,147 (588)
Cash and cash equivalents, beginning
of period 752 1,852
------ ------
Cash and cash equivalents, end of period $ 2,899 1,264
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4 2
====== ======
Income taxes $ 553 269
====== ======
Supplemental disclosures of noncash
financing activities:
Issuance of 14,886 common shares in
exchange for 5,978 common shares
delivered to the Company by officers
in connection with the employee
incentive stock option plan $ 74 -
====== ======
Issuance of 18,225 common shares in
exchange for 8,064 common shares
delivered to the Company by officers
in connection with the employee
incentive stock option plan $ - 43
====== ======
</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 30, 1998 and August 31, 1997
(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.
On September 29, 1998, McKesson Corporation [NYSE:MCK], the leading
healthcare supply management company in North America, announced the completion
of its acquisition of APS. APS will be renamed McKesson APS.
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 increased to $2,899,000 during the
first six months of fiscal 1999 from $752,000 at the end of fiscal 1998. The
increase resulted from cash provided by operating activities totaling $3,716,000
and proceeds of $45,000 from the sale of common stock in connection with the
employee incentive stock option plan. Partially offsetting the increase in cash
and cash equivalents from these sources were the repayments of long-term debt of
$4,000 and the revolving credit loan payable to bank of $1,000,000, purchases of
capital equipment of $238,000, and the payment of $372,000 in cash dividends to
shareholders. Funds used by operating activities during the first six months of
fiscal 1998 were $3,834,000.
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
- 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Liquidity and Capital Resources (Continued)
- -------------------------------
compliance with all covenants during the first six months of fiscal 1999.
Currently, the committed revolving credit facility has an expiration date of
August 31, 2000. The Company repaid its outstanding debt under the committed
revolving credit facility on March 2, 1998, and the Company did not have any
additional borrowings under the committed revolving credit facility during the
first six months of fiscal 1999.
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
Prescriptions 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. During fiscal 1998, the Bank
increased the borrowing availability to $3,000,000 and extended the expiration
date of the Facility. As of August 31, 1998, SI/BAKER's related debt outstanding
under the Facility was $900,000. SI/BAKER intends to satisfy the note during the
second half of fiscal 1999. The Facility has an expiration date of November 30,
1998.
On October 14, 1997, the Board of Directors of the Company declared a
three-for-two stock split that was 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 30, 1998 Versus Six Months Ended August 31, 1997
------------------------------------------------------------------------
The Company's net earnings for the first six months of fiscal 1999 were
$765,000 compared to net earnings of $1,185,000 for the first six months of
fiscal 1998.
Backlog at the end of the first half of fiscal 1999 was $34,535,000. During
the first half of fiscal 1999, the Company received orders totaling
approximately $31,200,000. The two largest orders received during the first half
of fiscal 1999 were for automated distribution systems. The first contract,
totaling approximately $12,400,000, engages the Company to automate the
distribution process, including a unique utilization of robotics. This project
is scheduled to be completed by the end of the first half of fiscal 2000. The
second contract, totaling approximately $4,500,000, engages the Company to
develop an integrated order fulfillment system to handle foreign currency orders
for international travelers. This project is anticipated to be completed during
the second half of fiscal 1999. These systems integration contracts contain a
high degree of ancillary products which provide lower gross profit margins than
sales of the Company's proprietary products.
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Results Of Operations
- ---------------------
(a) Six Months Ended August 30, 1998 Versus Six Months Ended August 31, 1997
------------------------------------------------------------------------
(Continued)
Net sales of $18,742,000 for the first six months of fiscal 1999 decreased
6.1% compared to net sales of $19,949,000 for the first six months of fiscal
1998. The sales decrease in the first six months of fiscal 1999 is attributed
primarily to a smaller backlog of orders entering fiscal 1999 ($22,092,000
versus a $31,029,000 backlog beginning fiscal 1998). The largest declines in
sales occurred in the Order Selection and Switch-Cart product lines. During the
first six months of fiscal 1999, Order Selection sales of approximately
$5,700,000 declined approximately $2,800,000 from the prior year comparable
period due to delays in earlier periods by prospective customers in signing
contracts often caused by expanding project scope or contractual negotiations,
along with the prior year comparable period containing revenue for progress made
on two contracts for warehousing and distribution systems. During the first six
months of fiscal 1999, Switch-Cart sales of approximately $5,000,000 declined
approximately $1,600,000 from the prior year comparable period due primarily to
the fiscal 1998 comparable period containing a greater amount of revenue for
progress made on the contract with the Defense Logistics Agency of the United
States government. Partially offsetting the decline in Order Selection and
Switch-Cart sales during the first six months of fiscal 1999 was an increase in
sales of approximately $3,200,000 across the Company's other products lines,
with the majority of the increase relating to sales of the Company's Cartrac,
Sortation, and Automated Guided Vehicle product lines.
Gross profit as a percentage of sales was 24.5% for the first six months of
fiscal 1999 compared to 22.5% for the first six months of fiscal 1998. The
attainment of the higher gross profit percentage during the first six months of
fiscal 1999 was primarily attributable to the favorable performance on several
contracts, principally for the Company's higher margin proprietary products,
initiated in the prior fiscal year that were completed or nearing completion
during the first six months of fiscal 1999. Partially offsetting the increase in
the gross profit percentage was progress on systems integration contracts which
contain a high degree of ancillary products and provide lower gross profit
margins than sales of the Company's proprietary products. The lower gross profit
percentage during the first six months of fiscal 1998 was primarily attributable
to a higher content of ancillary products with lower margins than contracts
containing a larger degree of higher margin proprietary products.
Selling, general, and administrative expenses of $3,262,000 were higher by
$190,000 in the first six months of fiscal 1999 than in the comparable fiscal
1998 period. The increase in selling, general, and administrative expenses is
primarily attributable to costs associated with product promotion and sales
efforts aimed at expanding the Company's customer base of business consistent
with the Company's strategic plan to grow the business as a systems integrator.
The increase in selling, general, and administrative expenses occurred primarily
in the first quarter of fiscal 1999.
Product development costs of $246,000 were higher by $138,000 in the first
six months of fiscal 1999 than in the comparable fiscal 1998 period. Development
programs in the first six months of fiscal 1999 included enhancements to the
Company's product controls and features and improvements to the Sortation and
Order Selection product lines. Development programs in the first six months of
fiscal
- 9 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Results Of Operations
- ---------------------
(a) Six Months Ended August 30, 1998 Versus Six Months Ended August 31, 1997
------------------------------------------------------------------------
(Continued)
1998 included efforts directed at improvements across various product lines, and
efforts associated with the introduction of the Henke light-duty overhead
transportation product.
Interest income of $80,000 was lower by $12,000 in the first six months of
fiscal 1999 than in the comparable fiscal 1998 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 1999. The decrease
in interest income occurred primarily in the first quarter of fiscal 1999.
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 unfavorable variance of $270,000 for the first six months of
fiscal 1999 in the equity in income of joint venture was attributable to
SI/BAKER's decline in sales to approximately $3,900,000 as compared to the
comparable fiscal 1998 period of approximately $12,700,000. The sales decrease
in fiscal 1999 was primarily attributable to a smaller backlog of orders
entering fiscal 1999 versus a larger backlog of orders at the beginning of
fiscal 1998. Fiscal 1998 sales were favorably impacted by performance on
contracts wherein customer specifications required systems to be commercially
operable by the end of fiscal 1998. Also contributing to the unfavorable
variance were increased development expenses of $68,000 for enhancements to
software and controls capabilities for various products. Partially offsetting
the unfavorable variance were SI/BAKER's decreases of (1) $357,000 in
revenue-based royalty costs due to the parent companies and (2) $89,000 in
selling, general, and administrative expenses for those expenses based on
revenue and profit performance.
The unfavorable variance of $207,000 in other income, net, is primarily
attributable to a decrease of $179,000 in revenue-based royalty income related
to the SI/BAKER joint venture.
The Company incurred income tax expense of $478,000 during the first six
months of fiscal 1999 compared to income tax expense of $761,000 in the
comparable fiscal 1998 period. Income tax expense was generally recorded at
statutory federal and state tax rates expected to apply for each fiscal year.
(b) Three Months Ended August 30, 1998 Versus Three Months Ended August 31,
1997 Changes in the second quarter of the current fiscal year compared to
the prior
year were consistent with those previously noted above for the six month period,
except for the following areas:
The increase in selling, general, and administrative expenses for the six
month period noted above occurred primarily in the first quarter of fiscal 1999,
while second quarter selling, general, and administrative expenses were
relatively the same as the comparable prior year period.
Interest income of $35,000 was higher by $10,000 in the second quarter of
fiscal 1999 than in the comparable fiscal 1998 period. The increase in interest
income is primarily attributable to the higher level of funds available for
short-term investments during the second quarter of fiscal 1999.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Year 2000
- ---------
The Year 2000 issue relates to the ability of computer systems,
microprocessors, and other electronic devices to deal appropriately with dates
on or after January 1, 2000 and other dates used for special programmatic
functions (e.g., 9999). The effect of the Year 2000 issue may include computer
failures and business interruption.
The Company has assembled a team of internal staff to oversee the matter
and is underway in completing its Year 2000 assessment. Internally, the Company
has upgraded its business system to address the Year 2000 issue. Externally, the
Company has and will continue to survey its suppliers, financial institutions,
and other organizations to ensure that those parties have appropriate plans to
remediate Year 2000 issues where their systems or business activities may impact
the Company's operations. However, the Company cannot presently estimate the
impact of the failure of third parties to be Year 2000 compliant. Also,
customers may utilize the services, on a fee basis, of the Company's customer
support group to assess and upgrade their materials handling systems purchased
from the Company in prior years for Year 2000 compliance. Costs incurred to date
and estimated costs to complete the Company's Year 2000 compliance efforts are
not expected to be material.
The outline of the general phases of the Company's Year 2000 project is as
follows: (1) Year 2000 methodology and compliance training for key personnel;
(2) inventorying Year 2000 items, internally and externally; (3) assigning
priorities to identified Year 2000 items; (4)assessing the Year 2000 compliance
of items determined to be material to the Company; (5) remediating or replacing
material items that are determined not to be Year 2000 compliant; (6) testing
material items for Year 2000 compliance; and (7) designing and implementing
contingency plans to the extent deemed necessary. The Company has substantially
completed phases (1) through (5) relating to existing internal hardware,
software, facilities and equipment; however, testing is ongoing as hardware,
software, and equipment are remediated, upgraded or replaced. Additionally, the
Company continues to assess and test newly engaged suppliers and their products
for Year 2000 compliance as part of the Company's normal business operations.
The Company has not completed its external surveys or made contingency plans in
the case that it is not Year 2000 compliant by the Year 2000. The Company will
continue to monitor its Year 2000 compliance program, address any material
issues and develop contingency planning as it deems appropriate.
The scheduled completion date for the Company's efforts to address the Year
2000 issue is July 1999. The failure to identify or correct a material Year 2000
problem could result in an interruption in, or a failure of, certain business
activities or operations such as the Company's ability to service its customers.
Such failures could materially and adversely affect the Company's results of
operations, liquidity, and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of suppliers and customers, the Company is unable to
determine at this time whether the consequences of Year 2000 failures will have
a material impact on the Company's results of operations, liquidity, and
financial condition. The Company's Year 2000 assessment process is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material suppliers and customers.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
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," "will likely,"
"are expected to," "will continue," "project," and similar expressions that
denote uncertainty, are intended to identify such forward-looking statements.
The Company's actual results, performance, or achievements could differ
materially from the results expressed in, or implied by, such "forward-looking
statements": (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.
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<PAGE>
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 28, 1998 with
the following item being submitted to a vote by shareholders:
1. The election of five directors.
Details of the proposal noted above were provided to shareholders in the
form of a Notice of Annual Meeting and Proxy Statement dated June 26, 1998 and
mailed on July 6, 1998, 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.
The voting results on the election of directors are set forth as follows:
1. Election of Directors:
---------------------
Name of Nominee Votes For Votes Withheld Non-Voting
--------------- --------- -------------- ----------
L. Jack Bradt 3,140,905 18,755 552,166
Edward J. Fahey 3,140,956 18,704 552,166
Elmer D. Gates 3,140,843 18,817 552,166
Michael J. Gausling 3,140,905 18,755 552,166
Leonard S. Yurkovic 3,140,956 18,704 552,166
Item 5. Other Information
- ------ -----------------
Discretionary Proxy Voting Authority/Shareholder Proposals
- ----------------------------------------------------------
On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934. The amendment to Rule 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a shareholder proposal
which the shareholder has not sought to include in the Company's proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify the Company at least 45 days prior to the month and day of mailing of the
prior year's proxy statement (or any date specified in an advance notice
provision), then the management proxies will be allowed to use their
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to the Company's 1999 Annual Meeting of Shareholders, if the
Company is not provided notice of a shareholder proposal, which the shareholder
has not previously sought to include in the Company's proxy statement, by May
24, 1999, the management proxies will be allowed to use their discretionary
authority as outlined above.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibit 27 - Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended August 30,
1998.
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<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
(Principal Financial Officer)
Dated: October 14, 1998
----------------
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<PAGE>
Schedule A
----------
SI/BAKER, INC.
Financial Statements
August 31, 1998
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<PAGE>
SI/BAKER, INC.
Balance Sheets
August 31, 1998 and February 28, 1998
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August February
31, 1998 28, 1998
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, principally
time deposits $ 543 388
Receivables:
Trade 1,791 2,881
Other receivables 24 51
----- -----
Total receivables 1,815 2,932
----- -----
Costs and estimated earnings in
excess of billings 3,321 3,263
Inventories - 118
Deferred income tax benefits 309 309
Prepaid expenses and other current
assets 274 18
----- -----
Total current assets 6,262 7,028
----- -----
Machinery and equipment, at cost 163 125
Less: accumulated depreciation 79 64
----- -----
Net machinery and equipment 84 61
----- -----
Equipment leased to customer 487 487
Less: accumulated depreciation 309 249
----- -----
Net equipment leased to customer 178 238
----- -----
Deferred income tax benefits 35 35
----- -----
Other assets 86 57
----- -----
Total assets $6,645 7,419
===== =====
</TABLE>
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<PAGE>
SI/BAKER, INC.
Balance Sheets
August 31, 1998 and February 28, 1998
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
August February
31, 1998 28, 1998
-------- --------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank $ 900 900
Accounts payable:
Trade 422 930
Affiliated companies 23 97
----- -----
Total accounts payable 445 1,027
----- -----
Customers' deposits and billings in
excess of costs and estimated
earnings 1,941 1,740
Accrued salaries, wages, and
commissions 71 413
Income taxes payable - 44
Accrued royalties payable 306 288
Accrued product warranties 777 799
Accrued other liabilities 19 43
----- -----
Total current liabilities 4,459 5,254
----- -----
Deferred compensation 111 111
----- -----
Stockholders' equity:
Common stock, $1 par value; authorized
1,000 shares; issued 200 shares - -
Additional paid-in capital 200 200
Retained earnings 1,875 1,854
----- -----
Total stockholders' equity 2,075 2,054
----- -----
Total liabilities and stockholders'
equity $6,645 7,419
===== =====
</TABLE>
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<PAGE>
SI/BAKER, INC.
Statements of Operations
Six Months Ended August 31, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- -------------------
August August August August
31, 1998 31, 1997 31, 1998 31, 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 1,787 8,019 3,861 12,723
Cost of sales 1,416 6,818 3,159 10,714
------ ------ ------ ------
Gross profit on sales 371 1,201 702 2,009
------ ------ ------ ------
Selling, general and
administrative
expenses 233 265 437 526
Product development
costs 71 - 71 3
Royalty expense
to parent companies 71 323 154 511
Interest income (3) (8) (5) (15)
Interest expense 21 27 35 60
Other income, net (23) (6) (25) (26)
------ ------ ------ ------
370 601 667 1,059
------ ------ ------ ------
Earnings before
income taxes 1 600 35 950
Income tax expense - 245 14 387
------ ------ ------ ------
Net earnings $ 1 355 21 563
====== ====== ====== ======
</TABLE>
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<PAGE>
SI/BAKER, INC.
Statements of Cash Flows
Six Months Ended August 31, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
---------------------
August August
31, 1998 31, 1997
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 21 563
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation of machinery and
equipment and leased equipment 75 71
Changes in operating assets and
liabilities:
Receivables 1,117 -
Costs and estimated earnings
in excess of billings (58) (657)
Inventories 118 23
Prepaid expenses and other
current assets (256) 18
Other assets (29) -
Accounts payable (582) 723
Customers' deposits and
billings in excess of costs
and estimated earnings 201 1,049
Accrued salaries, wages, and
commissions (342) (27)
Income taxes payable (44) 45
Accrued royalties payable 18 297
Accrued product warranties (22) (54)
Accrued other liabilities (24) (112)
----- -----
Net cash provided
by operating activities 193 1,939
----- -----
Cash flows used in investing activities:
Additions to machinery and equipment (38) (15)
----- -----
Cash flows used by financing activities:
Repayment of note payable to bank - (1,750)
----- -----
Increase in cash and cash equivalents 155 174
Cash and cash equivalents,
beginning of period 388 484
----- -----
Cash and cash equivalents, end of period $ 543 658
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 307 342
===== =====
Interest $ 46 64
===== =====
</TABLE>
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<PAGE>
SI HANDLING SYSTEMS, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit No.
- ----------
27 Financial Data Schedule.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM FORM 10-Q FOR
THE QUARTER ENDED AUGUST 30, 1998 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> FEB-28-1999
<PERIOD-END> AUG-30-1998
<CASH> 2,899
<SECURITIES> 0
<RECEIVABLES> 5,103
<ALLOWANCES> 0
<INVENTORY> 2,621
<CURRENT-ASSETS> 16,878
<PP&E> 7,832
<DEPRECIATION> 6,332
<TOTAL-ASSETS> 19,638
<CURRENT-LIABILITIES> 7,504
<BONDS> 21
0
0
<COMMON> 3,729
<OTHER-SE> 8,175
<TOTAL-LIABILITY-AND-EQUITY> 19,638
<SALES> 18,742
<TOTAL-REVENUES> 18,742
<CGS> 14,149
<TOTAL-COSTS> 14,149
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 1,243
<INCOME-TAX> 478
<INCOME-CONTINUING> 765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 765
<EPS-PRIMARY> .21
<EPS-DILUTED> .20
</TABLE>
