-----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, DT0IRtwKmJ264TgLERkcnWIdIQhoyi067IkR9gorNstM5VxD7qwbvImAFVXRJljb caQriE6TlNTKiMaFhXtHSg== 0000950152-96-002172.txt : 19960509 0000950152-96-002172.hdr.sgml : 19960509 ACCESSION NUMBER: 0000950152-96-002172 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960508 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: 96558049 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 1 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1996 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 (I.R.S. Employer Identification No.) jurisdiction of incorporation or organization) 970 East 64th Street, Cleveland, Ohio 44103 - -------------------------------------------------------------------------------- (Address of principal executive (Zip Code) offices) 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, 1996 - ------------------ ------------------------------- Common Stock, $1 Par Value 5,113,644 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX ------
Page No. ---------- Financial Statements: Consolidated Condensed Balance Sheets -- March 31, 1996, and September 30, 1995 2 Consolidated Condensed Statements of Income -- Three Months and Six Months Ended March 31, 1996 and 1995 3 Consolidated Condensed Statements of Cash Flows -- Three Months and Six Months Ended March 31, 1996 and 1995 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 1996 1995 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 1,228 $ 1,469 Accounts Receivable, Net 17,308 15,121 Inventories Raw Materials & Supplies 5,247 3,488 Work-in-Process & Finished Goods 9,493 9,797 ------- ------- 14,740 13,285 Prepaid Expenses and Other Current Assets 1,434 711 ------- ------- TOTAL CURRENT ASSETS 34,710 30,586 Property, Plant & Equipment, Net 22,650 23,460 Goodwill, Net of Amortization 4,038 4,097 Funds Held by Trustee For Capital Project 262 472 Other Non-Current Assets 1,858 2,067 ------- ------- TOTAL ASSETS $63,518 $60,682 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities Notes Payable $ 5,500 $ 4,200 Current Portion of Long-Term Debt 2,300 2,300 Accounts Payable 7,492 6,664 Accrued Expenses 5,030 4,758 Accrued Income Taxes 200 27 ------- ------- TOTAL CURRENT LIABILITIES 20,522 17,949 Long-Term Debt - Less Current Portion 6,100 6,675 Deferred Federal Income Taxes and Other 5,022 5,253 Shareholders' Equity Serial Preferred Shares - No Par Value -- -- Common Shares, Par Value $1 Per Share 5,114 5,092 Paid-in-Surplus 5,917 5,873 Retained Earnings 20,843 19,840 ------- ------- TOTAL SHAREHOLDERS' EQUITY 31,874 30,805 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $63,518 $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 Six Months Ended March 31 March 31 1996 1995 1996 1995 -------- -------- -------- -------- Net Sales of SIFCO Industries, Inc. $ 22,096 $ 17,374 $ 40,367 $ 33,371 Cost & Expenses Cost of Goods Sold 17,621 13,750 32,607 26,377 Selling, General & Administrative Expense 2,967 2,810 5,561 5,655 Interest Income (28) (30) (43) (60) Interest Expense 298 257 578 501 Other (Income) Expense, Net 20 95 26 3 Reversal of Restructuring Charge to Income -- (1,512) -- (1,512) -------- -------- -------- -------- Total Costs & Expenses 20,878 15,370 38,729 30,964 Income Before Income Taxes 1,218 2,004 1,638 2,407 Provision for Federal, Foreign & State Income Taxes 116 79 174 169 -------- -------- -------- -------- Net Income (Loss) $ 1,102 $ 1,925 $ 1,464 $ 2,238 ======== ======== ======== ======== Net Income (Loss) Per Share $ .22 $ .38 $ .29 $ .44 ======== ======== ======== ======== Average Shares Outstanding 5,120 5,081 5,111 5,078 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 1996 1995 ------- ------- Net cash provided by (used for) operating activities: Net income (loss) $ 1,464 $ 2,238 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 1,642 1,693 Deferred income taxes and other (231) 211 Reversal of restructuring charge to income -- (1,512) ------- ------- Subtotal 2,875 2,630 Net cash provided by (used for) changes in operating assets and liabilities, net of effect of acquisition: Receivables (2,187) 731 Inventories (1,455) (3,374) Accrued or refundable income taxes 173 1,212 Prepaid expenses and other current assets (723) (755) Accounts payable 828 819 Accrued expenses 272 (270) ------- ------- Net cash provided by (used for) changes in operating assets and liabilities (3,092) (1,637) ------- ------- Net cash provided by (used for) operating activities (217) 993 Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (1,044) (2,362) (Increase) decrease in funds held by trustee for capital project 210 117 Other 85 654 ------- ------- Net cash provided by (used for) investing activities (749) (1,591) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 1,300 1,000 Repayment of borrowings (575) (450) Cash dividends declared -- -- ------- ------- Net cash provided by (used for) financing activities 725 550 ------- ------- Increase (decrease) in cash and cash equivalents (241) (48) Cash and cash equivalents, beginning of year 1,469 2,256 ------- ------- Cash and cash equivalents, end of period $ 1,228 $ 2,208 ======= =======
See accompanying notes to consolidated condensed financial statements. 4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION ----------------------------------------------------- MARCH 31, 1996 -------------- 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, 1996 and September 30, 1995 consisted of:
Mar. 31 Sept. 30 1996 1995 ------ ------ ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $2,475 $2,625 Note payable to bank, due in quarterly installments of $150,000, at the base rate plus 1/2% (adjusted quarterly) 2,925 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 Selectrons, Ltd., at the base rate plus 1/2% (adjusted quarterly) 2,000 2,000 ------ ------ 8,400 8,975 Less - current maturities 2,300 2,300 ------ ------ $6,100 $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 March 31, 1996 the Company had $5.5 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, 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 $4.6 million and $3.5 million during the six month period of 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 March 31, 1996, tangible net worth exceeded the required minimum by $3.4 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 and net loss carry forward. 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 $3,583,000 and $3,463,000 higher than reported at March 31, 1996 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. (10) Basis of Presentation: ---------------------- The accompanying financial information for the six months ended March 31, 1996 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 Six Months Ended March 31 March 31 1996 and 1995 1996 and 1995 ------------------- ------------------- Net Sales of SIFCO Industries, Inc. $ 4,722 27% $ 6,996 21% Cost of Sales 3,871 28% 6,230 24% Selling, General & Administrative 157 6% (94) (2)% Interest Income (2) (7)% (17) (28)% Interest Expense 41 16% 77 15% Other Expense, Net (75) (79)% 23 766% Reversal of Restructuring Charge to Income (1,512) N/A (1,512) N/A Income Before Income Taxes (786) (39)% (769) (32)% Provision for Federal, Foreign & State Income Taxes 37 47% 5 3% Net Income (823) (42)% (774) (35)%
8 10 MANAGEMENT'S DISCUSSION - ----------------------- We are happy to announce a profit before tax of $1,218,000 on sales of $22,096,000 for the second quarter ended March 31, 1996. This compares to last year's profit before tax of $2,004,000 which included the reversal of a restructuring expense to income of $1,512,000. Sales for the second quarter in 1995 were $17,374,000. Profit before tax for the six months ended March 31, 1996 was $1,638,000 on sales of $40,367,000, compared to $2,407,000 on sales of $33,371,000 in 1995. Net income for the second quarter just ended was $1,102,000, or $0.22 per share, compared to $1,925,000, or $0.38 per share last year. Net income for the six months was $1,464,000, or $0.29 per share, compared to $2,238,000, or $0.44 per share in 1995. Profit before tax as well as net income for the six months ending March 31, 1995 include the reversal to income of the $1,512,000 restructuring expense recorded in the second quarter of last year. Forge sales increased to $6.8 million from $5.2 million last year. Operating income for the period just ended was $348,000, up from $183,000 in 1995. The growing strength of the rebounding aerospace industry is apparent as bookings averaged in excess of $3 million for each month of the quarter, compared to $1.7 million last year. A major contributor to incoming business was Boeing Aircraft's increasing build rates for its most popular airliners, all of which use a variety of SIFCO forgings. Defense orders were also higher with several programs underway including the new V-22 vertical lift aircraft, the C-17 and a retrofit for the venerable Chinook helicopter. Technical capabilities were also updated when Forge earned certification for its heat treat facilities from the National Aerospace and Defense Contractors Accreditation Program. We are also pleased with the performance of the Specialty Products segment. They achieved a substantial improvement in sales to $15.4 million, up from $12.7 million a year ago, while operating income rose from $1,036,000 to $1,598,000. Bookings managed a slight improvement to $15 million during the quarter. A welcome contribution to our turbine component repair business during the quarter has been the surge of overhaul activity on the CFM56 series engine. Having completed record breaking in-service times, these engines are now being scheduled for repair. Our Just-In-Time inventory management programs which are available for CFM56 series engines as well as other major powerplants has been well received, particularly in the high demand environment of the past several months and has been providing a strong marketing incentive for airline customers. In other areas of our Specialty Products segment, our plating personnel enhanced the reputation of their technology as they continued to participate in NASA's Space Habitat Program. They also earned the ISO 9002 designation for international quality performance at their facility in the United Kingdom. The comparison of our business segments year-to-date indicates that our customer service techniques, product expansion efforts, and improved efficiencies are getting the job done. For example, excluding the reversal of the $1,512,000 restructuring expense in the second quarter last year reveals an increase in earnings per share from $0.089 to $0.22 and an improvement in profit before tax from $492,000 last year to $1,218,000 this reporting period. The 27% increase in our combined sales activity for the quarter is solid evidence that the aerospace industry is back. The increasing demands of our customers however still occur in that highly competitive arena that characterizes our business. We must meet the challenges of that competition to benefit from the earnings opportunities increased business represents. To that end, we are concentrating on refining the use of our present resources - our facilities, our technologies and, most importantly, the capabilities of our skilled and experienced workforce. 9 11 FINANCIAL ANALYSIS - ------------------ Net sales for the second quarter ended March 31, 1996 increased $4.7 million to $22.1 million from $17.4 million a year ago or 27%. Defense-related sales increased $1.7 million to $3.9 million from $2.2 million. The Company reported a net income of $1.1 million compared to $1.9 million a year ago. Last year's quarter included the reversal of $1.5 million of restructuring expense. Net sales for the six months ended March 31, 1996 increased $7 million to $40.4 million from $33.4 million a year ago or 21%. Defense-related sales were $6.0 million compared to $4.4 million last year. The Company reported net income of $1.5 million compared to last year's $2.2 million that included the $1.5 million of restructuring expense. Operating income before corporate and interest expense for the quarter was $3.0 million compared to $3.9 million last year and $1.9 million year-to-date to $2.7 million last year. Last year's quarter and year-to-date amounts benefited from the $1.5 million reversal of the restructuring reserve. Net interest expense was $.3 million compared to $.2 million a year ago. Year-to-date net interest expense was $.5 million compared to $.4 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 $25.0 million compared to last year's $19.8 million and $44.2 million compared to $35.6 million last year. SPECIALTY PRODUCTS net sales for the quarter increased $2.7 million to $15.4 million from $12.7 million (21%). Defense-related sales were not significant. Specialty Products income from operations before corporate and interest expense increased to $1.6 million from $1.0 million last year. SPECIALTY PRODUCTS net sales for the six months increased to $29.0 million from $24.1 million (20%). Specialty Products income from operations before corporate and interest expense increased $.3 million to $2.4 million from $2.1 million. FORGING SEGMENT net sales for the quarter increased $1.6 million to $6.8 million from $5.2 million last year (31%). Defense-related sales were $3.5 million (51%) compared to $1.8 million (25%) last year. Forging income from operations before corporate and interest expense was $.3 million compared to $1.7 million last year that included the $1.5 million reversal of restructuring expense. FORGING SEGMENT net sales for the six months increased $2.0 million to $12.0 million from $10.0 million (20%). Defense-related sales were $5.3 million (44%) compared to $3.7 million (37%) last year. Forging income from operations before corporate and interest expense was $.6 million compared to $18 million last year that included the $1.5 million reversal of restructuring expense. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital increased to $14.2 million at March 31, 1996 compared to $12.6 million at September 30, 1995. The current ratio was 1.7 for both dates. Total debt as a percentage of tangible shareholders' equity was 53.3% at March 31, 1996 compared to 53.9% at September 30, 1995. Capital expenditures were $1.0 million compared to $2.4 million a year ago. The Company considers it has adequate financing available to meet its needs for the year. 10 12 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 and net loss carryforward. 11 13 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, 1996. 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 April 30, 1996 /s/ Jeffrey P. Gotschall -------------- ----------------------------- Jeffrey P. Gotschall Chief Executive Officer Date April 30, 1996 /s/ Richard A. Demetter -------------- --------------------------- Richard A. Demetter Vice President - Finance (Principal Accounting Officer) EX-27 2 EXHIBIT 27
5 0000090168 SIFCO INDUSTRIES, INC 1,000 6-MOS SEP-30-1996 OCT-01-1995 MAR-31-1996 1,228 0 17,308 0 14,740 34,710 22,650 0 63,518 20,522 0 5,114 0 0 26,760 63,518 40,367 40,367 32,607 38,168 (17) 0 578 1,638 174 1,464 0 0 0 1,464 .29 .29
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