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 December 1, 1996
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 December 1, 1996: 2,458,806.
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- 2 -
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
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SI HANDLING SYSTEMS, INC.
Balance Sheets
(In Thousands, Except Share Data)
December March
Assets 1, 1996 3, 1996
- - - - - - - - - - - ------ -------- -------
Current assets:
Cash and cash equivalents, principally
time deposits $ 1,399 1,335
Short-term investments 4,290 2,414
------- -------
Total cash, cash equivalents, and
short-term investments 5,689 3,749
------- -------
Receivables:
Trade 1,901 2,505
Notes and other receivables 564 528
------- -------
Total receivables 2,465 3,033
------- -------
Costs and estimated earnings in excess
of billings 1,723 1,803
Inventories:
Raw materials 657 963
Finished goods and work-in-process 1,215 799
------- -------
Total inventories 1,872 1,762
------- -------
Deferred income tax benefits 414 229
Prepaid expenses and other current assets 193 141
------- -------
Total current assets 12,356 10,717
------- -------
Property, plant and equipment, at cost:
Land 27 27
Buildings and improvements 3,276 3,276
Machinery and equipment 3,581 3,331
------- -------
6,884 6,634
Less: accumulated depreciation 5,699 5,461
------- -------
Net property, plant and equipment 1,185 1,173
------- -------
Deferred income tax benefits 71 71
Investment in joint venture 538 530
Other assets, at cost less accumulated
amortization of $65 in 1997 and $57
in 1996 68 79
------- -------
Total assets $14,218 12,570
======= =======
See accompanying notes to financial statements.
- 3 -
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
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SI HANDLING SYSTEMS, INC.
Balance Sheets
(In Thousands, Except Share Data)
December March
Liabilities and Stockholders' Equity 1, 1996 3, 1996
- - - - - - - - - - - ------------------------------------ ---------- ---------
Current liabilities:
Current installments of long-term debt $ 20 20
Accounts payable 1,143 1,542
Customers' deposits and billings in excess
of costs and estimated earnings 2,544 1,112
Accrued salaries, wages, and commissions 712 929
Income taxes payable 549 275
Accrued royalties payable 343 593
Liabilities and deferred credits associated
with the AGV Asset Purchase Agreement 62 80
Accrued other liabilities 733 659
------- -------
Total current liabilities 6,106 5,210
------- -------
Long-term liabilities:
Long-term debt, excluding current installments:
Mortgages payable 32 49
------- -------
Total long-term debt 32 49
------- -------
Deferred compensation 111 101
------- -------
Total long-term liabilities 143 150
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value; authorized
5,000,000 shares; issued 2,458,806 shares
in 1997 and 2,441,341 shares in 1996 2,459 2,441
Additional paid-in capital 3,742 3,613
Retained earnings 1,768 1,156
------- -------
Total stockholders' equity 7,969 7,210
------- -------
Total liabilities and stockholders' equity $14,218 12,570
======= =======
See accompanying notes to financial statements.
- 4 -
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
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SI HANDLING SYSTEMS, INC.
Statements of Operations
(In Thousands, Except Share And Per Share Data)
Three Months Ended Nine Months Ended
-------------------- --------------------
December November December November
1, 1996 26, 1995 1, 1996 26, 1995
-------- -------- -------- --------
Net sales $ 4,929 6,702 15,982 19,683
Cost of sales 3,430 5,166 11,271 14,923
------- ------- ------- -------
Gross profit on sales 1,499 1,536 4,711 4,760
------- ------- ------- -------
Selling, general and
administrative
expenses 1,226 1,282 3,824 3,715
Net income associated
with the AGV Asset
Purchase Agreement -- (250) -- (250)
Product development
costs 59 99 165 282
Interest expense 1 5 6 13
Interest income (80) (49) (175) (117)
Equity in (income) loss
of joint venture 69 (31) (8) (172)
Other expense
(income), net (75) (29) (176) (127)
------- ------- ------- -------
1,200 1,027 3,636 3,344
------- ------- ------- -------
Earnings before
income taxes 299 509 1,075 1,416
Income tax expense 26 76 84 212
------- ------- ------- -------
Net earnings $ 273 433 991 1,204
======= ======= ======= =======
Net earnings per common
share and common
share equivalent* $ .11 .18 .40 .49
======= ======= ======= =======
Dividends per share** $ - - .10 .07
======= ======= ======= =======
<FN>
* On July 18, 1995, the Board of Directors declared a three-for-two stock
split that was distributed on August 11, 1995 to stockholders of record on
July 31, 1995. 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, which
were 2,467,000 and 2,480,000, respectively, at December 1, 1996 and November
26, 1995.
** Dividends per share for the nine months ended November 26, 1995 were
adjusted for the three-for-two stock split that was distributed on August
11, 1995 to stockholders of record on July 31, 1995.
</FN>
See accompanying notes to financial statements.
- 5 -
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
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SI HANDLING SYSTEMS, INC.
Statements of Cash Flows
(In Thousands)
Nine Months Ended
------------------------
December November
1, 1996 26, 1995
-------- --------
Cash flows from operating activities:
Net earnings $ 991 1,204
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation of plant and equipment 238 338
Amortization of intangibles 8 8
Equity in income of joint venture (8) (172)
Change in operating assets and liabilities:
Receivables 568 2,933
Costs and estimated earnings in
excess of billings 80 637
Inventories (110) (114)
Deferred income tax benefits (185) (4)
Prepaid expenses and other
current assets (52) 127
Other noncurrent assets 3 -
Accounts payable (399) (835)
Customers' deposits and billings
in excess of costs and estimated
earnings 1,432 480
Accrued salaries, wages, and
commissions (217) 289
Income taxes payable 274 216
Accrued royalties payable (250) (219)
Liabilities and deferred credits
associated with the AGV
Asset Purchase Agreement (18) (442)
Accrued other liabilities 74 148
Deferred compensation 10 1
------- -------
Net cash provided by operating activities 2,439 4,595
------- -------
Cash flows from investing activities:
Purchases of short-term investments (1,876) -
Additions to property, plant and equipment (250) (139)
------- -------
Net cash used in investing
activities (2,126) (139)
------- -------
See accompanying notes to financial statements.
- 6 -
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
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SI HANDLING SYSTEMS, INC.
Statements of Cash Flows (Continued)
(In Thousands)
Nine Months Ended
------------------------
December November
1, 1996 26, 1995
-------- --------
Cash flows from financing activities:
Sale of treasury stock in connection with
employee stock option plan - 33
Sale of common shares in connection
with employee stock option plan 12 --
Repayment of long-term debt, including
current portion (17) (16)
Increase in (repayment of) loan
payable to bank - (500)
Dividends paid on common stock (244) (164)
Dividends paid to stockholders for
fractional shares in connection
with three-for-two stock split - (1)
------- -------
Net cash used by financing
activities (249) (648)
------- -------
Increase in cash and cash equivalents 64 3,808
Cash and cash equivalents, beginning
of period 1,335 571
------- -------
Cash and cash equivalents, end of
period $ 1,399 4,379
======= =======
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 2 11
======= =======
Income taxes $ (5) --
======= =======
See accompanying notes to financial statements.
- 7 -
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
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SI HANDLING SYSTEMS, INC.
Statements of Cash Flows (Continued)
(In Thousands)
Nine Months Ended
-----------------------
December November
1, 1996 26, 1995
-------- --------
Supplemental disclosure of noncash
investing and financing activities:
Issuance of 27,431 common shares
in exchange for 12,814 common
shares delivered to the Company
by officers in connection with the
employee incentive stock option plan $ 135 -
======== =======
Issuance of 6,600 common shares
held in treasury in exchange for
3,162 common shares delivered to
treasury by an officer in connection
with the employee incentive stock
option plan $ - 21
======== =======
Relief of liability related to obligations
under the AGV Asset Purchase
Agreement due to disposal of
machinery and equipment $ - 98
======== =======
See accompanying notes to financial statements.
- 8 -
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
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SI HANDLING SYSTEMS, INC.
Notes To Financial Statements
Nine Months Ended December 1, 1996 and November 26, 1995
(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 increased to $1,399,000 during the
first nine months of fiscal 1997 from $1,335,000 at the end of fiscal 1996. The
increase resulted from cash provided by operating activities totaling $2,439,000
and proceeds of $12,000 from the sale of common stock in connection with the
employee stock option plan. Offsetting the increase in cash and cash equivalents
were repayments of long-term debt of $17,000, purchases of short-term
investments of $1,876,000, purchases of equipment of $250,000, and the payment
of $244,000 in cash dividends to stockholders. Funds provided by operating
activities during the first nine months of fiscal 1996 were $4,595,000.
- 9 -
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 1997. The term of the original arrangement was for three years with an
expiration date of July 31, 1996; however, effective March 1, 1996, the
Company's principal bank amended certain covenants to allow the Company greater
operating flexibility and extended the expiration date of the revolving credit
facility. Currently, the committed revolving credit facility has an expiration
date of August 31, 1999. During the first nine months of fiscal 1997, the
Company did not have any borrowings under the committed revolving credit
facility.
On May 15, 1996, SI/BAKER, INC. ("SI/BAKER") borrowed $2,000,000 from its
principal bank to fund short-term working capital requirements. The Company and
its joint venture partner, Automated Prescription Systems, Inc.("APS"), each
guaranteed fifty percent (50%) of the borrowing. SI/BAKER repaid the $2,000,000
short-term debt on June 4, 1996. Also, on August 15, 1996, SI/BAKER borrowed
$300,000 from its principal bank to fund short-term working capital
requirements. The $300,000 of short-term debt, guaranteed equally by both parent
companies, was repaid on August 26, 1996. The Company and APS may guarantee
future borrowings of its joint venture company if the circumstances surrounding
the borrowing transaction warrant the guarantee.
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) Nine Months Ended December 1, 1996 versus Nine Months Ended November 26,
------------------------------------------------------------------------
1995
---
The Company's net earnings for the first nine months of fiscal 1997 were
$991,000 compared to net earnings of $1,204,000 for the first nine months of
fiscal 1996.
- 10 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- - - - - - - - - - - ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
SI HANDLING SYSTEMS, INC.
Results Of Operations
- - - - - - - - - - - ---------------------
(a) Nine Months Ended December 1, 1996 versus Nine Months Ended November 26,
- - - - - - - - - - - --- ------------------------------------------------------------------------
1995 (Continued)
----
Backlog at the end of the third quarter of fiscal 1997 was $30,844,000 with
the majority of the backlog pertaining to Switch-Cart and Dispen-SI-matic
contracts. During the third quarter of fiscal 1997, the Company was the
recipient of orders totalling $27,465,000 with the majority attributable to
three large orders. In the first contract, the Company has been awarded a $16.9
million prime mechanization contract with the Defense Logistics Agency for the
Army Distribution Depot in Red River, Texas. This contract, one of the largest
in the Company's history, will take approximately two years to complete. The
second contract, totalling approximately $3.7 million, engages the Company to
automate the distribution process at one of the leading manufacturers of
vitamins in the health and beauty aids field. This project is anticipated to be
completed during the second quarter of fiscal 1998. The third contract,
totalling approximately $2.4 million, engages the Company to automate the
distribution process at one of the largest wholesale suppliers in the
pharmaceutical industry. This project is anticipated to be completed during the
second quarter of fiscal 1998.
Net sales of $15,982,000 for the first nine months of fiscal 1997 decreased
18.8% compared to net sales of $19,683,000 for the first nine months of fiscal
1996. The sales decrease in the first nine months of fiscal 1997 is attributed
primarily to a smaller backlog of orders entering fiscal 1997 ($10,488,000
versus a $16,665,000 backlog beginning fiscal 1996). The largest declines in
sales occurred in the Cartrac and Order Selection product lines. The decline in
the Order Selection product line was primarily attributable to the prior year
comparable period containing substantial revenues for a significant amount of
progress relating to a large contract which encompassed a small parcel sortation
system. Also, the decline experienced in the Company's Cartrac product line was
similar to the above mentioned decline associated with the Order Selection
product line whereby during the first nine months of fiscal 1996 a significant
amount of progress relating to two large automotive contracts, subsequently
completed by the end of fiscal 1996, resulted in substantial revenues.
Contributing to the lower backlog at the beginning of fiscal 1997, and hence
sales in the first nine 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 other customer activities.
Partially offsetting the declines mentioned above was an increase in sales of
the Company's Switch-Cart product, principally relating to performance on
contracts received during the fourth quarter of fiscal 1996 and the first
quarter of fiscal 1997. During the first nine months of fiscal 1996, the
Company's Switch-Cart product line accounted for an insignificant amount of
sales revenues.
- 11 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- - - - - - - - - - - ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
SI HANDLING SYSTEMS, INC.
Results Of Operations
- - - - - - - - - - - ---------------------
(a) Nine Months Ended December 1, 1996 versus Nine Months Ended November 26,
------------------------------------------------------------------------
1995 (Continued)
----
Gross profit as a percentage of sales was 29.5% for the first nine months
of fiscal 1997 compared to 24.2% for the first nine months of fiscal 1996. The
increase in the gross profit percentage for the first nine 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 nine months
of fiscal 1997 as well as to a higher content in contracts currently in progress
of proprietary product wherein margins are higher than contracts containing a
high degree of ancillary products. Partially offsetting the increase in the
gross profit percentage are additional contract costs arising from first-time
design inefficiencies relating to the Company's integration of new technology
from a licensee for applications in distribution operations. Also contributing
to the lower gross profit percentage in the fiscal 1996 comparable period were
primarily two factors: difficulties in executing and concluding several AGVS
contracts as additional costs became necessary to meet contractual throughput
and durability requirements and higher costs associated with first-time design
inefficiencies relating to the Company's new small parcel sortation system aimed
at improvements to mail order distribution operations.
Selling, general, and administrative expenses of $3,824,000 were higher by
$109,000 in the first nine months of fiscal 1997 than in the comparable fiscal
1996 period. The increase in selling, general, and administrative expenses is
due primarily to costs associated with product promotion and sales efforts in
response to increased quoting activities and aimed at expanding the Company's
customer base of business along with shareholder relations expenditures
associated with increasing the visibility of the Company. Also contributing to
the lower selling, general, and administrative expenses in the fiscal 1996
comparable period was the reversal of accrued legal fees near the end of the
third quarter of fiscal 1996 that were no longer required due to the settlement
of the Apogee litigation
During the first nine months of fiscal 1996, the Company recognized net
income of $250,000 associated with the AGV Asset Purchase Agreement. The net
income resulted from the reversal of accrued liabilities, in addition to the
legal fees mentioned above, no longer required due to the settlement of the
Apogee litigation near the end of the third quarter of fiscal 1996. The Company
incurred no expense or income related to the AGV Asset Purchase Agreement during
the comparable fiscal 1997 period.
Product development costs of $165,000 were lower by $117,000 in the first
nine months of fiscal 1997 than in the comparable fiscal 1996 period.
Development programs in the first nine 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
- 12 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- - - - - - - - - - - ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
SI HANDLING SYSTEMS, INC.
Results Of Operations
- - - - - - - - - - - ---------------------
(a) Nine Months Ended December 1, 1996 versus Nine Months Ended
-----------------------------------------------------------
November 26, 1995 (Continued)
-----------------
particular emphasis aimed at Dispen-SI-matic and Pick-to-Light Systems.
Development programs in the first nine months of fiscal 1996 included
improvements to the Order Selection and Sortation product lines, with particular
emphasis aimed at new technologies to provide Pick-to-Light and Small Parcel
Sortation Systems where orders had already been received or were imminent.
Interest income of $175,000 was higher by $58,000 in the first nine months
of fiscal 1997 than in the comparable fiscal 1996 period. The increase in
interest income is primarily attributable to the higher level of funds available
for short-term investments during the first nine months of fiscal 1997.
Equity in (income) loss of joint venture represented the Company's
proportionate share of its investment in SI/BAKER, INC. which is being accounted
for under the equity method. Despite the growth in SI/BAKER's revenues, the
unfavorable variance for the first nine months of fiscal 1997 in the equity in
(income) loss of joint venture was attributable to a combination of several
factors including competitively restrained prices, royalty costs associated with
the recently settled patent infringement litigation, and cost overruns
associated with both first-time products and difficulties in executing and
concluding several contracts as additional costs became necessary to meet
contractual throughput requirements. Also contributing to the unfavorable
variance were increased revenue-based royalty costs due to the parent companies,
increased product development costs, and increased selling, general, and
administrative expenses, including legal costs associated with the recently
settled patent infringement litigation.
The favorable variance in other expense (income), net, is primarily
attributable to an increase in royalty income related to the SI/BAKER, INC.
joint venture. Partially offsetting the increase was a reduction in purchase
discounts earned by the Company due to decreased purchasing requirements and the
write-off of the balance of a customer receivable due to its filing for
bankruptcy protection.
The Company incurred income tax expense of $84,000 during the first nine
months of fiscal 1997 compared to income tax expense of $212,000 in the
comparable fiscal 1996 period. Income tax expense for the first nine months of
fiscal 1997 and 1996 were less than the statutory rate 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.
- 13 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- - - - - - - - - - - ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
SI HANDLING SYSTEMS, INC.
Results Of Operations
- - - - - - - - - - - ---------------------
(b) Three Months Ended December 1, 1996 versus Three Months Ended November 26,
--------------------------------------------------------------------------
1995
----
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:
Selling, general, and administrative expenses for the third quarter of
fiscal 1997 decreased slightly from the comparable fiscal 1996 period. The
increase in selling, general, and administrative expenses for the nine month
period noted above occurred primarily in the first half of fiscal 1997, while
third quarter expenses for fiscal 1997 decreased slightly from the comparable
prior year period. Contributing to the slight decrease in selling, general, and
administrative expenses in the third quarter were cost savings associated with
delays in hiring replacement personnel for attrition experienced in the prior
fiscal year.
The favorable variance in other expense (income), net, is primarily
attributable to an increase in royalty income related to the SI/BAKER, INC.
joint venture.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- - - - - - - - - - - ------- -----------------
On April 15, 1996, a competitor filed suit in the United States District
Court for the Northern District of Illinois against the Company, its SI/BAKER
joint venture, and APS (the "defendants") alleging that certain of the products
of SI/BAKER infringed a patent held by the competitor. The competitor was
seeking monetary damages and a royalty related to sales by SI/BAKER of its
products.
On December 20, 1996, a Settlement Agreement was reached between the
defendants and the competitor. The competitor dismissed the action against the
defendants and granted a license to SI/BAKER allowing it the right to make, use,
sell, and offer for sale certain of the defendant's products ("licensed
products"). In exchange for the license, the defendants agreed to dismiss
counterclaims they brought against the competitor and pay the competitor a per
system royalty. On December 31, 1996, SI/BAKER satisfied a $600,000 liability
under the Settlement Agreement by paying the competitor for currently installed
licensed products or systems.
The term of the Settlement Agreement shall continue until the expiration of
the competitor's patent; however, SI/BAKER's status as sole licensee will remain
in effect until December 31, 2000 and all orders related to licensed products
received by SI/BAKER after December 31, 2000 will not be subject
- 14 -
SI HANDLING SYSTEMS, INC.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS (Continued)
- - - - - - - - - - - ------- -----------------
to royalty payments. All orders related to licensed products received prior to
the December 31, 2000 termination date will be subject to royalty payments.
In accordance with the terms of the Settlement Agreement, the defendants
neither acknowledge nor contest the competitor's claim of infringement of its
patent; however, the defendants did acknowledge the validity and enforceability
of the competitor's patent.
The management of both the Company and SI/BAKER believe that the provisions
of the Settlement Agreement will not have a material adverse effect on the
Company and SI/BAKER. The attainment of a Settlement Agreement removes the
uncertainty of litigation outcome and eliminates the diversion of court
proceedings.
The Company is presently engaged in certain other legal proceedings besides
the litigation noted above which, in the opinion of the Company counsel, present
no significant risk of material loss to the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - - - - - - - - - - ------- --------------------------------
(a) Exhibit 27 - Financial Data Schedule
(b) During the quarter ended December 1, 1996, a Form 8-K was filed on
November 4, 1996. The filing pertained to projections that were forward
looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934.
- 15 -
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: January 14, 1997
---------------------------
- 16 -
SCHEDULE A
SI/BAKER, INC.
FINANCIAL STATEMENTS
NOVEMBER 30, 1996
- 17 -
SI/BAKER, INC.
Balance Sheets
November 30, 1996 and February 29, 1996
(In Thousands, Except Share Data)
November February
30, 1996 29, 1996
-------- --------
Assets
- - - - - - - - - - - ------
Current assets:
Cash and cash equivalents, principally
time deposits $ 866 327
Receivables:
Trade 1,688 523
Other receivables 12 -
------ ------
Total receivables 1,700 523
------ ------
Costs and estimated earnings in
excess of billings 1,791 3,413
Inventories - purchased parts 70 16
Deferred income tax benefits 161 161
Prepaid income taxes 336 -
Prepaid expenses and other current
assets 104 5
------ ------
Total current assets 5,028 4,445
------ ------
Machinery and equipment, at cost 100 75
Less: accumulated depreciation 38 23
------ ------
Net machinery and equipment 62 52
------ ------
Equipment leased to customer 487 478
Less: accumulated depreciation 96 -
------ ------
Net equipment leased to customer 391 478
------ ------
Total assets $5,481 4,975
====== ======
- 18 -
SI/BAKER, INC.
Balance Sheets
November 30, 1996 and February 29, 1996
(In Thousands, Except Share Data)
November February
30, 1996 29, 1996*
-------- ---------
Liabilities and Stockholders' Equity
- - - - - - - - - - - ------------------------------------
Current liabilities:
Accounts payable:
Trade $ 779 798
Affiliated companies 462 1,080
------ ------
Total accounts payable 1,241 1,878
------ ------
Customers' deposits and billings in
excess of costs and estimated
earnings 1,773 1,007
Accrued salaries, wages, and
commissions 159 272
Income taxes payable - 194
Accrued royalties payable due
parent companies 174 134
Accrued royalties payable related
to litigation settlement 609 250
Accrued product warranties 351 133
Accrued audit and legal fees 72 21
Accrued other liabilities 20 20
------ ------
Total current liabilities 4,399 3,909
------ ------
Deferred income tax liability 6 6
------ ------
Contingencies
Stockholders' equity:
Common stock, $1 par value; authorized
1,000 shares; issued 200 shares - -
Additional paid-in capital 200 200
Retained earnings 876 860
------ ------
Total stockholders' equity 1,076 1,060
------ ------
Total liabilities and stockholders'
equity $5,481 4,975
====== ======
<FN>
*Certain amounts have been reclassified to conform with presentation adopted in
fiscal 1997.
</FN>
- 19 -
SI/BAKER, INC.
Statements of Operations
Nine Months Ended November 30, 1996 and 1995
(In Thousands)
Three Months Ended Nine Months Ended
-------------------- --------------------
November November November November
30, 1996 30, 1995 30, 1996 30, 1995
-------- -------- -------- --------
Net sales $ 4,353 1,810 11,480 6,035
Cost of sales 4,147 1,303 9,988 4,353
------- ------- ------- -------
Gross profit on sales 206 507 1,492 1,682
------- ------- ------- -------
Selling, general and
administrative
expenses 219 298 823 741
Product development
costs 74 40 224 131
Royalty expense to
parent companies, net 186 73 459 239
Interest income (24) (23) (35) (71)
Interest expense 1 - 9 -
Other expense
(income), net (15) - (13) 1
------- ------- ------- -------
441 388 1,467 1,041
------- ------- ------- -------
Earnings (loss) before
income taxes (235) 119 25 641
Income tax expense
(benefit) (96) 56 9 297
------- ------- ------- -------
Net earnings (loss) $ (139) 63 16 344
======= ======= ========= ========
- 20 -
SI/BAKER, INC.
Statements of Cash Flows
Nine Months Ended November 30, 1996 and 1995
(In Thousands)
Nine Months Ended
-------------------------
November November
30, 1996 30, 1995*
-------- ---------
Cash flow from operating activities:
Net earnings $ 16 344
Adjustments to reconcile net earnings
to net cash provided (used) by
operating activities:
Depreciation of machinery and
equipment 111 7
Changes in operating assets and
liabilities:
Receivables (1,177) 434
Costs and estimated earnings
in excess of billings 1,622 (729)
Inventories - purchased parts (54) -
Prepaid income taxes (336) -
Prepaid expenses and other
current assets (99) (8)
Accounts payable (637) 123
Customers' deposits and
billings in excess of costs
and estimated earnings 766 (657)
Accrued salaries, wages, and
commissions (113) 40
Income taxes payable (194) 235
Accrued royalties payable due
parent companies 40 (183)
Accrued royalties payable related
to litigation settlement 359 -
Accrued product warranties 218 14
Accrued audit and legal fees 51 27
Accrued other liabilities - 16
------- -------
Net cash provided (used) by operating
activities 573 (337)
------- -------
Cash flows used in investing activities:
Additions to machinery and equipment (25) (11)
Equipment leased to customer (9) -
------- -------
Net cash used by investing activities (34) (11)
------- -------
Increase (decrease) in cash and cash
equivalents 539 (348)
Cash and cash equivalents, beginning of period 327 1,830
------- -------
Cash and cash equivalents, end of period $ 866 1,482
======= =======
- 21 -
SI/BAKER, INC.
Statements of Cash Flows (Continued)
Nine Months Ended November 30, 1996 and 1995
(In Thousands)
Nine Months Ended
-------------------------
November November
30, 1996 30, 1995*
-------- ---------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Income taxes $ 539 63
==== ====
Interest $ 9 -
==== ====
<FN>
*Certain amounts have been reclassified to conform with presentation adopted in
fiscal 1997.
</FN>