-----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, Utb3GquVDhfn58s8Aav/ijKKyRj8rZq0FhO36Du84/E2yE8Rss5fYTI4VZcaCmaA pk2aEgAmOAtU+zrP+Rc5BQ== 0000950152-01-503609.txt : 20010809 0000950152-01-503609.hdr.sgml : 20010809 ACCESSION NUMBER: 0000950152-01-503609 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010808 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: 1700474 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 l89642ae10-q.txt SIFCO INDUSTRIES, INC. & SUBSIDIARIES 10-Q 1 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2001 ------------- 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) (216) 881-8600 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 ----- ----- As of July 31, 2001, the issuer had 5,137,033 shares of common stock outstanding. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited) (Amounts in thousands, except per share data)
Three Months Nine Months Ended Ended June 30 June 30 ------------------------ ------------------------ 2001 2000 2001 2000 ---- ---- ---- ---- Net sales $ 27,676 $ 26,097 $ 80,587 $ 79,624 Operating expenses: Cost of goods sold 22,170 22,656 66,097 67,596 Selling, general and administrative expenses 3,578 3,147 9,927 9,711 ---------- ---------- ---------- ---------- Total operating expenses 25,748 25,803 76,024 77,307 ---------- ---------- ---------- ---------- Operating income 1,928 294 4,563 2,317 Interest income (181) (31) (358) (118) Interest expense 343 274 895 775 Other (income) expense, net (447) 6 (486) 94 ---------- ---------- ---------- ---------- Income before income tax provision 2,213 45 4,512 1,566 Income tax provision 704 -- 1,706 103 ---------- ---------- ---------- ---------- Net income $ 1,509 $ 45 $ 2,806 $ 1,463 ========== ========== ========== ========== Net income per share (basic) $ .29 $ .01 $ .55 $ .28 Net income per share (diluted) $ .29 $ .01 $ .54 $ .28 Weighted-average number of common shares (basic) 5,137 5,144 5,136 5,172 Weighted-average number of common shares (diluted) 5,164 5,164 5,156 5,203
See accompanying notes to unaudited consolidated condensed financial statements. 3 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Amounts in thousands, except per share data)
June 30 September 30 2001 2000 ------------------ ------------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,435 $ 4,687 Receivables, net 19,162 19,743 Inventories 20,346 19,878 Deferred income taxes 1,486 1,486 Prepaid expenses and other current assets 809 656 ---------- ---------- Total current assets 54,238 46,450 PROPERTY, PLANT AND EQUIPMENT, NET 28,052 29,009 OTHER ASSETS: Funds held by trustee for capital project 303 530 Goodwill and other intangible assets, net 3,639 3,866 Other assets 741 645 ---------- ---------- Total other assets 4,683 5,041 ---------- ---------- Total assets $ 86,973 $ 80,500 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 1,430 $ 1,420 Accounts payable 6,924 6,723 Accrued liabilities 9,998 9,631 ---------- ---------- Total current liabilities 18,352 17,774 LONG-TERM DEBT--NET OF CURRENT MATURITIES 16,744 11,962 OTHER LONG-TERM LIABILITIES 4,790 5,264 SHAREHOLDERS' EQUITY: Serial preferred shares-no par value -- -- Common shares, par value $1 per share 5,208 5,205 Additional paid-in-capital 6,423 6,413 Accumulated other comprehensive loss (9,542) (8,310) Retained earnings 45,447 42,641 Common shares held in treasury at cost (449) (449) ---------- ---------- Total shareholders' equity 47,087 45,500 ---------- ---------- Total liabilities and shareholders' equity $ 86,973 $ 80,500 ========== ==========
See accompanying notes to unaudited consolidated condensed financial statements. 4 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
Nine Months Ended June 30 -------------------------- 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,806 $ 1,463 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,360 3,691 Loss on disposal of property and equipment 34 -- CHANGES IN OPERATING ASSETS AND LIABILITIES: Receivables 443 2,293 Inventories (636) 739 Refundable income taxes -- 94 Prepaid expenses and other current assets (165) (8) Other assets (101) 138 Accounts payable (228) (1,100) Accrued liabilities 912 (290) Other long-term liabilities (732) (299) ---------- ---------- Net cash provided by operating activities 5,693 6,721 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,557) (3,276) Decrease in funds held by trustee for capital project 228 154 Other (42) (33) ---------- ---------- Net cash used for investing activities (2,371) (3,154) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit facility 23,282 7,802 Repayments of revolving credit facility (17,370) (6,970) Repayments of long-term debt (1,120) (1,115) Repurchases of common shares -- (449) Cash dividends declared -- (517) Issuance of common shares 13 73 ---------- ---------- Net cash provided by (used for) financing activities 4,805 (1,176) Increase in cash and cash equivalents 8,127 2,390 Cash and cash equivalents at the beginning of the period 4,687 2,022 Effect of exchange rate changes on cash and cash equivalents (379) (200) ---------- ---------- Cash and cash equivalents at the end of the period $ 12,435 $ 4,212 ========== ========== Supplemental disclosure of cash flow information: Cash paid for interest 785 711 Cash paid for income taxes, net 384 605
See accompanying notes to unaudited consolidated condensed financial statements. 5 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Amounts in thousands) (Unaudited) 1. BASIS OF PRESENTATION The unaudited consolidated condensed financial statements included herein include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented, have been included. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the SIFCO Industries, Inc. and Subsidiaries ("Company") fiscal 2000 annual report on Forms 10-K and 10-K/A. 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. Certain prior period amounts have been reclassified in order to conform to current period classifications. 2. INVENTORIES Inventories consist of: June 30 September 30 2001 2000 ---------- ---------- Raw material and supplies $ 6,277 $ 4,427 Work-in-process 7,094 8,175 Finished goods 6,975 7,276 ---------- ---------- Total inventories $ 20,346 $ 19,878 ========== ========== If the FIFO method had been used for the entire Company, inventories would have been $2,928 and $2,979 higher than reported at June 30, 2001 and September 30, 2000, respectively. 3. LONG-TERM DEBT Effective March 30, 2001, the Company extended the maturity of its existing $6.0 million revolving credit facility with National City Bank to March 31, 2003. On June 1, 2001, the Company increased its revolving credit facility to $10.0 million. 4. INCOME TAXES During the nine months ended June 30, 2001, U.S. income taxes were provided on the undistributed earnings of non-U.S. subsidiaries that were earned during fiscal 2001, in anticipation that distributions from such earnings, to the extent they may occur in the future, would result in an additional income tax liability. The income tax provision on U.S. earnings is based on the anticipated effective rate for the year. 6 5. COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED OTHER COMPREHENSIVE LOSS Total comprehensive income is as follows:
Three Months Ended Nine Months Ended June 30 June 30 ------------------------ ------------------------ 2001 2000 2001 2000 ---- ---- ---- ---- Net income $ 1,509 $ 45 $ 2,806 $ 1,463 Foreign currency translation adjustment (912) 85 (907) (2,988) Cumulative effect adjustment of interest rate swap agreement, net of tax -- -- 135 -- Loss on interest rate swap agreement 24 -- (256) -- Loss on foreign currency exchange contracts (118) -- (204) -- ---------- ---------- ---------- ---------- Total comprehensive income (loss) $ 503 $ 130 $ 1,574 $ (1,525) ========== ========== ========== ==========
The components of accumulated other comprehensive loss are as follows:
June 30 September 30 2001 2000 ---------- ------------ Foreign currency translation adjustment $ (9,217) $ (8,310) Interest rate swap adjustment (121) -- Foreign currency exchange contract adjustment (204) -- ---------- ---------- Total accumulated other comprehensive loss $ (9,542) $ (8,310) ========== ==========
6. BUSINESS SEGMENTS Reportable segments are identified by the Company based upon distinct products manufactured and services provided. The Turbine Component Services and Repair segment consists primarily of turbine component remanufacturing, precision contract machining, subassemblies, and finished parts, as well as, selective electroplating equipment, solutions and services. The Aerospace Component Manufacturing segment consists primarily of domestically produced forgings and semi-finished components primarily for the aerospace industry. Segment information is as follows:
Three Months Ended Nine Months Ended June 30 June 30 ------------------------ ------------------------ 2001 2000 2001 2000 ---- ---- ---- ---- Net sales: Turbine Component Service and Repair $ 16,134 $ 16,476 $ 49,746 $ 53,562 Aerospace Component Manufacturing 11,542 9,621 30,841 26,062 ---------- ---------- ---------- ---------- Consolidated net sales $ 27,676 $ 26,097 $ 80,587 $ 79,624 ========== ========== ========== ========== Operating income: Turbine Component Services and Repair $ 1,239 $ 284 $ 3,736 $ 3,096 Aerospace Component Manufacturing 1,261 589 2,311 897 Corporate unallocated expenses (572) (579) (1,484) (1,676) ---------- ---------- ---------- ---------- Consolidated operating income 1,928 294 4,563 2,317 Interest expense, net 162 243 537 657 Other (income) expense, net (447) 6 (486) 94 ---------- ---------- ---------- ---------- Consolidated income before income tax provision $ 2,213 $ 45 $ 4,512 $ 1,566 ========== ========== ========== ==========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's Discussion and Analysis of Financial Condition and Results of Operations may contain 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. Such factors include the following: (1) future business environment, including capital and consumer spending; (2) competitive factors, including the ability to replace business which may be lost due to OEM encroachment into turbine component services and repair markets; (3) successful procurement of new repair process licenses; (4) the impact of fluctuations of foreign currency (euros) exchange rates on the results of operations; (5) successful development and market introductions of new products, including an advanced coating technology; (6) stability of government laws and regulations, including taxes; and (7) stable governments and business conditions in economies where business is conducted. SIFCO Industries, Inc. and its subsidiaries engage in the production and sale of a variety of metalworking processes, services and products produced primarily to the specific design requirements of its customers. The processes include forging, heat treating, coating, welding, machining and electroplating; and the products include forgings, machined forged parts and other machined metal parts, remanufactured component parts for turbine engines, and electroplating solutions and equipment. A. RESULTS OF OPERATIONS NINE MONTHS ENDED JUNE 30, 2001 COMPARED WITH NINE MONTHS ENDED JUNE 30, 2000 Net sales in the first nine months of fiscal 2001 increased 1.2% to $80.6 million, compared with $79.6 million for the comparable period in fiscal 2000. Income before income tax provision increased to $4.5 million, from $1.6 million. Net income increased 91.8% to $2.8 million, or $0.54 per diluted share, in the nine months ended June 30, 2001 from $1.5 million, or $0.28 per diluted share, in the same period in fiscal 2000. TURBINE COMPONENT SERVICES AND REPAIR GROUP ("REPAIR GROUP") The Repair Group's net sales in the first nine months of fiscal 2001 declined 7.1% to $49.7 million, from $53.6 million in the corresponding period in fiscal 2000. Repair volumes for the older engine types continued the decline that the Company experienced during fiscal 2000 and the first half of the current fiscal year. As the Company expected, demand for repairs to older model JT8D engines continued to decline due to the continued retirement and reduced utilization of older model aircraft. In addition, there was a reduction in repair volume related to the CFM-56 engines due principally to the continued encroachment of the engine OEMs into the marketplace. During the first nine months of fiscal 2001, reduced sales volumes for repair services again adversely impacted the Repair Group's operating income. This negative impact was partially offset by the positive impact of improved margins on the sales of replacement parts. However, the overwhelming contributor to the Company's sustained profitability in its Repair Group, in spite of its reduced sales volumes, has been the positive impact of the weaker euro during the first nine months of fiscal 2001, when compared to the same fiscal 2000 period. Because the majority of its non-U.S. operation's sales are denominated in U.S. dollars, while the majority of its related costs are denominated in local (euro) currency, the weaker euro has resulted in improved operating margins in the first nine months of 2001 when compared to the same period in fiscal 2000. Selling, general and administrative expenses were $6.7 million in the first nine months of fiscal 2001 compared to $6.3 million for the comparable period in fiscal 2000. During the first nine months of fiscal 2001 selling, general and administrative expenses were negatively impacted by a $0.6 million increase in the Repair Group's provision for doubtful accounts, partially offset by the positive impact of a weaker euro as discussed previously. Operating income for the first nine months of fiscal 2001 increased 20.7% to $3.7 million, or 7.5% of net sales, from $3.1 million, or 5.8% of net sales, in the comparable period in fiscal 2000. 8 AEROSPACE COMPONENT MANUFACTURING GROUP ("ACM GROUP") Net sales in the first nine months of fiscal 2001 increased 18.3% to $30.8 million, compared with $26.1 million in the same period in fiscal 2000. The sales increase is net of a reduction in selling price of approximately $1.0 million caused by a decline in the market price of a key raw material that was passed on to customers. The increase in net sales is primarily attributable to an increase in the number of AE series new generation jet engines built by Rolls-Royce plc for business and regional jets, as well as transport and surveillance aircraft. Net sales in the first nine months of fiscal 2001 also benefited from an increase in shipments of components for military aircraft, as well as airframe components sold to commercial aircraft manufacturers. Selling, general and administrative expenses were $1.7 million in the first nine months of fiscal 2001 and 2000. The ACM Group's operating income in the first nine months of fiscal 2001 was $2.3 million, or 7.5% of net sales, compared with $0.9 million, or 3.4% of net sales, in the comparable 2000 period. The Group's operating income in the first nine months of fiscal 2001 benefited by $0.8 million as a result of improved efficiencies resulting from higher production volumes. The operating profit in the first nine months of fiscal 2001 also benefited by $0.4 million due to process improvements. These improvements were partially offset by a $0.5 million increase in material costs due to a shift in the product mix towards products requiring more costly materials. Operating income as a percentage of net sales also benefited in the first nine months of fiscal 2001 from the decline in the market price of a key raw material. CORPORATE UNALLOCATED EXPENSES Corporate unallocated expenses, consisting of corporate salaries and benefits, legal and professional and other corporate expenses, were $1.5 million in the first nine months of fiscal 2001, compared with $1.7 million in the comparable period in fiscal 2000. Corporate unallocated expenses were favorably impacted by $0.3 million of lower expenses related to employee retirement and other benefits, charitable contributions, consulting and general insurance. This was offset by a $0.2 million increase in legal and professional expenses and management incentive expense in the first nine months of fiscal 2001. OTHER/GENERAL Interest income increased to $0.4 million in the first nine months of fiscal 2001 compared with $0.1 million in the comparable period in fiscal 2000 due primarily to the increase in cash and cash equivalents in fiscal 2001. Interest expense was $0.9 million in the first nine months of fiscal 2001 and $0.8 million in the comparable period in fiscal 2000. Interest expense was negatively impacted by higher average borrowings under the Company's revolving credit facility, offset in part by lower interest rates. Other income, net increased $0.6 million in the first nine months of fiscal 2001 compared with the first nine months of fiscal 2000. This was principally due to an increase in foreign currency gains resulting from the impact of the weakening of the euro on the carrying values of certain monetary assets and liabilities of the Company's non-U.S. subsidiaries. THREE MONTHS ENDED JUNE 30, 2001 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2000 Net sales in the third quarter of fiscal 2001 increased 6.1% to $27.7 million compared with $26.1 million for the comparable period in fiscal 2000. Income before income tax provision increased to $2.2 million from $0.1 million. Net income increased to $1.5 million, or $0.29 per diluted share, in the quarter ended June 30, 2001 from $0.1 million, or $0.01 per diluted share, in the same quarter in fiscal 2000. TURBINE COMPONENT SERVICES AND REPAIR GROUP ("REPAIR GROUP") The Repair Group's net sales in the third quarter of fiscal 2001 declined 2.1% to $16.1 million from $16.5 million in the corresponding period in fiscal 2000. Selling, general and administrative expenses in the third quarter of fiscal 2001 9 increased 17.5% to $2.4 million from $2.0 million in the same period in fiscal 2000. The Repair Group's selling, general and administrative expenses were negatively impacted during the third quarter of fiscal 2001 by a $0.4 million increase in the Group's provision for doubtful accounts. Operating income in the third quarter of fiscal 2001 increased to $1.2 million, or 7.7% of net sales, from $0.3 million, or 1.7% of net sales, in the third quarter of fiscal 2000. The business factors resulting in these changes and relevant trends affecting the Repair Group's business during the third quarter are comparable to those described in the preceding discussion for the first nine months of fiscal 2001. AEROSPACE COMPONENT MANUFACTURING GROUP ("ACM") Net sales in the third quarter of fiscal 2001 increased 20.0% to $11.5 million compared with $9.6 million in the same fiscal 2000 period. The increase in net sales is primarily attributable to an increase in shipments of components for military aircraft. Net sales in the third quarter of fiscal 2001 also benefited from an increase in the number of AE series new generation jet engines built by Rolls-Royce plc for business and regional jets, as well as transport and surveillance aircraft. Selling, general and administrative expenses were $0.6 million in the third quarter of fiscal 2001 compared with $0.5 million in the third quarter of fiscal 2000. The increase in selling, general and administrative expenses is primarily attributable to an increase in commissions expense as a result of the higher sales levels. The ACM Group's operating income in the third quarter of fiscal 2001 was $1.3 million, or 10.9% of net sales, compared with $0.6 million, or 6.1% of net sales, in the same 2000 period. The Group's operating income in the third quarter of fiscal 2001 benefited by $0.7 million as a result of improved efficiencies resulting from higher production volumes. The operating profit in the third quarter of fiscal 2001 also benefited by $0.3 million due to reduced tooling expenditures. These improvements were partially offset by a $0.7 million increase in material costs due to a shift in the product mix towards products requiring more costly materials. CORPORATE UNALLOCATED EXPENSES Corporate unallocated expenses, consisting of corporate salaries and benefits, legal and professional and other corporate expenses, were $0.6 million in the third quarter of fiscal 2001 and 2000. In the third quarter of fiscal 2001 reductions in employee retirement and other benefit expenses totaling $0.1 million were offset by increases in legal and professional and management incentive expenses. OTHER/GENERAL Interest income was $0.2 million in the third quarter of fiscal 2001 compared with $0.1 million in the corresponding period of fiscal 2000 due primarily to the increase in cash and cash equivalents in fiscal 2001. Interest expense was $0.3 million in the third quarter of fiscal 2001 and 2000. Interest expense in the third quarter of fiscal 2001 was negatively impacted by higher average borrowings under the Company's revolving credit facility, offset by lower interest rates. Other income, net increased by $0.5 million in the third quarter of fiscal 2001 compared with the comparable period in fiscal 2000. This was principally due to an increase in foreign currency gains resulting from the impact of the weakening of the euro on the carrying values of certain monetary assets and liabilities of the Company's non-U.S. subsidiaries. B. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents increased during the first nine months of fiscal 2001 to $12.4 million from $4.7 million at September 30, 2000. At present, essentially all of the Company's cash and cash equivalents are in the possession of its non-U.S. subsidiaries and relate to undistributed earnings of these non-U.S. subsidiaries. The Company considers the undistributed earnings, accumulated prior to October 1, 2000, of its non-U.S. subsidiaries to be indefinitely reinvested in operations outside the United States. Distributions of these non-U.S. subsidiary earnings would be subject to U.S. income taxes. The Company has provided for U.S. income taxes on the undistributed earnings of non-U.S. subsidiaries accumulated in fiscal 2001. 10 Cash flow activity for the first nine months of fiscal 2001 is presented in the Consolidated Condensed Statements of Cash Flows. An increase in the ACM Group's inventories of $0.9 million, offset by a net reduction in the Repair Group's inventories of $0.3 million required $0.6 million. The increase in the ACM Group's inventories is primarily attributable to the overall higher net sales levels of the Group. The Repair Group's inventory change is attributable to a $1.2 million increase in raw materials for orders expected to ship in the fourth quarter, offset by a $1.5 million reduction in replacement parts inventories in response to lower replacement part sales. An increase in the ACM Group's accounts receivable of $3.8 million was offset by a decline in the Repair Group's accounts receivable of $4.2 million. The increase in the ACM Group's accounts receivables is primarily attributable to the Group's overall higher net sales levels. The decrease in the Repair Group's accounts receivable is primarily attributable to overall lower sales levels, as well as an increase in the Group's allowance for doubtful accounts. Working capital was $35.9 million at June 30, 2001, compared with $28.7 million at September 30, 2000. The current ratio was 3.0 and 2.6 at June 30, 2001 and September 30, 2000, respectively. Capital expenditures were $2.6 million in the first nine months of fiscal 2001, compared with $3.3 million in the comparable period in fiscal 2000. The Company anticipates making $4.2 million of capital expenditures during fiscal 2001. These capital expenditures consist of expenditures for equipment that will enhance the Repair Group's turbine repair services, other new equipment and the upgrade of existing equipment. The Company's projection of capital expenditures for fiscal 2001 decreased by $1.8 million from the previous projection due primarily to the rescheduling of certain expenditures to fiscal 2002. The Company's long-term debt as a percentage of equity at June 30, 2001 was 35.6%, compared with 26.3% at September 30, 2000. During the third quarter the Company increased its existing $6.0 million revolving credit facility to $10.0 million. As of June 30, 2001, the Company had $6.3 million outstanding against its $10.0 million revolving credit facility. The Company believes that the funds available under its revolving credit facility and anticipated funds generated from its operations will be adequate to meet its liquidity requirements through the foreseeable future. B. EFFECTS OF FOREIGN CURRENCY AND INFLATION The Company generates a substantial portion of its revenues in international markets, which subjects its operations to the exposure of foreign currency exchange fluctuations. The effects of foreign currency exchange flunctuations on the operating results of the Company were discussed previously. The Company believes that inflation has not materially affected its results of operations in the first nine months of fiscal 2001 and 2000 and does not expect inflation to be a significant factor for the balance of fiscal 2001. C. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standard No. 141 (SFAS 141), "Business Combinations" and SFAS 142, "Goodwill and Other Intangible Assets." The statements are effective for the Company on October 1, 2002 but earlier adoption is allowed. SFAS 142 will result in modifications relative to the Company's accounting for goodwill and other intangible assets. Specifically, the Company will cease goodwill and certain intangible asset amortization beginning on the date of adoption of this statement. Additionally, intangible assets, including goodwill, will be subjected to new impairment testing criteria. The Company has not had ample time to evaluate the full impact of adoption on the Company's financial statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in interest rates and foreign currency exchange rates as part of its normal operations. At June 30, 2001, the Company had several forward exchange contracts for durations of up to three months to purchase foreign currencies aggregating U.S. $4.4 million. There have been no material changes in the 11 Company's market risk during the nine months ended June 30, 2001. For additional information refer to Item 7A of Form 10-K for the year ended September 30, 2000. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K None. 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. and Subsidiaries (Registrant) Date August 8, 2001 /s/ Jeffrey P. Gotschall -------------- ------------------------ Jeffrey P. Gotschall President and Chief Executive Officer Date August 8, 2001 /s/ Frank A. Cappello -------------- --------------------- Frank A. Cappello Vice President-Finance (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----