-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WnDEw2VLEjMThEWQOmmGSwOjwzcpqyBsybA9BUBi7BKmLPO1sD/q8ZcpFJ380zJK r4CfKuCouoWG3RSSKM+2qA== 0000950152-95-000103.txt : 19950209 0000950152-95-000103.hdr.sgml : 19950209 ACCESSION NUMBER: 0000950152-95-000103 CONFORMED SUBMISSION TYPE: 10-Q CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950208 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIFCO INDUSTRIES INC CENTRAL INDEX KEY: 0000090168 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT ENGINES & ENGINE PARTS [3724] IRS NUMBER: 340553950 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05978 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 970 E 64TH ST CITY: CLEVELAND STATE: OH ZIP: 44103 BUSINESS PHONE: 2168818600 MAIL ADDRESS: STREET 1: 970 EAST 64TH STREET CITY: CLEVELAND STATE: OH ZIP: 44103 FORMER COMPANY: FORMER CONFORMED NAME: STEEL IMPROVEMENT & FORGE CO DATE OF NAME CHANGE: 19690520 10-Q 1 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES 10-Q 1 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 1994 Commission File Number 1-5978 ------------------- -------- SIFCO Industries, Inc., and Subsidiaries ----------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0553950 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 970 East 64th Street, Cleveland, Ohio 44103 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (216) 881-8600 -------------- None - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No --- Class Outstanding at January 31, 1995 - --------------- ---------------------------------- Common Stock, $1 Par Value 5,066,369 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX -------
Page No. ---------- Financial Statements: Consolidated Condensed Balance Sheets -- December 31, 1994, and September 30, 1994 2 Consolidated Condensed Statements of Income -- Three Months Ended December 31, 1994 and 1993 3 Consolidated Condensed Statements of Cash Flows -- Three Months Ended December 31, 1994 and 1993 4 Notes to Consolidated Condensed Financial Statements 5,6,7,8 Management's Discussion and Analysis of the Consolidated Condensed Statements of Income 9,10,11 Other Information and Signatures 12
3 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- ($000 Omitted)
Dec. 31 Sept. 30 1994 1994 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 1,900 $ 2,256 Accounts Receivable, Net 11,643 12,883 Inventories Raw Materials & Supplies 1,953 1,847 Work-in-Process & Finished Goods 9,450 8,493 -------- -------- 11,403 10,340 Refundable Income Taxes 960 1,039 Prepaid Expenses and Other Current Assets 928 416 -------- -------- TOTAL CURRENT ASSETS 26,834 26,934 Property, Plant & Equipment, Net 21,708 21,476 Goodwill, Net of Amortization 4,183 4,213 Funds Held by Trustee For Capital Project 616 733 Other Non-Current Assets 2,269 2,428 -------- -------- TOTAL ASSETS $ 55,610 $ 55,784 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------- Current Liabilities Notes Payable $ 3,800 $ 2,400 Current Portion of Long-Term Debt 1,900 1,900 Accounts Payable 4,851 6,206 Accrued Expenses 3,910 4,067 Accrued Restructuring Expense 2,647 2,686 -------- ------- TOTAL CURRENT LIABILITIES 17,108 17,259 Long-Term Debt - Less Current Portion 6,750 6,975 Deferred Federal Income Taxes and Other 4,206 4,280 Shareholders' Equity Serial Preferred Shares - No Par Value --- --- Common Shares, Par Value $1 Per Share 5,066 5,062 Paid-in-Surplus 5,860 5,849 Retained Earnings 16,620 16,359 -------- -------- TOTAL SHAREHOLDERS' EQUITY 27,546 27,270 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 55,610 $ 54,784 ========= ======== See accompanying notes to consolidated condensed financial statements.
2 4 SIFCO INDUSTRIES,INC. AND SUBSIDIARIES -------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF INCOME ------------------------------------------- ($000 Omitted)
Three Months Ended December 31 1994 1993 ---- ---- Net Sales of SIFCO Industries, Inc. $ 15,997 $ 16,415 Cost & Expenses Cost of Goods Sold 12,627 13,235 Selling, General & Administrative Expense 2,845 2,817 Interest Income (30) (14) Interest Expense 244 155 Other (Income) Expense, Net (92) (31) Total Costs & Expenses 15,594 16,162 Income (Loss) Before Income Taxes 403 253 Provision (Benefit) for Federal, Foreign & State Income Taxes 90 70 ------- ------- Net Income (Loss) $ 313 $ 183 ======== ======= Net Income (Loss) Per Share $ .06 $ .04 ======== ======= Average Shares Outstanding 5,077 5,054 Cash Dividends per Common Share $ --- $ --- See accompanying notes to consolidated condensed financial statements.
3 5 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ----------------------------------------------- ($000 Omitted)
Three Months Ended December 31 1994 1993 ---- ---- Net cash provided by (used for) operating activities: Net income (loss) $ 313 $ 183 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 838 769 Deferred income taxes and other (74) (77) -------- --------- Net cash provided by operations 1,077 875 Net cash provided by (used for) changes in operating assets and liabilities, net of effect of acquisition: Receivables (1,240) (1,075) Inventories (1,063) 233 Accrued or refundable income taxes 79 72 Prepaid expenses and other current assets (512) (169) Accounts payable (1,355) (1,061) Accrued expenses (157) 200 Accrued restructuring (39) --- -------- -------- Net cash provided by (used for) changes in operating assets and liabilities (1,807) (1,800) -------- -------- Net cash provided by operating activities (730) (925) Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (1,149) (463) (Increase) decrease in funds held by trustee for capital project 117 145 Other 231 (40) -------- -------- Net cash provided by (used for) investing activities (801) (358) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 1,400 1,400 Repayment of borrowings (225) (225) Cash dividends declared --- --- -------- -------- Net cash provided by (used for) financing activities 1,175 1,175 -------- -------- Increase (decrease) in cash and cash equivalents (356) (108) Cash and cash equivalents, beginning of year 2,256 1,187 -------- -------- Cash and cash equivalents, end of period $ 1,900 $ 1,079 ======== ======== See accompanying notes to consolidated condensed financial statements.
4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION ----------------------------------------------------- DECEMBER 31, 1994 ----------------- NOTES - ----- (1) Summary of Significant Accounting Policies: ------------------------------------------- Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. Certain prior years' amounts have been reclassified to conform with the current year's classification. The Company accounts for its 15% investment in the common stock of Shanghai Chia Tai SIFCO Forge Co., Ltd., on the cost method. (2) Debt: ---- Long-term debt as of December 31, 1994 and September 30, 1994 consisted of:
Dec. 31 Sept. 30 1994 1994 -------- -------- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $ 2,850 $ 2,925 Note payable to bank, due in quarterly installments of $150,000, at the base rate plus 1/2% (adjusted quarterly) 1,800 1,950 Note payable to bank, due October 31, 1995, interest payable quarterly, at rates based upon LIBOR and DIBOR (adjusted quarterly) 1,000 1,000 Note payable to seller of Selectrons, Ltd., at the base rate plus 1/2% (adjusted quarterly) 3,000 3,000 ------- ------- 8,650 8,875 Less - current maturities 1,900 1,900 ------- ------- $ 6,750 $ 6,975 ======= =======
5 7 The Company has a $6 million revolving credit agreement subject to eligible working capital as defined, which expires January 1, 1996. As of December 31, 1994, the Company had $3.8 million outstanding under this agreement. In addition, the Company has a $1.15 million credit capacity which is used for an irrevocable letter of credit which secured the $1 million loan from an Irish bank due October 31, 1995. A commitment fee of 3/8% is incurred on the remaining unused balance. Interest is at the base rate plus 1/4% and is payable quarterly. The average balance outstanding against the remaining capacity was $3.0 million and $1.0 million during the three month period of 1994 and 1993, respectively. The Company also has a term loan agreement. Interest is at the base rate plus 1/2%. Repayment terms are twenty quarterly installments of $150,000, plus interest. The Company has available an additional $2,000,000 which can be drawn down prior to September 30, 1995. The repayment terms for the additional amount are interest only the first year, followed by sixteen quarterly payments of principal plus interest. The Industrial Development bond interest rate is reset weekly, based on prevailing tax-exempt money market rates, and is payable quarterly. Principal is payable in quarterly installments of $75,000 through May 1, 1996, becoming $100,000 quarterly thereafter, with the final balance due on May 1, 2002. The bonds are secured by the property and equipment of the facility, and backed by an irrevocable bank letter of credit which expires on May 1, 1996. The revolving credit, term loan and Industrial Development bonds are secured by the Company's domestic accounts receivable, inventory and equipment. Among other covenants, the Company is required to maintain a minimum tangible net worth (as defined) of $19.8 million, increasing by 50% of net income subsequent to September 30, 1993. At December 31, 1994, tangible net worth was $21.7 million. As part of the acquisition of Selectrons, Ltd., the seller provided financing in the form of unsecured installment notes. These notes bear interest at the base rate plus 1/2%, payable and adjustable quarterly. Principal is payable in annual installments of approximately $1 million, commencing July 1, 1993. The $1 million note payable revolving to the bank has a variable interest rate based on a combination of both LIBOR and DIBOR (Dublin Interbank Rates) rates. (3) Income Taxes: ------------- The provision for taxes on income, which is based on the anticipated effective rate for the year, does not bear the customary relationship to pre-tax income due primarily to foreign source income. Income tax expense differs from amounts currently payable due to certain items reported for financial statement purposes in periods which differ from those in which they are reported for tax purposes, principally accelerated depreciation. (4) Deferred Federal Income Taxes: ------------------------------ The Company has deferred to future periods the income taxes relating to timing differences between financial statement pre-tax income and taxable income. 6 8 (5) Depreciation: ------------- For financial reporting purposes, the Company provides for depreciation of plant and equipment, principally by the straight-line method, at annual rates sufficient to amortize the cost over its estimated useful life. For tax purposes, the Company uses various accelerated methods and, accordingly, provides for the related deferred taxes. The principal rates of depreciation for financial reporting purposes are: buildings 2% to 5%, and machinery and equipment 5% to 33 1/3%. (6) Inventories: ------------ The Company follows the LIFO method of accounting for certain of its Forge Group inventories. Since the LIFO inventory determination for fiscal 1995 will be based upon year-end inventory levels and costs, the Company has provided for its anticipated "LIFO Adjustment" based on its estimated year-end inventory levels and costs. Under the Average Cost Method, inventories would have been $3,378,000 and $3,378,000 higher than reported at December 31, 1994 and September 30, 1994, respectively. (7) Postretirement Health Care Benefits: ------------------------------------ The Company and its domestic subsidiaries provide certain health care benefits for non-union retired employees which are subject to the provisions of SFAS 106. The Company amended its current plan to freeze the Company's contribution to insurance premiums and exclude any active employees who retire after December 31, 1993 from eligibility for benefits. As a result of the amendments to the plan, the adoption of SFAS 106 did not have a material impact on the results of operations or financial position of the Company. (8) Other Income: ------------- Other income is comprised primarily of grant income from Irish government agencies, foreign exchange gains and losses, and royalty and fee income. (9) Acquisition of Business and Non-Competition Agreement: ------------------------------------------------------ On June 17, 1992, the Company acquired certain domestic net assets and the foreign subsidiaries of Selectrons, Ltd. ("Selectrons") at an aggregate purchase cost of approximately $6 million, including the assumption of $1.7 million of debt previously owed to the shareholders. The purchase price was provided from existing cash balances, a term loan from a bank, and an unsecured term loan from the seller. 7 9 The acquisition was accounted for as a purchase. The results of operations of the acquisition were combined with those of the Company commencing July 1, 1992. This acquisition is not material to the consolidated totals and its results of operations have been included in the accompanying statements of income since the acquisition date. The fair value of net assets acquired and liabilities assumed was approximately $2.6 million. The excess of purchase price over the fair value of the net assets purchases was $3.4 million, and such excess is being amortized over 40 years by the straight-line method. The Company is pursing legal action against the seller of Selectrons with respect to breach of contract. Any settlement will be treated as a reduction of previously recorded goodwill. (10) Basis of Presentation: ---------------------- The accompanying financial information for the three months ended December 31, 1994 has not been examined by independent public accountants. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation have been included. 8 10 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OF THE CONSOLIDATED CONDENSED STATEMENTS OF INCOME -------------------------------------------------- The following is management's discussion and analysis of certain significant factors which have affected the Company's earnings during the periods included in the accompanying consolidated condensed statements of income. A summary of the period-to-period changes in the principal items included in the consolidated condensed statements of income is shown below:
Three Months Ended December 31 1994 and 1993 _____________________ Net Sales of SIFCO Industries, Inc. $ (418) ( 2%) Cost of Sales (608) ( 5%) Selling, General & Administrative 28 1% Interest Income 16 N/A Interest Expense 89 57% Other Income, Net 61 197% Income Before Income Taxes 150 59% Provision for Federal, Foreign & State Income Taxes 20 29% Net Income 130 71%
9 11 MANAGEMENT'S DISCUSSION - ----------------------- We are pleased to report a profit before tax of $403,000 on sales of $15,997,000 for the first quarter ended December 31, 1994. This compares to a profit before tax of $253,000 on sales of $16,415,000 for the same period in 1993. Net earnings were $313,000, or $0.06 per share, compared to $183,000, or $0.04 per share in 1993. Net sales for the first quarter ended December 31, 1994 declined 2% to $16.0 million from $16.4 million a year. Defense-related sales increased to $2.4 million from $2.0 million. More importantly, new orders received increased 17% to $15.8 million from $13.6 million last year. The increase in new orders was achieved despite a decrease in defense-related orders from $1.5 million to $1.4 million in the first quarter of 1995. Most welcome this quarter is the news that our Forge segment was able to generate an operating profit in contrast to the loss it sustained in the same period last year. Increased productivity and better cost containment contributed to improved earnings performance despite some reduction in sales volume. Continued dedication to the restructuring is resulting in ongoing improvements throughout the operation. The Forge Group's continued emphasis on cooperative involvement with customers throughout all levels of production is illustrated by awards received during the quarter. American Braking System awarded our Forge operation the rank of "Certified Supplier" and named them as Number One supplier in their size range. This was in recognition of the Forge having achieved 100% quality performance for the entire production year. Excellent quality performance during the quarter also earned the Forge the "Gold" award - the highest quality achievement rating bestowed on suppliers by McDonnell-Douglas. One of the most interactive efforts our Forge operation has participated in is Allied Signal's TQS program - "Total Quality through Speed." A "TQS" team of Allied Signal personnel has been in the Forge working with SIFCO people to assist in the reduction of lead times and improved efficiencies. The cooperative effort represents an unusual commitment to the spirit of customer satisfaction and has been well received by all Forge personnel. These programs are leading examples of the "Spirit of Partnering" and emphasis on customer satisfaction which are at the core of the Forge restructuring philosophy. Much effort has been made to offer the same interactive customer service to foreign sources with very good results. SIFCO is now the sole source of several aircraft forgings for an overseas aircraft manufacturer and, as a preferred vendor, has first right of refusal for forgings in SIFCO's size category. As we described in the annual report, the new emphasis on customer service is pervasive throughout the company. The Specialty Products segment, and particularly the Turbine Component Repair Group, is offering customers a fairly unique assistance program in the management of parts inventories. The program assures the on-time delivery of the desired part while keeping the customer's inventory costs to a minimum. Recently, the Ireland facilities have entered into a J.I.T. (Just In Time) inventory management program with a major European 10 12 customer and a service agreement with a major airline based in Asia. These programs should establish our Ireland facility as a major innovator in customer service in the industry. We believe that the strong first quarter performance of our Forge segment demonstrates the effectiveness of restructuring efforts to date. We are also confident that our Specialty Product segment's expanded product lines will continue to provide us entry to new and larger markets. Our renewed commitment to customer satisfaction has had the added benefit of increasing our employee satisfaction. We are hopeful that our performance will also enhance our shareholder satisfaction. FINANCIAL ANALYSIS - ------------------ Net sales for the first quarter ended December 31, 1994 declined to $16.0 million from $16.4 million a year ago or 2%. Defense-related sales increased to $2.4 million from $2.0 million. The Company reported a net profit of $.313 million compared to $.183 million a year ago. Net interest expense increased to $.214 million from $.141 million a year ago. New orders received increased to $15.8 million from $13.6 million last year. Specialty Products net sales were basically flat at $11.4 million compared to $11.3 million last year. Specialty Products income from operations before corporate and interest expense was also flat at $1.0 million this and last year. Forging segment sales decreased to $4.8 million from $5.6 million last year. Defense-related sales were $1.9 million (40%), compared to $2.2 million (39%) last year. Forging income from operations before corporate and interest expense was $.1 million compared to a loss of $.2 million last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital was $9.7 million at December 31, 1994 and September 30, 1994. The current ratio for the same period was 1.6 and 1.6 respectively. Excluding the restructuring reserve from current liabilities for both periods, the majority of which will have no impact on working capital, the current ratio would be 1.9 and 1.9 respectively. Total debt as a percentage of tangible shareholders' equity was 57.4% at December 31, 1994 compared to 53.2% at September 30, 1994. The Company has borrowed $3.8 million against its revolving credit line and has an additional $2.0 million term loan available. The Company considers it has adequate financing to meet its needs through the coming year. PROVISION FOR TAXES ON INCOME ----------------------------- The provision for taxes on income, which is based on the anticipated effective rate for the year, does not bear the customary relationship to pre-tax income, due primarily to foreign source income. 11 13 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K (a) The following Exhibits are included herein: Exhibit 27 Financial Data Schedule (b) No report on Form 8-K was filed during the quarter ended December 31, 1994 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. SIFCO INDUSTRIES, INC. --------------------------- (Registrant) Date January 27, 1995 Jeffrey P. Gotschall ---------------- --------------------------- Jeffrey P. Gotschall Chief Executive Officer Date January 27, 1995 Richard A. Demetter ---------------- --------------------------- Richard A. Demetter Vice President _ Finance (Principal Accounting Officer) EX-27 2 SIFCO INDUSTRIES, INC. 10-Q EXHIBIT 27
5 0000090168 SIFCO INDUSTRIES,INC 1,000 3-MOS SEP-30-1995 OCT-01-1994 DEC-31-1994 1,900 0 11,643 0 11,403 26,834 21,708 0 55,610 17,108 6,750 5,066 0 0 22,480 55,610 15,997 15,997 12,627 15,472 (92) 0 214 403 90 313 0 0 0 313 .06 .06
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