-----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, UkQ/RYe9fmqSuNjNGswKnPPgr2ae0QhTkY7UItHEq1EUUJcnko2Z7IMeTtfcF5QX Vj/w6bZpnHYFGMtIlOGCWQ== 0000950152-96-003700.txt : 19960805 0000950152-96-003700.hdr.sgml : 19960805 ACCESSION NUMBER: 0000950152-96-003700 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960802 SROS: AMEX 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: 96603015 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 June 30, 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 jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 970 East 64th Street, Cleveland, Ohio 44103 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (216) 881-8600 -------------- None Former - ------------------------------------------------------------------- name, former address and former fiscal year, if changed since last report. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes X No --- ---
Class Outstanding at July 31, 1996 - ---------------- ---------------------------- Common Stock, $1 Par Value 5,118,766
2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX -----
Page No. -------- Financial Statements: Consolidated Condensed Balance Sheets -- June 30, 1996, and September 30, 1995 2 Consolidated Condensed Statements of Income -- Three Months and Nine Months Ended June 30, 1996 and 1995 3 Consolidated Condensed Statements of Cash Flows -- Three Months and Nine Months Ended June 30, 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 Other Information and Signatures 11
3 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- ($000 Omitted)
June 30 Sept. 30 1996 1995 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 3,345 $ 1,469 Accounts Receivable, Net 17,916 15,121 Inventories Raw Materials & Supplies 4,396 3,488 Work-in-Process & Finished Goods 11,677 9,797 ------- ------- 16,073 13,285 Prepaid Expenses and Other Current Assets 1,485 711 ------- ------- TOTAL CURRENT ASSETS 38,819 30,586 Property, Plant & Equipment, Net 22,675 23,460 Goodwill, Net of Amortization 4,009 4,097 Funds Held by Trustee For Capital Project 151 472 Other Non-Current Assets 1,721 2,067 ------- ------- TOTAL ASSETS $67,375 $60,682 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current Liabilities Notes Payable $ 6,100 $ 4,200 Current Portion of Long-Term Debt 2,300 2,300 Accounts Payable 9,059 6,664 Accrued Expenses 5,369 4,758 Accrued Income Taxes 277 27 ------- ------- TOTAL CURRENT LIABILITIES 23,105 17,949 Long-Term Debt - Less Current Portion 5,750 6,675 Deferred Federal Income Taxes and Other 4,991 5,253 Shareholders' Equity Serial Preferred Shares - No Par Value -- -- Common Shares, Par Value $1 Per Share 5,119 5,092 Paid-in-Surplus 5,937 5,873 Retained Earnings 22,473 19,840 ------- ------- TOTAL SHAREHOLDERS' EQUITY 33,529 30,805 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $67,375 $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 Nine Months Ended June 30 June 30 1996 1995 1996 1995 ---- ---- ---- ---- Net Sales of SIFCO Industries, Inc. $ 23,142 $ 17,721 $ 63,509 $ 51,092 Cost & Expenses Cost of Goods Sold 18,126 14,633 50,733 41,010 Selling, General & Administrative Expense 3,291 2,636 8,852 8,291 Interest Income (28) (37) (71) (97) Interest Expense 294 288 872 789 Other (Income) Expense, Net (9) 1 17 4 Reversal of Restructuring Charge to Income -- -- -- (1,512) -------- -------- -------- -------- Total Costs & Expenses 21,674 17,521 60,403 48,485 Income Before Income Taxes 1,468 200 3,106 2,607 Provision for Federal, Foreign & State Income Taxes 78 110 252 279 -------- -------- -------- -------- Net Income $ 1,390 $ 90 $ 2,854 $ 2,328 ======== ======== ======== ======== Net Income Per Share $ .27 $ .02 $ .56 $ .46 ======== ======== ======== ======== Average Shares Outstanding 5,133 5,085 5,117 5,080 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)
Nine Months Ended June 30 1996 1995 ---- ---- Net cash provided by (used for) operating activities: Net income (loss) $ 2,854 $ 2,328 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 2,491 2,571 Deferred income taxes and other (262) 173 Reversal of restructuring charge to income -- (1,512) ------- ------- Subtotal 5,083 3,560 Net cash provided by (used for) changes in operating assets and liabilities, net of effect of acquisition: Receivables (2,795) (209) Inventories (2,788) (3,217) Accrued or refundable income taxes 250 1,322 Prepaid expenses and other current assets (774) (814) Accounts payable 2,395 (441) Accrued expenses 611 (282) ------- ------- Net cash provided by (used for) changes in operating assets and liabilities (3,101) (3,641) ------- ------- Net cash provided by (used for) operating activities 1,982 (81) Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (1,758) (3,060) (Increase) decrease in funds held by trustee for capital project 321 117 Other 356 883 ------- ------- Net cash provided by (used for) investing activities (1,081) (2,060) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 1,900 3,800 Repayment of borrowings (925) (1,675) Cash dividends declared -- -- ------- ------- Net cash provided by (used for) financing activities 975 2,125 ------- ------- Increase (decrease) in cash and cash equivalents 1,876 (16) Cash and cash equivalents, beginning of year 1,469 2,256 ------- ------- Cash and cash equivalents, end of period $ 3,345 $ 2,240 ======= =======
See accompanying notes to consolidated condensed financial statements. 4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES --------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION ----------------------------------------------------- JUNE 30, 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 June 30, 1996 and September 30, 1995 consisted of:
June 31 Sept. 30 1996 1995 ---- ---- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $2,400 $2,625 Note payable to bank, due in quarterly installments of $275,000, at the base rate plus 1/2% 2,650 3,350 Note payable to bank, due October 31, 1996, interest payable quarterly, at rates based upon LIBOR and DIBOR 1,000 1,000 Note payable to seller of Selectrons, Ltd., at the base rate plus 1/2% 2,000 2,000 ------ ------ 8,050 8,975 Less - current maturities 2,300 2,300 ------ ------ $5,750 $6,675 ====== ======
5 7 The Company has a $8 million revolving credit agreement subject to eligible working capital as defined, which expires January 1, 1998. As of June 30, 1996 the Company had $6.1 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 $5.0 million and $3.7 million during the nine 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 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 June 30, 1996, tangible net worth exceeded the required minimum by $4.1 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 $3,703,000 and $3,463,000 higher than reported at June 30, 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. (9) Basis of Presentation: --------------------- The accompanying financial information for the nine months ended June 30, 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 Nine Months Ended June 30 June 30 1996 and 1995 1996 and 1995 ------------- ------------- Net Sales of SIFCO Industries, Inc. $5,421 31% $12,417 24% Cost of Sales 3,493 24% 9,723 24% Selling, General & Administrative 655 25% 561 7% Interest Income (9) (24)% (26) (27)% Interest Expense 6 2% 83 11% Other Expense, Net (10) N/A 13 N/A Reversal of Restructuring Charge to Income -- -- (1,512) N/A Income Before Income Taxes 1,268 634% 499 19% Provision for Federal, Foreign & State Income Taxes (32) (29)% (27) (10)% Net Income $1,300 1,444% $ 526 23%
8 10 MANAGEMENT'S DISCUSSION - ----------------------- We are pleased to report a strong improvement in net earnings for the third quarter ended June 30, compared to the same period last year. Earnings were $1,390,000, or $0.27 per share on sales of $23,142,000. This compares with net earnings of $90,000, or $0.02 per share on sales of $17,721,000 for the third quarter in 1995. Sales and earnings for the nine months ended June 30 were improved as well, with net earnings of $2,854,000, or $0.56 per share on sales of $63,509,000. In the same year-ago period, net earnings were $2,328,000, or $0.46 per share on sales of $51,092,000. (Earnings for the 1995 period include the reversal to income of $1,512,000 in restructuring expense.) Forge segment sales, both for the quarter and year-to-date, were up from the same year-ago periods -- 18% and 19% respectively -- while sales in our Specialty Products segment increased by 34% and 24% for those periods compared to 1995. Forge segment operating income (before corporate and interest expense) improved to $367,000 from $223,000 in the third quarter of 1995, and increased to $951,000 from $518,000 in the nine-month period last year. Specialty Products achieved a gain in operating income for both periods, increasing to $1,920,000 in the quarter from $557,000 last year and to $4,360,000 from $2,626,000 for the nine-month period in 1995. Bookings for both of our business segments have been reflecting the improving health of the airline industry we serve. The Air Transport Association has predicted a second straight year of record profits for the airlines, stimulated by the health of the global economy and increasing passenger traffic. Consequently, orders for new aircraft have surged and aircraft utilization has increased, producing both OEM and repair business. As a result, our bookings have increased to $29,000,000 for the quarter, up from $19,000,000 a year ago. Bookings for the nine months are $72,000,000 up from $54,000,000 in the same period last year. Backlog is $36,000,000, compared to $28,000,000 last year. We have adopted an expanded mission statement, and we believe that the commitment it declares to customer satisfaction sincerely expresses the priorities and concerns of SIFCO personnel worldwide. Those concerns and sense of priority also characterized negotiations between the company and bargaining unit employees and their ratification of new 3-year labor agreements in both business segments during the quarter. We continue to make excellent progress in expanding our customer base, and as the aerospace industry strengthens, we face the future with increasing confidence. FINANCIAL ANALYSIS - ------------------ Net sales for the third quarter ended June 30, 1996 increased $5.4 million to $23.1 million from $17.7 million a year ago. Defense related sales were $4.3 million compared to $1.9 million a year ago. The Company reported net income of $1.4 million compared to $.09 million a year a year ago. Income from operations before corporate and interest expense increased to $2.3 million from $.8 million last year. Net sales for the nine months ended June 30, 1996 increased $12.4 million to $63.5 million from $51.1 million a year ago. Defense related sales were $10.5 million compared to $6.4 million a year ago. The Company reported a net income of $2.9 million compared to $.2.3 million a year ago. Income from operations before corporate and interest expense was $5.3 million compared to $4.7 million last year. Both operating income and net income for the 1995 nine month period benefited $1.5 million from the reversal, in the second quarter, of the reserve that was established in September 1993 for the restructuring of the Forge Group. Net interest expense for the third quarter was $.3 million for both periods. Year to date net interest expense was $.8 million compared to $.7 million last year. 9 11 New orders received for the third quarter were $28.8 million up from $18.5 million a year ago. Year to date, new orders received were $72 million compared to $54 million a year ago. SPECIALTY PRODUCTS net sales for the third quarter increased $4.1 million to $15.9 million from $11.8 million a year ago. Specialty Products income from operations before corporate and interest expense increased to $1.9 million from $.6 million a year ago. SPECIALTY PRODUCTS net sales for the nine months increased $8.5 million to $44.4 million from $35.9 million a year ago. Specialty Products income from operation before corporate and interest expense increased to $ 4.4 million from $2.6 million a year ago. FORGING net sales for the quarter were $7.5 million compared to $6.4 million a year ago. Defense related sales were $4.0 million (53%) compared to $2.2 million (34%) a year ago. Forging operating profit before corporate and interest expense was $.4 million compared to $.2 million a year ago. FORGING net sales for the nine months were $19.6 million compared to $16.4 million a year ago. Forging operating profit before corporate and interest expense was $1.0 million compared to $2.0 million a year ago. Operating income for the 1995 nine month period benefited $1.5 million from the reversal, in the second quarter, of the reserve that was established in September 1993 for the restructuring of the Forge Group. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital increased to $15.7 million at June 30, 1996 from $12.6 million at September 30, 1995. The current ratio was 1.7 at both June 30, 1996 and September 30, 1995. Total debt as a percentage of tangible shareholders' equity was 51.3% at June 30, 1996 compared to 53.9% at September 30, 1995. Capital expenditures for the nine months were $1.8 million compared to $3.1 million a year ago. The company considers it has adequate financing available to meet its requirements. 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. 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 June 30, 1996. 10 12 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 July 31, 1996 /*/ Jeffrey P. Gotschall ------------- ------------------------- Jeffrey P. Gotschall Chief Executive Officer Date July 31, 1996 /*/ Richard A. Demetter ------------- ------------------------- Richard A. Demetter Vice President - Finance (Principal Accounting Officer) 11 EX-27 2 EXHIBIT 27
5 0000090168 SIFCO INDUSTRIES, INC 1,000 9-MOS SEP-30-1996 OCT-01-1995 JUN-30-1996 3,345 0 17,916 0 16,073 38,819 22,675 0 67,375 23,105 0 5,119 0 0 28,410 67,375 0 63,509 50,733 59,585 17 0 801 3,106 252 2,854 0 0 0 2,854 .56 .56
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