<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-21964
SHILOH INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0347683
- ------------------------------ --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 350, 1013 Centre Road, Wilmington, Delaware 19805
- --------------------------------------------------------------------------------
(Address of principal executive offices - zip code)
(302) 998-0592
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate 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
requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
- -------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of shares of Common Stock outstanding as of September 12, 1997 was
13,038,763 shares.
1
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SHILOH INDUSTRIES, INC.
-----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
----------- -------------
ASSETS
- ------
<S> <C> <C>
Cash and cash equivalents $ 1,141,775 $ 1,721,152
Accounts receivable 41,199,497 33,115,765
Inventory 29,845,936 18,626,492
Deferred income taxes 1,034,092 1,034,092
Prepaid expenses 4,459,060 3,573,160
------------ ------------
Total current assets 77,680,360 58,070,661
------------ ------------
Property, plant and equipment, net 162,383,525 122,293,375
Goodwill 7,934,572 615,318
Other long-term assets 3,886,113 26,029,671
------------ ------------
Total assets $251,884,570 $207,009,025
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 16,324,077 $ 9,719,528
Short-term debt 2,600,000 2,500,000
Accrued income taxes 3,209,811 1,412,499
Other accrued expenses 14,047,803 9,625,343
------------ ------------
Total current liabilities 36,181,691 23,257,370
------------ ------------
Long-term debt 67,400,000 50,433,352
Deferred income taxes 7,161,027 7,161,027
------------ ------------
Total liabilities 110,742,718 80,851,749
------------ ------------
Stockholders' equity
Common stock 130,387 130,116
Paid-in capital 38,743,406 38,375,152
Retained earnings 102,268,059 87,652,008
------------ ------------
Total stockholders' equity 141,141,852 126,157,276
------------ ------------
Commitments and contingent liabilities --- ---
Total liabilities and stockholders' equity $251,884,570 $207,009,025
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended July 31, Nine Months ended July 31,
--------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 65,460,360 $ 53,577,550 $ 200,716,879 $ 163,086,751
Cost of sales 51,184,773 42,768,033 158,762,270 130,851,302
------------- ------------- ------------- -------------
Gross Profit 14,275,587 10,809,517 41,954,609 32,235,449
Selling, general and administrative expenses 6,720,079 4,271,693 18,161,273 11,958,781
------------- ------------- ------------- -------------
Operating income 7,555,508 6,537,824 23,793,336 20,276,668
Interest expense 665,786 --- 1,407,481 262,587
Interest income (15,746) 1,558 40,055 152,029
Minority interest 115,558 --- 314,318 ---
Other income, net 7,904 51,187 204,907 61,555
------------- ------------- ------------- -------------
Income from continuing operations before
income taxes 6,997,438 6,590,569 22,945,135 20,227,665
Provision for income taxes 2,348,698 2,537,369 8,329,084 7,803,833
------------- ------------- ------------- -------------
Income from continuing operations 4,648,740 4,053,200 14,616,051 12,423,832
Loss from discontinued operations, net of
income taxes --- --- --- (379,311)
Loss on sale of discontinued operations, net of
income taxes --- --- --- (10,197,972)
------------- ------------- ------------- -------------
Net income (loss) $ 4,648,740 $ 4,053,200 $ 14,616,051 $ 1,846,549
============= ============= ============= =============
Earnings per share:
Income per share from continuing operations $.36 $.31 $1.12 $ .95
Loss per share from discontinued operations --- --- --- (.03)
Loss per share on sale of discontinued
operations --- --- --- (.78)
---- ---- ----- -----
Net income (loss) per share $.36 $.31 $1.12 $ .14
==== ==== ===== =====
Weighted average number of common shares: 13,038,763 13,011,663 13,029,829 13,011,663
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended July 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 14,616,051 $ 1,846,549
Adjustments to reconcile net income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization 7,813,464 5,381,566
Discontinued operations --- 10,197,972
Minority interest (314,318) ---
Loss (gain) on sale of assets (39,190) ---
Changes in operating assets and liabilities net of
effects of business acquired:
Accounts receivable (2,281,855) (65,864)
Inventories (5,144,520) (468,573)
Prepaids and other assets (843,504) (207,469)
Payables and accruals 7,381,804 3,554,728
Accrued income taxes 1,797,312 (613,404)
------------ ------------
Net cash provided by continuing operations 22,985,244 19,625,505
Discontinued operations - noncash charges
and working capital changes --- (1,746,245)
------------ ------------
Net cash provided by operating activities 22,985,244 17,879,260
------------ ------------
Cash Flows From Investing Activities:
Capital expenditures (37,870,879) (26,990,011)
Proceeds from sale of assets 171,977 13,200,000
Acquisition of business (3,300,893) ---
------------ ------------
Net cash used in investing activities (40,999,795) (13,790,011)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 14,600,000 11,000,000
Repayments of short-term borrowings (14,500,000) (11,000,000)
Proceeds from long-term borrowings 18,250,000 16,449,744
Repayments of long-term borrowings (1,283,352) (21,975,000)
Issuance of common stock 368,526 ---
------------ ------------
Net cash provided by financing activities 17,435,174 (5,525,256)
------------ ------------
Net increase (decrease) in cash and cash equivalents (579,377) (1,436,007)
Cash and cash equivalents at beginning of period 1,721,152 2,391,645
------------ ------------
Cash and cash equivalents at end of period $ 1,141,775 $ 955,638
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of Presentation and Business
- -------------------------------------------
The condensed consolidated financial statements have been prepared by
Shiloh Industries, Inc. (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. The information
furnished in the condensed consolidated financial statements includes normal
recurring adjustments and reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of such financial statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed consolidated
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1996 Annual Report to
Shareholders.
Revenues and operating results for the nine months ended July 31, 1997
are not necessarily indicative of the results to be expected for the full year.
The Consolidated Statement of Income and Consolidated Statement of Cash
Flows for the period ending July 31, 1996 have been reclassified to correspond
to current presentation for discontinued operations (see Note 2).
NOTE 2 - Discontinued Operations
- --------------------------------
In May 1996, the Company entered into an agreement to sell the stock of
its Shafer Valve Company (Shafer Valve) subsidiary to Bettis Corporation for
$13.2 million and has accounted for this operation as a discontinued operation
effective April 30, 1996, the measurement date. Results of operations for 1996
have been reclassified for amounts associated with the discontinued operation.
The sale of Shafer Valve was completed July 9, 1996. The net proceeds
from the sale of the operation were used primarily to reduce debt.
NOTE 3 - Inventories:
- ---------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
------------ -------------
<S> <C> <C>
Raw materials $ 18,572,882 $ 11,557,662
Work-in-process 7,147,160 2,797,698
Finished goods 5,394,815 5,475,054
------------ ------------
Total at average cost 31,114,857 19,830,414
LIFO reserve (1,268,921) (1,203,922)
------------ ------------
Total $ 29,845,936 $ 18,626,492
============ ============
</TABLE>
6
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NOTE 4 - Property, Plant and Equipment:
- ---------------------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
------------- -------------
<S> <C> <C>
Land $ 3,901,473 $ 3,584,572
Buildings and improvements 67,307,305 48,916,332
Machinery and equipment 116,470,632 87,121,959
Furniture and fixtures 6,919,176 4,810,494
Construction in progress 27,416,345 30,787,858
------------- -------------
Total, at cost 222,014,931 175,221,215
Less: Accumulated depreciation (59,631,406) (52,927,840)
------------- -------------
Net property, plant and equipment $ 162,383,525 $ 122,293,375
============= =============
</TABLE>
NOTE 5 - Financing Arrangements:
- --------------------------------
Short-term debt consists of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
------------ ------------
<S> <C> <C>
Revolving credit loan - interest at 6.1484% at July 31, 1997 $ 2,600,000 $ 2,500,000
------------ ------------
Total $ 2,600,000 $ 2,500,000
============ ============
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
------------ -----------
<S> <C> <C>
Revolving credit loan - interest at 6.1875% at July 31, 1997 $ 37,000,000 $26,500,000
Revolving credit loan - interest at 6.1641% at July 31, 1997 25,000,000 18,500,000
Variable rate industrial development bond, secured by letter of
credit, weighted average interest rate at 3.84% payable on
February 1, 2010 5,400,000 5,433,352
------------ -----------
$ 67,400,000 $50,433,352
Less: current portion --- ---
------------ -----------
Total $ 67,400,000 $50,433,352
============ ===========
</TABLE>
Prior to January 31, 1997, the Company had a $30 million revolving credit
facility ("Facility") with KeyBank National Association ("KeyBank"). On January
31, 1997, the Company increased this Facility to $70 million.
7
<PAGE> 8
Prior to February 24, 1997, the Company was acting as an 80% guarantor for a $23
million unsecured revolving credit facility ("SOM Facility") entered into by
Shiloh of Michigan with KeyBank. On February 24, 1997, the Company increased the
SOM Facilities to $28 million and remains an 80% guarantor of the SOM Facility.
Certain of the debt agreements described above contain various restrictive
covenants which, among other things, require the Company's various operating
subsidiaries to maintain minimum net worth levels and financial ratios. The
agreements also place certain restrictions on additional indebtedness and
capital expenditures.
Amounts available under the Company's revolving credit facilities, including the
SOM facility, aggregated $40.4 million at July 31, 1997.
NOTE 6 - Other Information:
- ---------------------------
During the nine months ended July 31, 1997 and July 31, 1996, cash payments for
interest amounted to $2,581,593 and $1,046,135, respectively, while cash
payments, net of refunds, for income taxes amounted to $6,470,144 and
$8,249,855, respectively.
The Company's 1993 Key Employee Stock Incentive Plan, as amended, provides for
granting officers and employees of the Company options to acquire up to an
aggregate 450,000 shares of the Company's Common Stock. To date, the Company has
granted options to certain officers and employees to purchase an aggregate of
251,400 shares at prices ranging from $11.00 to $16.50 per share.
On January 29, 1996 the Company issued 27,100 shares of Common Stock as the
result of the exercise of stock options. As a result of such issuance of Common
Stock, the Company received proceeds of $298,100.
NOTE 7 - Newly Issued Accounting Pronouncements:
- ------------------------------------------------
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), was issued. The
Company will adopt SFAS No. 123 in the year ending October 31, 1997. The Company
will continue to apply APB Opinion 25 in accounting for stock-based employee
compensation; however, the impact of the fair value based method described in
SFAS No. 123 will be presented in the notes to the financial statements.
In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings
per Share" ("SFAS No. 128"), was issued. This statement establishes standards
for computing and presenting earnings per share. Adoption of SFAS No. 128 is not
expected to have a material impact on the Company.
NOTE 8 - Subsequent Event:
- --------------------------
On August 29, 1997, the Company completed the acquisition of C & H Design
Company (C & H). The acquisition of substantially all of the assets and
assumption of certain liabilities of C & H will be accounted for as a purchase
and its results of operations will be included in Shiloh's consolidated results
from that date forward. The purchase price included approximately $7,300,000 in
cash and escrow payments and approximately $3,200,000 in assumed debt which was
repaid to the creditors of C & H immediately subsequent to closing. In addition,
costs associated with the transaction have been accrued at July 31, 1997.
The purchase agreement provides for final purchase price adjustments.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
- -------
The Company is a vertically integrated steel processor that supplies blanks,
stampings and processed steel to the automotive, heavy truck and other
industries. The Company currently provides a broad range of intermediate steel
processing services, which include: (i) blanking and stamping; and (ii) other
steel processing services (which include pickling hot rolled steel, slitting,
edge trimming, roller leveling and cutting to length of both hot and cold rolled
steel). With the August 29, 1997 purchase of C & H, the Company operates through
nine subsidiaries, Shiloh Corporation, Valley City Steel Company, The Sectional
Die Company, Medina Blanking, Inc., Sectional Stamping, Inc., Liverpool Coil
Processing, Inc., Shiloh of Michigan, L.L.C., the Company's joint venture with
Rouge Steel ("SOM"), Greenfield Die & Manufacturing Company ("GDM"), and C & H.
In 1995, the Company prepared a long-term business plan which included a
strategic decision to concentrate on the core steel processing business. As a
result, the Company sought inquiries from prospective bidders for the sale of
its subsidiary, Shafer Valve . Effective April 30, 1996, the Company accounted
for Shafer Valve as a discontinued operation. In May 1996, the Company entered
into an agreement to sell the stock of Shafer Valve to Bettis Corporation. The
sale was completed on July 9, 1996.
The Company typically experiences decreased revenue and operating income during
the first fiscal quarter of each year, usually resulting from generally slower
overall automobile production during the winter months. The revenues and
operating income in the third fiscal quarter can also be affected by the
typically lower automobile production activities in July due to manufacturers'
changeover in production lines.
In analyzing the financial aspects of the Company's steel processing operations,
a number of factors must be considered. First, plant utilization levels are very
important to profitability because of the capital intensive nature of these
operations. Because the Company performs a number of different processing
operations, however, it is not meaningful to analyze simply the total tons of
steel processed. For example, blanking and stamping involve more operational
processes, from the design and manufacture of tools and dies to the production
and packaging of the final product, than the Company's other steel processing
services and therefore generally have higher margins. Second, a significant
portion of the Company's steel processing products and services is provided to
the customers on a toll processing basis. Under these arrangements, the Company
charges a specified toll processing fee for the processing operations performed
without acquiring ownership of the steel and being burdened with the attendant
costs of ownership and risk of loss. Although the proportion of tons processed
by the Company that are directly owned and toll processed may fluctuate from
quarter to quarter primarily based on the customers for which the Company is
providing services during the period, the Company estimates that in 1994, 1995
and 1996 approximately 85.9%, 86.4% and 85.4%, respectively, of total tons
processed was done on a toll processing basis. Revenues from operations
involving directly owned steel include a component of raw material cost whereas
toll processing revenues do not, consequently, toll processing generally results
in lower gross profit, but higher gross margin, than directly owned steel
processing. Therefore, an increase in the proportion of total revenues
attributable to directly owned steel processing may result in higher revenues
and gross profits but lower gross margins. The Company's blanking and stamping
operations use more directly owned steel than do its other steel processing
operations. In addition, changes in the price of steel can impact the Company's
results of operations because raw material costs are by far the largest
component of cost of sales in processing directly owned steel.
9
<PAGE> 10
Results of Operations
- ---------------------
THREE MONTHS ENDED JULY 31, 1997
COMPARED TO THREE MONTHS ENDED JULY 31, 1996
REVENUES. Revenues increased by $11.9 million, or 22.2%, to $65.5 million for
the third quarter of fiscal 1997 from $53.6 million for the comparable period
in fiscal 1996. The increase in revenues is due primarily to the inclusion of
$8.6 million of revenues from GDM, which was acquired in November 1996.
Revenues from the blanking and stamping operations for the third quarter of
fiscal 1997 increased approximately 34.7% due primarily to the inclusion of
revenues from GDM, while revenues from the other steel processing operations
decreased approximately 7.1% from the comparable period in fiscal 1996. The
percentage of revenues from directly owned steel processed was 70.9% for the
third quarter of fiscal 1997 and 70.6% for the comparable period in fiscal
1996. Revenues from toll processed steel were 29.1% for the third quarter of
fiscal 1997 and 29.4% for the comparable period in fiscal 1996. The increase in
the percentage of revenues from directly owned steel processed was primarily
due to the inclusion of GDM which predominantly processes directly owned steel.
GROSS PROFIT. Gross profit increased by $3.5 million, or 32.1%, to $14.3 million
for the third quarter of fiscal 1997 from $10.8 million for the comparable
period in fiscal 1996. Gross margin increased to 21.8% for the third quarter of
fiscal 1997 from 20.2% for the comparable period in fiscal 1996. The increase in
gross margin is primarily attributable to a shift in the mix of toll and
directly owned steel processing at certain facilities and the value added
services provided by the inclusion of GDM.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 57.3% to $6.7 million for the third quarter
of fiscal 1997 from $4.3 million for the comparable period in fiscal 1996. As a
percentage of revenues, selling, general and administrative expenses increased
to 10.3% for the third quarter of fiscal 1997 from 8.0% for the comparable
period in fiscal 1996. The largest component of the increase, both as a
percentage of sales and in dollars, arose principally from the inclusion of GDM
for the third quarter of 1997. In addition, the increase was attributable to
costs associated with the adoption of a supplemental executive retirement plan,
and to a lesser extent, to increased personnel costs at the Company's corporate
offices in connection with the addition of new personnel.
OTHER. The Company incurred interest expense of $.7 million in the third quarter
of fiscal 1997 due primarily to increased average borrowings during the period
and the Company had no interest expense in the comparable period of fiscal 1996.
Interest expense of approximately $.4 million relating to expansion of several
facilities was capitalized during the three month period. The provision for
income taxes was $2.4 million in the third quarter of fiscal 1997 compared with
$2.5 million for the comparable period in fiscal 1996, representing effective
tax rates of 33.6% and 38.5%, respectively. The lower rate in the third quarter
of fiscal 1997 reflects the effect of state incentive programs.
DISCONTINUED OPERATIONS. On July 9, 1996 the Company sold Shafer Valve which had
been accounted for as a discontinued operation effective April 30, 1996.
NET INCOME. Net income from continuing operations for the third quarter of
fiscal 1997 increased by $.6 million, or 14.7 %, to $4.7 million from $4.1
million for the comparable period in fiscal 1996. This increase was
substantially the result of the inclusion of GDM, which was acquired by the
Company in November 1996.
10
<PAGE> 11
NINE MONTHS ENDED JULY 31, 1997
COMPARED TO NINE MONTHS ENDED JULY 31, 1996
REVENUES. Revenues increased by $37.6 million, or 23.1 %, to $200.7 million for
the first nine months of fiscal 1997 from $163.1 million for the comparable
period in fiscal 1996. The increase in revenues is primarily due to the
inclusion of $28.8 million of revenues from GDM. Revenues from the blanking and
stamping operations for the first nine months of fiscal 1997 increased
approximately 29.9% due primarily to the inclusion of revenues from GDM, while
revenues from the other steel processing operations for the first nine months
of fiscal 1997 increased approximately 6.7%, from the comparable period in
fiscal 1996. The percentage of revenues from directly owned steel processed
was 72.3% for the first nine months of fiscal 1997 and 71.0% for the comparable
period in fiscal 1996. Revenues from toll processed steel were 27.7% for the
first nine months of fiscal 1997 and 29.0% for the comparable period in fiscal
1996. The increase in the percentage of revenues from directly owned steel
processed was primarily due to the inclusion of GDM which predominantly
processes directly owned steel.
GROSS PROFIT. Gross profit increased by $9.7 million, or 30.2%, to $41.9 million
for the first nine months of fiscal 1997 from $32.2 million for the comparable
period in fiscal 1996. Gross margin increased to 20.9% for the first nine months
of fiscal 1997 from 19.8% for the comparable period in fiscal 1996. The increase
in gross margin is primarily attributable to higher gross margins realized with
the inclusion of GDM, off-set by pre-operating costs incurred at SOM and
start-up costs related to certain expansion projects.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $6.2 million, or 51.9% to $18.2 million
for the first nine months of fiscal 1997 from $12.0 million for the comparable
period in fiscal 1996. As a percentage of revenues, selling, general and
administrative expenses increased to 9.1% for the first nine months of fiscal
1997 from 7.3% for the comparable period in fiscal 1996. The largest component
of the increase, both as a percentage of sales and in dollars, arose
principally from the inclusion of GDM. In addition, the increase was
attributable to costs associated with the adoption of a supplemental
executive retirement plan, and to a lesser extent, to increased personnel costs
at the Company's corporate offices in connection with the addition of new
personnel.
OTHER. Interest expense increased to $1.4 million for the first nine months of
fiscal 1997 from $.3 million for the comparable period in fiscal 1996 due
primarily to increased average borrowings during the first nine months of fiscal
1997 that were primarily incurred in connection with the acquisition of GDM.
Interest expense of approximately $1.3 million relating to expansion of several
facilities was capitalized during the first nine months of fiscal 1997. The
provision for income taxes was $8.3 million for the first nine months of fiscal
1997 compared with $7.8 million for the comparable period in fiscal 1996,
representing effective tax rates of 36.3% and 38.6%, respectively. The lower
rate for the first nine months of fiscal 1997 reflects the effect of state
incentive programs.
DISCONTINUED OPERATIONS. On July 9, 1996 the Company sold Shafer Valve which had
been accounted for as a discontinued operation effective April 30, 1996.
NET INCOME. Net income from continuing operations for the first nine months of
fiscal 1997 increased by $2.2 million, or 17.6%, to $14.6 million from $12.4
million for the comparable period in fiscal 1996. This increase was
substantially the result of the inclusion of GDM.
11
<PAGE> 12
Liquidity and Capital Resources
- -------------------------------
At July 31, 1997, the Company had $41.5 million of working capital, representing
a current ratio of 2.1 to 1 and a debt-to-capitalization ratio of 33.2%. As a
result of the financial condition of the Company, the Company believes that it
will be able to continue its planned investment in new equipment and facilities
through fiscal 1997.
Net cash provided by operating activities is primarily generated from net income
of the Company plus non-cash charges for depreciation and amortization, which,
because of the capital intensive nature of the Company's business, are
substantial. Net cash provided by operating activities during the first nine
months of fiscal 1997 was $23.0 million as compared to $17.9 million for the
comparable period of fiscal 1996. Net cash provided by operating activities has
historically been used by the Company to fund a portion of its capital
expenditures.
The Company had planned capital expenditures for fiscal 1997 of up to $60.4
million, which included the planned construction of a new $17.0 million stamping
facility for GDM, and an $11.4 million tooling center in Wellington, Ohio, as
well as $26.4 million for new machinery and equipment and the expansion of
existing operating facilities and $5.6 million in sustaining capital
expenditures. Capital expenditures were $37.9 million during the first nine
months of fiscal 1997 and $27.0 million for the comparable period in fiscal
1996. Approximately $23.6 million of the capital expenditures during the first
nine months of fiscal 1997 were for expansions of the Company's current blanking
and stamping facilities. In addition, approximately $6.6 million was for
construction and equipment at SOM. Such facilities and machinery and equipment
are being constructed or obtained to support increased business and anticipated
new business and to enhance productivity. For fiscal 1997, the Company has
remaining planned capital expenditures of up to approximately $22.5 million.
Prior to January 31, 1997, the Company had a $30 million revolving credit
facility ("Facility") with KeyBank National Association ("KeyBank"). On January
31, 1997, the Company increased this Facility to $70 million. The term of the
Facility extends to February 28, 2001 with an option for successive one year
term extensions available at the Company's request and KeyBank's approval, upon
proper written notification. The Company has the option to select the applicable
interest rate at KeyBank's prime rate or the LIBOR rate plus 1/2% fixed in
increments of 30, 60 or 90 days. The terms of the agreement require an annual
commitment fee equal to 1/4% on the average unused amount of the Facility.
Prior to February 24, 1997, the Company was acting as an 80% guarantor for a $23
million unsecured revolving credit facility ("SOM Facility") entered into by
Shiloh of Michigan with KeyBank. On February 24, 1997, the Company increased the
SOM Facility to $28 million and remains an 80% guarantor of the SOM Facility.
Shiloh of Michigan has the option to select the applicable interest rate at
KeyBank's prime rate or the LIBOR rate plus 1/2% fixed in increments of 30, 60
or 90 days. The terms of the agreement require an annual commitment fee equal to
1/4% on the average unused amount of the SOM Facility.
The Company executed a promissory note as of December 6, 1996 in favor of
Richland Bank in the aggregate principal amount of $4.0 million. Interest
accrues on the outstanding principal balance thereunder at LIBOR rate plus 3/4%.
In addition, the Company executed a promissory note as of January 31, 1997 in
favor of KeyBank and received an aggregate amount of $3.0 million for working
capital purposes. Interest accrues on the outstanding principal balance of this
promissory note at the LIBOR rate.
In March 1995, Medina County, Ohio issued on the behalf of the Company an
aggregate of $5.4 million in principal amount of variable rate industrial
revenue bonds due 2010, which are secured by the Company with a letter of
credit. The funds from these bonds were used to finance a portion of the
expansion at the Company's steel pickling operations in Valley City, Ohio. The
entire $5.4 million of such proceeds was outstanding as of July 31, 1997.
12
<PAGE> 13
The Company believes that it currently has sufficient liquidity and available
capital resources to meet its existing needs, and the financial capability to
increase its long-term borrowing level if that becomes appropriate due to
changes in its capital requirements. Total availability under the Company's
unsecured lines of credit and revolving credit facilities is $105 million, $40.4
million of which was unused at July 31, 1997.
FORWARD-LOOKING STATEMENTS
The statements contained in this Report that are not historical facts
are forward-looking statements. These forward-looking statements are subject to
certain risks and uncertainties with respect to the Company's operations in
fiscal 1997 as well as over the long term such as, without limitation, (i) a
downturn in the automotive industry, which is highly cyclical, dependent on
consumer spending and subject to the impact of domestic and international
economic conditions and regulations and policies regarding international trade,
(ii) the ability of the Company to accomplish its strategic objectives with
respect to external expansion through selective acquisitions, internal expansion
and the construction of new facilities, (iii) the Company's ability to integrate
its acquisitions, and (iv) increases in the price of, or limitations on the
availability of steel, the Company's primary raw material. Any or all of these
risks and uncertainties could cause actual results to differ materially from
those reflected in the forward-looking statements. These forward-looking
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors it believes are
appropriate in the circumstances. In addition, such statements are subject to a
number of assumptions, risks and uncertainties, including, without limitation,
the risks and uncertainties identified in this Report, general economic and
business conditions, the business opportunities (or lack thereof) that may be
presented to and pursued by the Company, changes in laws or regulations and
other factors, many of which are beyond the control of the Company. Investors
and prospective investors are cautioned that any such statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in the forward-looking statements.
13
<PAGE> 14
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. Exhibits
27 Financial Data Schedule.
b. Reports on Form 8-K: None.
14
<PAGE> 15
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 thereunto duly authorized.
Date: September 12, 1997 SHILOH INDUSTRIES, INC.
By: /s/ Robert L. Grissinger
-----------------------------
Robert L. Grissinger,
Chairman, President and
Chief Executive Officer
By: /s/ Craig A. Stacy
-----------------------------
Craig A. Stacy,
Chief Financial Officer
and Treasurer
15
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