-----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, WBqbllojyET4s/iL4cz0IC7j0VCj9TnlOfwAvAzsKqJl/yEJuBEq5ABsXcaUkiQL dJqXyxxJctvR8OiGouAgLA== 0000950152-97-003458.txt : 19970502 0000950152-97-003458.hdr.sgml : 19970502 ACCESSION NUMBER: 0000950152-97-003458 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970501 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: 97593505 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 FORM 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, 1997 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 April 25, 1997 - ------------- ------------------------------ Common Stock, $1 Par Value 5,137,751
2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. -------- Financial Statements: Consolidated Condensed Balance Sheets -- March 31, 1997, and September 30, 1996 2 Consolidated Condensed Statements of Income -- Three Months and Six Months Ended March 31, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows -- Three Months and Six Months Ended March 31, 1997 and 1996 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)
Mar 31 Sept. 30 1997 1996 ---- ---- ASSETS ------ Current Assets Cash & Cash Equivalents $2,296 $2,130 Accounts Receivable, Net 20,825 17,929 Inventories Raw Materials & Supplies 5,861 5,067 Work-in-Process & Finished Goods 12,523 12,722 ------- ------- 18,384 17,789 Refundable Income Taxes -0- 193 Prepaid Expenses and Other Current Assets 1,249 627 ------- ------- TOTAL CURRENT ASSETS 42,754 38,668 Property, Plant & Equipment, Net 22,998 23,200 Goodwill, Net of Amortization 3,922 3,980 Other Non-Current Assets 1,982 2,122 ------- ------- TOTAL ASSETS $71,656 $67,970 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current Portion of Long-Term Debt 2,256 2,500 Accounts Payable 9,137 9,402 Accrued Expenses 6,233 5,906 Accrued Income Taxes 361 -0- ------- ------- TOTAL CURRENT LIABILITIES 17,987 17,808 Long-Term Debt - Less Current Portion 11,944 10,575 Deferred Federal Income Taxes and Other 3,423 3,630 Shareholders' Equity Serial Preferred Shares - No Par Value -- -- Common Shares, Par Value $1 Per Share 5,138 5,127 Paid-in-Surplus 6,027 5,978 Retained Earnings 27,137 24,852 ------- ------- TOTAL SHAREHOLDERS' EQUITY 38,302 35,957 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $71,656 $67,970 ======= =======
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 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales of SIFCO Industries, Inc. $ 27,122 $ 22,096 $ 50,883 $ 40,367 Cost & Expenses Cost of Goods Sold 21,757 17,621 40,666 32,607 Selling, General & Administrative Expense 3,271 2,967 6,325 5,561 Interest Income (25) (28) (59) (43) Interest Expense 306 298 624 578 Other (Income) Expense, Net 4 20 41 26 -------- -------- -------- -------- Total Costs & Expenses 25,313 20,878 47,597 38,729 Income Before Income Taxes 1,809 1,218 3,286 1,638 Provision for Federal, Foreign & State Income Taxes 383 116 762 174 -------- -------- -------- -------- Net Income $ 1,426 $ 1,102 $ 2,524 $ 1,464 ======== ======== ======== ======== Net Income Per Share $ .28 $ .22 $ .49 $ .29 Average Shares Outstanding 5,189 5,120 5,181 5,111 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 1997 1996 ---- ---- Net cash provided by (used for) operating activities: Net income $ 2,524 $ 1,464 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 1,925 1,642 Deferred income taxes and other (207) (231) ------- ------- Subtotal 4,242 2,875 Net cash provided by (used for) changes in operating assets and liabilities: Receivables (2,896) (2,187) Inventories (595) (1,455) Accrued or refundable income taxes 554 173 Prepaid expenses and other current assets (622) (365) Accounts payable (265) 828 Accrued expenses 327 272 ------- ------- Net cash provided by (used for) changes in operating assets and liabilities (3,497) (2,734) ------- ------- Net cash provided by (used for) operating activities 745 141 Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (1,862) (1,044) (Increase) decrease in funds held by trustee for capital project -- 210 Other 158 (273) ------- ------- Net cash provided by (used for) investing activities (1,704) (1,107) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 1,600 1,300 Repayment of borrowings (475) (575) Cash dividends declared -- -- ------- ------- Net cash provided by (used for) financing activities 1,125 725 ------- ------- Increase (decrease) in cash and cash equivalents 166 (241) Cash and cash equivalents, beginning of year 2,130 1,469 ------- ------- Cash and cash equivalents, end of period $ 2,296 $ 1,228 ======= =======
See accompanying notes to consolidated condensed financial statements. 4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION MARCH 31, 1997 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 1997 classification. (2) Debt: ----- Long-term debt as of March 31, 1997 and September 30, 1996 consisted of:
March 31 Sept. 30 1997 1996 ---- ---- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $ 2,100 $ 2,300 Note payable to bank, due in quarterly installments of $214,000, at the base rate 6,000 2,375 Note payable to bank, due October 31, 1997, interest payable quarterly, at rates based upon LIBOR and DIBOR 1,000 1,000 Note payable to seller of acquired business at the base rate plus 1/2% 1,000 1,000 Note payable under revolving credit agreement, at the base rate 4,100 6,400 ------- ------- $14,200 $13,075 Less - current maturities 2,256 2,500 ------- ------- $11,944 $10,575 ======= =======
5 7 The Company has a $9 million revolving credit agreement subject to eligible working capital as defined, which expires March 31, 1999. As of March 31, 1997 the Company had $4.1 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, 1997. A commitment fee of 3/8% is incurred on the remaining unused balance. Interest is at the base rate and is payable quarterly. The average balance outstanding against the revolving credit was $6.2 million and $4.6 million and during the six month period of fiscal 1997 and 1996, respectively. The balances outstanding under this credit agreement have been classified as long term debt. 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, 1997, tangible net worth exceeded the required minimum by $6.7 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 and adjustable quarterly. The final principal payment of approximately $1 million is due July 1, 1997. 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 1997 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 $3,770,000 and $3,570,000 higher than reported at March 31, 1997 and September 30, 1996, respectively. (7) Other Income: ------------- Other income is comprised primarily of grant income from Irish government agencies, foreign exchange gains and losses, and royalty and fee income. (8) Earnings Per Share: ------------------- In March 1997, the Financial Accounting Standards Board issued SFAS 128 on "Earnings Per Share." SFAS 128 will change the manner in which earnings per share is computed effective in fiscal year 1998 and applied retroactively. Management's preliminary estimates are that adoption of SFAS 128 will not have a material impact on earnings per share as previously reported under the earlier accounting standard. (9) Basis of Presentation and Management Estimates: ----------------------------------------------- The accompanying financial information for the six months ended March 31, 1997 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. The Company prepares its financial statements in accordance with generally accepted accounting principles, which requires management to make estimates and assumptions that affect amounts reported in the financial statements for the reporting period. Actual results could differ from those based upon such estimates and assumptions. These estimates and assumptions are revised as necessary. 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 1997 and 1996 1997 and 1996 ------------- ------------- Net Sales of SIFCO Industries, Inc. $ 5,026 23% $10,516 26% Cost of Sales 4,136 23% 8,059 25% Selling, General & Administrative 304 10% 764 14% Interest Income (3) (11)% 16 37% Interest Expense 8 3% 46 8% Other Income, Net (16) (80)% 15 58% Income Before Income Taxes 591 49% 1,648 101% Provision for Federal, Foreign & State Income Taxes 267 230% 588 338% Net Income 324 29% 1,060 72%
8 10 MANAGEMENT'S DISCUSSION - ----------------------- As we complete the first half of fiscal 1997, it appears current sales trend could be propelling us to our first $100 million sales year. During the second quarter ended March 31, net sales increased 23% to $27 million compared to $22 million last year. Net sales for the 6-month period improved 26% to $51 million from $40 million in the same period in 1996. Incoming orders attest to the strength of our aerospace markets climbing to $28 million from $25 million during the quarter and to $60 million during the 6 months from $44 million last year. The net sales and incoming order volume strongly support our hope of achieving our first $100 million sales year. Profit before tax for the second quarter increased 49% to $1,809,000 from $1,218,000, while earnings per share increased 27% to $0.28 compared to $0.22 in the 1996 quarter. Profit before tax for the 6 months doubled at $3,286,000 from $1,638,000 and earnings per share were $0.49 for an improvement of 69% compared to the 6 months in 1996. We have achieved an expansion of our capabilities to service new generation power plants by GE, CFMI, Pratt & Whitney and Rolls-Royce. As a result, our Specialty Products segment through its Turbine Group has established itself as a world class provider of repairs for hot section vanes, blades and related components, such as those pictured below. The hot section of the turbine engine is positioned directly behind the area where combustion occurs and is exposed to temperatures that can exceed 20000 F. The elements within the hot section include one or more stages of alternate stationary and rotating airfoil section blades. The rotating blades are carried on discs and the stationary blades (called nozzle guide vanes) are housed in the turbine casing. These vanes and blades direct the flow of super hot gases and provide rotational energy for the compressor stages at the front of the engine which feed the entire process with air at high pressure. The vanes and blades in each engine number in the hundreds and are subjected to extremes of high temperature and pressure. Our repair service, using a variety of state-of-the-art metalworking technologies can restore these components to like- new specifications while providing substantial savings to our customers. The Forge segment has greatly enhanced its reputation as a top-ranked supplier of aerospace forgings from exotic alloys. They are able to provide cost-competitive value on part weights from as little as 2 pounds to as much as 400 pounds, and on lot orders as small as a dozen pieces. This flexibility is much in demand by aerospace customers. Throughout the Company we will continue to direct our efforts to provide products and services for the most contemporary needs of new generation aircraft and powerplants. These efforts are not only leading us to our first $100 million sales year in fiscal 1997, but also to opportunities for enhancing shareholders' value in the years ahead. 9 11 FINANCIAL ANALYSIS - ------------------ Net sales for the second quarter ended March 31, 1997 increased $5.0 to $27.1 million from $22.1 million a year ago or 23%. Defense related sales were $3.8 million compared to $3.9 million last year. The Company reported profit before tax of $1.8 million compared to $1.2 million last year and net income of $1.4 million and $1.1 million, respectively. Net sales for the six months ended March 31, 1997 increased $10.5 million to $50.9 million from $40.4 million a year ago or 26%. Defense-related sales were $7.3 million compared to $6.0 million last year. The Company reported profit before tax of $3.3 million compared to $1.6 million last year and net income of $2.5 and $1.5 million, respectively. Operating income before corporate and interest expense for the quarter was $2.8 million compared to $1.9 million last year and $5.1 million year-to-date compared to $3.0 million last year. Net interest expense was $.3 million, the same as the quarter last year. Year-to-date net interest expense was $.6 million compared to $.5 million last year. New orders received increased against last year for both the second quarter and the six months. New orders for the second quarter were $27.8 million compared to last year's $25.0 million and $59.9 million compared to $44.2 million last year. SPECIALTY PRODUCTS net sales for the quarter increased by $1.7 million to $17.1 million from $15.4 Million (11%). Defense-related sales were not significant. Specialty Products income from operations before corporate and interest expense increased to $2.0 million from $1.6 million last year. SPECIALTY PRODUCTS net sales for the six months increased to $32.9 million from $28.6 million (15%). Specialty Products income from operations before corporate and interest expense increased $1.0 million to $3.4 million from $2.4 million last year. FORGING segment sales for the quarter increased $3.3 million to $10.1 million from $6.8 million last year (48%). Defense-related sales were $3.8 million (38%) compared to $3.5 million (51%) last year. Forging income from operations before corporate and interest expense was $.8 million compared to $.3 million last year. FORGING segment sales for the six months increased $6.2 million to $18.2 million from $12.0 million (51%). Defense-related sales were $6.6 million (36%) compared to $5.3 million (44%) last year. Forging income from operations before corporate and interest expense was $1.6 million compared to $.6 million last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital increased to $24.8 million at March 31, 1997, compared to $20.9 million at September 30, 1996. The current ratio was 2.4 and 2.2 respectively. Total debt as a percentage of tangible shareholders' equity was 43.4% at March 31, 1997 compared to 43.5% at September 30, 1996. Capital expenditures for the six months were $1.9 million compared to $1.0 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. 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, 1997. 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 25, 1997 -------------- --------------------------------- Jeffrey P. Gotschall Chief Executive Officer Date April 25, 1997 -------------- --------------------------------- Richard A. Demetter Vice President - Finance (Principal Accounting Officer) 11 13 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 March 31, 1997. 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 25, 1997 /s/ Jeffrey P. Gotschall -------------- -------------------------- Jeffrey P. Gotschall Chief Executive Officer Date April 25, 1997 /s/ 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 6-MOS SEP-30-1997 OCT-01-1996 MAR-31-1997 2,296 0 20,825 0 18,384 42,754 22,998 0 71,656 17,987 0 5,137 0 0 33,165 71,656 0 50,883 40,666 46,991 (18) 0 624 3,281 762 2,524 0 0 0 2,524 .49 .49
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