-----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, TcLjUnjOD79eQIx3jW1L3XRX47rqy395uge0l0WmS9J1Na3FZHnsyzyj0D6rwrgP 3gAL6AgeRUBpfVDGmaPyLw== 0000950152-95-000880.txt : 19950509 0000950152-95-000880.hdr.sgml : 19950509 ACCESSION NUMBER: 0000950152-95-000880 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950508 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: 95535110 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 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, 1995 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 April 30, 1995 - -------------- ------------------------------- Common Stock, $1 Par Value 5,066,369 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX -----
Page No. ---------- Financial Statements: Consolidated Condensed Balance Sheets -- March 31, 1995, and September 30, 1994 2 Consolidated Condensed Statements of Income -- Three Months and Six Months Ended March 31, 1995 and 1994 3 Consolidated Condensed Statements of Cash Flows -- Three Months and Six Months Ended March 31, 1995 and 1994 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)
Mar 31 Sept. 30 1995 1994 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 2,208 $ 2,256 Accounts Receivable, Net 12,152 12,883 Inventories Raw Materials & Supplies 2,366 1,847 Work-in-Process & Finished Goods 11,348 8,493 -------- --------- 13,714 10,340 Refundable Income Taxes --- 1,039 Prepaid Expenses and Other Current Assets 1,171 416 -------- -------- TOTAL CURRENT ASSETS 29,245 26,934 Property, Plant & Equipment, Net 22,587 21,476 Goodwill, Net of Amortization 4,154 4,213 Funds Held by Trustee For Capital Project 616 733 Other Non-Current Assets 2,206 2,428 -------- -------- TOTAL ASSETS $ 58,808 $ 55,784 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------- Current Liabilities Notes Payable $ 3,400 $ 2,400 Current Portion of Long-Term Debt 1,900 1,900 Accounts Payable 7,025 6,206 Accrued Expenses 4,971 4,067 Accrued Restructuring Expense ---- 2,686 Accrued Income Taxes 173 ---- -------- -------- TOTAL CURRENT LIABILITIES 17,469 17,259 Long-Term Debt - Less Current Portion 6,525 6,975 Deferred Federal Income Taxes and Other 4,491 4,280 Shareholders' Equity Serial Preferred Shares - No Par Value --- --- Common Shares, Par Value $1 Per Share 5,066 5,062 Paid-in-Surplus 5,861 5,849 Retained Earnings 19,396 16,359 -------- -------- TOTAL SHAREHOLDERS' EQUITY 30,323 27,270 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 58,808 $ 55,784 ========= ========= 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 Six Months Ended March 31 March 31 1995 1994 1995 1994 ---- ---- ---- ---- Net Sales of SIFCO Industries, Inc. $ 17,374 $ 14,997 $ 33,371 $ 31,412 Cost & Expenses Cost of Goods Sold 13,750 12,853 26,377 26,088 Selling, General & Administrative Expense 2,810 2,587 5,655 5,404 Interest Income (30) (17) (60) (31) Interest Expense 257 166 501 321 Other (Income) Expense, Net 95 (135) 3 (166) Total Costs & Expenses 16,882 15,454 32,476 31,616 Operating Income (Loss) 492 (457) 895 (204) Reversal of Restructuring Charge to Income 1,512 ----- 1,512 ----- Income (Loss) Before Income Taxes 2,004 (457) 2,407 (204) Provision (Benefit) for Federal, Foreign & State Income Taxes 79 42 169 112 ---------- --------- --------- --------- Net Income (Loss) $ 1,925 $ (499) $ 2,238 $ (316) ========== ========= ========= ========= Net Income (Loss) Per Share $ .38 $ (.10) $ .44 $ (.06) ========== ========= ========= ========= Average Shares Outstanding 5,081 5,070 5,078 5061 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)
Six Months Ended March 31 1995 1994 ---- ---- Net cash provided by (used for) operating activities: Net income (loss) $ 2,238 $ (316) Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 1,693 1,537 Deferred income taxes and other 211 (101) Reversal of restructuring charge to income (1,512) ----- ------- ------- Subtotal 2,630 1,120 Net cash provided by (used for) changes in operating assets and liabilities, net of effect of acquisition: Receivables 731 (589) Inventories (3,374) 306 Accrued or refundable income taxes 1,212 1,615 Prepaid expenses and other current assets (755) (251) Accounts payable 819 (1,205) Accrued expenses (270) (207) Net cash provided by (used for) changes in operating assets and liabilities (1,637) (331) ------- ------- Net cash provided by operating activities 993 789 Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (2,362) (1,187) (Increase) decrease in funds held by trustee for capital project 117 240 Other 654 129 ------- -------- Net cash provided by (used for) investing activities (1,591) (818) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 1,000 1,100 Repayment of borrowings (450) (450) Cash dividends declared --- --- -------- -------- Net cash provided by (used for) financing activities 550 650 -------- -------- Increase (decrease) in cash and cash equivalents (48) 621 Cash and cash equivalents, beginning of year 2,256 1,187 -------- -------- Cash and cash equivalents, end of period $ 2,208 $ 1,808 ======== ======== See accompanying notes to consolidated condensed financial statements.
4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION ----------------------------------------------------- MARCH 31, 1995 -------------- 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. (2) Debt: ----- Long-term debt as of March 31, 1995 and September 30, 1994 consisted of:
Mar. 31 Sept. 30 1995 1994 -------- -------- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $ 2,775 $ 2,925 Note payable to bank, due in quarterly installments of $150,000, at the base rate plus 1/2% (adjusted quarterly) 1,650 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 -------- -------- 8,425 8,875 Less - current maturities 1,900 1,900 -------- -------- $ 6,525 $ 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 March 31, 1995 the Company had $3.4 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 $3.5 million and $0.1 million during the six month period of 1995 and 1994, 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, excluding the $1.5 million reversal to income of the restructuring reserve that occurred in the second quarter of 1995. At March 31, 1995, tangible net worth exceeded the required minimum by $2.0 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 $3,358,000 and $3,378,000 higher than reported at March 31, 1995 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 six months ended March 31, 1995 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 Six Months Ended March 31 March 31 1995 and 1994 1995 and 1994 ------------------ ---------------- Net Sales of SIFCO Industries, Inc. $ 2,377 16% $ 1,959 6% Cost of Sales 897 7% 289 1% Selling, General & Administrative 223 9% 251 5% Interest Income 13 76% 29 94% Interest Expense 91 55% 180 56% Other Expense, Net 230 N/A 169 N/A Operating Income (Loss) 949 N/A 1,099 N/A Reversal of Restructuring Charge to Income 1,512 N/A 1,512 N/A Income Before Income Taxes 2,461 N/A 2,611 N/A Provision for Federal, Foreign & State Income Taxes 37 88% 57 51% Net Income 2,424 N/A 2,554 N/A
9 11 MANAGEMENT'S DISCUSSION - ----------------------- We are extremely pleased to report a profit before tax of $2,004,000 on sales of $17,374,000 for the second quarter ended March 31, 1995, compared to a loss before tax of $457,000 on sales of $14,997,000 for the same period a year ago. Operating income for the six months ended March 31, 1995 was $895,000 on sales of $33,371,000, compared to a loss before tax of $204,000 on sales of $31,412,000 for the same period in 1994. Net income for the second quarter was $1,925,000, or $0.38 per share, compared to a loss of $499,000, or $0.10 per share, for the same period last year. Net income for the six months was $2,238,000, or $0.44 per share, compared to a loss of $316,000, or $0.06 per share in 1994. Both the second quarter and the six-month net income include a return of $1,512,000 from an original reserve of $6,500,000 established in September of 1993 to cover costs associated with the restructuring of our Forge Group, which was substantially completed in the second quarter just ended. There was no tax penalty levied on the reserve reversal as no tax benefit was taken when the reserve was established. It is worth noting that we achieved an operating income of $403,000 during the first quarter of the fiscal year, and $492,000 in the second quarter, demonstrating a positive earning trend so far in fiscal 1995. Net sales for the second quarter increased 16% while defense-related sales increased 46% compared to last year. Net sales for the six months increased 6% and defense-related sales went up 13% over a year ago. New orders received increased against last year for both the second quarter and the six months. New orders for the second quarter improved 36% and 26% for the six-month period, respectively. Our solid sales and earnings improvements were achieved despite continued pricing competition. They are positive indicators that the diversity and quality of our products are earning them preferred status in the markets we serve. It is also being demonstrated that the extraordinary efforts of our divisions to tailor their services to the individual needs of our customers are generating customer loyalty and appreciation. Primary among the restructuring accomplishments of our Forge Group has been the Group's improvement in operating earnings. They have achieved profitability through these first six months of fiscal 1995 compared to losses through the same period last year. Forge sales in the second quarter also experienced a strong resurgence as the Group reached the highest net sales volume in several years, as well as a solid increase in bookings year-to-date. The major elements of the restructuring effort included team-oriented strategies covering all programs within the plan: a redesigned marketing philosophy which focussed on matching best capabilities to specialized market opportunities; and a streamlining of organizational functions which enhanced production efficiencies, reducing costs significantly as well as improving customer service. 10 12 The Turbine Group is now equipped with an LPPS (low pressure plasma system) which provides the capability to apply the bond base coat prior to the application of the thermal barrier on Rolls Royce, GE and Pratt & Whitney engines. Approvals have also been received for 1st and 2nd blade repairs on GE's CF6 engines, up to and including the CF6-80C2. We are also experiencing strong interest in OEM and repair business for components of industrial turbines. FINANCIAL ANALYSIS - ------------------ Net sales for the second quarter ended March 31, 1995 increased $2.4 million to $17.4 million from $15.0 million a year ago or 16%. Defense-related sales increased $.7 million to $2.2 million from $1.5 million. The Company reported a net income of $1.9 million compared to a net loss of $.5 for the same period a year ago. Net income for the second quarter and six months this year benefited $1.5 million from the reversal of the Restructuring Reserve that was established in September 1993 for the restructuring of the Forge Group. There was no tax benefit provided when the reserve was established and therefore no tax penalty with the reversal of the reserve. Income from operations before corporate and interest expense increased to $1.2 million from $.05 million a year ago. Net sales for the six months ended March 31, 1995 increased $2 million to $33.4 million from $31.4 million a year ago or 6%. Defense-related sales were $4.4 million compared to $3.9 million last year. The Company reported net income of $2.2 million compared to a net loss of $.3 million a year ago. Income from operations before corporate and interest expense increased $1.5 million to $2.4 million from $.9 million a year ago. Net interest expense for the quarter was $.2 million compared to $.1 million a year ago. Year-to-date net interest expense was $.4 million compared to $.3 million a year ago. New orders received increased against last year for both the second quarter and for the six months. New orders for the second quarter were $19.8 million to last year's $14.6 million and $35.6 million for the current year-to-date compared to $28.2 million last year. SPECIALTY PRODUCTS net sales for the quarter increased $1.4 million to $12.7 million from $11.3 million (8.5%). Defense-related sales were not significant. Specialty Products income from operations before corporate and interest expense increased $.1 million to $1.0 million from $.9 million last year. SPECIALTY PRODUCTS net sales for the six months increased $1.5 million to $24.1 million from $22.6 million (6.6%). Specialty Products income from operations before corporate and interest expense increased $.2 million to $2.1 million from $1.9 million. FORGING SEGMENT net sales for the quarter were $5.2 million compared to $4.4 million last year. Defense-related sales were $1.8 million (35%) compared to $1.1 million (25%) last year. Forging income from operations before corporate and interest expense was $.2 million compared to a loss of $.8 million a year ago. 11 13 FORGING SEGMENT net sales for the six months were flat at $10.0 million compared to $9.9 million a year ago. Defense-related sales were $3.7 million (37%) compared to $3.3 million (33%) last year. Forging income from operations was $.3 million compared to a loss of $1.0 million last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital increased to $11.8 million at March 31, 1995 from $9.7 million at September 30, 1994. The current ratio was 1.7 at March 31, 1995 and 1.6 at September 30, 1994. Total debt as a percentage of tangible shareholders' equity was 49.9% at March 31, 1995 compared to 53.2% at September 30, 1994. The Company has borrowed $3.4 million against its revolving credit line and has an additional $2.0 million term loan available. Capital expenditures in the first six months amount to $2.4 million compared to $1.2 million a year ago. The Company considers it has adequate financing available to meet its needs for the 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. 12 14 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, 1995. 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, 1995 Jeffrey P. Gotschall ----------- ---------------------------------- Jeffrey P. Gotschall Chief Executive Officer Date May 3, 1995 Richard A. Demetter ----------- ---------------------------------- Richard A. Demetter Vice President - Finance (Principal Accounting Officer) 13 EX-27 2 SIFCO INDUSTRIES EX-27
5 0000090168 SIFCO INDUSTRIES, INC. 1,000 6-MOS SEP-30-1995 OCT-01-1994 MAR-31-1995 2,208 0 12,152 0 13,714 29,245 22,587 0 58,808 17,469 6,525 5,066 0 0 25,257 58,808 33,371 33,371 26,377 32,032 1,515 0 441 2,407 169 2,238 0 0 0 2,238 .44 .44
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