-----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, QgWVKJDKnGtUl58FQApOr91dfE3r+WIBwfSxeeRy+s21HfW4bhFJFQyV3WSTbBx1 ywHTx4XyWUJa5ghpmf3TWg== 0000950152-96-000365.txt : 19960209 0000950152-96-000365.hdr.sgml : 19960209 ACCESSION NUMBER: 0000950152-96-000365 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960208 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: 96513360 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 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, 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 January 31, 1996 - ------------------ --------------------------------- Common Stock, $1 Par Value 5,108,411 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX Page No. ---------- Financial Statements: Consolidated Condensed Balance Sheets -- December 31, 1995, and September 30, 1995 2 Consolidated Condensed Statements of Income -- Three Months Ended December 31, 1995 and 1994 3 Consolidated Condensed Statements of Cash Flows -- Three Months Ended December 31, 1995 and 1994 4 Notes to Consolidated Condensed Financial Statements 5,6,7 Management's Discussion and Analysis of the Consolidated Condensed Statements of Income 8,9,10 Other Information and Signatures 11 3 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- ($000 Omitted)
Dec. 31 Sept. 30 1995 1995 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 1,158 $ 1,469 Accounts Receivable, Net 15,076 15,121 Inventories Raw Materials & Supplies 2,857 2,390 Work-in-Process & Finished Goods 11,376 10,895 ------- ------- 14,233 13,285 Prepaid Expenses and Other Current Assets 1,197 711 ------- ------- TOTAL CURRENT ASSETS 31,664 30,586 Property, Plant & Equipment, Net 22,920 23,460 Goodwill, Net of Amortization 4,067 4,097 Funds Held by Trustee For Capital Project 328 472 Other Non-Current Assets 1,925 2,067 ------- ------- TOTAL ASSETS $60,904 $60,682 ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------
Current Liabilities Notes Payable $ 5,200 $ 4,204 Current Portion of Long-Term Debt 2,300 2,300 Accounts Payable 6,048 6,664 Accrued Expenses 4,658 4,758 Accrued Income Taxes 85 27 ------- ------- TOTAL CURRENT LIABILITIES 18,291 17,949 Long-Term Debt - Less Current Portion 6,450 6,675 Deferred Federal Income Taxes and Other 5,144 5,253 Shareholders' Equity Serial Preferred Shares - No Par Value --- --- Common Shares, Par Value $1 Per Share 5,108 5,092 Paid-in-Surplus 5,901 5,873 Retained Earnings 20,010 19,840 ------- ------- TOTAL SHAREHOLDERS' EQUITY 31,019 30,805 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $60,904 $60,682 ======= =======
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 1995 1994 ---- ---- Net Sales of SIFCO Industries, Inc. $18,271 $15,997 Cost & Expenses Cost of Goods Sold 14,986 12,627 Selling, General & Administrative Expense 2,594 2,845 Interest Income (15) (30) Interest Expense 280 244 Other (Income) Expense, Net 6 (92) Total Costs & Expenses 17,851 15,594 Income (Loss) Before Income Taxes 420 403 Provision (Benefit) for Federal, Foreign & State Income Taxes 58 90 ------- ------- Net Income (Loss) $ 362 $ 313 ======= ======= Net Income (Loss) Per Share $ .07 $ .06 ======= ======= Average Shares Outstanding 5,104 5,077 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 1995 1994 ---- ---- Net cash provided by (used for) operating activities: Net income (loss) $ 362 $ 313 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 851 838 Deferred income taxes and other (109) (74) ------ ------ Subtotal 1,104 1,077 Net cash provided by (used for) changes in operating assets and liabilities: Receivables 45 1,240 Inventories (948) (1,063) Accrued or refundable income taxes 58 79 Prepaid expenses and other current assets (486) (512) Accounts payable (616) (1,355) Accrued expenses (100) (157) Accrued restructuring --- (39) ------ ------ Net cash provided by (used for) changes in operating assets and liabilities (2,047) (1,807) ------ ------ Net cash provided by operating activities (943) (730) Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (341) (1,149) (Increase) decrease in funds held by trustee for capital project 144 117 Other 54 231 ------ ------ Net cash provided by (used for) investing activities (143) (801) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 1,000 1,400 Repayment of borrowings (225) (225) Cash dividends declared --- --- ------ ------ Net cash provided by (used for) financing activities 775 1,175 ------ ------ Increase (decrease) in cash and cash equivalents (311) (356) Cash and cash equivalents, beginning of year 1,469 2,256 ------ ------ Cash and cash equivalents, end of period $1,158 $1,900 ------ ------
See accompanying notes to consolidated condensed financial statements. 4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION ----------------------------------------------------- DECEMBER 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. (2) Debt: ---- Long-term debt as of December 31, 1995 and September 30, 1995 consisted of: Dec. 31 Sept. 30 1995 1995 -------- -------- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $2,550 $2,625 Note payable to bank, due in quarterly installments, plus interest, at the base rate plus 1/2% 3,200 3,350 Note payable to bank, due October 31, 1996, interest payable quarterly, at rates based upon LIBOR and DIBOR (adjusted quarterly) 1,000 1,000 Note payable to seller of acquired business at the base rate plus 1/2% 2,000 2,000 ------ ------ 8,750 8,975 Less - current maturities 2,300 2,300 ------ ------ $6,450 $6,675 ====== ====== 5 7 The Company has a $7 million revolving credit agreement subject to eligible working capital as defined, which expires January 1, 1998. As of December 31, 1995, the Company had $5.2 million outstanding under this agreement. In addition, the Company has a $1.15 million credit facility which is used for an irrevocable letter of credit which secures the $1 million loan from an Irish bank due October 31, 1996. 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 $4.2 million and $3.0 million during the three month period of fiscal 1996 and 1995, 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 $275,000, 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, 1998. 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, 1995, tangible net worth exceeded the required minimum by $2.7 million. As part of a previous acquisition, the seller provided financing in the form of unsecured installment notes. These notes bear interest at the base rate plus 1/2%, payable 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 1996 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 $3,463,000 and $3,463,000 higher than reported at December 31, 1995 and September 30, 1995, 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) Basis of Presentation: ---------------------- The accompanying financial information for the three months ended December 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. 7 9 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 1995 and 1994 ------------------- Net Sales of SIFCO Industries, Inc. $2,274 14% Cost of Sales 2,359 19% Selling, General & Administrative (251) (9%) Interest Income (15) (50%) Interest Expense 36 15% Other Income, Net (98) --- Income Before Income Taxes 17 4% Provision for Federal, Foreign & State Income Taxes (32) (36%) Net Income 49 16% 8 10 MANAGEMENT'S DISCUSSION - ----------------------- We are pleased to report a profit before tax of $420,000 on sales of $18,271,000 for the first quarter ended December 31, 1995. This compares to earnings of $402,000 on sales of $15,997,000 for the same period last year. Net earnings were $362,000 or $.07 per share compared to $313,000 or $.06 per share in 1994. Forge sales and earnings achieved a modest improvement over last year. Sales increased to $5.2 million compared to $4.8 million in 1994, and operating profit increased to $236,000 from $112,000. The success of Forge's marketing focus on complex, higher margin products was apparent throughout the quarter. Margins steadily improved and performance exceeded bookings and financial forecasts for each month of the period. The Forge segment continues to stimulate positive customer response through its commitment to service and quality. As an example, McDonnell-Douglas formally designated Forge as a "High Performance Supplier" during the quarter. This designation recognizes the Forge's consistent quality performance. As a result, McDonnell-Douglas has determined that the usual source inspection procedures they employ are unnecessary in our forging operation. Our Specialty Products segment also expanded their market activity during the quarter as sales increased to $13.2 million form $11.4 million a year ago. Operating income for the quarter was $842,000, down from $1,033,000 last year. The majority of the increased sales volume resulted from the sale of OEM products which traditionally produce lower margins. Margins were also affected by the cost of bringing new turbine component repair processes on stream. We are confident that our continuing product and market development programs will enhance profits while assuring us of meeting the competitive demands of the aerospace markets we serve. We take pride in the reputation for technology and quality that SIFCO has earned through the years. Our expertise allows us to qualify for the most demanding state-of-the-art programs. A few examples of these include the experimental F-22 fighter and Boeing's ultra modern 777 commercial jetliner for which we produce complex forgings. Another, and possibly the most interesting example is the international space station named Freedom now under construction. Our plating operation has a series of projects on the station, including nickel plating connector devices between modules to provide corrosion protection. In the application of any of our technologies we are most proud of the skill and commitment to quality that characterize SIFCO employees. FINANCIAL ANALYSIS - ------------------ Net sales for the first quarter ended December 31, 1995 increased to $18.3 million from $16.0 million a year ago or 14%. Defense-related sales were $2.1 million compared to $2.4 million a year ago. The Company reported a net profit of $.362 million compared to $.313 million a year ago. Net interest expense increased to $.265 million from $.214 million a year ago reflecting additional borrowing for increased working capital needed to support the additional sales. New orders received increased to $19.3 million from $15.8 million last year. 9 11 Specialty Products net sales increased to $13.2 million from $11.4 million last year. Specialty Products income from operations before corporate and interest expense declined to $.8 million compared to $1.0 million last year. Specialty Products margins were negatively impacted by a higher mix of OEM products which traditionally have lower margins and the cost of bringing new turbine component repair processes on stream. Forging segment sales increased to $5.2 million from $4.8 million last year. Defense-related sales were $1.8 million (35%), compared to $1.9 million (40%) last year. Forging income from operations before corporate and interest expense was $.2 million compared to $.1 million last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital was $13.4 million at December 31, 1995 and $12.6 million at September 30, 1995. The current ratio for the same period was 1.7 and 1.7 respectively. Total debt as a percentage of tangible shareholders' equity was 56.1% at December 31, 1995 compared to 53.9% at September 30, 1995. The Company has borrowed $5.2 million against its revolving credit line of $7.0 million. The Company considers it has adequate financing to meet its needs through the current 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. 10 12 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, 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 January 27, 1996 /S/ Jeffrey P. Gotschall ---------------- ----------------------- Jeffrey P. Gotschall Chief Executive Officer Date January 27, 1996 /S/ Richard A. Demetter ---------------- ---------------------- Richard A. Demetter Vice President - Finance (Principal Accounting Officer) 11 EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 0000090168 SIFCO INDUSTRIES, INC 1,000 3-MOS SEP-30-1996 OCT-01-1995 DEC-31-1995 1,158 0 15,076 0 14,233 31,664 22,920 0 60,904 18,291 6,450 5,108 0 0 25,911 60,904 0 18,271 14,986 17,580 6 0 265 420 58 362 0 0 0 362 .07 .07
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