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The
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SI Technologies is a designer, manufacturer and marketer of
high-performance industrial sensors, weighing and factory automation
systems. The proprietary products of our businesses share common
technologies, manufacturing processes, customers and enjoy leading
positions in the niche markets they serve. Product development
and acquisitions have diversified the Company's revenue base
and positioned SI as an integrator of technologies, products
and companies that are enabling SI to become a leading supplier
of innovative force measurement and automation solutions to
a global customer base. SI products are used in a wide variety
of industries including aerospace, aviation, food processing
and packaging, forestry, manufacturing, mining, transportation,
warehousing and distribution, and waste management. Headquartered
in Tustin, California, the company has over 220 employees throughout
its operations in North America and Europe. SI stock is traded
on the NASDAQ under the symbol SISI. |
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SI stainless steel sensor products
are typically found in the food processing and packaging industry
in batching, blending, mixing, fill- by-weight, and final product
inspection applications. |
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Corporate
Strategy |
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SI
Technologies' business strategy is two fold. First, the strategy
is focused on increasing sales to existing customers, broadening
channels of distribution, developing new innovative products,
geographic expansion and continuous improvement of efficiencies
and customer service. In these pursuits, all business units
continually work to leverage the expanding resources of our
growing company. This includes consolidating operations for
greater manufacturing efficiencies and pooling of human resources,
utilizing economies of scale in our collective purchase of materials
and administrative services, sharing of best practices and integration
of technology and know-how to design and build better products,
and capitalizing on revenue synergy among complementary products
to common customers and markets. Second, SI intends to grow
through the acquisition of technologies, products and companies
that can be tightly integrated with the Company’s existing
production capabilities and marketing and sales infrastructure.
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(Above)
In the transportation, warehousing and distribution industry,
SI products weigh freight and vehicles for payload management
and automate billing and inventory management processes. |
(Left) From sensor and control products used for product measurement
and inspection, to engineered equipment weighing steel billets
in mills, to transporters loading 50-ton dies on and off stamping
presses, SI products are used throughout the automotive, durable
goods and capital equipment manufacturing industries. |
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Dear Shareholders,
We are pleased to report that your Company remained profitable
during Fiscal 2003, despite continued softness and highly
competitive conditions in our primary markets. |
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Total net sales increased 1.3% to $33.0 million
(vs. $32.6 million), with sales of Industrial Measurement
products (primarily force sensors for weighing equipment
and other machinery) rising 4.4% and sales of Industrial
Automation products (mostly factory automation systems)
declining 9.5%. Net income (including income tax benefits)
declined to $1,197,000, or $0.32 per diluted share, compared
with $1,673,000, or $0.47 per diluted share, in the previous
fiscal year.
Gross profit margin narrowed to 34.9% of sales
(vs. 35.9%), due primarily to continued downward pressure
on the price of many products, along with
a shift in sales mix towards lower-margin products during
the second half of the year.
Selling, general and administrative expenses increased
6.4% as the Company expanded its sales and marketing efforts
in order to leverage improved manufacturing efficiencies
into future market share gains and the pursuit of new
business opportunities.
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Research,
development and engineering expenses increased 12.8% as
the Company invested in expanding its capabilities with
global outsourcing partners and initiated joint product
cost reduction, feature enhancement, and expansion programs.
In our Industrial Measurement business, such initiatives
involve enhancing and reducing the cost of lift truck
scales for the freight market and portable wheelload weighers
for the weight enforcement market. An expansion in our
low capacity load cell product line will better position
the Company to serve the food processing, test/measurement
and medical industries, all three of which are experiencing
higher growth rates than other markets served by many
of our traditional products.
Operating income, after an additional restructuring charge
of $486,000 representing the balance of lease payments
due on a plant in Maryland that the Company closed in
Fiscal 2002 and has been unable to sublease, declined
to $942,000, compared with $1,943,000 in the previous
fiscal year.
Although operating results in the most recent fiscal year
were disappointing, it is important for our shareholders
to realize the significance of actions taken during the
past 30 months to enhance the competitiveness and long-term
profit potential of
SI Technologies, Inc. |
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During the second half of Fiscal 2001, we initiated
a three-pronged corporate restructuring plan designed
to improve the utilization of our assets and position
the Company for long-term profitability despite
uncertainties surrounding the outlook for worldwide
capital spending trends.
The restructuring program called for (1) the consolidation of
our Industrial Measurement components and weighing equipment
operations in North America into one facility and business unit;
(2) outsourcing the production of certain high-volume, low-margin
component products to manufacturing partners in low labor cost
countries; and (3) downsizing our Southern California facility
and operations, commensurate with the outsourcing plan, in order
to further reduce expenses.
We are pleased to report that we have fully implemented the
facilities consolidation program, allowing the Company to reduce
corporate overhead and operating expenses by more than $2.6
million annually. The program included the closure of several
facilities and the consolidation of our North American Industrial
Measurement businesses into one plant in Tustin, California.
Our global outsourcing partnership initiative is fifty
percent complete. By developing strategic relationships with
manufacturing partners overseas,
Respectfully submitted, |
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we are continually driving product costs (labor, materials and
overhead) down, while concurrently redesigning products for
maximum cost and performance efficiency. Our growing partner
network was a key contributor to the Company’s ability
to remain profitable despite downward price pressures in many
of our markets during Fiscal 2003.
To date, the depressed industrial real estate market in Southern
California has not allowed us to realize the cost-savings inherent
in the subleasing of our high-cost Tustin facility. However,
our lease on the Tustin plant expires in September 2004, and
a subsequent move into more cost-efficient facilities will result
in significant additional cost savings.
In summary, while the near-term outlook for our markets remains
clouded by uncertain economic conditions, we are confident that
SI Technologies will reap further benefits from the corporate
restructuring program in coming years. Longer term, a recovery
in global capital spending should allow us to leverage our more
efficient operating structure into higher profitability.
We would like to close with a message of heartfelt thanks to
all of our employees, who have worked extremely hard and effectively
to re-position the Company for long-term success during the
past couple of years. Their efforts are clearly reflected in
the 84% increase in SI Technologies’ common stock price
on The NASDAQ Stock Market during the twelve months ended November
17, 2003, and our entire team is dedicated to the further enhancement
of long-term shareholder values. |
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Rick
A. Beets
President and Chief Executive Officer |
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Ralph
E. Crump
Chairman |
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