-----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, MWQuwUXZW0ItvzMkUVu7HtJKGkQIWBTYy2Ht0Vh7lXMvENRF5+MgCHGCM+A0SEg5 j/Q2uf4szA94fzyk8zXM+g== 0000950152-98-000825.txt : 19980210 0000950152-98-000825.hdr.sgml : 19980210 ACCESSION NUMBER: 0000950152-98-000825 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980209 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: SEC FILE NUMBER: 001-05978 FILM NUMBER: 98525704 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, INC. 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, 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 January 31, 1998 - ------------------ --------------------------------- Common Stock, $1 Par Value 5,160,679 2 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. -------- Financial Statements: Consolidated Condensed Balance Sheets -- December 31, 1997, and September 30, 1997 2 Consolidated Condensed Statements of Income -- Three Months Ended December 31, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows -- Three Months Ended December 31, 1997 and 1996 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)
Dec. 31 Sept. 30 1997 1997 ------- ------- ASSETS ------ Current Assets Cash & Cash Equivalents $ 3,711 $ 2,998 Accounts Receivable, Net 20,927 20,516 Inventories Raw Materials & Supplies 5,798 6,032 Work-in-Process & Finished Goods 15,624 13,814 ------- ------- 21,422 19,846 Prepaid Expenses and Other Current Assets 1,378 689 ------- ------- TOTAL CURRENT ASSETS 47,438 44,049 Property, Plant & Equipment, Net 25,549 24,714 Goodwill, Net of Amortization 3,835 3,864 Other Non-Current Assets 1,638 1,817 ------- ------- TOTAL ASSETS $78,460 $74,444 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current Portion of Long-Term Debt 1,256 1,256 Accounts Payable 10,047 10,497 Accrued Expenses 7,508 7,548 Accrued Income Taxes 672 228 ------- ------- TOTAL CURRENT LIABILITIES 19,483 19,529 Long-Term Debt - Less Current Portion 13,902 11,716 Deferred Federal Income Taxes and Other 2,507 2,631 Shareholders' Equity Serial Preferred Shares - No Par Value --- --- Common Shares, Par Value $1 Per Share 5,161 5,160 Paid-in-Surplus 6,116 6,101 Retained Earnings 31,291 29,307 ------- ------- TOTAL SHAREHOLDERS' EQUITY 42,568 40,568 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $78,460 $74,444 ======= =======
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 1997 1996 ---- ---- Net Sales of SIFCO Industries, Inc. $ 29,898 $ 23,761 Cost & Expenses Cost of Goods Sold 23,212 18,909 Selling, General & Administrative Expense 3,441 3,054 Interest Income (50) (34) Interest Expense 257 318 Other (Income) Expense, Net (139) 37 Total Costs & Expenses 26,721 22,284 Income Before Income Taxes 3,177 1,477 Provision for Federal, Foreign & State Income Taxes 750 379 -------- -------- Net Income $ 2,427 $ 1,098 ======== ======== Net Income Per Share (Basic) $ .47 $ .21 Net Income Per Share (Diluted) $ .47 $ .21 Average Shares Outstanding (Basic) 5,160 5,133 Average Shares Outstanding (Diluted) 5,206 5,174 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 1997 1996 ---- ---- Net cash provided by (used for) operating activities: Net income (loss) $ 2,427 $ 1,098 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 1,052 951 Deferred income taxes and other (124) 62 ------- ------- Subtotal 3,355 2,111 Net cash provided by (used for) changes in operating assets and liabilities: Receivables (411) (1,264) Inventories (1,576) (399) Accrued or refundable income taxes 444 379 Prepaid expenses and other current assets (689) (374) Accounts payable (450) (2,250) Accrued expenses (48) (1,406) ------- ------- Net cash provided by (used for) changes in operating assets and liabilities (2,730) (5,314) ------- ------- Net cash provided by (used for) operating activities 625 (3,203) Net cash provided by (used for) investing activities: Purchase of property, plant & equipment (2,153) (783) Other 55 381 ------- ------- Net cash provided by (used for) investing activities (2,098) (402) Net cash provided by (used for) financing activities: Proceeds from additional borrowings 2,500 3,900 Repayment of borrowings (314) (575) Cash dividends declared --- --- ------- ------- Net cash provided by (used for) financing activities 2,186 3,325 ------- ------- Increase (decrease) in cash and cash equivalents 713 (280) Cash and cash equivalents, beginning of year 2,998 2,130 ------- ------- Cash and cash equivalents, end of period $ 3,711 $ 1,850 ======= =======
See accompanying notes to consolidated condensed financial statements. 4 6 SIFCO INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION DECEMBER 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. (2) Debt: ----- Long-term debt as of December 31, 1997 and September 30, 1997 consisted of:
Dec. 31 Sept. 30 1997 1997 ------- ------- ($000 Omitted) Variable Rate Industrial Development Demand Revenue Improvement and Refunding Bonds $ 1,800 $ 1,900 Note payable to bank, due in quarterly installments of $214,000, plus interest, at 5,358 5,572 base rate with LIBOR option Note payable to bank, due October 31, 1998, interest payable quarterly, at rates based upon LIBOR and DIBOR, adjusted quarterly 1,000 1,000 Note payable under revolving credit agreement, at the base rate with LIBOR option 7,000 4,500 ------- ------- $15,158 $12,972 Less - current maturities 1,256 1,256 ------- ------- $13,902 $11,716 ======= =======
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 December 31, 1997 the Company had $7.0 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 1/4% 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 $4.7 million and $7.8 million and during the three month period of fiscal 1998 and 1997, 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 $100,000, 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 $30.0 million, increasing by 50% of net income subsequent to September 30, 1997. At December 31, 1997, tangible net worth exceeded the required minimum by $8.0 million. 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. 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 8 (6) Inventories: ------------ The Company follows the LIFO method of accounting for certain of its Forge Group inventories. Since the LIFO inventory determination for fiscal 1998 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 $4,372,000 and $4,372,000 higher than reported at December 31, 1997 and September 30, 1997, 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) Basis of Presentation and Management Estimates: ----------------------------------------------- The accompanying financial information for the three months ended December 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 Dec. 31 1997 and 1996 ------------------------ Net Sales of SIFCO Industries, Inc. $ 6,137 26% Cost of Sales 4,303 23% Selling, General & Administrative 387 13% Interest Income 16 47% Interest Expense (61) (19)% Other Income, Net 176 N/A Income Before Income Taxes 1,700 115% Provision for Federal, Foreign & State Income Taxes 371 98% Net Income $ 1,329 121%
8 10 MANAGEMENT'S DISCUSSION - ----------------------- We are pleased to report that we have entered the new fiscal year with considerable strength and enthusiasm. Net sales for the first quarter of fiscal 1998 were up 26%, while profit before tax, net earnings and earnings per share were all double the performance LEVELS we achieved in the same period last year. Profit before tax was $3,177,000 on sales of $29,898,000 for the quarter. This compares to a profit before tax of $1,477,000 on sales of $23,761,000 last year. Net income was $2,427,000, or $.47 per share, compared to $1,098,000 or $.21 per share in the 1997 period. Our combined bookings of $31 million and our company-wide backlog of $46 million reflect the continuing strength of our airline markets for both OEM products and repair services. The strength of our sales portfolio reflects two major assets: the diversity of our customer base and the shift in our major business activity from OEM forgings to turbine component services and repair. Our product diversity and change in product mix are a result of long-term strategies that were designed to protect us from the vacillations that have historically dominated the aircraft industry and its supply markets. We are following a new format. Each future report will provide the usual financial review but, in addition, will include as its theme a focus on a predetermined subject such as new products, improved facilities or the acquisition or special training of personnel. These are the elements that contribute to our reputation for expertise in technology, quality and customer service. It is this reputation that has given us a competitive advantage. That advantage was strengthened during the quarter by the acquisition and promotion of key personnel. John Parkinson joined SIFCO during the quarter as Senior Vice President of the Turbine Component Services and Repair Group. In this new position John will assume certain responsibilities worldwide, as well as manage the turbine component repair facilities in the United States. John will report to Tim Crean, President of the Turbine Component Repair Group. John began his career with Rolls-Royce PLC and comes to us from Howmet Corporation where he was responsible for Howmet's five component repair facilities in the United States. The facilities provided advanced technology turbine engine airfoil repair to airlines worldwide. We are pleased to have acquired an executive of John's caliber and technical experience. His addition to our staff demonstrates to our customers our continuing commitment to provide the very finest in turbine component repair services worldwide. During the quarter our Forge Group operations were enhanced by the promotion of Hudson Smith to the new position of Forge Group President. Hudson has been with the company for over 23 years in a variety of managerial, financial and sales positions and has also served as a Director of the Company since 1988. Hud's comprehensive knowledge of the forging industry is an important asset for the continued growth and success of our forging business. All of our training programs directly or indirectly focus on our company-wide commitment to assure that our customers receive the best service, quality and technology available worldwide. 9 11 For example, the Forge Group has developed a sophisticated curriculum of computer-based interactive training subjects covering everything from basic work skills to the application of sophisticated techniques in forging and finishing processes. The training facility is in the plant operations area and its use is scheduled for the convenience of employees off-time use. Our repair segment has also developed a curriculum of subjects designed to give the employee/trainee insights into the interpersonal skills and attitudes necessary for effective participation in a team-oriented work environment. At our Annual Meeting January 27, 1998, our Board of Directors declared a cash dividend of $.05 per share for the fiscal 1998 first quarter. This dividend will be payable March 3, 1998 on the Common Shares of the Corporation to holders of record at the close of business on February 17, 1998. As you may recall, our most recent cash dividend had been $.15 per share for the 1997 fiscal year. The first quarter declaration follows the Company's decision to shift from annual to quarterly dividend payments. The dividend also reflects the strong performance of our business segments during this past quarter as well as our optimism for the year ahead. We appreciate your continued loyalty and look forward to rewarding your support in the future. FINANCIAL ANALYSIS - ------------------ Net sales for the first quarter ended December 31, 1997 increased to $29.9 million from $23.8 million a year ago or 26%. The Company reported net income of $2.4 million compared to $1.1 million a year ago. Net interest expense decreased to $.207 million from $.284 million a year ago, reflecting lower borrowing requirements for increased working capital needed to support additional sales as cash flow improved. New orders received were basically flat at $31 million compared to $32 million last year while backlog declined to $46 million from $51 million a year ago. TURBINE COMPONENT SERVICE AND REPAIR net sales increased to $19.5 million from $15.7 million last year. Income from operations before corporate and interest expense increased to $3.0 million compared to $1.4 million last year. AEROSPACE COMPONENT MANUFACTURING segment sales increased to $10.1 million from $8.1 million last year. Income from operations before corporate and interest expense was $1.0 million compared to $.8 million last year. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital was $28.0 million at December 31, 1997 and $24.5 million at September 30, 1997. The current ratio for the same period was 2.4 and 2.3 respectively. Total debt as a percentage of tangible shareholders' equity was 38.7% at December 31, 1997 compared to 35.3% at September 30, 1997. The Company has borrowed $7.0 million against its revolving credit line of $9.0 million at December 31, 1997. The Company considers it has adequate financing available to meet its needs through the current year. 10 12 YEAR 2000 CONVERSION - -------------------- The Company has commenced a project to identify, evaluate and implement changes to computer systems and applications necessary to achieve a year 2000 conversion date with no effect on customers or disruptions to business operations. The total cost of compliance and its effect on the Company's future results of operations will be determined as part of this project. Based on initial review, the total cost is not expected to have a material effect on the Company's results of operations or financial statements. 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 December 31, 1997. 11 13 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 February 5, 1998 /*/ Jeffrey P. Gotschall ---------------- ------------------------------ Jeffrey P. Gotschall Chief Executive Officer Date February 5, 1998 /*/ Richard A. Demetter ---------------- ------------------------------ Richard A. Demetter Vice President - Finance (Principal Accounting Officer) 12 EX-27 2 EXHIBIT 27
5 0000090168 SIFCO INDUSTRIES, INC. 1,000 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 3,711 0 20,927 0 21,422 47,438 25,549 0 78,460 19,483 0 0 0 5,161 37,407 78,460 0 29,898 23,212 26,653 (189) 0 257 3,177 750 2,427 0 0 0 2,427 .47 .47
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