EX-99.1 2 pressreleaseq32017.htm EXHIBIT 99.1 PRESS RELEASE Q3 2017 Exhibit


SIFCO Industries, Inc. (“SIFCO”) Announces
Third Quarter Fiscal 2017 Financial Results

Cleveland - SIFCO Industries, Inc. (NYSE MKT: SIF) today announced financial results for its third quarter of fiscal 2017, which ended June 30, 2017.
Third Quarter
•
Net sales from operations in the third quarter of fiscal 2017 decreased 2.7% to $30.2 million, compared with $31.0 million in the third quarter of fiscal 2016.
•
Net loss for the third quarter of fiscal 2017 was $6.2 million, or ($1.13) per diluted share, compared with a loss of $1.0 million or ($0.19) per diluted share, in the third quarter of fiscal 2016.
•
Adjusted EBITDA in the third quarter of fiscal 2017 was $2.1 million compared with Adjusted EBITDA of $1.3 million in the third quarter of fiscal 2016.
•
Cash flow from operating activities for the third quarter of fiscal 2017 was $2.4 million, compared with cash flow used for operating activities of ($0.4) million in the third quarter of fiscal 2016.

First Nine Months
•
Net sales from operations in the first nine months of fiscal 2017 increased 6.5% to $92.9 million, compared with $87.2 million in the first nine months of fiscal 2016.
•
Net loss for the first nine months of fiscal 2017 was $10.5 million, or ($1.91), per diluted share, compared with a loss of $3.9 million, or ($0.72) per diluted share, in the first nine months of fiscal 2016.
•
Adjusted EBITDA in the first nine months of fiscal 2017 was $6.4 million compared with Adjusted EBITDA of $2.6 million in the first nine months of fiscal 2016.
•
Cash flow from operating activities for the nine months ended of fiscal 2017 was $7.7 million, compared with cash flow from operating activities of $11.4 million in the nine months of fiscal 2016.

President and CEO Peter W. Knapper stated, "In the third quarter, we've continued to execute on our plans to turn around our business. The new sales organization structure implemented earlier this year continues to find new opportunities for our business and we will continue to focus on serving our customers, associates, and shareholders. We previously announced the decision to close and consolidate our Alliance, Ohio location to our Cleveland, Ohio location in order to improve utilization and reduce fixed costs while maintaining available capacity to be able to handle significant growth. As a result of this decision, we incurred a $4.4 million non-cash asset impairment charge. In addition we've made the decision to sell the property we own in Ireland, identifying this asset as held for sale. We expect to close this transaction in the first quarter of fiscal 2018 and will use the proceeds to repay debt in accordance with our amended credit agreement."

The Company's Form 10-K for the year ended September 30, 2016 can be accessed through its website: www.sifco.com, or on the Securities and Exchange Commission's website: www.sec.gov.

The Company is engaged in the production of forgings and machined components primarily in the Aerospace and Energy markets. The processes and services and services include heat-treating and machining. The Company operates under one segment.






Use of Non-GAAP Financial Measures
The Company uses certain non-GAAP measures in this release. Adjusted EBITDA is a non-GAAP financial measure and is intended to serve as a supplement to results provided in accordance with accounting principles generally accepted in the United States. SIFCO Industries, Inc. believes that such information provides an additional measurement and consistent historical comparison of the Company’s performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

Forward-Looking Language
Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, competition and other uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings.































sifcologoa07.jpg
Third Quarter Ended June 30
(Amounts in thousands, expect per share data)
(Unaudited)
 
Three Months Ended 
 June 30,
 
Nine Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
Net sales
$
30,167

 
$
31,004

 
$
92,942

 
$
87,240

Cost of goods sold
26,599

 
28,009

 
81,546

 
78,574

Gross profit
3,568

 
2,995

 
11,396

 
8,666

Selling, general and administrative expenses
3,918

 
4,157

 
13,617

 
12,907

Asset impairment
4,366

 
—

 
4,366

 
—

Amortization of intangible assets
579

 
633

 
1,744

 
1,961

(Gain) loss on disposal of operating assets
3

 
—

 
(3
)
 
32

Operating loss
(5,298
)
 
(1,795
)
 
(8,328
)
 
(6,234
)
Interest income
(12
)
 
(9
)
 
(42
)
 
(41
)
Interest expense
464

 
428

 
1,682

 
1,273

Foreign currency exchange loss (gain), net
(6
)
 
(8
)
 
11

 
27

Other income, net
(110
)
 
(107
)
 
(324
)
 
(322
)
Loss from operations before income tax expense (benefit)
(5,634
)
 
(2,099
)
 
(9,655
)
 
(7,171
)
Income tax expense (benefit)
568

 
(1,049
)
 
812

 
(3,224
)
Net loss
$
(6,202
)
 
$
(1,050
)
 
$
(10,467
)
 
$
(3,947
)
 
 
 
 
 
 
 
 
Net loss per share
 
 
 
 
 
 
 
Basic
$
(1.13
)
 
$
(0.19
)
 
$
(1.91
)
 
$
(0.72
)
Diluted
$
(1.13
)
 
$
(0.19
)
 
$
(1.91
)
 
$
(0.72
)
 
 
 
 
 
 
 
 
Weighted-average number of common shares (basic)
5,499

 
5,466

 
5,480

 
5,460

Weighted-average number of common shares (diluted)
5,499

 
5,466

 
5,480

 
5,460
























Consolidated Condensed Balance Sheets
(Amounts in thousands, except share data)
 
June 30, 
 2017
 
March 31,   2017
 
September 30,   2016
 
(unaudited)
 
(unaudited)
 
 
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
1,099

 
$
1,356

 
$
471

Receivables, net of allowance for doubtful accounts of $328, $423, and $706, respectively
26,408

 
26,190

 
25,158

Inventories, net
23,798

 
25,449

 
28,496

Refundable income taxes
319

 
1,825

 
1,773

Prepaid expenses and other current assets
1,863

 
2,207

 
2,177

Assets held for sale
1,447

 
—

 
—

Total current assets
54,934

 
57,027

 
58,075

Property, plant and equipment, net
42,219

 
45,878

 
48,958

Intangible assets, net
7,131

 
9,801

 
11,138

Goodwill
11,874

 
11,349

 
11,748

Other assets
284

 
281

 
538

Total assets
$
116,442

 
$
124,336

 
$
130,457

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Current maturities of long-term debt
$
7,545

 
$
7,393

 
$
18,258

Revolving credit agreement
20,387

 
21,573

 
12,751

Accounts payable
14,048

 
15,418

 
14,520

Accrued liabilities
5,325

 
5,877

 
5,234

Total current liabilities
47,305

 
50,261

 
50,763

Long-term debt, net of current maturities
6,241

 
6,660

 
7,623

Deferred income taxes
3,144

 
2,836

 
2,929

Pension liability
7,917

 
8,010

 
8,341

Other long-term liabilities
458

 
465

 
431

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 – 5,596 at June 30, 2017, 5,599 at March 31, 2017 and 5,525 at September 30, 2016
5,596

 
5,599

 
5,525

Additional paid-in capital
9,598

 
9,470

 
9,219

Retained earnings
48,009

 
54,211

 
58,476

Accumulated other comprehensive loss
(11,826
)
 
(13,176
)
 
(12,850
)
Total shareholders’ equity
51,377

 
56,104

 
60,370

Total liabilities and shareholders’ equity
$
116,442

 
$
124,336

 
$
130,457











Consolidated Condensed Statements of Cash Flows
(Unaudited)
 
Nine Months Ended 
 June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(10,467
)
 
$
(3,947
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
7,526

 
8,021

Amortization and write-off of debt issuance cost
382

 
109

(Gain) loss on disposal of operating assets
(3
)
 
32

Asset impairment
4,366

 
—

LIFO expense (benefit)
204

 
(144
)
Share transactions under company stock plan
450

 
(406
)
Purchase price inventory adjustment
—

 
266

Other
—

 
(101
)
Other long-term liabilities
295

 
201

Deferred income taxes
185

 
619

Changes in operating assets and liabilities:
 
 
 
Receivables
(1,062
)
 
6,660

Inventories
4,595

 
(1,555
)
Refundable taxes
1,455

 
(91
)
Prepaid expenses and other current assets
626

 
(268
)
Other assets
255

 
32

Accounts payable
(1,172
)
 
2,534

Other accrued liabilities
(500
)
 
(79
)
Accrued income and other taxes
542

 
(508
)
Net cash provided by operating activities
7,677

 
11,375

Cash flows from investing activities:
 
 
 
Acquisition of business
—

 
270

Proceeds from disposal of operating assets
70

 
—

Capital expenditures
(1,598
)
 
(2,034
)
Net cash used for investing activities
(1,528
)
 
(1,764
)
Cash flows from financing activities:
 
 
 
Payments on long term debt
(13,659
)
 
(3,866
)
Proceeds from revolving credit agreement
63,628

 
35,533

Repayments of revolving credit agreement
(55,992
)
 
(40,320
)
Payment of debt issue costs
(498
)
 
—

Short-term debt borrowings
2,649

 
1,904

Short-term debt repayments
(1,650
)
 
(2,728
)
Net cash used for financing activities
(5,522
)
 
(9,477
)
Increase in cash and cash equivalents
627

 
134

Cash and cash equivalents at the beginning of the period
471

 
667

Effect of exchange rate changes on cash and cash equivalents
1

 
18

Cash and cash equivalents at the end of the period
$
1,099

 
$
819

Supplemental disclosure of cash flow information of operations:
 
 
 
Cash paid for interest
$
(1,224
)
 
$
(1,059
)
Cash refund for income taxes, net
1,425

 
2,885











Consolidated Condensed Statements of Cash Flows
(Unaudited)
 
Quarter to date 
June 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net loss
$
(6,202
)
 
$
(1,050
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation and amortization
2,587

 
2,655

Amortization and write-off of debt issuance cost
54

 
37

Loss on disposal of operating assets
3

 
—

Asset impairment
4,366

 
—

LIFO expense (benefit)
(21
)
 
(136
)
Share transactions under company stock plan
125

 
236

Other
—

 
(101
)
Other long-term liabilities
94

 
41

Deferred income taxes
153

 
1,261

Changes in operating assets and liabilities:
 
 
 
Receivables
183

 
221

Inventories
2,014

 
(1,180
)
Refundable taxes
1,507

 
1,283

Prepaid expenses and other current assets
304

 
49

Other assets
12

 
(283
)
Accounts payable
(2,053
)
 
(2,275
)
Other accrued liabilities
(1,097
)
 
(801
)
Accrued income and other taxes
375

 
(345
)
Net cash provided by operating activities of operations
2,404

 
(388
)
Cash flows from investing activities:
 
 
 
Acquisition of business
—

 
270

Proceeds from disposal of operating assets
22

 
—

Capital expenditures
(634
)
 
(858
)
Net cash used for investing activities of operations
(612
)
 
(588
)
Cash flows from financing activities:
 
 
 
Payments on long term debt
(752
)
 
(1,305
)
Proceeds from revolving credit agreement
18,559

 
16,164

Repayments of revolving credit agreement
(19,745
)
 
(12,784
)
Short-term debt borrowings
319

 
454

Short-term debt repayments
(432
)
 
(1,681
)
Net cash used for financing activities of operations
(2,051
)
 
848

Increase (decrease) in cash and cash equivalents
(259
)
 
(128
)
Cash and cash equivalents at the beginning of the period
1,356

 
952

Effect of exchange rate changes on cash and cash equivalents
2

 
(5
)
Cash and cash equivalents at the end of the period
$
1,099

 
$
819

Supplemental disclosure of cash flow information of operations:
 
 
 
Cash paid for interest
$
(434
)
 
$
(323
)
Cash paid for income taxes, net
1,480

 
3,070













The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA:
Dollars in thousands
Three Months Ended
 
Nine Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Net loss
$
(6,202
)
 
$
(1,050
)
 
$
(10,467
)
 
$
(3,947
)
Adjustments:
 
 
 
 
 
 
 
Depreciation and amortization expense
2,587

 
2,655

 
7,526

 
8,021

Interest expense, net
452

 
419

 
1,640

 
1,232

Income tax expense (benefit)
568

 
(1,049
)
 
812

 
(3,224
)
EBITDA
(2,595
)
 
975

 
(489
)
 
2,082

Adjustments:
 
 
 
 
 
 
 
Foreign currency exchange loss, net (1)
(6
)
 
(8
)
 
11

 
27

Other income, net (2)
(110
)
 
(107
)
 
(324
)
 
(322
)
(Gain) loss on disposal of operating assets (3)
3

 
—

 
(3
)
 
32

Inventory purchase accounting adjustments (4)
—

 
—

 
—

 
266

Equity compensation (5)
139

 
227

 
484

 
(236
)
Acquisition transaction-related expenses (6)
—

 
—

 
—

 
(94
)
LIFO impact (7)
(21
)
 
(136
)
 
204

 
(144
)
Orange expansion (8)
288

 
388

 
2,171

 
775

Impairment of long-lived assets (9)
4,366

 
—

 
4,366

 
—

Executive search (10)
—

 
—

 
—

 
223

Adjusted EBITDA
$
2,064

 
$
1,339

 
$
6,420

 
$
2,609

(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 the equity-based compensation benefit and expense recognized by the Company under its 2007 Long-Term Incentive Plan due to granting of awards, awards not vesting and/or forfeitures.
(6)
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.
(7)
Represents the increase in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method.
(8)
Represents costs related to expansion of one of the plant locations that are required to be expensed as incurred.
(9)
Represents impairment charge of long-lived assets incurred at Alliance. See Note 1 within Item 1 of the consolidated condensed financial statements for further discussion.
(10)
Represents cost incurred for executive search as mentioned in its Form 8-K filing on March 18, 2016.


 
 
 
 
 

Contacts
SIFCO Industries, Inc.
Thomas R. Kubera, 216-881-8600
www.sifco.com