<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 COMMISSION FILE NO. 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
incorporation or organization) identification no.)
Suite 350, 1013 Centre Road, Wilmington, Delaware 19805
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (302) 998-0592
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, Par Value $0.01 Per Share
Indicate by checkmark whether the registrant: (1) has filed
all reports 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 --- ---
Indicate by checkmark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Annual
Report on Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of Common Stock held by non-affiliates
of the registrant as of January 17, 1997 at a closing price of $18.25 per share
as reported by the Nasdaq National Market was approximately $66,466,846. Shares
of Common Stock held by each officer and director, their respective spouses,
and by each person who owns or may be deemed to own 10% or more of the
outstanding Common Stock have been excluded since such persons may be deemed to
be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Number of shares of Common Stock outstanding as of January 17, 1997 was
13,011,663.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference
to Parts I, II, III and IV of this Annual Report on Form 10-K: (i) the Proxy
Statement for the Registrant's 1997 Annual Meeting of Stockholders (the "Proxy
Statement"); and (ii) the Registrant's 1996 Annual Report for the fiscal year
ended October 31, 1996 (the "Annual Report").
<PAGE> 2
SHILOH INDUSTRIES, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C> <C>
Item 1. Business............................................................................... 1
Item 2. Properties............................................................................. 5
Item 3. Legal Proceedings...................................................................... 7
Item 4. Submission of Matters to a Vote of Securityholders..................................... 7
Item 4A. Executive Officers of the Company...................................................... 7
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters ................................................................... 8
Item 6. Selected Financial Data................................................................ 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................... 8
Item 8. Financial Statements and Supplementary Data............................................ 8
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................................... 8
PART III
Item 10. Directors and Executive Officers of the Company........................................ 8
Item 11. Executive Compensation................................................................. 9
Item 12. Security Ownership of Certain Beneficial Owners
and Management...................................................................... 9
Item 13. Certain Relationships and Related Transactions......................................... 9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K......................................................................... 9
</TABLE>
-2-
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL
Shiloh Industries, Inc. (the "Company") is a vertically
integrated steel processor that supplies high quality blanks, stampings and
processed steel to the automotive and other industries. The Company's products
include steel blanks used principally by domestic and foreign automotive
manufacturers for automobile fenders and hoods and heavy truck wheels and brake
parts, as well as steel stampings used principally by automobile component
manufacturers. The Company also designs, engineers and produces precision tools
and dies for use in its own blanking and stamping operations as well as for sale
to other industrial customers. In addition, the Company performs a variety of
value-added intermediate steel processing services, such as pickling hot rolled
steel and slitting, edge trimming, roller leveling and cutting to length hot and
cold rolled steel.
The Company's origins date back to 1950 when its predecessor,
Shiloh Tool & Die Mfg. Company, began to design and manufacture precision tools
and dies. As an outgrowth of its precision tool and die expertise, the Company
expanded into blanking and stamping operations in the early 1960's. In 1977, the
Company formed a joint venture with MTD Products Inc, a privately-held
manufacturer of outdoor power equipment and tools, dies and stampings for the
automotive industry ("MTD Products"), to develop additional steel processing
capabilities.
On July 9, 1996, the Company sold all of the outstanding stock
of its wholly owned subsidiary, Shafer Valve Company ("Shafer Valve"), for $13.2
million in cash. Shafer Valve, which the Company had acquired in May 1992,
manufactured valve actuators primarily for the oil and gas industries. The sale
of Shafer Valve was consistent with the Company's strategic objective to focus
on its core steel processing business. In 1995, Shafer Valve accounted for
approximately $16.5 million of the Company's total revenues of $228.8 million.
On November 1, 1996, the Company acquired substantially all of
the assets of Greenfield Die & Manufacturing Corp. ("Greenfield") for
approximately $22.6 million, which consisted of approximately $15.0 million in
cash and approximately $7.6 million in assumed debt that was repaid immediately
subsequent to closing. On January 3, 1997, the Company made an additional
payment of approximately $2.3 million required under the terms of the Greenfield
purchase agreement. Greenfield, headquartered in Canton, Michigan, a suburb of
Detroit, serves the automotive industry by providing a variety of value added
processes including tool and die design and build, stamping, assembly, welding,
prototyping operations and mold design and build. In 1995, Greenfield had sales
of approximately $30 million. Today, after giving effect to the sale of Shafer
Valve and the acquisition of Greenfield, the Company operates through eight
facilities with a total of over 1.4 million square feet of manufacturing space.
The Company was organized as a Delaware corporation in April
1993 to serve as a holding company for seven operating subsidiaries. In June
1993, the Company effected a reorganization whereby these seven operating
subsidiaries became direct or indirect subsidiaries of the Company. The
Company's other subsidiary is Greenfield Die & Manufacturing Corporation, which
the Company used to acquire the assets of Greenfield. In July 1993, the Company
completed an initial public offering of 3,782,500 shares of its Common Stock.
The Company's principal executive offices are located at Suite 350, 1013 Centre
Road, Wilmington, Delaware 19805 and its telephone number is (302) 998-0592.
Unless otherwise indicated, all references to the "Company" refer to Shiloh
Industries, Inc. and its direct and indirect subsidiaries.
MARKET OVERVIEW
The Company occupies the market niche between primary steel
producers and end-product manufacturers. Primary steel producers typically find
it more cost effective to focus on the sale of standard size and tolerance steel
to large volume purchasers and view the intermediate steel processor as part of
their
<PAGE> 4
customer base. End-product manufacturers seek to purchase steel free from
oxidation and scale, with closer tolerances, on shorter lead times and with more
reliable and more frequent delivery than the primary steel producers can provide
efficiently. Additionally, many end-product manufacturers are unwilling to
invest in the technology, equipment and labor required to further blank, stamp
or otherwise process steel for use in their manufacturing operations. By
outsourcing certain components, many end-product manufacturers are able to
significantly enhance the flexibility of their manufacturing operations in order
to accommodate the shorter production runs and changeover times required by
competitive pressures. These factors, together with the lower cost structure
typically found in the outside supplier, have caused many end-product
manufacturers to find it more beneficial, from a cost, quality and manufacturing
flexibility standpoint, to outsource to steel processors many of the component
parts which are utilized in the production of their end-products.
Sales to the automotive industry have historically represented
a significant portion of the Company's sales. This is expected to continue for
the foreseeable future. Sales to automotive and heavy truck manufacturers, and
suppliers to those manufacturers, constituted 64%, 66% and 57% of the Company's
revenues for the fiscal years ended October 31, 1996, 1995 and 1994,
respectively.
STEEL PROCESSING PRODUCTS AND SERVICES
Blanking and Stamping. The Company produces precision stamped
steel components through its blanking and stamping operations. Blanking is a
process in which flat rolled steel is cut into precise two dimensional shapes by
passing steel through a press employing a blanking die. The Company's blanking
presses range in size from 200 tons to 3,000 tons, giving the Company the
flexibility to produce blanks from flat rolled steel ranging in thickness from
.020 inches to .500 inches. The Company's blanks are used principally by
manufacturers in the automobile, heavy truck, heating, ventilating and air
conditioning and lawn and garden industries to produce items such as automobile
exterior parts including fenders, hoods and side panels, and heavy truck wheel
rims and brake components.
Stamping is a process in which steel is passed through dies in
a stamping press in order to form the steel into three dimensional parts. The
Company's stamping presses range in size from 150 tons to 1,500 tons, giving the
Company the flexibility to stamp flat rolled steel and steel blanks ranging in
thickness from .015 inches to .250 inches. The Company produces stamped parts
using precision single stage, progressive and transfer dies, which in most cases
are designed and manufactured by the Company. The Company produces stamped
components principally for use in the manufacture of seat components, window
assemblies and exhaust systems for automobiles and light trucks. In addition,
the Company's stamping and blanking operations provide value-added processes
such as welding, assembly, prototyping and mold design and build. These
processes are principally utilized in the automotive industry.
The Company also designs, engineers and produces precision
tools and dies. The Company produces tools and dies for use in its own blanking
and stamping operations as well as for sale to other industrial customers. The
Company maintains state-of-the-art technology to improve its tool and die
production capabilities, and has computerized most of the design and engineering
portions of its tool and die production process to reduce production time and
cost. All of the Company's tool and die manufacturing facilities are
electronically connected to certain major customers to expedite the delivery of
tool and die specifications.
Other Steel Processing. The Company processes flat rolled
steel principally for primary steel producers and manufacturers, including its
own operations, that require processed steel for end-product manufacturing
purposes. The Company either purchases or receives on a toll processing basis
(i.e., the Company does not acquire ownership of the steel) hot rolled and cold
rolled steel from primary steel producers located throughout the Midwest. This
steel typically requires additional processing to meet the requirements of the
end-product manufacturers. The Company's intermediate processing operations
include pickling, slitting, edge trimming, roller leveling, cutting to length
and quality inspecting of flat rolled steel.
-2-
<PAGE> 5
The first processing operation for hot rolled steel typically
involves pickling, a chemical process in which an acidic solution is applied to
the steel to remove the surface oxidation and scale which develops on the steel
shortly after it is hot rolled. During the pickling process, the steel is either
coated with oil to prevent oxidation or with a borax based solution to prevent
oxidation and facilitate the stamping process. The Company recently added a new
pickling line, which allows the Company to nearly double its capacity for
cleaning, finishing and coating steel. This new pickling line became fully
operational in 1996. After pickling, the steel is ready for either delivery to
the customer or additional processing. Cold rolled steel does not require
pickling.
Pickled steel and cold rolled steel often go through
additional processing operations by the Company to meet the requirements of
end-product manufacturers. Slitting is the cutting of coiled steel to precise
widths. Edge trimming removes a specified portion of the outside edges of the
coiled steel to produce a uniform width. Roller leveling flattens the steel by
applying pressure across the width of the steel to make the steel suitable for
blanking and stamping. Cutting to length produces steel cut to specified lengths
ranging from 12 inches to 168 inches. In addition to cleaning, leveling and
cutting steel, the Company visually inspects steel to detect production flaws
and utilizes computers to provide both visual displays and documented records of
the thickness maintained throughout the entire coil of steel. To achieve high
quality and increased volume levels, and to be responsive to manufacturers'
just-in-time supply requirements, the Company has computerized most of its steel
processing operations and has combined several complementary processing lines
such as pickling, slitting and cutting to length at single facilities. The
Company also performs inspection and inventory control services for certain
customers.
FORMATION OF JOINT VENTURE; EXPANSION INTO MICHIGAN
In January 1996, the Company and Rouge Steel Company formed a
limited liability company, Shiloh of Michigan, L.L.C. ("Shiloh of Michigan"), to
create a joint venture to produce engineered steel blanks, with the Company as
an eighty percent (80%) equity owner. The Company's investment in this joint
venture has totaled approximately $18.8 million. Shiloh of Michigan commenced
construction of a new manufacturing facility in Romulus, Michigan in 1995.
Construction of this facility was completed in 1996 and it is anticipated that
the facility will operate at full capacity by the end of fiscal 1997.
In November 1996, the Company completed its acquisition of
Greenfield, which is based in a suburb of Detroit, Michigan. See "Business --
General." Through Greenfield and its interest in Shiloh of Michigan, the Company
has expanded its geographic presence in Michigan. This expansion is consistent
with the Company's long-term strategy of broadening its geographic scope.
SALES AND MARKETING
The Company's steel processing products and services are
marketed directly by a sales force consisting of 14 salesmen who cover 9 states
located principally in the Midwest. Two of the Company's salesmen focus on the
Company's relationships with primary steel producers. Each of the Company's
salesmen is trained to market the Company's entire line of steel processing
products and services. The Company supplements its sales efforts with the
technical support of its engineering staff, which, in many cases, offers the
customer technical assistance during the product development stage. Certain of
the Company's executive officers also actively participate in the Company's
marketing efforts.
CUSTOMERS
The Company produces blanked and stamped parts and processes
flat rolled steel for a variety of industrial customers. The Company supplies
steel blanks primarily to the Big Three automobile manufacturers and
manufacturers of heavy truck wheels and brake parts, and supplies stamped
components to other automobile parts producers such as AP Parts, Johnson
Controls and Excel Industries, who in turn sell to the Big Three and other
automobile manufacturers. In addition, the Company also supplies blanks and
stampings to manufacturers
-3-
<PAGE> 6
in the heating, ventilating and air conditioning, steel tubing, lawn and garden,
home appliance and construction industries. The Company estimates that in fiscal
1996, sales of blanks and stampings to the automotive industry accounted for
approximately 53% of the Company's revenues. The Company processes flat rolled
steel for a number of primary steel producers and for end-product manufacturers
in a variety of industries, including the automotive and lawn and garden
industries.
One of the Company's largest customers is the Parma, Ohio
stamping facility of the Metal Fabricating division of General Motors
Corporation ("MFD Parma"). During fiscal 1996, MFD Parma accounted for
approximately 8.5% of the Company's revenues and, because these revenues relate
to blanks that are produced on a toll processing basis, approximately 15.2% of
the total steel tonnage processed by the Company. The Company is the exclusive
supplier of blanks to MFD Parma and has principally dedicated one of its
blanking facilities to such production. MFD Parma produces stamped exterior body
parts for use in many General Motors automobiles. The Company is linked through
an electronic data interchange with MFD Parma and supplies blanks on a
just-in-time basis.
LTV Steel Company, Inc. ("LTV Steel"), a primary steel
producer with significant production facilities located in close proximity to
the Company, is another large customer of the Company. During fiscal 1996, LTV
Steel accounted for approximately 1.9% of the Company's revenues and
approximately 8.5% of the total steel tonnage processed by the Company. The
Company processes steel for LTV Steel on a toll processing basis and typically
ships the processed steel to end-product manufacturers after completion of the
necessary processing operations.
OPERATIONS AND ENGINEERING
The Company operates its steel processing facilities on an
integrated basis. A significant portion of the processed flat rolled steel
required by the Company in its blanking and stamping operations is supplied
through its other steel processing operations. With three tool and die
facilities, the Company typically designs, engineers and manufactures
substantially all of the tools and dies used in its blanking and stamping
operations.
Five of the Company's facilities were constructed by the
Company and were located and designed to facilitate the integrated flow of the
Company's processing operations. In addition, the Company has developed a
just-in-time delivery system that enables the Company to meet its customers'
requirements for deliveries on shorter lead times thereby minimizing their need
to carry significant inventory levels.
The Company has a highly qualified and trained work force
supplemented, where appropriate, with automation. In 1990, the Company
established its own Total Quality Management program, known as the Integrated
Continuous Improvement Program, which allows employees to take active roles in
the improvement of their manufacturing processes and environment. The employees
meet regularly to generate new ideas or projects relating to quality
improvements, production safety and cost reduction.
RAW MATERIALS
The basic materials required for the Company' steel processing
operations are hot and cold rolled steel. The Company obtains steel for
processing from a number of primary steel producers, including Rouge Steel,
Wheeling-Pittsburgh Steel, LTV Steel, Warren Consolidated Steel, U.S. Steel and
Weirton Steel. A significant portion of the Company's steel processing products
and services are provided on a toll processing basis. Under these arrangements,
the Company charges a specified fee for processing steel without acquiring
ownership of the steel and being burdened with the attendant costs of ownership
and risk of loss. Through centralized purchasing, the Company attempts to
purchase its raw materials at the lowest competitive prices for the quantity
purchased. The amount of steel available for processing is a function of the
production levels of primary steel producers. Although the Company has been able
to satisfy all of its current requirements for flat
-4-
<PAGE> 7
rolled steel, most of its suppliers have instituted allocation programs due to
the current strong demand for flat rolled steel.
COMPETITION
Competition for sales of steel blanks and stampings is
intense, coming from numerous companies, including internal divisions of the Big
Three automobile manufacturers, which have blanking facilities and greater
financial and other resources than the Company. The market for the Company's
other steel processing operations is also highly competitive. The Company
competes with a number of steel processors in its region, such as Worthington
Industries and Samuel Steel Pickling Company, and primary steel producers, many
of which also have comparable facilities and greater financial and other
resources than the Company. The primary characteristics of competition
encountered by the Company in each of these markets are product quality,
just-in-time delivery and price.
EMPLOYEES
As of December 31, 1996, the Company had approximately 1,270
employees. The employees at two of the Company's operating facilities (an
aggregate of 326 employees) are covered by collective bargaining agreements that
are due to expire on January 14, 2000 and June 4, 2001, respectively.
BACKLOG
Because the Company conducts its steel processing operations
generally on the basis of short-term orders, backlog is not a meaningful
indicator of future performance.
SEASONALITY
The Company typically experiences decreased revenue and
operating income during its first fiscal quarter of each year, usually resulting
from generally slower overall automobile production during the winter months.
The Company's revenues and operating income in its third fiscal quarter can also
be affected by the typically lower automobile production activities in July due
to manufacturers' changeover in production lines.
ENVIRONMENTAL MATTERS
The Company is subject to environmental laws and regulations
concerning emissions to the air, discharges to waterways, and generation,
handling, storage, transportation, treatment and disposal of waste materials,
and is also subject to other Federal and state laws and regulations regarding
health and safety matters. Each of the Company's production facilities has
permits and licenses allowing and regulating air emissions and water
discharges. While the Company believes that at the present time it is in
substantial compliance with environmental laws and regulations, these laws and
regulations are constantly evolving and it is impossible to predict whether
compliance with these laws and regulations may have a material adverse effect
on the Company in the future.
ITEM 2. PROPERTIES.
The Company is a Delaware holding corporation that conducts
its operations through eight manufacturing plants, six located in north central
Ohio and two located in Michigan. The Company believes substantially all of its
property and equipment is in good condition and that it has sufficient capacity
to meet its
-5-
<PAGE> 8
current operational needs. The Company considers full capacity of its steel
processing facilities to be three eight hour shifts for 5.5 days per week. At
October 31, 1996, the Company's steel processing operations were operating at
near full capacity. The Company's eight operating facilities, all of which are
owned (except for portions of its Canton, Michigan facility), are as follows:
<TABLE>
<CAPTION>
SQUARE DATE OF
LOCATION FOOTAGE OPERATION DESCRIPTION OF USE
-------- ------- --------- ------------------
<S> <C> <C> <C>
Mansfield Ohio................................. 274,245(1) 1955 Blanking/Tool and Die
Production
Valley City, Ohio.............................. 256,095(2) 1986 Blanking
Wellington, Ohio............................... 32,700 1946 Tool and Die Production
Wellington, Ohio............................... 210,915(3) 1987 Stamping
Valley City, Ohio.............................. 257,815 1977 Other Steel Processing
Valley City, Ohio.............................. 222,870 1990 Other Steel Processing
Romulus, Michigan(4)........................... 170,600 1996(5) Blanking
Canton, Michigan............................... 96,706 1996(6) Stamping/Tool and Die
Production
- -------------------
<FN>
(1) Includes a 58,963 square foot addition to this facility, which was
completed in October 1994 and houses the Company's automated blanking
press line.
(2) Includes a 56,630 square foot addition to this facility, which is
expected to be completed in February 1997.
(3) Includes a 98,095 square foot addition to this facility, which was
completed in September 1996.
(4) This facility is owned by Shiloh of Michigan, the Company's joint
venture with Rouge Steel. The Company is a 80% equity owner of Shiloh
of Michigan.
(5) The Shiloh of Michigan facility was completed in August 1996.
(6) The Company acquired these operating facilities in November 1996 in
connection with its acquisition of Greenfield.
</TABLE>
The facilities in Valley City, Ohio are in close proximity to
each other, facilitating greater integration of operations and management. In
addition, the Company's operating facilities at Canton, Michigan consist of six
separate facilities (five of which are leased) located within a five mile radius
of each other.
-6-
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various lawsuits arising in the
ordinary course of business. In management's opinion, the outcome of these
matters will not have a material adverse effect on the Company's financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
No matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of securityholders of the Company.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The information under this Item 4A is furnished pursuant to
Instruction 3 to Item 401(b) of Regulation S-K.
ROBERT L. GRISSINGER, CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER. Mr. Grissinger was appointed Chairman of the Board in October
1996. In addition, he was appointed Chief Executive Officer of the Company in
January 1995 and has been President and a Director of the Company since its
formation in April 1993. Mr. Grissinger has also served as the Executive Vice
President of Shiloh Corporation since 1989, and has been employed by Shiloh
Corporation since 1963 in various financial and operational capacities. Mr.
Grissinger is 58 years old.
DOMINICK C. FANELLO, VICE CHAIRMAN OF THE BOARD. Mr. Fanello has been
Vice Chairman of the Board since October 1996 and a Director of the Company
since its formation in April 1993. Mr. Fanello served as Chairman of the Board
of the Company from April 1993 to October 1996. In January 1995, Mr. Fanello
resigned his position as the Chief Executive Officer of the Company, a position
that he had previously held since April 1993. Mr. Fanello has also served as the
Chairman and Chief Executive Officer of Shiloh Corporation since 1954, and was
one of the founders of Shiloh Corporation and its predecessor. Mr. Fanello also
serves as a director of Park National Bank (Newark, Ohio), Richland Trust
Company and Rouge Steel Company. Mr. D. Fanello is 75 years old.
JAMES C. FANELLO, EXECUTIVE VICE PRESIDENT AND PRESIDENT OF STAMPING
AND BLANKING. Mr. Fanello has been the Executive Vice President and President of
Stamping and Blanking and a Director of the Company since its formation in April
1993. Mr. Fanello has been employed by Shiloh Corporation and its predecessor
since 1951 during which time he has held various positions, including President
and Executive Vice President. Mr. J. Fanello is 68 years old.
WILLIAM R. BURTON, SENIOR VICE PRESIDENT, CORPORATE PLANNING. Mr.
Burton joined the Company in October 1994 and served as President of Shafer
Valve until its sale in July 1996. Since January 1995, Mr. Burton has
served as Senior Vice President, Corporate Planning. From December 1990 through
September 1994, Mr. Burton was the President and General Manager of Hartman
Electrical Manufacturing, a division of Figgie International, Inc. that
manufacturers electrical components principally for use in commercial and
military aircraft. Mr. Burton is 58 years old.
G. RODGER LOESCH, EXECUTIVE VICE PRESIDENT OF MANUFACTURING AND SALES.
Mr. Loesch was appointed Executive Vice President of Manufacturing and Sales of
the Company in October 1996. Prior to October 1996, Mr. Loesch had been the
Chief Financial Officer of the Company since January 1995 and the Treasurer of
the Company since its formation in April 1993. Mr. Loesch has also served as the
Corporate Controller of Shiloh Corporation since 1986. Mr. Loesch is a Certified
Public Accountant. Prior to joining Shiloh Corporation, Mr. Loesch was employed
by Burroughs Corporation and Arthur Andersen & Co. Mr. Loesch is 42 years old.
-7-
<PAGE> 10
CRAIG A. STACY, CHIEF FINANCIAL OFFICER AND TREASURER. Mr. Stacy was
appointed Chief Financial Officer and Treasurer in October 1996. Mr. Stacy had
been the Corporate Controller of the Company since 1994. Prior to joining the
Company, Mr. Stacy was employed by Price Waterhouse LLP and Ernst & Young LLP.
Mr. Stacy is a Certified Public Accountant. Mr. Stacy is 30 years old.
DAVID K. FRINK, VICE PRESIDENT OF STEEL PROCESSING AND DIRECTOR OF
CORPORATE PURCHASING. Mr. Frink was named Vice President of Steel Processing and
Director of Corporate Purchasing in August 1996. Prior to August 1996, Mr. Frink
had been the plant general manager at Liverpool Coil Processing since June 1991.
Mr. Frink is 49 years old.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by Item 5 is set forth at page 23 of
the Annual Report, which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by Item 6 is set forth at page 18
and pages 29 through 39 of the Annual Report, which information is incorporated
herein by reference. In addition to such information incorporated herein by
reference, at October 31, 1994, 1993 and 1992, the total assets of the Company
were $155,733, $143,064 and $130,566, respectively, and the long-term debt of
the Company was $22,868, $26,914 and $62,791, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by Item 7 is set forth at pages 19
through 22 of the Annual Report, which information is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 is set forth at pages 23
through 39 of the Annual Report, which information is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information with respect to Directors of the Company is set
forth in the Proxy Statement on pages 1 through 4 under the heading "Election
of Directors," which information is incorporated herein by reference.
Information regarding the executive officers of the Company is included as Item
4A of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to
Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation
S-K is set forth in the Proxy Statement on page 7 under the heading "Section
16(a) Beneficial Ownership Reporting Compliance," which information is
incorporated herein by reference.
-8-
<PAGE> 11
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is set
forth in the Proxy Statement on pages 8 through 11 under the heading
"Compensation of Executive Officers" and on page 4 under the heading "Election
of Directors -- Compensation Committee Interlocks and Insider Participation and
Certain Relationships and Related Transactions," which information is
incorporated herein by reference (except for the Compensation Committee Report
on Executive Compensation and the Comparative Stock Performance Graph).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain
beneficial owners and management is set forth in the Proxy Statement on pages 5
and 6 under the heading "Beneficial Ownership of Common Stock," which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with respect to certain relationships and related
transactions is set forth in the Proxy Statement on page 4 under the heading
"Election of Directors -- Compensation Committee Interlocks and Insider
Participation and Certain Relationships and Related Transactions," which
information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Annual Report
on Form 10-K.
1. Financial Statements. The following consolidated financial
statements of the Company and its subsidiaries and the report
of independent accountants thereon, included in the Annual
Report on pages 23 through 39, are incorporated by reference
in Item 8:
Report of Independent Accountants
Consolidated Balance Sheet at October 31, 1996 and 1995.
Consolidated Statement of Income for the three years ended
October 31, 1996.
Consolidated Statement of Cash Flows for the three years ended
October 31, 1996.
Consolidated Statement of Stockholders' Equity for the three
years ended October 31, 1996.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules. The following consolidated
financial statement schedules of the Company and its
subsidiaries and the report of independent accountants thereon
are filed as part of this Annual Report on Form 10-K and
should be read in conjunction with the consolidated financial
statements of the Company and its subsidiaries included in the
Annual Report:
SCHEDULES
---------
Report of Independent Accountants on Financial Statement
Schedule
II. Valuation and Qualifying Accounts
-9-
<PAGE> 12
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated financial statements or notes thereto.
3. Exhibits:
2.1 Stock Purchase Agreement, dated May 22, 1996, by and
between the Company and Bettis Corporation is
incorporated herein by reference to Exhibit 2.1 of
the Company's Current Report on Form 8-K filed July
24, 1996 (Commission File No. 0-21964).
2.2 Asset Purchase Agreement, dated September 6, 1996,
among GDM Acquisition, Inc., Greenfield Die &
Manufacturing Corp. and 3-D Engineering, Inc. is
incorporated herein by reference to Exhibit 2.2 of
the Company's Current Report on Form 8-K filed July
24, 1996 (Commission File No. 0-21964).
3.1(i) Restated Certificate of Incorporation of the Company
is incorporated herein by reference to Exhibit 3.1(i)
of the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (Commission File
No. 0-21964).
(ii) By-Laws of the Company are incorporated herein by
reference to Exhibit 3.1(ii) of the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1995 (Commission File No. 0-21964).
4.1 Specimen certificate for the Common Stock, par value
$.01 per share, of the Company is incorporated herein
by reference to Exhibit 4.1 of the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1995 (Commission File No. 0-21964).
4.2 Stockholders Agreement, dated June 22, 1993, by and
among the Company, MTD Products Inc. and the
stockholders named therein is incorporated herein by
reference to Exhibit 4.2 of the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1995 (Commission File No. 0-21964).
4.3 Registration Rights Agreement, dated June 22, 1993,
by and among the Company, MTD Products Inc and the
stockholders named therein is incorporated herein by
reference to Exhibit 4.3 of the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1995 (Commission File No. 0-21964).
4.4 First Amendment to Stockholders Agreement, dated
March 11, 1994, by and among the Company, MTD
Products Inc and the stockholders named therein is
incorporated herein by reference to Exhibit 4.4 of
the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (Commission File
No. 0-21964).
10.1 Credit Agreement, effective as of April 16, 1996,
between the Company, the Banks listed on Annex A
thereto and Society National Bank, as Agent is
incorporated herein by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended April 30, 1996 (Commission File
No. 0-21964).
10.2 Credit Agreement, effective as of April 16, 1996,
between Shiloh of Michigan, L.L.C., the Banks listed
on Annex A thereto and Society National Bank, as
Agent is incorporated herein by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 30, 1996
(Commission File No. 0-21964).
-10-
<PAGE> 13
10.3 Guaranty of Payment, dated April 16, 1996, by the
Company in favor of the Banks named therein (with an
attached schedule identifying the other subsidiaries
of the Company that have entered into an identical
agreement) is incorporated herein by reference to
Exhibit 10.3 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 1996
(Commission File No. 0-21964).
10.4 Loan Agreement, dated February 1, 1995, by and
between Medina County, Ohio and Valley City Steel
Company is incorporated herein by reference to
Exhibit 10.4 of the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 30, 1996
(Commission File No. 0-21964).
10.5 Operating Agreement for Shiloh of Michigan, L.L.C.,
dated January 2, 1996, by and among Shiloh of
Michigan, L.L.C., Rouge Steel Company and the Company
is incorporated herein by reference to Exhibit 10.5
of the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended April 30, 1996 (Commission
File No. 0-21964).
10.6 Master Unsecured Demand Promissory Note of Shiloh
Corporation to The Richland Trust Company of
Mansfield, dated April 2, 1991, is incorporated
herein by reference to Exhibit 10.7 of the Company's
Annual Report on Form 10-K for the fiscal year ended
October 31, 1995 (Commission File No. 0-21964).
*10.7 1993 Key Employee Stock Incentive Plan is
incorporated herein by reference to Exhibit 10.8 of
the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995 (Commission File
No. 0-21964).
*10.8 Executive Incentive Bonus Plan is incorporated herein
by reference to Exhibit 10.9 of the Company's Annual
Report on Form 10-K for the fiscal year ended October
31, 1995 (Commission File No. 0-21964).
*10.9 Indemnification Agreement, dated July 2, 1993, by and
between the Company and Robert L. Grissinger (with an
attached schedule identifying the directors and
officers of the Company that have entered into an
identical agreement) is incorporated herein by
reference to Exhibit 10.10 of the Company's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1995 (Commission File No. 0-21964).
*10.10 Option Agreement, dated May 28, 1993, by and between
the Company and Robert L. Grissinger (with an
attached schedule identifying the other optionees
that have entered into option agreements with the
Company) is incorporated herein by reference to
Exhibit 10.15 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21964).
13.1 1996 Annual Report.
21.1 Subsidiaries of the Company.
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended October 31, 1996.
- -----------------
* Reflects management contract or other compensatory arrangement required
to be filed as an exhibit pursuant to Item 14(c) of this Report.
-11-
<PAGE> 14
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 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.
SHILOH INDUSTRIES, INC.
BY: /s/ ROBERT L. GRISSINGER
--------------------------------------
Robert L. Grissinger
Chairman, President and Chief Executive
Officer
DATE: JANUARY 25, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Vice Chairman and Director January 25, 1997
- ---------------------------------------
DOMINICK C. FANELLO
/s/ Robert L. Grissinger Chairman, President and Chief Executive Officer January 25, 1997
- --------------------------------------- and Director (Principal Executive Officer)
ROBERT L. GRISSINGER
* Treasurer and Chief Financial Officer January 25, 1997
- --------------------------------------- (Principal Accounting and Principal
CRAIG A. STACY Financial Officer)
* Director January 25, 1997
- ---------------------------------------
JAMES C. FANELLO
* Director January 25, 1997
- ---------------------------------------
CURTIS E. MOLL
* Director January 25, 1997
- ---------------------------------------
DIETER KAESGEN
* Director January 25, 1997
- ---------------------------------------
DAVID J. HESSLER
* Director January 25, 1997
- ---------------------------------------
RICHARD S. GRAY
* Director January 25, 1997
- ---------------------------------------
JAMES A. KARMAN
* Director January 25, 1997
- ---------------------------------------
THEODORE K. ZAMPETIS
<FN>
* The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K pursuant to the Powers of Attorney executed by the
above-named officers and Directors of the Company and filed with the
Securities and Exchange Commission on behalf of such officers and Directors.
</TABLE>
By: /s/ Robert L. Grissinger
---------------------------------------
ROBERT L. GRISSINGER, ATTORNEY-IN-FACT
-12-
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Exhibit Description
- ----------- -------------------
2.1 Stock Purchase Agreement, dated May 22, 1996, by and
between the Company and Bettis Corporation is incorporated
herein by reference to Exhibit 2.1 of the Company's Current
Report on Form 8-K filed July 24, 1996 (Commission File No.
0-21964).
2.2 Asset Purchase Agreement, dated September 6, 1996, among
GDM Acquisition, Inc., Greenfield Die & Manufacturing Corp.
and 3-D Engineering, Inc. is incorporated herein by
reference to Exhibit 2.2 of the Company's Current Report on
Form 8-K filed July 24, 1996 (Commission File No. 0-21964).
3.1(i) Restated Certificate of Incorporation of the Company is
incorporated herein by reference to Exhibit 3.1(i) of the
Company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1995 (Commission File No. 0-21964).
3.1(ii) By-Laws of the Company are incorporated herein by reference
to Exhibit 3.1(ii) of the Company's Annual Report on Form
10-K for the fiscal year ended October 31, 1995 (Commission
File No. 0-21964).
4.1 Specimen certificate for the Common Stock, par value $.01
per share, of the Company is incorporated herein by
reference to Exhibit 4.1 of the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1995
(Commission File No. 0-21964).
4.2 Stockholders Agreement, dated June 22, 1993, by and among
the Company, MTD Products Inc. and the stockholders named
therein is incorporated herein by reference to Exhibit 4.2
of the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1995 (Commission File No. 0-21964).
4.3 Registration Rights Agreement, dated June 22, 1993, by and
among the Company, MTD Products Inc and the stockholders
named therein is incorporated herein by reference to
Exhibit 4.3 of the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1994 (Commission File No.
0-21964).
4.4 First Amendment to Stockholders Agreement, dated March 11,
1994, by and among the Company, MTD Products Inc and the
stockholders named therein is incorporated herein by
reference to Exhibit 4.4 of the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1995
(Commission File No. 0-21964).
10.1 Credit Agreement, effective as of April 16, 1996, between
the Company, the Banks listed on Annex A thereto and
Society National Bank, as Agent is incorporated herein by
reference to Exhibit 10.1 of the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended April 30, 1996
(Commission File No. 0-21964).
X-1
<PAGE> 16
Exhibit No. Exhibit Description
- ----------- -------------------
10.2 Credit Agreement, effective as of April 16, 1996, between
Shiloh of Michigan, L.L.C., the Banks listed on Annex A
thereto and Society National Bank, as Agent is incorporated
herein by reference to Exhibit 10.2 of the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1996 (Commission File No. 0-21964).
10.3 Guaranty of Payment, dated April 16, 1996, by the Company
in favor of the Banks named therein (with an attached
schedule identifying the other subsidiaries of the Company
that have entered into an identical agreement) is
incorporated herein by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1996 (Commission File No. 0-21964).
10.4 Loan Agreement, dated February 1, 1995, by and between
Medina County, Ohio and Valley City Steel Company is
incorporated herein by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1996 (Commission File No.
0-21964).
10.5 Operating Agreement for Shiloh of Michigan, L.L.C., dated
January 2, 1996, by and among Shiloh of Michigan, L.L.C.,
Rouge Steel Company and the Company is incorporated herein
by reference to Exhibit 10.5 of the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended April 30,
1996 (Commission File No. 0-21964).
10.6 Master Unsecured Demand Promissory Note of Shiloh
Corporation to The Richland Trust Company of Mansfield,
dated April 2, 1991, is incorporated herein by reference to
Exhibit 10.7 of the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1995 (Commission File
No. 0-21964).
10.7 1993 Key Employee Stock Incentive Plan is incorporated
herein by reference to Exhibit 10.8 of the Company's Annual
Report on Form 10-K for the fiscal year ended October 31,
1995 (Commission File No. 0-21964).
10.8 Executive Incentive Bonus Plan is incorporated herein by
reference to Exhibit 10.9 of the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 1995
(Commission File No. 0-21964).
10.9 Indemnification Agreement, dated July 2, 1993, by and
between the Company and Robert L. Grissinger (with an
attached schedule identifying the directors and officers of
the Company that have entered into an identical agreement)
is incorporated herein by reference to Exhibit 10.10 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (Commission File No. 0-21964).
10.10 Option Agreement, dated May 28, 1993, by and between the
Company and Robert L. Grissinger (with an attached schedule
identifying the other optionees that have entered into
option agreements with the Company) is incorporated herein
by reference to Exhibit 10.15 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission File No. 0-21964).
X-2
<PAGE> 17
Exhibit No. Exhibit Description
- ----------- -------------------
13.1 1996 Annual Report.
21.1 Subsidiaries of the Company.
24.1 Powers of Attorney.
27.1 Financial Schedule.
X-3
<PAGE> 18
Schedule II
SHILOH INDUSTRIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end of
of period expenses Deductions period
--------- -------- ---------- ------
Description
- -----------
<S> <C> <C> <C> <C>
Valuation account for accounts
receivable
Year ended October 31, 1996 $1,105,068 $ 34,600 $226,598 $ 913,070
Year ended October 31, 1995 829,344 322,064 46,340 1,105,068
Year ended October 31, 1994 549,200 587,853 307,709 829,344
Reserve for excess, slow moving
and potentially obsolete
material
Year ended October 31, 1996 $482,368 $ 82,181 $482,368 $ 82,181
Year ended October 31, 1995 505,000 426,340 448,972 482,368
Year ended October 31, 1994 26,000 505,000 26,000 505,000
Valuation allowance for deferred
tax assets (a)
Year ended October 31, 1996 $ 92,941 $5,046,335 $ 92,941 $5,046,335
Year ended October 31, 1995 94,972 _____ 2,031 92,941
Year ended October 31, 1994 _____ 94,972 _____ 94,972
</TABLE>
<PAGE> 1
Exhibit 13.1
The following table sets forth selected consolidated financial data of the
Company. The data for each of the five years in the period ended October 31,
1996, are derived from the consolidated financial statements of the Company,
which have been audited by Price Waterhouse LLP, independent accountants. The
data presented below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the Financial
Statements and the notes thereto included elsewhere in this annual report.
<TABLE>
<CAPTION>
(amounts in thousands, except per share data) Years Ended October 31,
-----------------------------------------------------
INCOME STATEMENT DATA: 1996 1995 1994 1993 1992
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 219,466 $ 212,348 $ 194,766 $ 162,526 $132,661
Cost of sales 173,836 173,734 164,013 134,607 106,726
-----------------------------------------------------
Gross profit 45,630 38,614 30,753 27,919 25,935
Selling, general and administrative expenses 17,086 14,341 13,962 12,324 13,314
-----------------------------------------------------
Operating income 28,544 24,273 16,791 15,595 12,621
Interest expense, net 111 402 836 1,377 1,820
Minority interest 123 -- -- (6) (57)
Other income (expense), net (81) 64 (82) 182 133
-----------------------------------------------------
Income from continuing operates before taxes and effect of
change in accounting principle 28,475 23,935 15,873 14,394 10,877
Provision for income taxes 10,952 9,471 6,491 5,958 4,523
-----------------------------------------------------
Income from continuing operations before effect of
change in accounting principle 17,523 14,464 9,382 8,436 6,354
Loss from discontinued operations, net of income taxes (256) (289) (613) 427 636
Loss of sale of discontinued operations, net of income taxes (9,589) -- -- -- --
Effect of change in accounting principle -- -- (281) -- --
-----------------------------------------------------
Net income $ 7,678 $ 14,175 $ 8,488 $ 8,863 $ 6,990
=====================================================
ACTUAL
Income from continuing operations before effect of
change in accounting principle per share $ 1.35 $ 1.11 $ 0.72
Loss from discontinued operations, net of income taxes per share (0.02) (0.02) (0.05)
Loss on sale of discontinued operations, net of income taxes per share (0.74) -- --
Effect of change in accounting principle per share -- -- (0.02)
-------------------------------
Net income per share $ 0.59 $ 1.09 $ 0.65
===============================
Weighted average number of common shares 13,011 13,003 12,968
PRO FORMA: (1)
Income from continuing operations before effect of
change in accounting principle per share (1) $ 0.82 $ 0.69
Income from discontinued operations, net of income taxes per share (1) 0.04 0.07
-------------------
Net income per share (1) $ 0.86 $ 0.76
===================
Weighted average number of common shares: 10,351 9,167
OTHER DATA:
(excludes Shafer Valve)
Capital expenditures $ 37,482 $ 25,519 $ 12,815 $ 12,803 $ 15,504
Depreciation and amortization 7,166 6,467 6,063 5,125 4,440
BALANCE SHEET DATA:
Working capital $ 34,813 $ 36,405
Total assets 207,009 173,264
Total debt 52,933 23,306
Stockholders' equity 126,157 118,479
<FN>
(1) Periods prior to the reorganization are computed based upon the number of
shares outstanding immediately subsequent to the Company's initial public
offering in July 1993.
</TABLE>
18
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHILOH INDUSTRIES, INC.
GENERAL
In 1995, the Company prepared a long-term, business plan which included a
strategic decision to concentrate on the core steel processing segment. As a
result, the Company sought inquiries from prospective bidders for the sale of
its subsidiary, Shafer Valve Company ("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.
Subsequent to the November 1, 1996 purchase of Greenfield Die &
Manufacturing Company ("GDM"), the Company operates through eight 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
("Shiloh of Michigan"), and GDM.
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.
The Company provides a full range of intermediate steel processing services
through two product lines: blanking and stamping; and other steel processing
services, which include pickling hot rolled steel and slitting, edge trimming,
roller leveling and cutting to length hot and cold rolled steel. The following
table sets forth, for the periods indicated, revenues by product line. Revenues
from intercompany sales have been allocated to the product line providing the
product or service.
<TABLE>
<CAPTION>
Years Ended October 31
--------------------------------------------------------------------------
(dollars in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
AMOUNT % Amount % Amount %
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Blanking and Stamping $153,270 69.8 % $151,282 71.2 % $133,373 68.5 %
Other Steel Processing 66,196 30.2 % 61,066 28.8 % 61,393 31.5 %
--------------------------------------------------------------------------
Total $219,466 100.0 % $212,348 100.0 % $194,766 100.0 %
==========================================================================
</TABLE>
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 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. The Company estimates that during
the past three years approximately 86% 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. As a result, the proportion of toll processing revenues to total steel
processing revenues decreases as total revenues increase, provided the mix
between toll processing and directly owned steel processing remains relatively
constant. By product line, 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.
19
<PAGE> 3
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, income statement
data of the Company expressed as a percentage of revenues:
<TABLE>
<CAPTION>
Years Ended October 31,
- --------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of sales 79.2 81.8 84.2
- --------------------------------------------------------------------------------------
Gross profit 20.8 18.2 15.8
Selling, general and administrative expenses 7.8 6.8 7.2
- --------------------------------------------------------------------------------------
Operating income from continuing operations 13.0 11.4 8.6
Interest expense, net -- .2 .4
Minority interest -- -- --
- --------------------------------------------------------------------------------------
Income from continuing operations
before taxes and effect of change in
accounting principle 13.0 11.2 8.2
Provision for income taxes 5.0 4.4 3.3
- --------------------------------------------------------------------------------------
Income from continuing operations
before effect of change in
accounting principle 8.0 6.8 4.9
Loss from discontinued operations, net
of income taxes .1 .1 .3
Loss on sale of discontinued
operations, net of tax 4.4 -- --
Effect of change in accounting principle -- -- (.2)
- --------------------------------------------------------------------------------------
Net income 3.5% 6.7% 4.4%
======================================================================================
</TABLE>
YEAR ENDED
OCTOBER 31, 1996
COMPARED TO
YEAR ENDED
OCTOBER 31, 1995
REVENUES. Revenues increased by $7.1 million, or 3.4%, to $219.5 million
for the year ended October 31, 1996 from $212.4 million for the comparable
period in 1995. The increase in revenues primarily reflects improvements in the
Company's steel processing product line. The percentage of toll processing sales
as a percentage of total sales increased to 28.8% in 1996 from 26.3% in 1995.
Revenues from the blanking and stamping product line for 1996 increased
approximately 1.3% from the comparable period of 1995, while revenues from the
other steel processing product line increased approximately 8.4%.
GROSS PROFIT. Gross profit increased $7.0 million, or 18.2%, to $45.6
million for 1996 from $38.6 million for the comparable period in 1995. Gross
margin increased to 20.8% for 1996 from 18.2% for the comparable period in 1995.
The increase in gross margin is principally due to management's continued
efforts to contain costs and recover historical steel price increases through
higher sale prices to its customers. Continued improvements in gross margin will
be more difficult to achieve as the impact of these price increases lessens. In
addition, the increase in toll processing sales as a percentage of total sales
contributed to gross margin improvement.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $2.8 million, or 19.6%, to $17.1 million
for 1996 from $14.3 million for the comparable period in the prior year. As a
percentage of revenues, these expenses increased to 7.8% for 1996 from 6.8% for
the comparable period in 1995. The increase is primarily due to the expansion of
the corporate sales staff and to pre-operating costs with respect to Shiloh of
Michigan.
20
<PAGE> 4
OTHER. Interest expense, net decreased to $110,540 in 1996 from $402,449 in
the prior year due primarily to capitalization of interest related to expansion
of several facilities. The provision for income taxes was $11.0 million in 1996
compared with $9.5 million in 1995, representing effective tax rates of 38.5%
and 39.6%. The reduction in the effective tax rate is primarily due to state tax
credits.
DISCONTINUED OPERATIONS. On July 9, 1996, the Company sold the stock of
Shafer Valve and accordingly has accounted for this operation as a discontinued
operation. Prior years' statements of income and cash flows have been restated
to reflect the discontinuation of the valve actuator segment.
YEAR ENDED OCTOBER 31, 1995 COMPARED TO YEAR ENDED OCTOBER 31, 1994
REVENUES. Revenues increased by $17.6 million, or 9.0%, to $212.4 million
for the year ended October 31, 1995 from $194.8 million for 1994. The increase
in revenues primarily reflects improvements in the Company's blanking and
stamping product line. Revenues from blanking and stamping increased 13.4% while
revenues from other steel processing decreased by 0.5% in 1995 compared with
1994. The percentage of total steel processing revenues from directly owned
steel processed decreased from 75.6% to 73.7%.
GROSS PROFIT. Gross profit increased $7.9 million, or 25.6%, to $38.6
million for 1995 from $30.8 million for the comparable period in 1994. Gross
margin increased to 18.2% in 1995 from 15.8% in 1994. The increase in gross
margin is primarily a result of management's continued efforts to contain costs
and recover historical steel price increases through higher sale prices to its
customers. In addition, the increase in toll processing sales as a percentage
of total sales contributed to gross margin improvement as did the shift in mix
to blanking and stamping from other steel processing. The percentage of total
steel processing revenues from toll processing increased to 26.3% in 1995 from
24.4% in 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $0.4 million, or 2.9% to $14.3 million in
1995 from $14.0 million in 1994. As a percentage of revenues, these expenses
declined to 6.8% in 1995 from 7.2% in 1994. The decrease is attributable to
successful cost containment measures implemented beginning the second quarter of
1994.
OTHER. Interest expense, net decreased to $402,449 in 1995 from $836,141 in
the prior year due primarily to capitalization of interest related to expansion
of several facilities. The provision for income taxes was $9.5 million in 1995
compared with $6.5 million in 1994, representing effective tax rates of 39.6%
and 40.9%, respectively.
LIQUIDITY
AND CAPITAL RESOURCES
At October 31, 1996, the Company had $34.8 million of working capital,
representing a current ratio of 2.5 to 1 and long-term debt of 40.0% of total
equity. As a result of this strong financial condition, the Company will be able
to continue its planned investment in new equipment and facilities through the
next fiscal year.
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 for 1996 was $16.6
million as compared to $25.5 million for the comparable period in 1995.
Fluctuations in working capital, including the working capital of discontinued
operations, were the primary factors causing the decrease in net cash provided
by operations from 1995 to 1996. The provision for loss on sale of the
discontinued operations had no effect on cash flow during the period. Net cash
provided by operating activities has historically been used by the Company to
fund a portion of its capital expenditures.
Capital expenditures were $37.5 million during the year ended October 31,
1996 and $25.5 million for the comparable period in 1995. The capital
expenditures made during 1996 were primarily for the construction of a blanking
facility in Romulus, Michigan, a joint venture with Rouge Steel, as well as a
$15 million expansion of stamping operations at the Company's Sectional Stamping
facility in Wellington, Ohio. The Company's total capital budget for 1997
amounts to approximately $60 million. The increased level of capital
expenditures is due to the planned construction of an $8.0 million tool and die
facility in Wellington, Ohio, as well as $25.6 million in expansions of current
blanking and stamping facilities. These additions are being made to support
increased business and anticipated new business and to enhance productivity. The
Company anticipates financing these expansions through traditional bank
financing.
21
<PAGE> 5
On November 1, 1996, the Company completed the acquisition of GDM for
approximately $22 million. This acquisition was financed with funds obtained
through Shiloh's credit facilities.
Prior to April 16, 1996, the Company had a $23 million unsecured revolving
credit facility with Society National Bank (now known as KeyBank National
Association)("KeyBank"). In conjunction with the negotiation of the new credit
facility described below, this line was terminated. On April 16, 1996, the
Company signed an agreement with KeyBank for a new revolving credit facility
("Shiloh Facility") not to exceed $30 million. The term of the Shiloh Facility
extends to February 28, 2000 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 Shiloh
Facility. In addition, the Company is acting as an 80% guarantor for a $23
million revolving credit facility entered into by Shiloh of Michigan ("SOM
Facility"). The Company is required to maintain certain customary operating and
financial covenants during the terms of the Shiloh Facility and the SOM
Facility. The Company is in compliance with all of its loan covenants, and none
of these covenants would preclude the Company from completing currently planned
capital expenditures.
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. Aggregate total availability under
the Shiloh Facility and the SOM Facility is $56.0 million, $11.0 million of
which was unused at October 31, 1996. The $13.2 million proceeds from the sale
of Shafer Valve was used primarily to reduce debt.
In March 1995, Medina County, Ohio issued on 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
Company had withdrawn the entire $5.4 million as of October 31, 1996.
OUTLOOK
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 limitations, (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 and internal
expansion and (iii) 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 reflect management's analysis only as of the date of the filing of
this Report. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof. In addition to the disclosure contained herein, readers should
carefully review risks and uncertainties contained in other documents the
Company files from time to time with the Securities and Exchange Commission.
EFFECT OF
INFLATION
Inflation generally affects the Company by increasing the interest expense
of floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. Although the general level of inflation has not had a material
effect on the Company's financial results, the Company's difficulties in passing
through steel price increases adversely affected its operating results in fiscal
1994.
22
<PAGE> 6
MARKET FOR
COMPANY'S
COMMON
EQUITY AND
RELATED
STOCKHOLDERS'
MATTERS
As of the close of business on January 17, 1997, there were 175
stockholders of record for the Company's Common Stock. The Company has not
declared or paid any cash dividends on shares of its equity securities,
including Common Stock, since its incorporation in April 1993. The Company
currently intends to retain earnings to support its growth strategy and does not
anticipate paying dividends in the foreseeable future. The Common Stock is
traded on the Nasdaq National Market under the symbol "SHLO."
STOCK HIGH LOW
The Company's Common Stock commenced trading on June 29, 1993. The table
below sets forth the high and low closing prices for the Company's Common Stock
for its four quarters in 1995 and 1996.
<TABLE>
<CAPTION>
High Low
- -----------------------------------------------
<S> <C> <C>
1st Quarter
January 31, 1995 $ 9.25 $ 7.00
2nd Quarter
April 30, 1995 $ 9.88 $ 8.25
3rd Quarter
July 31, 1995 $11.13 $ 7.63
4th Quarter
October 31, 1995 $12.38 $10.25
1st Quarter
January 31, 1996 $13.00 $10.63
2nd Quarter
April 30, 1996 $14.38 $12.00
3rd Quarter
July 31, 1996 $17.75 $13.00
4th Quarter
October 31, 1996 $18.00 $12.75
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Shiloh Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of stockholders' equity,
present fairly, in all material respects, the financial position of Shiloh
Industries, Inc. and its subsidiaries at October 31, 1996 and 1995 and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
management of Shiloh Industries, Inc.; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 10 and 12 to the consolidated financial statements,
the Company changed its method of accounting for postretirement benefits other
than pensions and for income taxes in 1994.
/s/ Price Waterhouse LLP
Cleveland, Ohio
December 10, 1996
23
<PAGE> 7
CONSOLIDATED BALANCE SHEET
Shiloh Industries, Inc.
<TABLE>
<CAPTION>
October 31,
- -------------------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,721,152 $ 2,391,645
Accounts receivable 33,115,765 31,908,590
Inventory 18,626,492 21,047,110
Deferred income taxes 1,034,092 2,860,311
Prepaid expenses 3,573,160 2,469,767
- -------------------------------------------------------------------------------
Total current assets 58,070,661 60,677,423
- -------------------------------------------------------------------------------
Property, plant and equipment, net 122,293,375 97,952,032
Goodwill 615,318 11,295,553
Other long-term assets 26,029,671 3,338,583
- -------------------------------------------------------------------------------
Total assets $207,009,025 $173,263,591
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,719,528 $ 8,559,699
Current portion of long-term debt -- 2,350,000
Short-term note payable 2,500,000 --
Accrued income taxes 1,412,499 2,927,251
Other accrued expenses 9,625,343 10,435,319
- -------------------------------------------------------------------------------
Total current liabilities 23,257,370 24,272,269
- -------------------------------------------------------------------------------
Long-term debt 50,433,352 20,956,042
Deferred income taxes 7,161,027 9,494,277
Long-term person liability -- 61,827
- -------------------------------------------------------------------------------
Total liabilities 80,851,749 54,784,415
- -------------------------------------------------------------------------------
Stockholders' equity
Common stock, par value $.01 per share;
25,000,000 shares authorized;
13,011,663 shares issued and outstanding
at October 31, 1996 and 1995 130,116 130,116
Preferred stock, $.01 per share; 5,000,000
shares authorized and unissued -- --
Paid-in capital 38,375,152 38,375,152
Retained earnings 87,652,008 79,973,908
- -------------------------------------------------------------------------------
Total stockholders' equity 126,157,276 118,479,176
- -------------------------------------------------------------------------------
Commitments and contingent liabilities -- --
Total liabilities and stockholders'
equity $207,009,025 $173,263,591
===============================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
24
<PAGE> 8
CONSOLIDATED STATEMENT OF INCOME
Shiloh Industries, Inc.
<TABLE>
<CAPTION>
Year Ended October 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 219,465,925 $ 212,347,916 $ 194,765,771
Cost of sales 173,835,459 173,734,108 164,012,691
- ----------------------------------------------------------------------------------------------------------------------------------
Gross Profit 45,630,466 38,613,808 30,753,080
Selling, general and administrative expenses 17,086,152 14,340,652 13,961,812
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 28,544,314 24,273,156 16,791,268
Interest expense, net 110,540 402,449 836,141
Minority interest 123,162 -- --
Other income (expense), net (81,215) 64,019 (82,254)
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before taxes and effect of change in
accounting principle 28,475,721 23,934,726 15,872,873
Provision for income taxes 10,952,269 9,470,855 6,490,598
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before effect of change in accounting principle 17,523,452 14,463,871 9,382,275
Loss from discontinued operations, net of income taxes (256,139) (288,469) (613,453)
Loss on sale of discontinued operations, net of income taxes (9,589,213) -- --
Effect of change in accounting principle -- -- (280,943)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income $ 7,678,100 $ 14,175,402 $ 8,487,879
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings per share:
Income from continuing operations before effect of change in
accounting principle $ 1.35 $ 1.11 $ .72
Loss from discontinued operations (.02) (.02) (.05)
Loss on sale of discontinued operations (.74) -- --
Effect of change in accounting principle -- -- (.02)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income per share $ 0.59 $ 1.09 $ .65
==================================================================================================================================
Weighted average number of common shares 13,011,663 13,002,616 12,968,210
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
25
<PAGE> 9
CONSOLIDATED STATEMENT OF CASH FLOWS
Shiloh Industries, Inc.
<TABLE>
<CAPTION>
Years Ended October 31,
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 7,678,100 $ 14,175,402 $ 8,487,879
Adjustments to reconcile net income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 7,165,910 6,466,668 6,062,570
Discontinued operations 9,845,352 288,469 613,453
Minority interest (103,162) -- --
Deferred income taxes 1,290,012 683,979 215,691
Deferred pension -- 61,827 (746,750)
Loss (gain) on sale of assets -- 40,831 301,321
Effect of accounting change -- -- 280,943
Changes in operating assets and liabilities:
Accounts receivable (3,412,343) (1,757,362) 1,559,378
Inventories (2,527,297) 2,639,569 (5,994,768)
Prepaids and other assets (1,415,075) 1,690,578 (2,421,798)
Payables and accruals 3,492,744 1,060,896 2,373,245
Accrued income taxes (1,226,016) 1,270,429 2,781,325
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 20,788,225 26,621,286 13,512,489
Discontinued operations - non cash and working capital changes (4,225,697) (1,165,511) 1,418,686
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,562,528 25,455,775 14,931,175
- --------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Capital expenditures (37,482,394) (25,519,357) (12,814,959)
Proceeds from sale of assets 13,200,000 297,580 108,416
Deposit for acquisition of business (22,577,937) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (46,860,331) (25,221,777) (12,706,543)
- --------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 16,500,000 11,800,000 7,800,000
Repayments of short-term borrowings (14,000,000) (11,800,000) (19,000,000)
Proceeds from long-term borrowings 65,102,310 5,331,042 12,500,000
Repayments of long-term borrowings (37,975,000) (4,892,836) (5,346,558)
Issuance of common stock -- 194,696 368,362
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 29,627,310 632,902 (3,678,196)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (670,493) 866,900 (1,453,564)
Cash and cash equivalents at beginning of period 2,391,645 1,524,745 2,978,309
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,721,152 $ 2,391,645 $ 1,524,745
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
26
<PAGE> 10
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Shiloh Industries, Inc.
<CAPTION>
Common
Stock Additional
($.01 Par Paid-in Retained
Value) Capital Earnings Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 31, 1993 $129,492 $37,812,718 $57,310,627 $ 95,252,837
Issuance of 39,680 common shares 397 367,965 -- 368,362
Net Income -- -- 8,487,879 8,487,879
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1994 129,889 38,180,683 65,798,506 104,109,078
Issuance of 22,813 common shares 227 194,469 -- 194,696
Net Income -- -- 14,175,402 14,175,402
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1995 130,116 38,375,152 79,973,908 118,479,176
Net Income -- -- 7,678,100 7,678,100
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1996 $130,116 $38,375,152 $87,652,008 $126,157,276
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shiloh Industries, Inc.
NOTE 1
BUSINESS
The Company is a vertically integrated steel
processor that supplies high quality blanks, stampings and processed
steel to the automotive and other industries.
NOTE 2
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all wholly-owned and majority-owned subsidiaries. All significant
intercompany transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue upon product shipment. Revenues include both
direct sales as well as toll processing revenue. Toll processing revenue is
generated when the Company processes customer owned material. Revenues include
$63,171,827, $55,848,345 and $47,439,862 of toll processing revenue for 1996,
1995 and 1994, respectively.
EMPLOYEE BENEFIT PLANS
The Company accrues the cost of defined benefit pension plans which cover a
majority of the Company's employees in accordance with Statement of Financial
Accounting Standards No. 87 ("SFAS 87"). The plans are funded based on the
requirements and limitations of the Employee Retirement Income Security Act of
1974. Substantially all employees of the Company participate in discretionary
profit sharing plans administered by the Company. The Company also provides
postretirement benefits to certain employees (Note 10).
GOODWILL
The total cost of the Shafer Valve acquisition in May 1992 was $26,489,971,
excluding acquired cash of $7,483,092, which exceeded the fair value of net
assets by $12,066,500. The excess was amortized on a straight-line basis over 30
years. Accumulated amortization was $1,407,029 at October 31, 1995.
During June 1993, the Company acquired the minority interest of the
Sectional Die Company for $1,939,856. Such amount exceeded the minority interest
in the underlying net assets by $847,752 and this excess was allocated to assets
and liabilities utilizing purchase accounting. Of this amount $693,320 was
allocated to goodwill which is being amortized on a straight line basis over 30
years. During 1996, 1995 and 1994, goodwill amortization amounted to $20,763,
$23,113 and $25,595, respectively. Accumulated amortization was $78,001 and
$57,238 at October 31, 1996 and 1995, respectively.
The Company uses an undiscounted cash flow method to periodically review
the net realizable value of goodwill and other long-term assets.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include checking accounts and all highly liquid
investments with an original maturity of three months or less.
INVENTORIES
Inventories are valued at the lower of cost or market, cost being
determined primarily by the last-in, first-out ("LIFO") method and the balance
determined by the first-in, first-out ("FIFO") method, which approximates
average cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Expenditures for
maintenance, repairs and renewals are charged to expense as incurred, whereas
major improvements are capitalized. The cost of these improvements is
depreciated over their estimated useful lives. Useful lives range from five to
twelve years for furniture and fixtures and machinery and equipment, fifteen to
twenty years for land improvements and thirty to forty years for buildings and
their related improvements. Depreciation is computed using principally the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes.
INCOME TAXES
The Company utilizes the asset and liability method in accounting for
income taxes which requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of temporary differences between
the carrying amount and tax basis of assets and liabilities.
28
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shiloh Industries, Inc.
NOTE 2
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES --
CONTINUED
CONCENTRATION OF CREDIT RISK
The Company sells products to customers primarily in the automotive and
heavy truck industries. The Company performs on-going credit evaluations of its
customers and generally does not require security when extending credit. The
Company maintains a reserve for potential credit losses. Such losses have
historically been within management's expectations. Currently, the Company does
not have financial instruments with off-balance sheet risk.
FAIR VALUE OF
FINANCIAL INSTRUMENTS
The carrying amount of cash and investments, trade receivables and payables
approximates fair value because of the short maturity of those instruments. The
carrying value of the Company's long-term debt is considered to approximate the
fair value of these instruments based on the borrowing rates currently available
to the Company for loans with similar terms and maturities.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNINGS PER SHARE
Earnings per share is computed by dividing the net income by the weighted
average number of common shares outstanding.
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.
NOTE 3
DISCONTINUED
OPERATIONS
On July 9, 1996, the Company completed the sale of substantially all of the
issued and outstanding common stock of Shafer Valve for $13,200,000 in cash. The
disposition of this segment resulted in a $9,589,213 loss after tax and has been
accounted for as a discontinued operation. Accordingly, prior years' statements
of income and cash flows have been restated to reflect the discontinuation of
the valve actuator segment.
Summary operating data of the discontinued operation for the period ending
July 9, 1996, and fiscal years 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $10,931,052 $16,461,916 $15,252,804
Gross profit 2,395,279 4,235,599 4,281,962
Loss before income
taxes (756,391) (309,034) (883,488)
Income tax benefit 244,238 20,565 270,035
- --------------------------------------------------------------------------------
Net loss from
discontinued
operations (512,153) (288,469) (613,453)
================================================================================
</TABLE>
29
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shiloh Industries, Inc.
NOTE 4
ACCOUNTS
RECEIVABLE
Accounts receivable in the consolidated balance sheet are expected to be
collected within one year and are net of provisions for doubtful accounts, in
the amount of $913,070 and $1,105,068, at October 31, 1996 and 1995,
respectively.
NOTE 5
INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
October 31,
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Raw materials $11,557,662 $14,521,604
Work-in-process 2,797,698 3,400,070
Finished goods 5,475,054 4,760,141
- ----------------------------------------------------------------------
Total at average cost 19,830,414 22,681,815
LIFO reserve (1,203,922) (1,634,705)
- ----------------------------------------------------------------------
Total $18,626,492 $21,047,110
======================================================================
</TABLE>
Average cost inventory is net of reserves to reduce certain inventory from
cost to net realizable value. Such reserves aggregated $82,181 and $482,368 at
October 31, 1996 and 1995, respectively. Of the total inventory at average cost
at October 31, 1996 and 1995, $17,741,751 and $15,472,642, respectively, were
valued using the LIFO method.
During 1995, the Company reduced certain inventory quantities which were
valued at lower LIFO costs prevailing in prior years. The effect of this
reduction was to decrease cost of goods sold by approximately $246,800 and to
increase net income by approximately $148,080 or $.01 per share.
NOTE 6
OTHER
ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
October 31,
- -------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Cash surrender value of life
insurance $ 2,990,140 $2,975,615
Long-term pension asset -- 61,827
Other 461,594 301,141
Deposit for acquisition (Note 16) 22,577,937 --
- -------------------------------------------------------------------
Total $26,029,671 $3,338,583
===================================================================
</TABLE>
30
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shiloh Industries, Inc.
NOTE 7
PROPERTY,
PLANT AND
EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
October 31,
1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Land $ 3,584,572 $ 3,199,675
Buildings and improvements 48,916,332 40,172,317
Machinery and equipment 87,121,959 77,314,621
Furniture and fixtures 4,810,494 5,836,662
Construction in progress 30,787,858 24,048,847
- --------------------------------------------------------------------
Total, at cost 175,221,215 150,572,122
Less: Accumulated depreciation (52,927,840) (52,620,090)
- --------------------------------------------------------------------
Net property, plant and
equipment $122,293,375 $ 97,952,032
====================================================================
</TABLE>
Depreciation expense was $7,145,146, $6,443,556 and $6,036,975 for 1996,
1995 and 1994, respectively.
During the three years ended October 31, 1996, interest costs of $650,629,
$445,648, and $37,210 were capitalized as part of property, plant and equipment
respectively.
The Company had commitments for capital expenditures of approximately $19.2
million at October 31, 1996.
NOTE 8
FINANCING
ARRANGEMENTS
Short-term debt consists of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
October 31,
1996 1995
- --------------------------------------------------------------------
<S> <C> <C>
Revolving credit loan -- interest
at 5.90% at October 31, 1996 $2,500,000 $ --
- --------------------------------------------------------------------
Total $2,500,000 $ --
=====================================================================
</TABLE>
31
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 8
FINANCING
ARRANGEMENTS
-- CONTINUED
Long-term debt consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
October 31,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit loan -- interest at
6.03% at October 31, 1996 $26,500,000 $13,500,000
Revolving credit loan -- interest at
5.90% at October 31, 1996 18,500,000 --
Term loan -- due in twenty quarterly
installments of $300,000 plus
interest which is fixed at 8.78% -- 600,000
Term loan -- due in quarterly
installments of $437,500 plus
interest which is fixed at 7.10% -- 7,875,000
Variable rate industrial development
bond, secured by letter of credit,
weighted average interest rate at
3.80% payable on February 1, 2010 5,433,352 1,331,042
- -------------------------------------------------------------------------------
$50,433,352 $23,306,042
Less: current portion -- (2,350,000)
- -------------------------------------------------------------------------------
$50,433,352 $20,956,042
================================================================================
</TABLE>
Prior to April 16, 1996, the Company had a $23 million unsecured revolving
credit facility with Society National Bank (now known as KeyBank National
Association) ("KeyBank"). In conjunction with the negotiation of the new credit
facility described below, this line was terminated. On April 16, 1996, the
Company signed an agreement with KeyBank for a revolving credit facility
("Shiloh Facility") not to exceed $30 million. The term of the Shiloh Facility
extends to February 28, 2000 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 Shiloh
Facility.
On April 16, 1996, Shiloh of Michigan signed an agreement with KeyBank for
a revolving credit facility ("SOM Facility") not to exceed $23 million. The term
of the SOM Facility extends to February 28, 1998 with an option for successive
one year term extensions available at Shiloh of Michigan's request and KeyBank's
approval, upon proper written notification. 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 is an 80% guarantor of the SOM Facility.
Under the Company's revolving credit facilities, including the SOM
Facility, $11 million was unused at October 31, 1996.
32
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 8
FINANCING
ARRANGEMENTS
-- CONTINUED
At October 31, 1996, the scheduled maturities of all long-term debt during
the next five years is as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 --
1998 18,500,000
1999 --
2000 26,500,000
2001 --
2002 --
Thereafter 5,433,352
</TABLE>
In March 1995, Medina County, Ohio issued on behalf of the Company an
aggregate of $5.4 million in principal amount of variable rate industrial 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. At October 31, 1996,
substantially all the proceeds had been utilized.
Certain of the debt agreements described above contain various restrictive
covenants which, among others, 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, capital
expenditures and cash dividends. Interest paid amounted to $1,063,938,
$1,575,547 and $1,610,241 during 1996, 1995 and 1994, respectively.
NOTE 9
LEASES
The Company leases certain equipment under operating leases. Rent expense
under operating leases for 1996, 1995 and 1994 was $274,441, $252,791 and
$265,982, respectively. Future minimum lease payments under operating leases are
as follows at October 31, 1996:
<TABLE>
<CAPTION>
---------------------------------
Operating
---------------------------------
<S> <C> <C>
1997 $189,826
1998 52,181
1999 22,221
2000 16,692
2001 --
---------------------------------
Total minimum lease
payments $280,920
=================================
</TABLE>
NOTE 10
EMPLOYEE
BENEFIT
PLANS
The Company maintains pension plans covering most employees. The
assets of the plans consist primarily of insurance and annuity contracts. The
assumptions used to develop net periodic pension cost were as follows:
discount rate ranged from 7.25% to 8.25% for all plans for the three years
ended October 31, 1996; expected long-term rate of return on plan assets
ranged from 6.0% to 8.0% for all plans for the three years ended October 31,
1996; rates of increase in compensation levels of salaried plans ranged from
4.5% to 5.0% for all plans for the three years ended October 31, 1996. For the
valuation of pension obligations at the end of 1996, the discount rate for all
plans was increased to 8.00% from 7.50% at the end of 1995.
33
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 10
EMPLOYEE
BENEFIT
PLANS --
CONTINUED
The components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
October 31,
- -----------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for the current
period $ 863,168 $ 688,641 $ 769,444
Interest cost on projected
benefit obligation 651,116 623,452 600,745
Actual return on assets (603,488) (1,100,300) 238,737
Net amortization and
deferrals 90,722 574,211 (680,529)
- -----------------------------------------------------------------------
$1,001,518 $ 786,004 $ 928,397
=======================================================================
</TABLE>
Employee pension funded status was as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------
OCTOBER 31, 1996 October 31, 1995
-------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested employees $(6,180,351) $ -- $(5,011,158) $(1,689,509)
Non-vested employees (180,578) -- (140,478) (46,401)
--------------------------------------------------------
Accumulated benefit obligation (6,360,929) -- (5,151,636) (1,735,910)
Additional benefits based on estimated
future salary levels (2,994,145) -- (3,877,655) --
--------------------------------------------------------
Projected benefit obligation (9,355,074) -- (9,029,291) (1,735,910)
Plan assets at fair value 9,728,033 -- 7,717,485 1,627,437
--------------------------------------------------------
Funded status 372,959 -- (1,311,806) (108,473)
Unamortized net liability existing at date
of adoption of SFAS 87 988,596 -- 840,505 234,915
Unrecognized net experience loss (gain) (366,087) -- 462,212 (547,710)
Minimum liability -- -- -- (61,827)
Unrecognized prior service cost 515,796 -- 51,075 374,622
--------------------------------------------------------
Pension related asset (liability) $ 1,511,264 $ -- $ 41,986 $ (108,473)
========================================================
</TABLE>
In addition to the defined benefit plans described above, the Company
recorded expense of $1,118,322, $1,022,830 and $744,228 during 1996, 1995 and
1994, respectively, with respect to its defined contribution plans.
Effective November 1, 1993, the Company adopted SFAS 106. This statement
requires the expected cost of postretirement benefits to be recognized during
the years that employees render service. The Company provides postretirement
health care benefits to certain employees (and their dependents) who retire
early, but coverage generally continues only until age 65. Prior to the adoption
of SFAS 106 these benefits were recorded on a cash basis and were insignificant
in 1993 and 1992. As permitted under SFAS 106, the Company elected to amortize
the transition liability of $586,000 over twenty years.
34
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 10
EMPLOYEE
BENEFIT
PLANS --
CONTINUED
The Company's accumulated postretirement benefit obligation (APBO) is
comprised of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
October 31,
- ----------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Retirees
Fully eligible active plan $(396,018) $(929,323)
participants (274,507) (235,402)
Other active plan participants (1,263,562) (161,014)
- ----------------------------------------------------------------------
APBO (1,934,087) (1,325,739)
Unrecognized transition liability 455,060 527,334
Unrecognized prior service cost -- --
Unrecognized net loss (gain) 876,833 534,341
- ----------------------------------------------------------------------
Postretirement benefit related
liability $(602,194) $(264,064)
======================================================================
</TABLE>
The net periodic postretirement benefit cost included the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
October 31,
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Service cost of benefits earned $137,813 $ 52,011
Interest cost on APBO 167,549 84,569
Amortization of transition
liability 28,401 42,281
Net amortization and deferrals 66,823 --
- ----------------------------------------------------------------------
Total $400,586 $178,861
======================================================================
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation at October 31, 1996 was 10.0%, gradually
declining to 4.5% in 2001 and remaining at that level thereafter. A
one-percentage point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation by
approximately $636,313 at October 31, 1996 and the postretirement benefit cost
by approximately $159,638 for the year then ended. The actuarial present value
of accumulated postretirement benefit obligations was determined using a
weighted average discount rate of 8.0% at October 31, 1996. The 1996 and 1995
net periodic postretirement benefit cost was determined using a weighted average
discount rate of 7.5% and 8.25%, respectively.
SFAS 112, "Employers' Accounting for Postemployment Benefits", was issued
in November 1992 and was adopted by the Company during fiscal 1994.
Implementation of this pronouncement did not have a material impact on the
Company as the Company currently provides no significant benefits, as defined by
the statement, to former or inactive employees.
35
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 11
STOCK AND
BONUS PLANS
1993 KEY EMPLOYEE STOCK INCENTIVE PLAN
The Company's 1993 Key Employee Stock Incentive Plan (the "Incentive
Plan"), which was adopted by the Company in May 1993, authorizes grants to
officers and other key employees of the Company and its subsidiaries of (i)
stock options that are intended to qualify as "incentive stock options," (ii)
nonqualified stock options and (iii) restricted stock awards. The Incentive Plan
also authorizes grants of nonqualified stock options and restricted stock awards
to consultants to the Company and its subsidiaries. The Incentive Plan
authorizes the granting of stock options and restricted stock awards up to an
aggregate of 450,000 shares of Common Stock, subject to adjustment upon the
occurrence of certain events to prevent any dilution or expansion of the rights
of participants that might otherwise result from the occurrence of such events.
Incentive stock options are exercisable for up to 10 years at an option price of
not less than the fair market value of the Common Stock on the date on which the
option is granted or at an option price of not less than 110% of the fair market
value of the Common Stock in the case of an officer or other key employee who
owns at the time the option is granted more than 10% of the Common Stock.
Nonqualified stock options may be granted for up to 10 years at such exercise
price and upon such terms and conditions as the Board of Directors or the
Compensation Committee may determine. In May 1993, the Company granted
nonqualified stock options for 46,400 shares of Common Stock, with an exercise
price equal to $11.00 per share. Such options became exercisable over a period
of three years commencing on the first anniversary of the date of grant. On
October 17, 1995, the Company granted nonqualified stock options for 47,000
shares of Common Stock (no stock options were granted in 1994), at an exercise
price of $11.00 per share. Such options became exercisable as of the date of
grant and will remain so for a period of five years from the date of grant. On
October 23, 1996, the Company granted nonqualified stock options for 160,000
shares of Common Stock, at an exercise price of $16.50 per share. Such options
become exercisable as of the date of grant and will remain so for a period of 5
years commencing from the date of grant.
EXECUTIVE INCENTIVE BONUS PLAN
The Company maintains an Executive Incentive Bonus Plan (the "Bonus Plan")
which provides annual incentive bonuses to its executive officers. The Bonus
Plan provides for an aggregate annual bonus pool equal to an amount (the
"Aggregate Amount") which is the lesser of (i) 60% of the aggregate base
compensation of the participating executive officers or (ii) 15% of the
Company's net income before taxes and any incentive bonuses for the year on
which the bonuses are based. The Aggregate Amount is then adjusted as follows:
50% of the Aggregate Amount is available for bonus allocations regardless of the
Company's performance; 25% is available only if the Company satisfied its
operating profit goal for the year (as established by the Board of Directors);
and 25% is available only if the Company satisfied its return on equity goal for
the year (as established by the Board of Directors). Within these parameters,
the Chairman of the Board of Directors determines, with approval from the
Company's Compensation Committee, the amount to be paid to each officer,
considering such factors as the officer's performance during the year and the
Company's overall performance during the year. During fiscal 1996, 1995 and
1994, $516,600, $519,100 and $125,000, respectively was expensed under this
bonus plan.
36
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 12
INCOME TAXES
The components of the provision for income taxes on income from continuing
operations were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Years Ended October 31,
- ------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $8,570,579 $7,455,226 $5,006,859
State and local 1,091,678 1,331,650 1,268,048
- ------------------------------------------------------------------------
9,662,257 8,786,876 6,274,907
Deferred 1,290,012 683,979 215,691
- ------------------------------------------------------------------------
Total $10,952,269 $9,470,855 $6,490,598
========================================================================
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities were comprised of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
October 31,
- ---------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserves $ 365,228 $ 442,027
Inventory reserves 349,061 336,887
State income and franchise taxes 608,622 667,078
Accrued group insurance 366,800 411,260
Personal property tax reserves 394,999 400,266
Accrued vacation reserves 375,807 423,804
Net operating loss carryforwards 241,475 600,197
Capital loss carryforwards 5,046,335 92,941
Other reserves 647,304 369,351
- ---------------------------------------------------------------------
8,395,631 3,743,811
Less: Valuation allowance (5,046,335) (92,941)
- ---------------------------------------------------------------------
Total deferred tax assets 3,349,296 3,650,870
Deferred tax liabilities:
Fixed assets (8,712,337) (10,179,291)
Pension assets (763,894) (105,545)
- ---------------------------------------------------------------------
Net deferred tax liability $(6,126,935) $(6,633,966)
======================================================================
</TABLE>
The valuation allowance relates to capital loss carryforwards which are not
expected to be utilized.
Effective November 1, 1993, the Company adopted SFAS 109. This statement
required the Company to adopt the asset and liability method of accounting for
income taxes. The effect of adopting SFAS 109 in 1994 amounted to a charge of
$280,943 to net income, or $.02 per share. This amount is reflected as the
effect of a change in accounting principle.
37
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 12
INCOME TAXES
- -- CONTINUED
A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Years Ended October 31,
- ---------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax at statutory rate 35.0% 35.0% 34.3%
State and local income taxes 3.0 3.6 5.0
Other 0.5 1.0 1.6
- ---------------------------------------------------------------------------
Effective income tax rate 38.5% 39.6% 40.9%
===========================================================================
</TABLE>
Income taxes paid amounted to $10,942,558, $8,616,188 and $3,926,358 for
the years 1996, 1995 and 1994, respectively.
For federal income tax purposes at October 31, 1996, the Company had
available net operating loss carryforwards of approximately $689,928, expiring
in 2005, if not utilized. These net operating losses were incurred during
Liverpool Coil Processing, Inc.'s ("Liverpool") initial separate return year and
can only be utilized by Liverpool. In addition, at October 31, 1996, the Company
had available a capital loss carryforward of approximately $12,615,837, expiring
in 2001, if not utilized. The capital loss was incurred on the sale of Shafer
Valve and a full valuation allowance has been provided.
NOTE 13
RELATED
PARTY
TRANSACTIONS
The Company had sales to a significant shareholder of $5,360,341,
$5,899,935 and $7,109,446, for the years 1996, 1995 and 1994, respectively. The
Company believes these transactions were made on the same basis as would have
been made with independent third parties. At October 31, 1996 and 1995, the
Company had receivable balances of $845,482 and $786,329 respectively, due from
this shareholder.
NOTE 14
QUARTERLY
RESULTS OF
OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OCTOBER 31, 1996
Revenues $51,539 $ 58,045 $53,503 $ 56,379
Gross Profit 10,006 11,270 10,959 13,395
Operating Income 6,190 7,399 6,688 8,267
Income from Continuing Operations 3,740 4,544 4,140 5,099
Loss from Discontinued Operations (376) (3) -- 123
Income (Loss) on Sale of Discontinued
Operations -- (10,198) -- 609
Net Income (Loss) 3,364 $ (5,657) $ 4,140 $ 5,831
-----------------------------------------------
Net Income from Continuing Operations per
Share $ .29 $ .35 $ .31 $ .39
Loss from Discontinued Operations per Share (.03) (.00) (.00) .01
Loss from Sale of Discontinued Operations
per Share (.00) (.78) (.00) .05
-----------------------------------------------
Net Income (Loss) per Share $ .26 $ (.43) $ .31 $ .45
===============================================
</TABLE>
38
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
NOTE 14
QUARTERLY
RESULTS OF
OPERATIONS
(UNAUDITED)
- -- CONTINUED
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OCTOBER 31, 1995
Revenues $52,132 $ 56,320 $47,888 $ 56,008
Gross Profit 8,840 10,124 8,692 10,958
Operating Income 4,986 6,686 4,801 7,800
Income from Continuing Operations 3,036 3,966 2,863 4,599
Income (Loss) on Discontinued Operations (548) (88) 165 182
Net Income (Loss) $2,488 $3,878 $3,028 $4,781
---------------------------------------------
Net Income from Continuing Operations per
Share $ .23 $ .31 $ .22 $ .35
Income (Loss) from Discontinued
Operations per Share (.04) (.01) .01 .02
-----------------------------------------------
Net Income per Share $ .19 .30 .23 .37
===============================================
</TABLE>
NOTE 15
COMMITMENTS
AND
CONTINGENT
LIABILITIES
The Company is a party to several lawsuits and claims arising in the normal
course of its business. In the opinion of management, the Company's liability or
recovery, if any, under pending litigation and claims would not materially
affect its financial condition or results of operations.
NOTE 16
SUBSEQUENT
EVENT
On November 1, 1996, the Company completed the acquisition of GDM. The
acquisition of substantially all of the assets and assumption of certain
liabilities of GDM 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 (paid to the owners or creditors) included
approximately $15,000,000 in cash and approximately $7,600,000 in assumed debt
which was repaid immediately subsequent to closing. These cash amounts are
reflected as a deposit in the company's balance sheet at October 31, 1996, since
the cash was held in escrow at that date. In addition, costs associated with the
transaction have been accrued at October 31, 1996. On January 3, 1997, a
$2,299,002 additional payment was made as provided by the purchase agreement.
It is estimated that the purchase price will be allocated among the fair
value of assets acquired and liabilities assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Net working capital $8,717,433
Property, plant and equipment 9,578,000
Goodwill 7,000,000
</TABLE>
This preliminary purchase price allocation is subject to final purchase
price adjustments.
39
<PAGE> 1
EXHIBIT 21.1
------------
LIST OF SUBSIDIARIES OF SHILOH INDUSTRIES, INC.
The following is a list of the subsidiaries of Shiloh
Industries, Inc., a Delaware corporation (the "Corporation"). The common stock
of all the corporations listed below is wholly owned, directly or indirectly, by
the Corporation. If indented, the corporation is a wholly owned subsidiary of
the corporation under which it is listed unless otherwise noted.
NAME OF CORPORATION STATE OF INCORPORATION
- ------------------- ----------------------
Shiloh Corporation Ohio
The Sectional Die Company Ohio
Sectional Stamping, Inc. Ohio
Valley City Steel Company (1) Ohio
Medina Blanking, Inc. (2) Ohio
Liverpool Coil Processing, Ohio
Incorporated
Greenfield Die & Manufacturing
Corporation Ohio
The Corporation also owns an 80% equity interest in Shiloh of Michigan, L.L.C.,
a Michigan limited liability company.
- -------------
(1) Valley City Steel Company is 50% owned by the Corporation and 50% owned
by Shiloh Corporation.
(2) Medina Blanking, Inc. is 22% owned by the Corporation, 22% owned by
Shiloh Corporation and 56% owned by Valley City Steel Company.
<PAGE> 1
EXHIBIT 24.1
------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
directors and officers of Shiloh Industries, Inc., a Delaware corporation,
hereby constitutes and appoints Robert L. Grissinger, Craig A. Stacy and Thomas
C. Daniels, and each of them, as the true and lawful attorney or
attorneys-in-fact, with full power of substitution and revocation, for each of
the undersigned and in the name, place and stead of each of the undersigned, to
sign on behalf of each of the undersigned an Annual Report on Form 10-K for the
fiscal year ended October 31, 1996, pursuant to Section 13 of the Securities
Exchange Act of 1934 and to sign any and all amendments to such Annual Report,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting to
said attorney or attorneys-in-fact, and each of them, full power and authority
to do so and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorney or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple
counterparts, each of which shall be deemed an original with respect to the
person executing it.
Executed as of this 20th day of December 1996.
/s/ Dominick C. Fanello /s/ James C. Fanello
- -------------------------- ---------------------------
Dominick C. Fanello James C. Fanello
Vice Chairman of the Board and Director
Director
/s/ David J. Hessler /s/ Curtis E. Moll
- -------------------------- ---------------------------
David J. Hessler Curtis E. Moll
Director Director
/s/ James A. Karman /s/ Theodore K. Zampetis
- -------------------------- ---------------------------
James A. Karman Theodore K. Zampetis
Director Director
/s/ /s/ Richard S. Gray
- -------------------------- ---------------------------
Richard S. Gray
Director Director
/s/ Robert L. Grissinger /s/ Craig A. Stacy
- -------------------------- ---------------------------
Robert L. Grissinger Craig A. Stacy
President, Chief Executive Treasurer and Chief Financial
Officer (Principal Executive Officer (Principal Financial
Officer), Chairman of the and Accounting Officer)
Board and Director
<PAGE> 2
Exhibit 24.1
------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Shiloh Industries, Inc.,
a Delaware corporation (the "Corporation"), hereby constitutes and appoints
Robert L. Grissinger, Craig A. Stacy and Thomas C. Daniels, and each of them, as
the true and lawful attorney or attorneys-in-fact, with full power of
substitution and revocation, for the Corporation and in the name, place and
stead of the Corporation, to sign on behalf of the Corporation an Annual Report
on Form 10-K for the fiscal year ended October 31, 1996, pursuant to Section 13
of the Securities Exchange Act of 1934 and to sign any and all amendments to
such Annual Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting to said attorney or attorneys-in-fact, and each of them, full power and
authority to do so and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorney or attorneys-in-fact or any of them or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Executed as of this 20th day of December 1996.
SHILOH INDUSTRIES, INC.
By: /s/ Robert L. Grissinger
-------------------------------
Robert L. Grissinger
President, Chief Executive
Officer, Chairman of the Board
and Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000904979
<NAME> SHILOH INDUSTRIES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,721,152
<SECURITIES> 0
<RECEIVABLES> 33,115,765
<ALLOWANCES> 0
<INVENTORY> 18,626,492
<CURRENT-ASSETS> 58,070,661
<PP&E> 175,221,215
<DEPRECIATION> 52,927,840
<TOTAL-ASSETS> 207,009,025
<CURRENT-LIABILITIES> 23,257,370
<BONDS> 0
<COMMON> 130,116
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 207,009,025
<SALES> 219,465,925
<TOTAL-REVENUES> 219,465,925
<CGS> 173,835,459
<TOTAL-COSTS> 190,921,611
<OTHER-EXPENSES> (41,947)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (110,540)
<INCOME-PRETAX> 28,475,721
<INCOME-TAX> 10,952,269
<INCOME-CONTINUING> 17,523,452
<DISCONTINUED> (9,845,352)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,678,100
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
