ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ohio | 34-0553950 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
970 East 64th Street, Cleveland Ohio | 44103 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | ý |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net sales | $ | 31,004 | $ | 28,717 | $ | 87,240 | $ | 73,412 | |||||||
Cost of goods sold | 28,009 | 23,750 | 78,574 | 61,742 | |||||||||||
Gross profit | 2,995 | 4,967 | 8,666 | 11,670 | |||||||||||
Selling, general and administrative expenses | 4,157 | 5,863 | 12,907 | 14,793 | |||||||||||
Amortization of intangible assets | 633 | 520 | 1,961 | 1,560 | |||||||||||
Loss on disposal of operating assets | — | 61 | 32 | 63 | |||||||||||
Operating loss | (1,795 | ) | (1,477 | ) | (6,234 | ) | (4,746 | ) | |||||||
Interest income | (9 | ) | (3 | ) | (41 | ) | (10 | ) | |||||||
Interest expense | 428 | 83 | 1,273 | 191 | |||||||||||
Foreign currency exchange (gain) loss, net | (8 | ) | 109 | 27 | 52 | ||||||||||
Other income, net | (107 | ) | (180 | ) | (322 | ) | (394 | ) | |||||||
Loss from continuing operations before income tax benefit | (2,099 | ) | (1,486 | ) | (7,171 | ) | (4,585 | ) | |||||||
Income tax benefit | (1,049 | ) | (479 | ) | (3,224 | ) | (1,373 | ) | |||||||
Loss from continuing operations | (1,050 | ) | (1,007 | ) | (3,947 | ) | (3,212 | ) | |||||||
Income from discontinued operations, net of tax | — | — | — | 736 | |||||||||||
Net loss | $ | (1,050 | ) | $ | (1,007 | ) | $ | (3,947 | ) | $ | (2,476 | ) | |||
Loss per share from continuing operations | |||||||||||||||
Basic | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.59 | ) | |||
Diluted | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.59 | ) | |||
Income per share from discontinued operations, net of tax | |||||||||||||||
Basic | $ | — | $ | — | $ | — | $ | 0.14 | |||||||
Diluted | $ | — | $ | — | $ | — | $ | 0.14 | |||||||
Net loss per share | |||||||||||||||
Basic | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.45 | ) | |||
Diluted | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.45 | ) | |||
Weighted-average number of common shares (basic) | 5,466 | 5,448 | 5,460 | 5,435 | |||||||||||
Weighted-average number of common shares (diluted) | 5,466 | 5,454 | 5,460 | 5,449 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net loss | $ | (1,050 | ) | $ | (1,007 | ) | $ | (3,947 | ) | $ | (2,476 | ) | |||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustment | (443 | ) | — | (128 | ) | — | |||||||||
Retirement plan liability adjustment, net of tax | 134 | 137 | 390 | 398 | |||||||||||
Interest rate swap agreement adjustment, net of tax | (50 | ) | — | (50 | ) | 5 | |||||||||
Comprehensive loss | $ | (1,409 | ) | $ | (870 | ) | $ | (3,735 | ) | $ | (2,073 | ) |
June 30, 2016 | September 30, 2015 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 819 | $ | 667 | |||
Receivables, net of allowance for doubtful accounts of $758 and $1,127, respectively | 29,333 | 36,024 | |||||
Inventories, net | 29,325 | 27,943 | |||||
Refundable income taxes | 2,607 | 2,516 | |||||
Deferred income taxes | 2,753 | 2,785 | |||||
Prepaid expenses and other current assets | 1,870 | 1,600 | |||||
Total current assets | 66,707 | 71,535 | |||||
Property, plant and equipment, net | 50,318 | 54,865 | |||||
Intangible assets, net | 11,716 | 13,265 | |||||
Goodwill | 15,792 | 16,480 | |||||
Other assets | 451 | 544 | |||||
Total assets | $ | 144,984 | $ | 156,689 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Current maturities of long-term debt | $ | 9,507 | $ | 10,503 | |||
Accounts payable | 16,348 | 14,201 | |||||
Accrued liabilities | 7,832 | 8,446 | |||||
Total current liabilities | 33,687 | 33,150 | |||||
Long-term debt, net of current maturities | 29,905 | 38,426 | |||||
Deferred income taxes | 5,603 | 4,849 | |||||
Pension liability | 6,379 | 6,743 | |||||
Other long-term liabilities | 481 | 452 | |||||
Shareholders’ equity: | |||||||
Serial preferred shares, no par value, authorized 1,000 shares | — | — | |||||
Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares – 5,525 at June 30, 2016 and 5,468 at September 30, 2015 | 5,525 | 5,468 | |||||
Additional paid-in capital | 9,315 | 9,778 | |||||
Retained earnings | 65,865 | 69,811 | |||||
Accumulated other comprehensive loss | (11,776 | ) | (11,988 | ) | |||
Total shareholders’ equity | 68,929 | 73,069 | |||||
Total liabilities and shareholders’ equity | $ | 144,984 | $ | 156,689 |
(Unaudited, Amounts in thousands) | Nine Months Ended June 30, | ||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (3,947 | ) | $ | (2,476 | ) | |
Income from discontinued operations, net of tax | — | (736 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | |||||||
Depreciation and amortization | 8,021 | 5,413 | |||||
Amortization on debt issuance cost | 109 | — | |||||
Loss on disposal of operating assets | 32 | 63 | |||||
LIFO (income) expense | (144 | ) | 558 | ||||
Share transactions under company stock plan | (406 | ) | 750 | ||||
Purchase price inventory adjustment | 266 | — | |||||
Other | (101 | ) | — | ||||
Other long-term liabilities | 201 | (64 | ) | ||||
Deferred income taxes | 619 | (2 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Receivables | 6,660 | 224 | |||||
Inventories | (1,555 | ) | (9,090 | ) | |||
Refundable taxes | (91 | ) | (823 | ) | |||
Prepaid expenses and other current assets | (268 | ) | (473 | ) | |||
Other assets | 32 | (32 | ) | ||||
Accounts payable | 2,534 | 2,306 | |||||
Other accrued liabilities | (79 | ) | 1,912 | ||||
Accrued income and other taxes | (508 | ) | (73 | ) | |||
Net cash provided by (used for) operating activities of continuing operations | 11,375 | (2,543 | ) | ||||
Net cash used for operating activities of discontinued operations | — | (479 | ) | ||||
Cash flows from investing activities: | |||||||
Acquisition of business | 270 | — | |||||
Proceeds from disposal of operating assets | — | 2 | |||||
Capital expenditures | (2,034 | ) | (7,174 | ) | |||
Net cash used for investing activities of continuing operations | (1,764 | ) | (7,172 | ) | |||
Net cash provided by investing activities of discontinued operations | — | 1,422 | |||||
Cash flows from financing activities: | |||||||
Proceeds on long term debt | — | 20,000 | |||||
Payments on long term debt | (3,866 | ) | (4,000 | ) | |||
Proceeds from revolving credit agreement | 35,533 | 58,802 | |||||
Repayments of revolving credit agreement | (40,320 | ) | (46,044 | ) | |||
Payment of debt issue costs | — | (724 | ) | ||||
Short-term debt borrowings | 1,904 | — | |||||
Short-term debt repayments | (2,728 | ) | — | ||||
Cash dividends paid | — | (1,090 | ) | ||||
Net cash provided by (used for) financing activities of continuing operations | (9,477 | ) | 26,944 | ||||
Increase in cash and cash equivalents | 134 | 18,172 | |||||
Cash and cash equivalents at the beginning of the period | 667 | 4,596 | |||||
Effect of exchange rate changes on cash and cash equivalents | 18 | — | |||||
Cash and cash equivalents at the end of the period | $ | 819 | $ | 22,768 | |||
Supplemental disclosure of cash flow information of continuing operations: | |||||||
Cash paid for interest | $ | (1,059 | ) | $ | (189 | ) | |
Cash paid (received) for income taxes, net | 2,885 | 31 |
1. | Summary of Significant Accounting Policies |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Loss from continuing operations | $ | (1,050 | ) | $ | (1,007 | ) | $ | (3,947 | ) | $ | (3,212 | ) | |||
Income from discontinued operations, net of tax | — | — | — | 736 | |||||||||||
Net loss | $ | (1,050 | ) | $ | (1,007 | ) | $ | (3,947 | ) | $ | (2,476 | ) | |||
Weighted-average common shares outstanding (basic) | 5,466 | 5,448 | 5,460 | 5,435 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Restricted shares | — | 6 | — | 13 | |||||||||||
Performance shares | — | — | — | 1 | |||||||||||
Weighted-average common shares outstanding (diluted) | 5,466 | 5,454 | 5,460 | 5,449 | |||||||||||
Net loss per share – basic | |||||||||||||||
Continuing operations | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.59 | ) | |||
Discontinued operations | — | — | — | 0.14 | |||||||||||
Net loss | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.45 | ) | |||
Net loss per share – diluted: | |||||||||||||||
Continuing operations | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.59 | ) | |||
Discontinued operations | — | — | — | 0.14 | |||||||||||
Net loss | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.72 | ) | $ | (0.45 | ) | |||
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share | 38 | 15 | 23 | 15 |
2. | Inventories |
June 30, 2016 | September 30, 2015 | ||||||
Raw materials and supplies | $ | 6,982 | $ | 7,212 | |||
Work-in-process | 12,915 | 11,088 | |||||
Finished goods | 9,428 | 9,643 | |||||
Total inventories | $ | 29,325 | $ | 27,943 |
3. | Accumulated Other Comprehensive Loss |
June 30, 2016 | September 30, 2015 | ||||||
Foreign currency translation adjustment | $ | (5,859 | ) | $ | (5,731 | ) | |
Retirement plan liability adjustment, net of tax | (5,867 | ) | (6,257 | ) | |||
Interest rate swap agreement adjustment, net of tax | (50 | ) | — | ||||
Total accumulated other comprehensive loss | $ | (11,776 | ) | $ | (11,988 | ) |
4. | Long-Term Debt |
June 30, 2016 | September 30, 2015 | ||||||
Revolving credit agreement | $ | 11,713 | $ | 16,500 | |||
Foreign subsidiary borrowings | 10,650 | 13,197 | |||||
Capital lease obligations | 163 | 252 | |||||
Term loan | 17,143 | 19,286 | |||||
Less: unamortized debt issuance cost | (257 | ) | (306 | ) | |||
Term loan less unamortized debt issuance cost | 16,886 | 18,980 | |||||
Total Debt | 39,412 | 48,929 | |||||
Less – current maturities | (9,507 | ) | (10,503 | ) | |||
Total long-term debt | $ | 29,905 | $ | 38,426 |
6. | Retirement Benefit Plans |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Service cost | $ | 69 | $ | 37 | $ | 209 | $ | 110 | |||||||
Interest cost | 256 | 244 | 767 | 732 | |||||||||||
Expected return on plan assets | (407 | ) | (418 | ) | (1,222 | ) | (1,253 | ) | |||||||
Amortization of net loss | 210 | 136 | 630 | 409 | |||||||||||
Net periodic cost | $ | 128 | $ | (1 | ) | $ | 384 | $ | (2 | ) |
7. | Stock-Based Compensation |
8. | Business Acquisition |
Balance at September 30, 2015 | $ | 16,480 | |
Goodwill purchase price adjustment | (589 | ) | |
Currency translation | (99 | ) | |
Balance at June 30, 2016 | $ | 15,792 |
Three Months Ended June 30, 2015 (unaudited) | Nine Months Ended June 30, 2015 (unaudited) | |||||
Net sales | $ | 34,157 | 89,282 | |||
Net loss | $ | (1,562 | ) | (2,410 | ) | |
Net loss per share (basic) | $ | (0.29 | ) | (0.44 | ) | |
Net loss per share (diluted) | $ | (0.29 | ) | (0.44 | ) |
9. | Subsequent Events |
• | Neither EBITDA nor Adjusted EBITDA reflects the interest expense, or the cash requirements necessary to service interest payments on indebtedness; |
• | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such replacements; |
• | The omission of the substantial amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA; and |
• | Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations. |
Dollars in thousands | Three Months Ended | Nine Months Ended | |||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net loss | $ | (1,050 | ) | $ | (1,007 | ) | $ | (3,947 | ) | $ | (2,476 | ) | |||
Less: Income from discontinued operations, net of tax | — | — | — | 736 | |||||||||||
Loss from continuing operations | (1,050 | ) | (1,007 | ) | (3,947 | ) | (3,212 | ) | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization expense | 2,655 | 1,878 | 8,021 | 5,413 | |||||||||||
Interest expense, net | 419 | 80 | 1,232 | 181 | |||||||||||
Income tax benefit | (1,049 | ) | (479 | ) | (3,224 | ) | (1,373 | ) | |||||||
EBITDA | 975 | 472 | 2,082 | 1,009 | |||||||||||
Adjustments: | |||||||||||||||
Foreign currency exchange (gain) loss, net (1) | (8 | ) | 109 | 27 | 52 | ||||||||||
Other income, net (2) | (107 | ) | (180 | ) | (322 | ) | (394 | ) | |||||||
Loss on disposal of operating assets (3) | — | 61 | 32 | 63 | |||||||||||
Inventory purchase accounting adjustments (4) | — | — | 266 | — | |||||||||||
Non-recurring severance expense (5) | — | — | — | 964 | |||||||||||
Equity compensation expense (benefit) (6) | 227 | 385 | (236 | ) | 785 | ||||||||||
Acquisition transaction-related expenses (7) | — | 1,785 | (94 | ) | 2,553 | ||||||||||
LIFO impact (8) | (136 | ) | 373 | (144 | ) | 558 | |||||||||
Orange expansion (9) | 388 | 192 | 775 | 480 | |||||||||||
Executive search (10) | — | — | 223 | — | |||||||||||
Adjusted EBITDA | $ | 1,339 | $ | 3,197 | $ | 2,609 | $ | 6,070 |
(1) | Represents the gain or loss from changes in the exchange rates between the functional currency and the foreign currency in which the transaction is denominated. |
(2) | Represents miscellaneous non-operating income or expense, primarily rental income from the Company's Irish subsidiary. |
(3) | Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company’s books. |
(4) | Represents accounting adjustments to value inventory at fair market value associated with the acquisition of a business that was charged to cost of goods sold when the inventory was sold. |
(5) | Represents severance expense related to the departure of an executive officer. Included in the $964 is $233 of equity based compensation expense recognized by the Company under its 2007 Long-term Incentive Plan. |
(6) | Represents the equity-based compensation expense (benefit) recognized by the Company under its 2007 Long-Term Incentive Plan. |
(7) | Represents transaction-related costs such as legal, financial, tax due diligence expenses, valuation services costs, and executive travel that are required to be expensed as incurred. |
(8) | Represents the increase in the reserve for inventories for which cost is determined using the last in, first out (“LIFO”) method. |
(9) | Represents costs related to expansion of one of the plant locations that are required to be expensed as incurred. |
(10) | Represents costs incurred for executive search fees as mentioned in its Form 8-K filing on March 18, 2016. |
(Dollars in millions) | Nine Months Ended June 30, | Increase (Decrease) | |||||||||
Net Sales | 2016 | 2015 | |||||||||
Aerospace components for: | |||||||||||
Fixed wing aircraft | $ | 45.8 | $ | 41.1 | $ | 4.7 | |||||
Rotorcraft | 13.9 | 18.6 | (4.7 | ) | |||||||
Energy components for power generation units | 23.1 | 6.9 | 16.2 | ||||||||
Commercial product and other revenue | 4.4 | 6.8 | (2.4 | ) | |||||||
Total | $ | 87.2 | $ | 73.4 | $ | 13.8 |
Weighted Average Interest Rate Nine Months Ended June 30, | Weighted Average Outstanding Balance Nine Months Ended June 30, | ||||||||
2016 | 2015 | 2016 | 2015 | ||||||
Revolving credit agreement | 3.7 | % | 1.2 | % | $ 14.1 million | $ 11.7 million | |||
Term note | 3.5 | % | 2.6 | % | $ 18.6 million | $ 3.7 million | |||
Foreign term debt | 2.5 | % | — | % | $ 12.4 million | $ 0.0 million |
(Dollars in millions) | Three Months Ended June 30, | Increase (Decrease) | |||||||||
Net Sales | 2016 | 2015 | |||||||||
Aerospace components for: | |||||||||||
Fixed wing aircraft | $ | 16.4 | $ | 16.3 | $ | 0.1 | |||||
Rotorcraft | 4.8 | 7.3 | (2.5 | ) | |||||||
Energy components for power generation units | 8.6 | 3.6 | 5.0 | ||||||||
Commercial product and other revenue | 1.2 | 1.5 | (0.3 | ) | |||||||
Total | $ | 31.0 | $ | 28.7 | $ | 2.3 |
Weighted Average Interest Rate Three Months Ended June 30, | Weighted Average Outstanding Balance Three Months Ended June 30, | ||||||||
2016 | 2015 | 2016 | 2015 | ||||||
Revolving credit agreement | 4.4 | % | 1.3 | % | $ 13.4 million | $ 16.2 million | |||
Term note | 3.9 | % | 3.0 | % | $ 17.9 million | $ 3.9 million | |||
Foreign term debt | 2.5 | % | — | % | $ 11.2 million | $ 0.0 million |
• | Inadequate journal entry approval controls related to the posting of unapproved manual journal entries, and |
• | Lack of effective execution of controls related to the testing of completeness and accuracy of system-generated reports. |
• | Lack of proper reconciliations performed and the precision and sufficiency of reconciliation reviews performed, and |
• | Improper application of cash receipts to outstanding receivables balances. |
Exhibit No. | Description | |
2.1 | Stock Purchase Agreement between Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated March 16, 2015 filed as Exhibit 2.1 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference | |
2.2 | Amendment to the Stock Purchase Agreement Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated June 30, 2015 filed as Exhibit 2.2 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference | |
3.1 | Third Amended Articles of Incorporation of SIFCO Industries, Inc., filed as Exhibit 3(a) of the Company’s Form 10-Q dated March 31, 2002, and incorporated herein by reference | |
3.2 | SIFCO Industries, Inc. Amended and Restated Code of Regulations dated January 28, 2016, filed as Exhibit 3.2 of the Company’s Form 10-K dated September 30, 2015, and incorporated herein by reference | |
4.1 | Credit and Security Agreement among Fifth Third Bank and SIFCO Industries, Inc. (and subsidiaries) dated December 10, 2010, filed as Exhibit 4.23 to the Company’s Form 8-K dated December 10, 2010 and incorporated herein by reference |
Exhibit No. | Description | |
4.2 | First Amendment and Joinder to Credit and Security Agreement among Fifth Third Bank and SIFCO Industries, Inc. (and subsidiaries) dated October 28, 2011, filed as Exhibit 4.2 to the Company’s Form 8-K dated October 28, 2011 and incorporated herein by reference | |
4.3 | Second Amendment and Joinder to Credit and Security Agreement among Fifth Third Bank and SIFCO Industries, Inc. (and subsidiaries) dated July 23, 2013, filed as Exhibit 4.3 to the Company’s Form 8-K dated July 23, 2013 and incorporated herein by reference | |
4.4 | Third Amendment and Joinder to Credit and Security Agreement among Fifth Third Bank and SIFCO Industries, Inc. (and subsidiaries) dated September 25, 2014, filed as Exhibit 99.1 to the Company’s Form 8-K dated September 29, 2014 and incorporated herein by reference | |
4.5 | Credit and Security Agreement among KeyBank National Association and SIFCO Industries, Inc. (and subsidiaries) dated June 26, 2015, filed as Exhibit 4.1 to the Company’s Form 8-K dated July 2, 2015 and incorporated herein by reference | |
4.6 | First Amendment to Credit and Security Agreement among KeyBank National Association and SIFCO Industries, Inc. (and subsidiaries) dated August 5, 2016 filed as Exhibit 4.1 to the Company’s Form 8-K dated August 10, 2016 and incorporated herein by reference | |
9.1 | Voting Trust Agreement dated January 31, 2013, filed as Exhibit 9.1 to the Company’s Form 10-Q dated December 31, 2012 and incorporated herein by reference | |
9.2 | Voting Trust Extension Agreement dated January 15, 2015, filed as Exhibit 9.2 to the Company's Form 10-Q dated December 31, 2014 and incorporated herein by reference | |
10.1 | SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2008 Annual Meeting to Shareholders dated December 14, 2007, and incorporated herein by reference | |
10.2 | Letter Agreement between the Company and Jeffrey P. Gotschall, dated August 12, 2009 filed as Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2009 and incorporated herein by reference | |
10.3 | Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and incorporated herein by reference | |
10.4 | Change in Control Agreement and Separation Agreement between the Company and Peter W. Knapper, effective June 29, 2016, filed as Exhibit 10.2 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference | |
10.5 | Change in Control Agreement between the Company and Salvatore Incanno, dated May 11, 2015, filed as Exhibit 10.1 to the Company's Form 8-K dated May 11, 2015, and incorporated herein by reference | |
10.6 | Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.6 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference | |
10.7 | Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.7 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference | |
10.8 | Award agreement between the Company and Peter W. Knapper, granted June 29, 2016, filed as Exhibit 10.1 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference | |
14.1 | Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 10-K dated September 30, 2003, and incorporated herein by reference | |
*31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) | |
*31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) | |
*32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 | |
*32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
*101 | The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2016 filed with the SEC on August 9, 2016, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended June 30, 2016 and 2015, (ii) Consolidated Condensed Statements of Comprehensive Income for the fiscal periods ended June 30, 2016 and 2015, (iii) Consolidated Condensed Balance Sheets at June 30, 2016 and September 30, 2015, (iv) Consolidated Condensed Statements of Cash Flow for the fiscal periods ended June 30, 2016 and 2015, and (iv) the Notes to the Consolidated Condensed Financial Statements. |
SIFCO Industries, Inc. | ||
(Registrant) | ||
Date: August 9, 2016 | /s/ Peter W. Knapper | |
Peter W. Knapper | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: August 9, 2016 | /s/ Salvatore Incanno | |
Salvatore Incanno | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
1. | I have read this Quarterly Report on Form 10-Q of SIFCO Industries, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 9, 2016 | /s/ Peter W. Knapper | |
Peter W. Knapper | ||
President and Chief Executive Officer |
1. | I have read this Quarterly Report on Form 10-Q of SIFCO Industries, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 9, 2016 | /s/ Salvatore Incanno | |
Salvatore Incanno | ||
Chief Financial Officer | ||
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 9, 2016 | /s/ Peter W. Knapper | |
Peter W. Knapper | ||
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: August 9, 2016 | /s/ Salvatore Incanno | |
Salvatore Incanno | ||
Chief Financial Officer | ||
Document and Entity Information |
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Document Documentand Entity Information [Abstract] | |
Entity Registrant Name | SIFCO INDUSTRIES INC |
Entity Central Index Key | 0000090168 |
Current Fiscal Year End Date | --09-30 |
Entity Filer Category | Smaller Reporting Company |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2016 |
Document Fiscal Year Focus | 2016 |
Document Fiscal Period Focus | Q3 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 5,466,063 |
Trading Symbol | SIF |
Consolidated Condensed Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (1,050) | $ (1,007) | $ (3,947) | $ (2,476) |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | (443) | 0 | (128) | 0 |
Retirement plan liability adjustment, net of tax | 134 | 137 | 390 | 398 |
Interest rate swap agreement adjustment, net of tax | (50) | 0 | (50) | 5 |
Comprehensive loss | $ (1,409) | $ (870) | $ (3,735) | $ (2,073) |
Consolidated Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
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Statement of Financial Position [Abstract] | ||
Receivables, allowance for doubtful accounts | $ 758 | $ 1,127 |
Serial preferred shares, no par value (in dollars per share) | ||
Serial preferred shares, number of shares authorized | 1,000,000 | 1,000,000 |
Common shares, par value (in dollars per share) | $ 1 | $ 1 |
Common shares, number of shares authorized | 10,000,000 | 10,000,000 |
Common shares, number of shares issued | 5,525,000 | 5,468,000 |
Common shares, number of shares outstanding | 5,525,000 | 5,468,000 |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies A. Principles of Consolidation The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. For these operations, all gains and losses from completed currency transactions are included in income currently. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange for the period. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the unaudited consolidated condensed financial statements. These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s fiscal 2015 Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. B. Accounting Policies A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's fiscal 2015 Annual Report on Form 10-K, with the exception of the following: Goodwill and Intangible Assets At March 31, 2016, management identified a triggering event, which resulted in the Company performing an interim impairment test at its Orange, California reporting unit and performed a financial analysis of its C*Blade reporting unit in Maniago, Italy as of March 31, 2016. The carrying values at both reporting units, inclusive of assigned goodwill, were compared to their respective fair values and the income approach was used to estimate the fair value of these reporting units. Significant assumptions inherent in the valuation methodologies for goodwill were employed and include, but are not limited to, prospective financial information, growth rates, terminal value and discount rates and requires the Company to make certain assumptions and estimates regarding industry economic factors and future profitability of its business. When performing the income approach for each reporting unit, SIFCO incorporated the use of projected financial information and a discount rate that are developed using market participant based assumptions. The cash flow projections are based on five-year financial forecasts developed by management that include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth. The selected discount rate considers the risk and nature of the respective reporting unit's cash flows and ratios of return that market participants would require to invest their capital in our plants. Although the Company believes its assumptions are reasonable, actual results may vary significantly and may expose the Company to material impairment charges in the future. The methodology for determining fair values was consistent for the periods presented. Based on this quantitative test, we determined that the fair value of these reporting units exceeded their carrying value, and therefore Step 2 of the two-step goodwill impairment test was unnecessary. C. Net Loss per Share The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Net loss per diluted share reflects the effect of the Company’s outstanding stock options, restricted shares and performance shares under the treasury stock method. The dilutive effect of the Company’s restricted shares and performance shares were as follows:
D. Derivative Financial Instruments The Company entered into an interest rate swap agreement to reduce risk related to variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. At June 30, 2016, the Company held one interest rate swap agreement with a notional amount of $8,571. Cash flows related to the interest rate swap agreement are included in interest expense. The Company’s interest rate swap agreement and its variable-rate term debt were based upon LIBOR. At June 30, 2016, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note and its mark-to-market valuation is a $79 liability at June 30, 2016. E. Impact to Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This ASU 2016-10 clarifies the implementation guidance on identifying performance obligations. These ASUs, along with subsequent updates, apply to all companies that enter into contracts with customers to transfer goods or services, and are effective for public entities for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before interim and annual reporting periods beginning after December 15, 2016. Companies have the choice to apply these ASUs either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying these standards at the date of initial application and not adjusting comparative information. The Company is currently evaluating the requirements of these standards and has not yet determined the impact on our condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of ASU 2016-02 and has not yet determined its impact on our condensed consolidated financial statements. On March 30, 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which makes a number of changes meant to simplify and improve accounting for share-based payments. The ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently considering early adoption of ASU 2016-09 in the next reporting period, as is permitted under the standard and has not yet determined the impact on our condensed consolidated financial statements. |
Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories consist of:
Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method for 46% and 38% of the Company’s inventories at June 30, 2016 and September 30, 2015, respectively. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $8,365 and $8,508 higher than reported at June 30, 2016 and September 30, 2015, respectively. |
Accumulated Other Comprehensive Loss |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows:
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Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-Term Debt Long-term debt consists of:
On June 26, 2015 the Company entered into a Credit and Security Agreement (the "Credit Agreement") with a new lender. The new credit facility is comprised of (i) a five year revolving credit facility with a maximum borrowing amount of up to $25,000, which reduced to $20,000 on January 1, 2016, and (ii) a five year term loan of $20,000. Amounts borrowed under the credit facility are secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 65% of the stock of its non-U.S. subsidiaries. The term loan is repayable in quarterly installments of $714 starting September 30, 2015. The amounts borrowed under the Credit Agreement were used to repay the Company's previous revolver and term note, to fund the acquisition of C*Blade S.p.A. Forging & Manufacturing ("C*Blade" - see Note 8) and for working capital and general corporate purposes. The Credit Agreement also has an accordion feature, which allows the Company to increase the availability by up to $15,000 upon consent of the existing lenders or upon additional lenders being joined to the facility. Borrowings will bear interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Credit Agreement. The revolver has a rate based on LIBOR plus a 2.75% spread and a prime rate which resulted in a weighted average rate of 3.7% at June 30, 2016 and the term loan has a rate of 3.4% at June 30, 2016, which was based on LIBOR plus a 2.75% spread. This rate becomes an effective fixed rate of 3.9% after giving effect to the interest rate swap agreement. There is also a commitment fee ranging from 0.15% to 0.35% to be incurred on the unused balance. Under the Company's Credit Agreement, the Company is subject to certain customary covenants. These include, without limitation, covenants that require maintenance of certain specified financial ratios, including that the Company not exceed a maximum debt to EBITDA ratio and maintain a minimum fixed charge coverage ratio. On August 5, 2016, the Company entered into an agreement with its lender to waive its compliance with loan covenants as of June 30, 2016 and to amend its financial covenants for future periods. As of June 30, 2016, the total foreign debt borrowings was $10,650, of which $6,650 is the current portion. Current debt consist of $4,318 of short-term borrowings, $2,147 is the current portion of long-term debt, $131 of factoring and $54 of capital leases. Interest rates on the term note are based on Euribor rates which range from 1.0% to 4.0%. The factoring programs are uncommitted, whereby the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are not isolated from the Company, and effective control of the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables. The Company accounts for the pledge of receivables under this agreement as short-term debt and continues to carry the receivables on its consolidated condensed balance sheets. There was $131 of short-term borrowings relating to this agreement at June 30, 2016 classified within short-term debt. The carrying value of the receivables pledged as collateral was $422 at June 30, 2016. |
Income Taxes |
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Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its continuing operations. This estimated effective rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate through the first nine months of fiscal 2016 was 45%, compared with 30% for the same period of fiscal 2015. This increase is primarily attributable to an increase in U.S federal tax credits applied against forecasted domestic results in fiscal 2016 as well as discrete tax benefits of $568 primarily related to the tax effects of legislation enacted during the first quarter of fiscal 2016, applied against a year-to-date loss. The effective tax rate differs from the U.S. federal statutory rate due primarily to (i) application of U.S. tax credits (ii) income and losses in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate, and (iii) the tax effects of legislation enacted during the year. The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy, and various state and local jurisdictions. The Company believes it has appropriate support for its federal income tax returns. |
Retirement Benefit Plans |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefit Plans | Retirement Benefit Plans The Company and certain of its subsidiaries sponsor defined benefit pension plans covering some of its employees. The components of net periodic benefit cost of the Company’s defined benefit plans are as follows:
During the nine months ended June 30, 2016 and 2015, the Company made no contributions to its defined benefit pension plans. The Company does not anticipate making any additional contributions to fund its defined benefit pension plans during the balance of fiscal 2016. |
Stock-Based Compensation |
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Jun. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company has awarded performance and restricted shares under its shareholder approved 2007 Long-Term Incentive Plan (“2007 Plan”). The aggregate number of shares that may be awarded under the 2007 Plan is 600 less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested shares. In addition, shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2007 Plan may be made in multiple forms, including stock options, stock appreciation rights, restricted or unrestricted stock, and performance related shares. Any such award is exercisable no later than ten years from the date of the grant. The performance shares that have been awarded under the 2007 Plan generally provide for the vesting of the Company’s common shares upon the Company achieving certain defined financial performance objectives during a period up to three years following the making of such award. The ultimate number of common shares of the Company that may be earned pursuant to an award ranges from a minimum of no shares to a maximum of 150% of the initial target number of performance shares awarded, depending on the level of the Company’s achievement of its financial performance objectives. With respect to such performance shares, compensation expense is being accrued. During each future reporting period, such expense may be subject to adjustment based upon the Company's financial performance, which impacts the number of common shares that it expects to vest upon the completion of the performance period. The performance shares were valued at the closing market price of the Company’s common shares on the date of the grant. The vesting of such shares is determined at the end of the performance period. During the first nine months of fiscal 2016, one award was granted for 92 performance shares under the 2007 Plan with a grant date fair value of $10.50. These shares vest over a three year performance period. A second award was granted for 10 performance shares under the 2007 Plan with a grant date fair value of $9.50. Half of the shares vest within six months service period and the remaining shares vest within the next six months service period. The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years. During the first nine months of fiscal 2016, one award was granted for 29 restricted shares with a grant date fair value of $9.45. These awards vest over a one year service period. Two separate awards for 20 restricted shares vested under the 2007 Plan. A second award was granted for 30 restricted shares with a grant date fair value of $9.60. This award vests over a three year service period. If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 159 shares that remain available for award at June 30, 2016. If any of the outstanding share awards are ultimately earned and vest at greater than the target number of shares, up to a maximum of 150% of such target, then a fewer number of shares would be available for award. Stock-based compensation under the 2007 Plan was a $228 benefit and $785 expense during the first nine months of fiscal 2016 and 2015, respectively and expense of $236 and $385 for the third quarter of fiscal 2016 and 2015, respectively. The Company reversed portions of its long-term incentive accruals in the current period and in fiscal 2015, $233 of stock compensation expense was included in severance expense for shares issued to a former executive as part of the executive's severance package. As of June 30, 2016, there was $1,646 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2007 Plan. The Company expects to recognize this cost over the next 2.3 years. |
Business Acquisition |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition | Business Acquisition On July 1, 2015, the Company completed the acquisition of all of the outstanding equity of C*Blade S.p.A. Forging & Manufacturing, from Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons. The forging business operates at two facilities located in Maniago, Italy. The purchase price paid for the forging business, net the assumed debt was approximately $16,719, after a $275 purchase price adjustment received and recorded in the first quarter of fiscal 2016 related to certain adjustments principally related to the final working capital level and indebtedness adjustment. The Company has completed the purchase accounting related to the C*Blade acquisition. Changes in the net carrying amount of goodwill was as follows:
The results of operation of C*Blade are included in the Company’s unaudited consolidated condensed statements of operations for the three months ended and nine months ended June 30, 2016. The following unaudited pro forma information presents a summary of the results of operations for the Company including C*Blade as if the acquisition had occurred on October 1, 2014:
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Subsequent Events |
9 Months Ended |
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Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company informed its workforce in July that it would be ceasing production in its Colorado Springs, Colorado facility in the fourth quarter of fiscal 2016. The Company expects to close the facility in the first quarter of fiscal 2017. Employee severance expense is being finalized, but is not expected to be material. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated. The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. For these operations, all gains and losses from completed currency transactions are included in income currently. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange for the period. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the unaudited consolidated condensed financial statements. These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s fiscal 2015 Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets At March 31, 2016, management identified a triggering event, which resulted in the Company performing an interim impairment test at its Orange, California reporting unit and performed a financial analysis of its C*Blade reporting unit in Maniago, Italy as of March 31, 2016. The carrying values at both reporting units, inclusive of assigned goodwill, were compared to their respective fair values and the income approach was used to estimate the fair value of these reporting units. Significant assumptions inherent in the valuation methodologies for goodwill were employed and include, but are not limited to, prospective financial information, growth rates, terminal value and discount rates and requires the Company to make certain assumptions and estimates regarding industry economic factors and future profitability of its business. When performing the income approach for each reporting unit, SIFCO incorporated the use of projected financial information and a discount rate that are developed using market participant based assumptions. The cash flow projections are based on five-year financial forecasts developed by management that include revenue projections, capital spending trends, and investment in working capital to support anticipated revenue growth. The selected discount rate considers the risk and nature of the respective reporting unit's cash flows and ratios of return that market participants would require to invest their capital in our plants. Although the Company believes its assumptions are reasonable, actual results may vary significantly and may expose the Company to material impairment charges in the future. The methodology for determining fair values was consistent for the periods presented. Based on this quantitative test, we determined that the fair value of these reporting units exceeded their carrying value, and therefore Step 2 of the two-step goodwill impairment test was unnecessary. |
Net Loss per Share | Net Loss per Share The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Net loss per diluted share reflects the effect of the Company’s outstanding stock options, restricted shares and performance shares under the treasury stock method. |
Impact to Recently Issued Accounting Standards | Impact to Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This ASU 2016-10 clarifies the implementation guidance on identifying performance obligations. These ASUs, along with subsequent updates, apply to all companies that enter into contracts with customers to transfer goods or services, and are effective for public entities for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but not before interim and annual reporting periods beginning after December 15, 2016. Companies have the choice to apply these ASUs either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying these standards at the date of initial application and not adjusting comparative information. The Company is currently evaluating the requirements of these standards and has not yet determined the impact on our condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of ASU 2016-02 and has not yet determined its impact on our condensed consolidated financial statements. On March 30, 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which makes a number of changes meant to simplify and improve accounting for share-based payments. The ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently considering early adoption of ASU 2016-09 in the next reporting period, as is permitted under the standard and has not yet determined the impact on our condensed consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of dilutive effect of company's stock options | The dilutive effect of the Company’s restricted shares and performance shares were as follows:
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Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule for components of inventories | Inventories consist of:
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Accumulated Other Comprehensive Loss (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule for components of accumulated other comprehensive loss | The components of accumulated other comprehensive loss are as follows:
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Long-Term Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of long-term debt | Long-term debt consists of:
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Retirement Benefit Plans (Tables) |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of net periodic benefit cost | The components of net periodic benefit cost of the Company’s defined benefit plans are as follows:
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Business Acquisition (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill activity for period end | Changes in the net carrying amount of goodwill was as follows:
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Pro forma results of operations | The following unaudited pro forma information presents a summary of the results of operations for the Company including C*Blade as if the acquisition had occurred on October 1, 2014:
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Inventories (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials and supplies | $ 6,982 | $ 7,212 |
Work-in-process | 12,915 | 11,088 |
Finished goods | 9,428 | 9,643 |
Total inventories | $ 29,325 | $ 27,943 |
Inventories - Additional Information (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Percentage of inventories determined using LIFO method | 46.00% | 38.00% |
Difference between cost of inventories if FIFO method had been used | $ 8,365 | $ 8,508 |
Components of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
---|---|---|
Equity [Abstract] | ||
Foreign currency translation adjustment | $ (5,859) | $ (5,731) |
Retirement plan liability adjustment, net of tax | (5,867) | (6,257) |
Interest rate swap agreement adjustment, net of tax | (50) | 0 |
Total accumulated other comprehensive loss | $ (11,776) | $ (11,988) |
Long-Term Debt (Detail) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Sep. 30, 2015 |
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Debt Instrument [Line Items] | ||
Long-term Debt | $ 39,412 | $ 48,929 |
Capital lease obligations | 163 | 252 |
Less – current maturities | (9,507) | (10,503) |
Total long-term debt | 29,905 | 38,426 |
Revolving credit agreement | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 11,713 | 16,500 |
Term loan | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 17,143 | 19,286 |
Less: unamortized debt issuance cost | (257) | (306) |
Long-term Debt | 16,886 | 18,980 |
Foreign subsidiary borrowings | ||
Debt Instrument [Line Items] | ||
Long-term Debt | 10,650 | $ 13,197 |
Less – current maturities | $ (6,650) |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Income Tax Disclosure [Abstract] | |||
Effective tax rate, percent | 45.00% | 30.00% | |
Income Tax Expense (Benefit) | $ 568 |
Components of Net Periodic Benefit Cost (Detail) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Compensation and Retirement Disclosure [Abstract] | ||||
Service cost | $ 69 | $ 37 | $ 209 | $ 110 |
Interest cost | 256 | 244 | 767 | 732 |
Expected return on plan assets | (407) | (418) | (1,222) | (1,253) |
Amortization of net loss | 210 | 136 | 630 | 409 |
Net periodic cost | $ 128 | $ (1) | $ 384 | $ (2) |
Retirement Benefit Plans - Additional Information (Detail) - USD ($) |
9 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Compensation and Retirement Disclosure [Abstract] | ||
Contributions amount in defined benefit pension plans | $ 0 | $ 0 |
Business Acquisition (Details Textual) - CBlade S.p.A. Forging & Manufacturing $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Dec. 31, 2015
USD ($)
|
Jun. 30, 2016
USD ($)
facility
|
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Business Acquisition [Line Items] | ||
Number of operated facilities | facility | 2 | |
Purchase price | $ 16,719 | |
Purchase price adjustment | $ 275 |
Business Acquisition Schedule of Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Goodwill Net Carrying Amount | |
Balance at September 30, 2015 | $ 16,480 |
Goodwill purchase price adjustment | (589) |
Currency translation | (99) |
Balance at June 30, 2016 | $ 15,792 |
Business Acquisition Pro Forma Results of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Jun. 30, 2015 |
Jun. 30, 2015 |
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Business Combinations [Abstract] | ||
Net sales | $ 34,157 | $ 89,282 |
Net loss | $ (1,562) | $ (2,410) |
Net loss per share (basic) (in dollars per share) | $ (0.29) | $ (0.44) |
Net loss per share (diluted) (in dollars per share) | $ (0.29) | $ (0.44) |
Subsequent Events (Details) $ in Thousands |
3 Months Ended |
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Sep. 30, 2016
USD ($)
| |
Scenario, Forecast | |
Subsequent Event [Line Items] | |
Severance Costs | $ 0 |
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