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 November 29, 1998
Commission File No. 0-3362
SI HANDLING SYSTEMS, INC.
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(Exact Name Of Registrant As Specified In Its Charter)
Pennsylvania 22-1643428
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(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
600 Kuebler Road, Easton, PA 18040
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(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 610-252-7321
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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
November 29, 1998: 3,718,862.
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<PAGE>
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
- ------ --------------------
SI Handling Systems, Inc.
Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
November March
29, 1998 1, 1998
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, principally
time deposits $ 2,238 752
Short-term investments - -
------ ------
Total cash, cash equivalents, and
short-term investments 2,238 752
------ ------
Receivables:
Trade 7,749 8,830
Notes and other receivables 209 51
------ ------
Total receivables 7,958 8,881
------ ------
Costs and estimated earnings in excess
of billings 7,329 6,774
Inventories:
Raw materials 1,233 920
Finished goods and work-in-process 1,222 1,578
------ ------
Total inventories 2,455 2,498
------ ------
Deferred income tax benefits 435 435
Prepaid expenses and other current assets 242 162
------ ------
Total current assets 20,657 19,502
------ ------
Property, plant and equipment, at cost:
Land 27 27
Buildings and improvements 3,387 3,387
Machinery and equipment 4,509 4,180
------ ------
7,923 7,594
Less: accumulated depreciation 6,432 6,131
------ ------
Net property, plant and equipment 1,491 1,463
------ ------
Deferred income tax benefits 175 175
Investment in joint venture 1,044 1,027
Other assets, at cost less accumulated
amortization of $85 in 1999 and $78
in 1998 45 52
------ ------
Total assets $ 23,412 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>
November March
29, 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 4,038 4,044
Customers' deposits and billings in excess
of costs and estimated earnings 4,319 2,218
Accrued salaries, wages, and commissions 723 1,495
Income taxes payable 388 380
Accrued royalties payable 322 432
Accrued other liabilities 1,172 960
------ ------
Total current liabilities 10,971 10,537
------ ------
Long-term liabilities:
Long-term debt, excluding current installments:
Mortgage payable 19 26
------ ------
Total long-term debt 19 26
Deferred compensation 215 190
------ ------
Total long-term liabilities 234 216
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Stockholders' equity:
Common stock, $1 par value; authorized
20,000,000 shares; issued 3,718,862
shares in 1999 and 3,711,826 shares
in 1998 3,719 3,712
Additional paid-in capital 2,750 2,645
Retained earnings 5,738 5,109
------ ------
Total stockholders' equity 12,207 11,466
------ ------
Total liabilities and stockholders' equity $ 23,412 22,219
====== ======
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
Item 1. Financial Statements (Continued)
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SI Handling Systems, Inc.
Statements of Operations
(In Thousands, Except Share And Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ -----------------------
November November November November
29, 1998 30, 1997 29, 1998 30, 1997
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 11,349 12,422 30,091 32,371
Cost of sales 9,074 9,665 23,223 25,134
--------- --------- --------- ---------
Gross profit on sales 2,275 2,757 6,868 7,237
--------- --------- --------- ---------
Selling, general, and
administrative expenses 1,549 1,684 4,811 4,756
Product development costs 115 53 361 161
Interest expense 6 3 10 8
Interest income (37) (23) (117) (115)
Equity in income
of joint venture (6) (33) (17) (314)
Other income, net (67) (80) (138) (358)
--------- --------- --------- ---------
1,560 1,604 4,910 4,138
--------- --------- --------- ---------
Earnings before
income taxes 715 1,153 1,958 3,099
Income tax expense 270 454 748 1,215
--------- --------- --------- ---------
Net earnings $ 445 699 1,210 1,884
========= ========= ========= =========
Basic earnings per
share* $ .12 .19 .33 .51
========= ========= ========= =========
Diluted earnings
per share* $ .12 .19 .32 .50
========= ========= ========= =========
Cash dividends
per share** $ - - .10 .07
========= ========= ========= =========
Average shares
outstanding 3,721,558 3,703,719 3,721,558 3,703,719
Dilutive effect of
stock options 29,258 44,016 29,258 44,016
Dilutive effect of
phantom stock units 10,714 6,619 10,714 6,619
--------- --------- --------- ---------
Average shares
outstanding
assuming dilution 3,761,530 3,754,354 3,761,530 3,754,354
========= ========= ========= =========
<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 nine months ended November 30, 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.
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<PAGE>
Item 1. Financial Statements (Continued)
SI Handling Systems, Inc.
Statements of Cash Flows
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
November November
29, 1998 30, 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,210 1,884
Adjustments to reconcile net earnings
to net cash provided (used)
by operating activities:
Depreciation of plant and equipment 301 259
Amortization of intangibles 7 8
Equity in income of joint venture (17) (314)
Change in operating assets and liabilities:
Receivables 923 1,317
Costs and estimated earnings in
excess of billings (555) (5,822)
Inventories 43 (411)
Prepaid expenses and other
current assets (80) (135)
Other noncurrent assets - (4)
Accounts payable (6) 1,295
Customers' deposits and billings
in excess of costs and estimated
earnings 2,101 (867)
Accrued salaries, wages, and
commissions (772) 414
Income taxes payable 8 191
Accrued royalties payable (110) (105)
Accrued other liabilities 212 (23)
Deferred compensation 25 28
------ ------
Net cash provided (used) by
operating activities 3,290 (2,285)
------ ------
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 (329) (449)
------ ------
Net cash provided (used) by
investing activities (329) 3,292
------ ------
</TABLE>
See accompanying notes to financial statements.
- 5 -
<PAGE>
Item 1. Financial Statements (Continued)
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SI Handling Systems, Inc.
Statements of Cash Flows (Continued)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------
November November
29, 1998 30, 1997
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Sale of common shares in connection
with employee incentive stock
option plan 60 59
Repayment of long-term debt (6) (10)
Dividends paid on common stock (372) (247)
Repayment of revolving credit
loan payable to bank (1,000) -
Repurchase and retirement of
common stock (157) -
Dividends paid to shareholders for
fractional shares in connection
with three-for-two stock split - (2)
------ ------
Net cash used by financing activities (1,475) (200)
------ ------
Increase in cash and
cash equivalents 1,486 807
Cash and cash equivalents, beginning
of period 752 1,852
------ ------
Cash and cash equivalents, end of period $ 2,238 2,659
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 9 4
====== ======
Income taxes $ 740 1,024
====== ======
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 $ - 88
====== ======
</TABLE>
See accompanying notes to financial statements.
- 6 -
<PAGE>
Item 1. Financial Statements (Continued)
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SI Handling Systems, Inc.
Notes To Financial Statements
Nine Months Ended November 29, 1998 and November 30, 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. Results for interim periods are not necessarily
indicative of results expected for the fiscal year. Refer to the Company's
10-K for the year ended March 1, 1998 for more complete financial
information.
SI Handling Systems, Inc. ("SI" or the "Company") and McKesson Automated
Prescription Systems, Inc. ("McKesson APS"), formerly known as Automated
Prescription Systems, Inc., are co-venturers in a joint venture named SI/BAKER,
INC. ("SI/BAKER" or the "joint venture"). On September 29, 1998, McKesson
Corporation [NYSE:MCK], a healthcare supply management company, announced the
completion of its acquisition of Automated Prescription Systems, Inc. Automated
Prescription Systems, Inc. was recently renamed McKesson Automated Prescription
Systems, Inc. The SI/BAKER joint venture draws upon the automated materials
handling systems experience of SI and the automated pill counting and dispensing
products of McKesson 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 increased to $2,238,000 during the
first nine months of fiscal 1999 from $752,000 at the end of fiscal 1998. The
increase resulted from cash provided by operating activities totaling $3,290,000
and proceeds of $60,000 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
$6,000 and the revolving credit loan payable to bank of $1,000,000, purchases of
capital equipment of $329,000, the payment of $372,000 in cash dividends to
shareholders, and the payment of $157,000 in connection with the repurchase and
retirement of the Company's common stock. Funds used by operating activities
during the first nine months of fiscal 1998 were $2,285,000.
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<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 nine 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 nine 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 and McKesson APS, 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 November 30,
1998, SI/BAKER did not have any borrowings under the Facility. The Facility has
an expiration date of August 31, 1999.
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.
On October 14, 1998, the Board of Directors of the Company authorized
management to purchase up to $400,000 of the Company's common stock through open
market transactions or negotiated transactions at prices not to exceed
prevailing market prices. The stock repurchase program allows the Company to
take advantage of opportunities to purchase the Company's common stock at
favorable prices.
The Company believes that its financial resources consisting of its current
assets, anticipated cash flow, and the available revolving credit facility will
adequately finance its operating requirements for 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) Nine Months Ended November 29, 1998 Versus Nine Months Ended November 30,
---------------------------------------------------------------------------
1997
----
The Company's net earnings for the first nine months of fiscal 1999 were
$1,210,000 compared to net earnings of $1,884,000 for the first nine months of
fiscal 1998.
Backlog at the end of the first nine months of fiscal 1999 was $27,266,000.
During the first nine months of fiscal 1999, the Company received orders
totaling approximately $35,300,000. One order, totaling approximately
$12,500,000, engages the Company to automate the distribution process at a major
health and beauty aids
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
(a) Nine Months Ended November 29, 1998 Versus Nine Months Ended November
---------------------------------------------------------------------
30, 1997 (Continued)
--------
company, including a unique utilization of robotics. This systems integration
contract contains a high degree of ancillary products, providing lower gross
profit margins than sales of the Company's proprietary products and is scheduled
to be completed by the end of the first half of fiscal 2000. Other contractual
work, totaling approximately $4,500,000, engages the Company to provide
proprietary product for automating three sites for one of the leading automotive
manufacturers and is anticipated to be completed during the first quarter of
fiscal 2000.
Net sales of $30,091,000 for the first nine months of fiscal 1999 decreased
7.0% compared to net sales of $32,371,000 for the first nine months of fiscal
1998. The sales decrease in the first nine 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 nine months of fiscal 1999, Order Selection sales of approximately
$11,000,000 declined approximately $975,000 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 protracted contractual
negotiations. However, Order Selection sales of $5,350,000 for the third quarter
of fiscal 1999 rose by $1,850,000 when compared to the third quarter of fiscal
1998 due to progress on a large systems integration contract. During the first
nine months of fiscal 1999, Switch-Cart sales of approximately $7,000,000
declined approximately $5,250,000 from the prior year comparable period due
primarily to the fiscal 1998 comparable period containing a greater amount of
revenue for progress 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 nine months of fiscal 1999 was an
increase in sales of approximately $3,950,000 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 22.8% for the first nine months
of fiscal 1999 compared to 22.4% for the first nine months of fiscal 1998.
Although the gross profit percentage was relatively the same as the comparable
prior year period, the fiscal 1999 gross profit percentage was impacted by
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 half of fiscal 1999. However,
offsetting the favorable performance was progress during the third quarter of
fiscal 1999 on systems integration contracts which contain a high degree of
ancillary products and provide lower gross profit margins than sales of the
Company's higher margin proprietary products.
Selling, general, and administrative expenses of $4,811,000 were higher by
$55,000 in the first nine months of fiscal 1999 than in the comparable fiscal
1998 period. The increase in selling, general, and administrative expenses is
attributable to (1) increases of approximately $400,000 for costs associated
with inflationary factors and 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 and (2) increases of
approximately $65,000 in professional fees and expenses associated with
increasing the visibility of the
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
(a) Nine Months Ended November 29, 1998 Versus Nine Months Ended November
---------------------------------------------------------------------
30, 1997 (Continued)
--------
Company and exploring business opportunities and strategic alliances. The
increases in selling, general, and administrative expenses occurred primarily in
the first half of fiscal 1999. Partially offsetting the increase in selling,
general, and administrative expenses was a reduction of approximately $380,000
for expenses associated with the Company's incentive-based compensation plan
which provides for gain sharing as a means of promoting performance excellence.
Product development costs of $361,000 were higher by $200,000 in the first
nine months of fiscal 1999 than in the comparable fiscal 1998 period.
Development programs in the first nine months of fiscal 1999 included
enhancements to the Company's product controls and features and improvements to
the Order Selection product line. Development programs in the first nine months
of fiscal 1998 included efforts directed at improvements across various product
lines, and efforts associated with the introduction of the Henke light-duty
overhead transportation product.
Equity in income of joint venture represents the Company's proportionate
share of its investment in SI/BAKER which is being accounted for under the
equity method. The unfavorable variance of $297,000 for the first nine months of
fiscal 1999 in the equity in income of joint venture was attributable to
SI/BAKER's decline in sales to approximately $5,993,000 as compared to the
comparable fiscal 1998 period of approximately $17,253,000. The sales decrease
in fiscal 1999 was primarily attributable to a smaller backlog of orders
entering fiscal 1999 versus a record high opening 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; however, the fiscal 1998 gross
profit percentage was unfavorably impacted by difficulties in executing and
concluding several contracts as additional costs became necessary to meet
contractual throughput requirements. Also contributing to fiscal 1999's
unfavorable variance was increased development expenses of $334,000 for software
and controls capabilities for various new products addressing changing market
requirements. Partially offsetting the unfavorable variance were SI/BAKER's
decreases of (1) $450,000 in revenue-based royalty costs due to the parent
companies and (2) $55,000 in selling, general, and administrative expenses for
those expenses based on revenue and profit performance. The decrease in selling,
general, and administrative expenses occurred primarily in the first half of
fiscal 1999; however, selling, general, and administrative expenses for the
third quarter of fiscal 1999 increased when compared to the third quarter of
fiscal 1998 due to costs associated with sales and administrative efforts aimed
at expanding SI/BAKER's customer base of business.
The unfavorable variance of $220,000 in other income, net, is primarily
attributable to a decrease in the revenue-based royalty income related to the
SI/BAKER joint venture.
The Company incurred income tax expense of $748,000 during the first nine
months of fiscal 1999 compared to income tax expense of $1,215,000 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.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- ---------------------
(b) Three Months Ended November 29, 1998 Versus Three Months Ended November 30,
---------------------------------------------------------------------------
1997
----
Changes in the third quarter of the current fiscal year compared to the
prior year were consistent with those previously noted above for the nine-month
period, except for the following areas:
Gross profit as a percentage of sales was 20.0% for the third quarter of
fiscal 1999 compared to 22.2% for the third quarter of fiscal 1998. The decline
in gross profit percentage was primarily attributable to a larger proportion of
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 higher margin proprietary products.
Selling, general, and administrative expenses of $1,549,000 were lower by
$135,000 in the third quarter of fiscal 1999 than in the comparable fiscal 1998
period. The decrease in selling, general, and administrative expenses is
primarily attributable to a reduction of expenses associated with the Company's
incentive-based compensation plan which provides for gain sharing as a means of
promoting performance excellence.
Interest income of $37,000 was higher by $14,000 in the third 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 third quarter of fiscal 1999.
- 11 -
<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.
- 13 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 5. Other Information
- ------- -----------------
Effective January 1, 1999, Leonard S. Yurkovic, President and Chief Executive
Officer, was elected Vice Chairman of the Board of Directors of the Company.
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 November 29,
1998.
- 14 -
<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: January 13, 1999
----------------
- 15 -
<PAGE>
Schedule A
----------
SI/BAKER, INC.
Financial Statements
November 30, 1998
- 16 -
<PAGE>
SI/BAKER, INC.
Balance Sheets
November 30, 1998 and February 28, 1998
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
November February
30, 1998 28, 1998
----------- ----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents, principally
time deposits $ 388 388
Receivables:
Trade 558 2,881
Other receivables - 51
------ ------
Total receivables 558 2,932
------ ------
Costs and estimated earnings in
excess of billings 2,364 3,263
Inventories - 118
Deferred income tax benefits 309 309
Prepaid expenses and other current
assets 312 18
------ ------
Total current assets 3,931 7,028
------ ------
Machinery and equipment, at cost 173 125
Less: accumulated depreciation 86 64
------ ------
Net machinery and equipment 87 61
------ ------
Equipment leased to customer 487 487
Less: accumulated depreciation 340 249
------ ------
Net equipment leased to customer 147 238
------ ------
Deferred income tax benefits 35 35
------ ------
Other assets 86 57
------ ------
Total assets $ 4,286 7,419
====== ======
</TABLE>
- 17 -
<PAGE>
SI/BAKER, INC.
Balance Sheets
November 30, 1998 and February 28, 1998
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
November February
30, 1998 28, 1998
----------- ----------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank $ - 900
Accounts payable:
Trade 411 930
Affiliated companies 94 97
------ ------
Total accounts payable 505 1,027
------ ------
Customers' deposits and billings in
excess of costs and estimated
earnings 750 1,740
Accrued salaries, wages, and
commissions 51 413
Income taxes payable - 44
Accrued royalties payable 155 288
Accrued product warranties 615 799
Accrued other liabilities 11 43
------ ------
Total current liabilities 2,087 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 1,888 1,854
------ ------
Total stockholders' equity 2,088 2,054
------ ------
Total liabilities and stockholders'
equity $ 4,286 7,419
====== ======
</TABLE>
- 18 -
<PAGE>
SI/BAKER, INC.
Statements of Operations
Nine Months Ended November 30, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------- --------------------
November November November November
30, 1998 30, 1997 30, 1998 30, 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 2,132 4,530 5,993 17,253
Cost of sales 1,497 4,036 4,656 14,750
------ ------ ------ ------
Gross profit on sales 635 494 1,337 2,503
------ ------ ------ ------
Selling, general and
administrative
expenses 238 204 675 730
Product development
costs 266 - 337 3
Royalty expense
to parent companies 86 179 240 690
Interest income (1) (6) (6) (21)
Interest expense 25 33 60 93
Other income, net - (25) (25) (51)
------ ------ ------ ------
614 385 1,281 1,444
------ ------ ------ ------
Earnings before
income taxes 21 109 56 1,059
Income tax expense 8 43 22 430
------ ------ ------ ------
Net earnings $ 13 66 34 629
====== ====== ====== ======
</TABLE>
- 19 -
<PAGE>
SI/BAKER, INC.
Statements of Cash Flows
Nine Months Ended November 30, 1998 and 1997
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------
November November
30, 1998 30, 1997
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 34 629
Adjustments to reconcile net earnings
to net cash provided (used) by
operating activities:
Depreciation of machinery and
equipment and leased equipment 113 108
Changes in operating assets and
liabilities:
Receivables 2,374 (1,747)
Costs and estimated earnings
in excess of billings 899 657
Inventories 118 36
Prepaid expenses and other
current assets (294) 5
Other assets (29) -
Accounts payable (522) (268)
Customers' deposits and
billings in excess of costs
and estimated earnings (990) 174
Accrued salaries, wages, and
commissions (362) 16
Income taxes payable (44) 80
Accrued royalties payable (133) 23
Accrued product warranties (184) 265
Accrued other liabilities (32) (96)
------ ------
Net cash provided (used)
by operating activities 948 (118)
------ ------
Cash flows used in investing activities:
Additions to machinery and equipment (48) (19)
------ ------
Cash flows used by financing activities:
Increase (repayment) of note payable to bank (900) 250
------ ------
Increase in cash and cash equivalents - 113
Cash and cash equivalents,
beginning of period 388 484
------ ------
Cash and cash equivalents, end of period $ 388 597
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes $ 325 350
====== ======
Interest $ 71 88
====== ======
</TABLE>
- 20 -
<PAGE>
SI HANDLING SYSTEMS, INC.
FORM 10-Q
EXHIBIT INDEX
Exhibit No.
- ----------
27 Financial Data Schedule.
- 21 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q FOR THE QUARTER ENDED
NOVEMBER 29, 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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> NOV-29-1998
<CASH> 2,238
<SECURITIES> 0
<RECEIVABLES> 7,749
<ALLOWANCES> 0
<INVENTORY> 2,455
<CURRENT-ASSETS> 20,657
<PP&E> 7,923
<DEPRECIATION> 6,432
<TOTAL-ASSETS> 23,412
<CURRENT-LIABILITIES> 10,971
<BONDS> 19
0
0
<COMMON> 3,719
<OTHER-SE> 8,488
<TOTAL-LIABILITY-AND-EQUITY> 23,412
<SALES> 30,091
<TOTAL-REVENUES> 30,091
<CGS> 23,223
<TOTAL-COSTS> 23,223
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 1,958
<INCOME-TAX> 748
<INCOME-CONTINUING> 1,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,210
<EPS-PRIMARY> .33
<EPS-DILUTED> .32
</TABLE>
