<PAGE> 1
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995 Commission File Number 1-5978
----------------- ------
SIFCO Industries, Inc., and Subsidiaries
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0553950
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
970 East 64th Street, Cleveland, Ohio 44103
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 881-8600
--------------
None
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
---
Class Outstanding at January 31, 1996
- ------------------ ---------------------------------
Common Stock, $1 Par Value 5,108,411
<PAGE> 2
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
INDEX
Page No.
----------
Financial Statements:
Consolidated Condensed Balance Sheets --
December 31, 1995, and September 30, 1995 2
Consolidated Condensed Statements of Income --
Three Months Ended
December 31, 1995 and 1994 3
Consolidated Condensed Statements of Cash Flows --
Three Months Ended
December 31, 1995 and 1994 4
Notes to Consolidated Condensed
Financial Statements 5,6,7
Management's Discussion and Analysis of the
Consolidated Condensed Statements of Income 8,9,10
Other Information and Signatures 11
<PAGE> 3
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
($000 Omitted)
<TABLE>
<CAPTION>
Dec. 31 Sept. 30
1995 1995
------- -------
ASSETS
------
<S> <C> <C>
Current Assets
Cash & Cash Equivalents $ 1,158 $ 1,469
Accounts Receivable, Net 15,076 15,121
Inventories
Raw Materials & Supplies 2,857 2,390
Work-in-Process & Finished Goods 11,376 10,895
------- -------
14,233 13,285
Prepaid Expenses and Other Current Assets 1,197 711
------- -------
TOTAL CURRENT ASSETS 31,664 30,586
Property, Plant & Equipment, Net 22,920 23,460
Goodwill, Net of Amortization 4,067 4,097
Funds Held by Trustee For Capital Project 328 472
Other Non-Current Assets 1,925 2,067
------- -------
TOTAL ASSETS $60,904 $60,682
======= =======
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities
Notes Payable $ 5,200 $ 4,204
Current Portion of Long-Term Debt 2,300 2,300
Accounts Payable 6,048 6,664
Accrued Expenses 4,658 4,758
Accrued Income Taxes 85 27
------- -------
TOTAL CURRENT LIABILITIES 18,291 17,949
Long-Term Debt - Less Current Portion 6,450 6,675
Deferred Federal Income Taxes and Other 5,144 5,253
Shareholders' Equity
Serial Preferred Shares - No Par Value --- ---
Common Shares, Par Value $1 Per Share 5,108 5,092
Paid-in-Surplus 5,901 5,873
Retained Earnings 20,010 19,840
------- -------
TOTAL SHAREHOLDERS' EQUITY 31,019 30,805
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $60,904 $60,682
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 4
SIFCO INDUSTRIES,INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
($000 Omitted)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1995 1994
---- ----
<S> <C> <C>
Net Sales of SIFCO
Industries, Inc. $18,271 $15,997
Cost & Expenses
Cost of Goods Sold 14,986 12,627
Selling, General &
Administrative Expense 2,594 2,845
Interest Income (15) (30)
Interest Expense 280 244
Other (Income) Expense, Net 6 (92)
Total Costs & Expenses 17,851 15,594
Income (Loss) Before Income Taxes 420 403
Provision (Benefit) for Federal, Foreign
& State Income Taxes 58 90
------- -------
Net Income (Loss) $ 362 $ 313
======= =======
Net Income (Loss) Per Share $ .07 $ .06
======= =======
Average Shares Outstanding 5,104 5,077
Cash Dividends per Common Share $ --- $ ---
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 5
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
($000 Omitted)
<TABLE>
<CAPTION>
Three Months Ended
December 31
1995 1994
---- ----
<S> <C> <C>
Net cash provided by (used for)
operating activities:
Net income (loss) $ 362 $ 313
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 851 838
Deferred income taxes and other (109) (74)
------ ------
Subtotal 1,104 1,077
Net cash provided by (used for) changes
in operating assets and liabilities:
Receivables 45 1,240
Inventories (948) (1,063)
Accrued or refundable income taxes 58 79
Prepaid expenses and other current assets (486) (512)
Accounts payable (616) (1,355)
Accrued expenses (100) (157)
Accrued restructuring --- (39)
------ ------
Net cash provided by (used for) changes
in operating assets and liabilities (2,047) (1,807)
------ ------
Net cash provided by operating activities (943) (730)
Net cash provided by (used for) investing
activities:
Purchase of property, plant & equipment (341) (1,149)
(Increase) decrease in funds held by trustee
for capital project 144 117
Other 54 231
------ ------
Net cash provided by (used for) investing
activities (143) (801)
Net cash provided by (used for) financing
activities:
Proceeds from additional borrowings 1,000 1,400
Repayment of borrowings (225) (225)
Cash dividends declared --- ---
------ ------
Net cash provided by (used for) financing
activities 775 1,175
------ ------
Increase (decrease) in cash and cash
equivalents (311) (356)
Cash and cash equivalents, beginning of year 1,469 2,256
------ ------
Cash and cash equivalents, end of period $1,158 $1,900
------ ------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE> 6
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL INFORMATION
-----------------------------------------------------
DECEMBER 31, 1995
-----------------
NOTES
- -----
(1) Summary of Significant Accounting Policies:
-------------------------------------------
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated.
(2) Debt:
----
Long-term debt as of December 31, 1995 and September 30, 1995 consisted
of:
Dec. 31 Sept. 30
1995 1995
-------- --------
($000 Omitted)
Variable Rate Industrial Development
Demand Revenue Improvement
and Refunding Bonds $2,550 $2,625
Note payable to bank, due in quarterly
installments, plus interest, at the base rate
plus 1/2% 3,200 3,350
Note payable to bank, due October 31, 1996,
interest payable quarterly, at rates based
upon LIBOR and DIBOR (adjusted quarterly) 1,000 1,000
Note payable to seller of acquired business
at the base rate plus 1/2% 2,000 2,000
------ ------
8,750 8,975
Less - current maturities 2,300 2,300
------ ------
$6,450 $6,675
====== ======
5
<PAGE> 7
The Company has a $7 million revolving credit agreement subject to eligible
working capital as defined, which expires January 1, 1998. As of December
31, 1995, the Company had $5.2 million outstanding under this agreement. In
addition, the Company has a $1.15 million credit facility which is used for
an irrevocable letter of credit which secures the $1 million loan from an
Irish bank due October 31, 1996. A commitment fee of 3/8% is incurred on the
remaining unused balance. Interest is at the base rate plus 1/4% and is
payable quarterly. The average balance outstanding against the remaining
capacity was $4.2 million and $3.0 million during the three month period of
fiscal 1996 and 1995, respectively.
The Company also has a term loan agreement. Interest is at the base rate
plus 1/2%. Repayment terms are twenty quarterly installments of $275,000,
plus interest.
The Industrial Development bond interest rate is reset weekly, based on
prevailing tax-exempt money market rates, and is payable quarterly.
Principal is payable in quarterly installments of $75,000 through May 1,
1996, becoming $100,000 quarterly thereafter, with the final balance due on
May 1, 2002. The bonds are secured by the property and equipment of the
facility, and backed by an irrevocable bank letter of credit which expires on
May 1, 1998.
The revolving credit, term loan and Industrial Development bonds are secured
by the Company's domestic accounts receivable, inventory and equipment.
Among other covenants, the Company is required to maintain a minimum tangible
net worth (as defined) of $19.8 million, increasing by 50% of net income
subsequent to September 30, 1993. At December 31, 1995, tangible net worth
exceeded the required minimum by $2.7 million.
As part of a previous acquisition, the seller provided financing in the form
of unsecured installment notes. These notes bear interest at the base rate
plus 1/2%, payable quarterly. Principal is payable in annual installments of
approximately $1 million, commencing July 1, 1993.
The $1 million note payable revolving to the bank has a variable interest
rate based on a combination of both LIBOR and DIBOR (Dublin Interbank Rates)
rates.
(3) Income Taxes:
-------------
The provision for taxes on income, which is based on the anticipated
effective rate for the year, does not bear the customary relationship to
pre-tax income due primarily to foreign source income. Income tax expense
differs from amounts currently payable due to certain items reported for
financial statement purposes in periods which differ from those in which they
are reported for tax purposes, principally accelerated depreciation.
(4) Deferred Federal Income Taxes:
------------------------------
The Company has deferred to future periods the income taxes relating to
timing differences between financial statement pre-tax income and taxable
income.
6
<PAGE> 8
(5) Depreciation:
-------------
For financial reporting purposes, the Company provides for depreciation of
plant and equipment, principally by the straight-line method, at annual rates
sufficient to amortize the cost over its estimated useful life. For tax
purposes, the Company uses various accelerated methods and, accordingly,
provides for the related deferred taxes. The principal rates of depreciation
for financial reporting purposes are: buildings 2% to 5%, and machinery and
equipment 5% to 33 1/3%.
(6) Inventories:
------------
The Company follows the LIFO method of accounting for certain of its Forge
Group inventories. Since the LIFO inventory determination for fiscal 1996
will be based upon year-end inventory levels and costs, the Company has
provided for its anticipated "LIFO Adjustment" based on its estimated
year-end inventory levels and costs. Under the Average Cost Method,
inventories would have been $3,463,000 and $3,463,000 higher than reported at
December 31, 1995 and September 30, 1995, respectively.
(7) Postretirement Health Care Benefits:
------------------------------------
The Company and its domestic subsidiaries provide certain health care
benefits for non-union retired employees which are subject to the provisions
of SFAS 106. The Company amended its current plan to freeze the Company's
contribution to insurance premiums and exclude any active employees who
retire after December 31, 1993 from eligibility for benefits. As a result of
the amendments to the plan, the adoption of SFAS 106 did not have a material
impact on the results of operations or financial position of the Company.
(8) Other Income
------------
Other income is comprised primarily of grant income from Irish government
agencies, foreign exchange gains and losses, and royalty and fee income.
(9) Basis of Presentation:
----------------------
The accompanying financial information for the three months ended December
31, 1995 has not been examined by independent public accountants. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation have been included.
7
<PAGE> 9
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF THE CONSOLIDATED CONDENSED STATEMENTS OF INCOME
--------------------------------------------------
The following is management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods included
in the accompanying consolidated condensed statements of income.
A summary of the period-to-period changes in the principal items included in
the consolidated condensed statements of income is shown below:
Three Months Ended
December 31
1995 and 1994
-------------------
Net Sales of SIFCO
Industries, Inc. $2,274 14%
Cost of Sales 2,359 19%
Selling, General &
Administrative (251) (9%)
Interest Income (15) (50%)
Interest Expense 36 15%
Other Income, Net (98) ---
Income Before Income Taxes 17 4%
Provision for Federal,
Foreign & State Income Taxes (32) (36%)
Net Income 49 16%
8
<PAGE> 10
MANAGEMENT'S DISCUSSION
- -----------------------
We are pleased to report a profit before tax of $420,000 on sales of
$18,271,000 for the first quarter ended December 31, 1995. This compares to
earnings of $402,000 on sales of $15,997,000 for the same period last year.
Net earnings were $362,000 or $.07 per share compared to $313,000 or $.06 per
share in 1994.
Forge sales and earnings achieved a modest improvement over last year. Sales
increased to $5.2 million compared to $4.8 million in 1994, and operating
profit increased to $236,000 from $112,000. The success of Forge's marketing
focus on complex, higher margin products was apparent throughout the quarter.
Margins steadily improved and performance exceeded bookings and financial
forecasts for each month of the period.
The Forge segment continues to stimulate positive customer response through its
commitment to service and quality. As an example, McDonnell-Douglas formally
designated Forge as a "High Performance Supplier" during the quarter. This
designation recognizes the Forge's consistent quality performance. As a
result, McDonnell-Douglas has determined that the usual source inspection
procedures they employ are unnecessary in our forging operation.
Our Specialty Products segment also expanded their market activity during the
quarter as sales increased to $13.2 million form $11.4 million a year ago.
Operating income for the quarter was $842,000, down from $1,033,000 last year.
The majority of the increased sales volume resulted from the sale of OEM
products which traditionally produce lower margins. Margins were also affected
by the cost of bringing new turbine component repair processes on stream. We
are confident that our continuing product and market development programs will
enhance profits while assuring us of meeting the competitive demands of the
aerospace markets we serve.
We take pride in the reputation for technology and quality that SIFCO has
earned through the years. Our expertise allows us to qualify for the most
demanding state-of-the-art programs. A few examples of these include the
experimental F-22 fighter and Boeing's ultra modern 777 commercial jetliner for
which we produce complex forgings. Another, and possibly the most interesting
example is the international space station named Freedom now under
construction. Our plating operation has a series of projects on the station,
including nickel plating connector devices between modules to provide corrosion
protection.
In the application of any of our technologies we are most proud of the skill
and commitment to quality that characterize SIFCO employees.
FINANCIAL ANALYSIS
- ------------------
Net sales for the first quarter ended December 31, 1995 increased to $18.3
million from $16.0 million a year ago or 14%. Defense-related sales were $2.1
million compared to $2.4 million a year ago. The Company reported a net profit
of $.362 million compared to $.313 million a year ago.
Net interest expense increased to $.265 million from $.214 million a year ago
reflecting additional borrowing for increased working capital needed to support
the additional sales.
New orders received increased to $19.3 million from $15.8 million last year.
9
<PAGE> 11
Specialty Products net sales increased to $13.2 million from $11.4 million last
year. Specialty Products income from operations before corporate and interest
expense declined to $.8 million compared to $1.0 million last year. Specialty
Products margins were negatively impacted by a higher mix of OEM products which
traditionally have lower margins and the cost of bringing new turbine component
repair processes on stream.
Forging segment sales increased to $5.2 million from $4.8 million last year.
Defense-related sales were $1.8 million (35%), compared to $1.9 million (40%)
last year. Forging income from operations before corporate and interest
expense was $.2 million compared to $.1 million last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital was $13.4 million at December 31, 1995 and $12.6 million at
September 30, 1995. The current ratio for the same period was 1.7 and 1.7
respectively. Total debt as a percentage of tangible shareholders' equity was
56.1% at December 31, 1995 compared to 53.9% at September 30, 1995. The
Company has borrowed $5.2 million against its revolving credit line of $7.0
million. The Company considers it has adequate financing to meet its needs
through the current year.
PROVISION FOR TAXES ON INCOME
-----------------------------
The provision for taxes on income, which is based on the anticipated
effective rate for the year, does not bear the customary relationship to
pre-tax income, due primarily to foreign source income.
10
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are included herein:
Exhibit 27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter ended December 31,
1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
SIFCO INDUSTRIES, INC.
----------------------
(Registrant)
Date January 27, 1996 /S/ Jeffrey P. Gotschall
---------------- -----------------------
Jeffrey P. Gotschall
Chief Executive Officer
Date January 27, 1996 /S/ Richard A. Demetter
---------------- ----------------------
Richard A. Demetter
Vice President - Finance
(Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000090168
<NAME> SIFCO INDUSTRIES, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,158
<SECURITIES> 0
<RECEIVABLES> 15,076
<ALLOWANCES> 0
<INVENTORY> 14,233
<CURRENT-ASSETS> 31,664
<PP&E> 22,920
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,904
<CURRENT-LIABILITIES> 18,291
<BONDS> 6,450
<COMMON> 5,108
0
0
<OTHER-SE> 25,911
<TOTAL-LIABILITY-AND-EQUITY> 60,904
<SALES> 0
<TOTAL-REVENUES> 18,271
<CGS> 14,986
<TOTAL-COSTS> 17,580
<OTHER-EXPENSES> 6
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 265
<INCOME-PRETAX> 420
<INCOME-TAX> 58
<INCOME-CONTINUING> 362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
