-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BxVukVCzcbwdGCeXB7bYn/6i5U2WM5vPW3suNbCBnKc8+rogbSjHTGsrqdjzuSHV Ae/Lt8G4iaUF6kRxEK05Xg== 0000950152-00-003896.txt : 20000512 0000950152-00-003896.hdr.sgml : 20000512 ACCESSION NUMBER: 0000950152-00-003896 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000511 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: SEC FILE NUMBER: 001-05978 FILM NUMBER: 626356 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. 10-Q 1 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2000 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 incorporation or organization) Identification 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 April 30, 2000 ----- ----------------------------- Common Stock, $1 Par Value 5,151,289 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. -------- Financial Statements: Consolidated Condensed Balance Sheets-- As of March 31, 2000 and September 30, 1999 2 Consolidated Condensed Statements of Income-- Three Months and Six Months Ended March 31, 2000 and 1999 3 Consolidated Condensed Statements of Cash Flows-- Six Months Ended March 31, 2000 and 1999 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 Other Information and Signatures 11,12 3 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS ($000 Omitted) March 31, Sept. 30, 2000 1999 -------- -------- ASSETS Current Assets Cash & Cash Equivalents $ 1,803 $ 1,487 Accounts Receivable, Net 18,904 22,192 Inventories Raw Materials & Supplies 4,797 6,780 Work-in-Process & Finished Goods 19,002 17,155 -------- -------- 23,799 23,935 Refundable Income Taxes 76 354 Prepaid Expenses and Other Current Assets 1,794 1,365 -------- -------- TOTAL CURRENT ASSETS 46,376 49,333 Property, Plant & Equipment, Net 30,031 31,392 Goodwill, Net of Amortization 3,574 3,632 Funds Held by Trustee for Capital Project 623 677 Other Non-Current Assets 1,220 1,427 -------- -------- TOTAL ASSETS $ 81,824 $ 86,461 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current Portion of Long-Term Debt 1,415 1,415 Accounts Payable 9,840 11,094 Accrued Expenses 6,103 6,566 -------- -------- TOTAL CURRENT LIABILITIES 17,358 19,075 Long-Term Debt - Less Current Portion 12,485 12,985 Deferred Federal Income Taxes and Other 3,824 4,355 Shareholders' Equity Serial Preferred Shares - No Par Value -- -- Common Shares, Par Value $1 Per Share 5,174 5,193 Paid-in-Surplus 6,243 6,352 Accumulated Other Comprehensive Income (Loss) (5,822) (2,749) Retained Earnings 42,562 41,250 -------- -------- TOTAL SHAREHOLDERS' EQUITY 48,157 50,046 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 81,824 $ 86,461 ======== ======== 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 Six Months Ended March 31, March 31, ------------------ ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net Sales of SIFCO Industries, Inc. $ 28,182 $ 30,281 $ 53,527 $ 59,806 Cost & Expenses Cost of Goods Sold 23,160 25,343 44,607 50,423 Selling, General & Administrative Expense 3,466 3,492 6,564 6,930 Interest Income (56) (50) (87) (105) Interest Expense 236 293 501 643 Other (Income) Expense, Net 47 (84) 88 (329) -------- -------- -------- -------- Total Costs & Expenses 26,853 28,994 51,673 57,562 Income Before Income Taxes 1,329 1,287 1,854 2,244 Provision for Federal, Foreign & State Income Taxes 241 189 282 267 -------- -------- -------- -------- Net Income $ 1,088 $ 1,098 $ 1,572 $ 1, 977 ======== ======== ======== ======== Net Income Per Share (Basic) $ .21 $ .21 $ .30 $ .38 Net Income Per Share (Diluted) $ .21 $ .21 $ .30 $ .38 Average Shares Outstanding (Basic) 5,191 5,175 5,193 5,173 Average Shares Outstanding (Diluted) 5,227 5,220 5,234 5,233 Cash Dividends per Common Share $ .05 $ .05 $ .05 $ .05 See accompanying notes to consolidated condensed financial statements. (3) 5 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ($000 Omitted)
Six Months Ended March 31, ----------------------- 2000 1999 ---- ---- Net cash provided by (used for) operating activities: Net income $ 1,572 $ 1,977 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 2,306 2,241 Deferred income taxes and other (531) 17 ------- ------- Subtotal 3,347 4,235 Net cash provided by (used for) changes in operating assets and liabilities: Receivables 3,288 944 Inventories 136 2,169 Accrued or refundable income taxes 278 (40) Prepaid expenses and other current assets (429) (568) Accounts payable (1,254) (3,229) Accrued expenses (463) (31) ------- ------- Net cash provided by (used for) changes in operating assets and liabilities 1,556 (755) ------- ------- Net cash provided by (used for) operating activities 4,903 3,480 Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (2,391) (2,236) (Increase) decrease in funds held by trustee for capital project 54 262 Other (1,306) (784) ------- ------- Net cash provided by (used for) investing activities (3,643) (2,758) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 100 1,600 Repayment of borrowings (600) (1,600) Cash dividends declared (260) (258) Repurchase of Common Stock (184) -- ------- ------- Net cash provided by (used for) financing activities (944) (258) ------- ------- Increase in cash and cash equivalents 316 464 Cash and cash equivalents, beginning of year 1,487 3,503 ------- ------- Cash and cash equivalents, end of period $ 1,803 $ 3,967 ======= =======
See accompanying notes to consolidated condensed financial statements. (4) 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS March 31, 2000 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 intercompany accounts and transactions have been eliminated. (2) Debt: ----- Long-term debt as of March 31, 2000 and September 30, 1999 consisted of: March 31, Sept. 30, 2000 1999 --------- --------- ($000 Omitted) Variable Rate Industrial Development Revenue Improvement and Refunding Bonds $ 3,900 $ 3,900 Note payable to bank 9,900 10,500 Note payable under revolving credit agreement, at the base rate 100 -- ------- ------- $13,900 $14,400 Less - current maturities 1,415 1,415 ------- ------- $12,485 $12,985 ======= ======= (5) 7 ((2) - continued) The Company has an available revolving credit agreement in the amount of $6.0 million as of March 31, 2000. The revolving credit agreement bears interest at the bank's base rate. The average balance outstanding against the revolving credit agreement was $0.14 million and $2.7 million during the six-month periods of fiscal 2000 and 1999, respectively. The balances outstanding under the revolving credit agreement have been classified as long term debt. A commitment fee of 1/4% is incurred on the remaining unused balance. The Company has a 10-year, $12.0 million term note payable. The term note payable requires quarterly payments of $0.3 million and bears interest at a fixed rate of 7.24%, subject to adjustment if certain loan covenants are not maintained. The Company has outstanding $4.1 million of 15-year, Industrial Development bonds. The proceeds of the bond were used to refund an existing Industrial Development bond of $1.6 million, and the balance of the funds are being used to expand the Turbine Component Services and Repair facility in Tampa, Florida. The interest rate is reset weekly, based on prevailing tax-exempt money market rates. Principal payments are due annually and increase each year until the final payment of $355,000 is due in 2013. The initial principal payment in the amount of $200,000 was paid in 1999. Subsequent payments increase by $15,000 and $5,000 in the second and third year, respectively, and by $10,000 in the following seven years. The bonds are secured by the property and equipment of the Tampa, Florida facility, and are backed by an irrevocable letter of credit. Among other covenants, the Company is required to maintain a minimum tangible net worth (as defined) of $30.0 million, increasing by 50% of net income subsequent to September 30, 1997. Tangible net worth exceeded the required minimum by $12.6 million at March 31, 2000. (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 inventories. Since the LIFO inventory determination for fiscal 2000 will be based upon year-end inventory levels and costs, the Company will provide for anticipated "LIFO Adjustment," if any, based on its estimated year-end inventory levels and costs. Under the Average Cost Method, inventories would have been $3,789,000 higher than reported at March 31, 2000 and September 30, 1999. (7) Other Income: ------------- Other income is comprised primarily of grant income from Irish government agencies, foreign exchange gains and losses, and royalty and fee income. (8) Comprehensive Income -------------------- Effective October 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." This statement requires the disclosure of comprehensive income, which includes net income and other comprehensive income items previously included within separate components of shareholders' equity. For the Company, this consists of foreign currency translation adjustments. Since the undistributed earnings of the Company's foreign subsidiaries are intended to be permanently reinvested, taxes have not been provided for foreign currency translation adjustments. Comprehensive income for the six months ended March 31, 2000 and 1999 are as follows (in thousands):
Three Months Ended Six Months Ended March 31, March 31, --------------------- --------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net Income $ 1,088 $ 1,098 $ 1,572 $ 1,977 Other comprehensive income (loss): Foreign currency translation adjustments (1,357) (2,407) (3,073) (2,676) ------- ------- ------- ------- Comprehensive income $ (269) $(1,309) $(1,501) $ (699) ======= ======= ======= =======
(7) 9 (9) Business Segment Information ---------------------------- The following table summarizes certain information regarding segments of the Company's operations for the quarter and six months ended March 31, 2000 and 1999:
($000 omitted) ---------------------------------------------------- Three Months Ended Six Months Ended March 31 March 31 --------------------- --------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net sales, including intersegment sales: Turbine Component Services & Repair $19,343 $21,475 $37,086 $42,190 Aerospace Component Manufacturing 8,839 8,805 16,441 17,615 Intersegment sales -- 1 -- 1 ------- ------- ------- ------- $28,182 $30,281 $53,527 $59,806 ======= ======= ======= ======= Income from operations before corporate expenses and interest expense: Turbine Component Services & Repair $ 1,638 $ 1,608 $ 2,723 $ 3,218 Aerospace Component Manufacturing 489 418 642 707 ------- ------- ------- ------- 2,127 2,026 3,365 3,925 Corporate expenses (618) (496) (1,097) (1,143) Interest (expense) income, net (180) (243) (414) (538) ------- ------- ------- ------- Income before income taxes $ 1,329 $ 1,287 $ 1,854 $ 2,244 ======= ======= ======= =======
(10) Basis of Presentation and Management Estimates: ----------------------------------------------- The Company prepares its financial statements in accordance with generally accepted accounting principles, which requires management to make estimates and assumptions that affect amounts reported in the financial statements for the reporting period. Actual results could differ from those based upon such estimates and assumptions. These estimates and assumptions are revised as necessary. In the opinion of the Company, the financial information in this Form 10-Q includes all adjustments, including those of a normal recurring nature, necessary to fairly state the results for the periods. (8) 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONSOLIDATED CONDENSED STATEMENTS OF INCOME The following is management's discussion and analysis of the financial condition, changes in financial condition, and the results of operations 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 Six Months Ended March 31, March 31, 2000 and 1999 2000 and 1999 ------------------ ---------------- Net Sales of SIFCO Industries, Inc. $(2,099) (7)% $(6,279) (10)% Cost of Goods Sold (2,183) (9)% (5,816) (12)% Selling, General & Administrative Expense (26) (1)% (366) (5)% Interest Income 6 12% (18) (17)% Interest Expense (57) (19)% (142) (22)% Other Income, Net (131) N/A (417) N/A Income Before Income Taxes 42 3% (390) (17)% Provision for Federal, Foreign & State Income Taxes 52 28% 15 6% Net Income (10) (1)% (405) (20)% (9) 11 MANAGEMENT'S DISCUSSION & FINANCIAL ANALYSIS (continued) For the second quarter of fiscal 2000, compared with the second quarter of fiscal 1999: - Net sales decreased 6.9% to $28.2 million from $30.3 million - Pre-tax income increased 3.3% to $1.33 million from $1.29 million - Net income decreased 0.9% to $1.08 million from $1.09 million - Earnings per diluted share remained at $0.21 Through the first half of fiscal 2000, compared with the first half of fiscal 1999: - Net sales decreased 10.5% to $53.5 million from $59.8 million - Pre-tax income decreased 17.4% to $1.9 million from $2.2 million - Net income decreased 20.5% to $1.6 million from $2.0 million - Earnings per diluted share decreased to $0.30 from $0.38 New orders for the second quarter increased to $28.0 million compared to last year's $27.4 million, and for the six months new orders decreased to $53.4 million from $56.0 million. Backlog at March 31, 2000 was $38.4 million compared to $37.3 million a year ago. Turbine Component Services and Repair Group Turbine Component Services and Repair (TCSR) sales declined 9.9% for the second quarter to $19.3 million from $21.5 million a year ago. Sales for the first half of fiscal 2000 decreased 12.1% to $37.1 million from $42.2 million a year ago. Operating profit for the second quarter increased 1.9% to $1.64 million from $1.61 million a year ago. Operating profit for the first half of fiscal 2000 decreased 15.4% to $2.7 million from $3.2 million in fiscal 1999. The Company realized productivity improvements during the second quarter 2000 from first quarter 2000, reflecting improvements at its newest facility which is dedicated to the repair of turbine blades. Aerospace Component Manufacturing Group Aerospace Component Manufacturing (ACM) sales for the second quarter increased 0.4% to $8.84 million from $8.81 million a year ago. Sales for the first half of fiscal 2000 decreased 6.7% to $16.4 million from $17.6 million a year ago. Operating profit for the second quarter increased 17.0% to $0.49 million from $0.42 million a year ago, because of a more profitable product mix. Operating profit for the first half of fiscal 2000 decreased 9.1% to $0.64 million from $0.71 million last year. The Company's ongoing efforts to satisfy the requirements for components used in smaller commercial aircraft are expected to increase sales in the future. The growth in the build rates for business and regional jet aircraft continues to rise and are expected to produce positive results for the Company. (10) 12 LIQUIDITY AND CAPITAL RESOURCES Working capital was $29.0 million at March 31, 2000, compared to $30.3 million at September 30, 1999. The current ratio as of those dates was 2.7 and 2.6, respectively. Total debt as a percentage of tangible shareholders' equity was 27.6% at March 31, 2000 compared to 29.6% at September 30, 1999. The Company announced in February 2000 that its board of directors had authorized a repurchase of up to 100,000 shares, or approximately 2% of the common shares outstanding. The shares, when purchased, will be used for corporate purposes. These purchases can be made in the open market or in negotiated transactions, depending on market conditions. Any such repurchase of shares will use a portion of the Company's working capital. Through March 31, 2000, the Company had repurchased 28,500 shares at an average price of $6.44. Year-to-date capital expenditures were $2.4 million compared to $2.2 million a year ago. Capital expenditures for fiscal 2000 are anticipated to be approximately $5.0 million compared to $4.9 million in fiscal 1999. The expenditures will be primarily used to upgrade existing equipment and new capabilities. The Company has borrowed $0.1 million against its revolving credit line of $6.0 million at March 31, 2000. The Company believes it has adequate financing available to meet its needs through the foreseeable future. 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. YEAR 2000 ISSUE --------------- Through April 30, 2000, the Company has not experienced any noticeable disruptions in its operations or in its ability to provide service to its customers as a result of Year 2000 issues. Furthermore, the Company has no knowledge of any conditions that exist, relative to the Year 2000 issue, that will present problems in the future that would have a material adverse effect on its financial condition or results of operations. Cumulative expenditures, excluding the cost of Company information technology personnel, made through December 31, 1999 related to the Year 2000 issue amounted to approximately $150,000. No such related expenditures were incurred during the second fiscal quarter of 2000. SAFE HARBOR STATEMENT --------------------- This Annual Report contains various forward-looking statements and includes assumptions concerning the Company's operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statement identifying important economic, political and technological factors, among others, the absence of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. (11) 13 Such factors include the following: (1) continuation of the current and projected future business environment, including interest rates and capital and consumer spending; (2) competitive factors and competitor responses to the Company's initiatives; (3) successful development and market introductions of anticipated new products; (4) stability of government laws and regulations, including taxes; (5) stable governments and business conditions in emerging economies; (6) successful penetration of emerging economies; (7) continuation of the favorable environment to make acquisitions, domestic and foreign, including regulatory requirements and market values of candidates; (8) successful identification and conversion of computer systems to address the year 2000 issue by the Company, suppliers and vendors. 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 March 31, 2000. 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 May 3, 2000 /*/ Jeffrey P. Gotschall ----------- ------------------------------ Jeffrey P. Gotschall Chief Executive Officer Date May 3, 2000 /*/ Frank A. Cappello ----------- ------------------------------ Frank A. Cappello Vice President - Finance & CFO (Principal Accounting Officer) (12) EX-27 2 EXHIBIT 27
5 0000090168 SIFCO INDUSTRIES, INC. 1,000 6-MOS SEP-30-2000 OCT-01-1999 MAR-31-2000 1,803 0 18,904 0 23,799 46,376 30,031 0 81,824 17,358 0 0 0 5,174 42,983 81,824 0 53,527 44,607 51,171 1 0 501 1,854 282 0 0 0 0 1,572 .30 .30
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