<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 0-21964
-----------------------
SHILOH INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 51-0347683
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
Suite 350, 1013 Centre Road, Wilmington, Delaware 19805
- --------------------------------------------------------------------------------
(Address of principal executive offices - zip code)
(302) 998-0592
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
- -------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of shares of Common Stock outstanding as of September 11, 1998 was
13,080,563 shares.
<PAGE> 2
SHILOH INDUSTRIES, INC.
-----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SHILOH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
July 31, October 31,
1998 1997
ASSETS --------------- ---------------
<S> <C> <C>
Cash and cash equivalents $ 1,279,353 $ 191,688
Accounts receivable 35,791,480 50,151,099
Inventory 40,524,364 31,148,360
Deferred income taxes 370,467 370,467
Prepaid expenses 4,316,468 3,921,449
--------------- ---------------
Total current assets 82,282,132 85,783,063
--------------- ---------------
Property, plant and equipment, net 232,827,176 187,178,766
Goodwill 11,850,717 12,643,610
Other assets 4,253,516 4,020,791
--------------- ---------------
Total assets $ 331,213,541 $ 289,626,230
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 23,022,224 $ 20,995,989
Short term note payable -- 3,000,000
Accrued income taxes 4,229,038 1,916,333
Other accrued expenses 14,231,907 14,387,519
--------------- ---------------
Total current liabilities 41,483,169 40,299,841
--------------- ---------------
Long-term debt 119,400,000 93,400,000
Deferred income taxes 9,307,241 9,307,241
--------------- ---------------
Total liabilities 170,190,410 143,007,082
--------------- ---------------
Stockholders' equity
Common stock 130,805 130,387
Paid-in capital 39,399,805 38,743,406
Retained earnings 121,492,521 107,745,355
--------------- ---------------
Total stockholders' equity 161,023,131 146,619,148
--------------- ---------------
Commitments and contingent liabilities -- --
Total liabilities and stockholders' equity $ 331,213,541 $ 289,626,230
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended July 31, Nine Months ended July 31,
--------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 64,367,661 $ 65,460,360 $ 220,335,409 $ 200,716,879
Cost of sales 52,228,665 51,184,773 176,010,373 158,762,270
--------------- --------------- --------------- ---------------
Gross Profit 12,138,996 14,275,587 44,325,036 41,954,609
Selling, general and administrative expenses 6,481,529 6,720,079 19,403,770 18,161,273
--------------- --------------- --------------- ---------------
Operating income 5,657,467 7,555,508 24,921,266 23,793,336
Interest expense 976,653 665,786 3,069,045 1,407,481
Interest income 47,190 (15,746) 122,667 40,055
Minority interest 34,361 115,558 164,402 314,318
Other income, net 62,697 7,904 158,165 204,907
--------------- --------------- --------------- ---------------
Income before income taxes 4,825,062 6,997,438 22,297,455 22,945,135
Provision for income taxes 1,840,886 2,348,698 8,550,287 8,329,084
--------------- --------------- --------------- ---------------
Net income $ 2,984,176 $ 4,648,740 $ 13,747,168 $ 14,616,051
=============== =============== =============== ===============
Earnings per share:
Basic earnings per share $ .23 $ .36 $1.05 $1.12
Basic weighted average number of common
shares: 13,077,030 13,038,763 13,053,881 13,030,027
Diluted earnings per share $ .23 $ .36 $1.05 $1.12
Diluted weighted average number of common
shares: 13,126,725 13,088,317 13,108,280 13,061,084
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended July 31,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 13,747,168 $ 14,616,051
Adjustments to reconcile net income from continuing
operations to net cash provided by operating
activities:
Depreciation and amortization 11,076,187 7,813,464
Minority interest (164,402) (314,318)
Loss (gain) on sale of assets (28,364) (39,190)
Changes in operating assets and liabilities net
of effects of business acquired:
Accounts receivable 14,359,619 (2,281,855)
Inventories (9,376,004) (5,144,520)
Prepaids and other assets (463,343) (843,504)
Payables and accruals 1,870,623 7,381,804
Accrued income taxes 2,312,705 1,797,312
--------------- ---------------
Net cash provided by operating activities 33,334,189 22,985,244
--------------- ---------------
Cash Flows From Investing Activities:
Capital expenditures (55,934,240) (37,870,879)
Proceeds from sale of assets 30,900 171,977
Acquisition of business -- (3,300,893)
--------------- ---------------
Net cash used in investing activities (55,903,340) (40,999,795)
--------------- ---------------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings -- 14,600,000
Repayments of short-term borrowings (3,000,000) (14,500,000)
Proceeds from long-term borrowings 26,000,000 18,250,000
Repayments of long-term borrowings -- (1,283,352)
Issuance of common stock 656,816 368,526
--------------- ---------------
Net cash provided by financing activities 23,656,816 17,435,174
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 1,087,665 (579,377)
Cash and cash equivalents at beginning of period 191,688 1,721,152
--------------- ---------------
Cash and cash equivalents at end of period $ 1,279,353 $ 1,141,775
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of Presentation and Business
- -------------------------------------------
The condensed consolidated financial statements have been prepared by Shiloh
Industries, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
in the condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of such financial statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed consolidated
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1997 Annual Report to
Shareholders.
Revenues and operating results for the nine months ended July 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
NOTE 2 - Inventories:
- ---------------------
Inventories consist of the following:
July 31, October 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Raw materials $ 14,094,630 $ 14,009,471
Work-in-process 18,334,897 12,873,380
Finished goods 9,180,906 5,431,578
--------------- ---------------
Total at average cost 41,610,433 32,314,429
LIFO reserve (1,086,069) (1,166,069)
--------------- ---------------
Total $ 40,524,364 $ 31,148,360
=============== ===============
NOTE 3 - Property, Plant and Equipment:
- ---------------------------------------
Property, plant and equipment consist of the following:
July 31, October 31,
1998 1997
--------------- ---------------
Land $ 5,704,070 $ 4,307,018
Buildings and improvements 81,751,681 69,457,521
Machinery and equipment 160,196,995 136,681,671
Furniture and fixtures 10,130,393 7,767,319
Construction in progress 46,747,008 30,695,279
--------------- ---------------
Total, at cost 304,530,147 248,908,808
Less: Accumulated depreciation (71,702,971) (61,730,042)
--------------- ---------------
Net property, plant and equipment $ 232,827,176 $ 187,178,766
=============== ===============
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
NOTE 4 - Financing Arrangements:
- --------------------------------
Short-term debt consists of the following:
July 31, October 31,
1998 1997
<S> <C> <C>
Revolving credit loan - interest at 6.16% at October 31, 1997 $ -- $ 3,000,000
--------------- ---------------
Total $ -- $ 3,000,000
=============== ===============
Long-term debt consists of the following:
July 31, October 31,
1998 1997
--------------- ---------------
Revolving credit loan - interest at 5.9766% at July 31, 1998 $ 114,000,000 $ 63,000,000
Revolving credit loan - interest at 6.1875% at July 31, 1997 -- 25,000,000
Variable rate industrial development bond, secured by letter of
credit, weighted average interest rate at 3.84% payable on
February 1, 2010 5,400,000 5,400,000
--------------- ---------------
$ $ 93,400,000
Less: current portion -- --
--------------- ---------------
Total $ 119,400,000 $ 93,400,000
=============== ===============
</TABLE>
Prior to January 22, 1998, the Company had a $70.0 million unsecured revolving
credit facility ("Shiloh Facility") with KeyBank National Association
("KeyBank"). On January 22, 1998, the Company increased the Shiloh Facility to
$135.0 million. The term of the Shiloh Facility extends to January 31, 2003. The
Company has the option to select the applicable interest rate at KeyBank's prime
rate or the LIBOR rate plus a factor determined by a pricing matrix based on the
Company's ratio of Funded Debt to EBITDA. As of July 31, 1998, the factor as
determined by the pricing matrix was 0.175%. The terms of the agreement require
an annual facility fee as determined by a pricing matrix based on the Company's
ratio of Funded Debt to EBITDA. This annual facility fee is currently 0.3%.
Prior to January 22, 1998, the Company was acting as an 80% guarantor for a
$28.0 million unsecured revolving credit facility ("SOM Facility") entered into
by Shiloh of Michigan, L.L.C. with KeyBank.
The Company executed a promissory note as of December 6, 1996 in favor of
Richland Bank in the aggregate principal amount of $4.0 million. Interest
accrues on the outstanding principal balance thereunder at LIBOR rate plus 3/4%.
Certain of the debt agreements described above contain various restrictive
covenants which, among others things, require the Company's various operating
subsidiaries to maintain minimum net worth levels and financial ratios. The
agreements also place certain restrictions on additional indebtedness and
capital expenditures.
Amounts available under the Company's revolving credit facilities, including the
SOM facility, aggregated $19.6 million at July 31, 1998.
7
<PAGE> 8
NOTE 5 - Other Information:
- ---------------------------
During the nine months ended July 31, 1998 and 1997, cash payments for interest
amounted to $5.1 million and $2.6 million respectively, while cash payments, net
of refunds, for income taxes amounted to $6.3 million and $6.5 million,
respectively. The provision for income taxes was $8.6 million for the first nine
months of fiscal 1998 compared with $8.3 million for the comparable period in
fiscal 1997, representing effective tax rates of 38.3% and 36.3%, respectively.
The higher rate for fiscal 1998 relates to a reduction in state tax credits
available to the Company in fiscal 1998.
The Company's non-qualified stock option plan, adopted in May 1993, provides for
granting officers and employees of the Company options to acquire an aggregate
of 450,000 shares at an exercise price equal to 100% of market price on the date
of grant. During the nine months ended July 31, 1998, 41,800 shares of the
granted options were exercised. As a result of such issuance of common stock,
the Company received $533,863 in proceeds. During fiscal year 1997, 27,100
shares of the granted options were exercised. As a result of such issuance of
common stock, the Company received proceeds of $298,100.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
- -------
The Company is a vertically integrated steel processor that supplies blanks,
stampings and processed steel to the automotive, heavy truck and other
industries. The Company currently provides a broad range of intermediate steel
processing services, which include: (i) blanking and stamping; and (ii) other
steel processing services (which include pickling hot rolled steel, slitting,
edge trimming, roller leveling and cutting to length of both hot and cold rolled
steel). The Company operates through ten subsidiaries, Shiloh Corporation,
Valley City Steel Company, The Sectional Die Company, Medina Blanking, Inc.,
Sectional Stamping, Inc. ("Sectional Stamping"), Liverpool Coil Processing,
Inc., Shiloh of Michigan, L.L.C., the Company's joint venture with Rouge Steel
("SOM"), Greenfield Die & Manufacturing Company ("GDM"), C&H Design Company,
d.b.a. C&H Die Technology ("C&H") and Jefferson Blanking, Inc..
In 1995, the Company prepared a long-term, business plan which included a
strategic decision to concentrate on the core steel processing business. As a
result, the Company sought inquires 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.
The Company typically experiences decreased revenue and operating income during
the first fiscal quarter of each year, usually resulting from generally slower
overall automobile production during the winter months. The revenues and
operating income in the third fiscal quarter can also be affected by the
typically lower automobile production activities in July due to manufacturers'
changeover in production lines. In addition, during the third quarter of fiscal
1998, the Company revenues and operating income were adversely affected as a
result of the strike at certain facilities of General Motors.
In analyzing the financial aspects of the Company's steel processing operations,
a number of factors must be considered. First, plant utilization levels are very
important to profitability because of the capital intensive nature of these
operations. Because the Company performs a number of different processing
operations, however, it is not meaningful to analyze simply the total tons of
steel processed. For example, blanking and stamping involve more operational
processes, from the design and manufacture of tools and dies to the production
and packaging of the final product, than the Company's other steel processing
services and therefore generally have higher margins. Second, a significant
portion of the Company's steel processing products and services is provided to
the customers on a toll processing basis. Under these arrangements, the Company
charges a specified toll processing fee for the processing operations performed
without acquiring ownership of the steel and being burdened with the attendant
costs of ownership and risk of loss. Although the proportion of tons processed
by the Company that are directly owned and toll processed may fluctuate from
quarter to quarter primarily based on the customers for which the Company is
providing services during the period, the Company estimates that during the past
three years approximately 87.2%, 85.9% and 86.4%, respectively, of total tons
processed were on a toll processing basis. Revenues from operations involving
directly owned steel include a component of raw material cost whereas toll
processing revenues do not, consequently, toll processing generally results in
lower gross profit, but higher gross margin, than directly owned steel
processing. Therefore, an increase in the proportion of total revenues
attributable to directly owned steel processing may result in higher revenues
and gross profits but lower gross margins. The Company's blanking and stamping
operations use more directly owned steel than do its other steel processing
operations. In addition, changes in the price of steel can impact the Company?s
results of operations because raw material costs are by far the largest
component of cost of sales in processing directly owned steel.
On November 25, 1997, the Company announced plans for the formation of a joint
venture with Bing Steel Management Inc. ("Bing") and Rouge Industries, Inc.
("Rouge") to produce and market first operation steel blanks for the automotive
industry. The entity that was formed by the joint venture, Bing Blanking LLC
("Bing
9
<PAGE> 10
LLC"), is a Michigan LLC and is principally managed and operated by Bing. On
March 31, 1998, the Company, through mutual agreement with the other parties,
terminated its interest as a member of Bing LLC due to the Company's decision to
focus its resources on other strategic initiatives.
Results of Operations
- ---------------------
THREE MONTHS ENDED JULY 31, 1998
COMPARED TO THREE MONTHS ENDED JULY 31, 1997
REVENUES. Revenues decreased by $1.1 million, or 1.7%, to $64.4 million for the
third quarter of fiscal 1998 from $65.5 million for the comparable period in
fiscal 1997. The decrease in revenues is primarily due to the impact of the GM
strike, which occurred during the third fiscal quarter. Revenues from blanking
and stamping and other steel processing operations decreased 2.0% and .5%
respectively for the third quarter of fiscal 1998, from the comparable period in
fiscal 1997. The percentage of revenues from directly owned steel processed
decreased slightly to 70.2% for the third quarter of fiscal 1998 from 70.9% for
the comparable period in fiscal 1997. The percentage of revenues from toll
processed steel increased slightly to 29.8% for the third quarter of fiscal 1998
from 29.1% for the comparable period in fiscal 1997. This slight shift in the
mix of revenue from directly owned steel processing and toll processing resulted
from a shift in customer orders for the quarter.
GROSS PROFIT. Gross profit decreased by $2.1 million, or 15.0%, to $12.1 million
for the third quarter of fiscal 1998 from $14.3 million for the comparable
period in fiscal 1997. Gross margin decreased to 18.9% for the third quarter of
fiscal 1998 from 21.8% for the comparable period in fiscal 1997. The decline in
gross margins is primarily attributed to the impact of the GM strike. In
addition, Greenfield Die & Manufacturing's operations were negatively impacted
by a combination of factors including facility expansion, implementation of a
new information system, adjusting to the impact of the acquisition by an
unrelated party of their largest customer and other transition issues as a
result of management changes. The impact of the GM strike and Greenfield Die &
Manufacturing issues were partially off-set by policy rebates of approximately
$.9 million from the Ohio Bureau of Worker's Compensation (OBWC) relating to the
Company's operations in Ohio. These policy rebates were the result of better
than expected investment returns on reserves held by the OBWC to pay claims.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased 3.5% to $6.5 million for the third quarter of
fiscal 1998 from $6.7 million for the comparable period in fiscal 1997. As a
percentage of revenues, selling, general and administrative expenses decreased
to 10.1% for the third quarter of fiscal 1998 from 10.3% for the comparable
period in fiscal 1997. The largest component of this decrease, in dollars, is
principally the initiative to control variable costs, in order to appropriately
match general administrative expenses with revenues due to the impact of the GM
strike.
OTHER. The Company incurred interest expense of $1.0 million in the third
quarter of fiscal 1998 compared to $.7 million of interest expense in the
comparable period of fiscal 1997. This increase is due primarily to increased
average borrowings. Interest expense of approximately $.8 million relating to
expansion of several facilities was capitalized during the third quarter of
fiscal 1998. The provision for income taxes was $1.8 million in the third
quarter of fiscal 1998 compared with $2.3 million for the comparable period in
fiscal 1997, representing effective tax rates of 38.2% and 33.6%, respectively.
The lower rate in the third quarter of fiscal 1997 reflects the utilization of
certain state tax credits.
NET INCOME. Net income from continuing operations for the third quarter of
fiscal 1998 decreased by $1.7 million, or 35.8%, to $3.0 million from $4.6
million for the comparable period in fiscal 1997. This decrease was primarily
the result of the impact from the GM strike.
10
<PAGE> 11
NINE MONTHS ENDED JULY 31, 1998
COMPARED TO NINE MONTHS ENDED JULY 31, 1997
REVENUES. Revenues increased by $19.6 million, or 9.8%, to $220.3 million for
the first nine months of fiscal 1998 from $200.7 million for the comparable
period in fiscal 1997. The increase in revenues is primarily due to the
inclusion of $14.4 million of revenues from C&H. The remaining increase is
attributed to a significant volume increase at Sectional Stamping, off-set by a
decrease in revenue caused by the impact of the GM strike. Revenues from the
blanking and stamping and the other steel processing operations for the first
nine months of fiscal 1998 increased approximately 12.5% and 1.8%, respectively,
from the comparable period in fiscal 1997. The percentage of revenues from
directly owned steel decreased to 71.4% for the first nine months of fiscal 1998
from 72.3% for the comparable period in fiscal 1997. Revenues from toll
processed steel increased to 28.6% for the first nine months of fiscal 1998 from
27.7% for the comparable period in fiscal 1997. The increase in the percentage
of revenues from toll processed steel was primarily due to the increased toll
processing revenue and tonnage at certain facilities during the first quarter of
fiscal 1998.
GROSS PROFIT. Gross profit increased by $2.4 million, or 5.7%, to $44.3 million
for the first nine months of fiscal 1998 from $42.0 million for the comparable
period in fiscal 1997. Gross margin decreased to 20.1% for the first nine months
of fiscal 1998 from 20.9% for the comparable period in fiscal 1997. This decline
resulted from the impact of the GM strike and several factors impacting
Greenfield Die and Manufacturing. In addition, during the third quarter the
Company received approximately $.9 million in policy rebates from the OBWC.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $1.2 million, or 6.8% to $19.4 million for
the first nine months of fiscal 1998 from $18.2 million for the comparable
period in fiscal 1997. As a percentage of revenues, selling, general and
administrative expenses decreased to 8.8% for the first nine months of fiscal
1998 from 9.0% for the comparable period in fiscal 1997. The largest component
of the increase, in dollars, arose principally from the inclusion of C&H. In
addition, the increase was attributable to pre-operating costs of Jefferson
Blanking incurred during the first six months of fiscal 1998.
OTHER. Interest expense increased to $3.1 million for the first nine months of
fiscal 1998 from $1.4 million for the comparable period in fiscal 1997. This
increase was due primarily to increased average borrowings during the first nine
months of fiscal 1998 that were incurred in connection with the acquisition of
C&H as well as significant capital expenditures made during the last half of
fiscal 1997 and fiscal 1998. Interest expense of approximately $2.1 million
relating to expansion of several facilities was capitalized during the first
nine months of fiscal 1998. The provision for income taxes was $8.6 million for
the first nine months of fiscal 1998 compared with $8.3 million for the
comparable period in fiscal 1997, representing effective tax rates of 38.3% and
36.3%, respectively.
NET INCOME. Net income from continuing operations for the first nine months of
fiscal 1998 decreased by $.9 million, or 5.9%, to $13.7 million from $14.6
million for the comparable period in fiscal 1997. This decrease was primarily
the result of the impact from the GM strike.
11
<PAGE> 12
Liquidity and Capital Resources
- -------------------------------
At July 31, 1998, the Company had $40.8 million of working capital, representing
a current ratio of 1.98 to 1 and a debt-to-capitalization ratio of 42.6%. As a
result of the financial condition of the Company, the Company believes that it
will be able to continue its planned investment in new equipment and facilities
through fiscal 1999.
Net cash provided by operating activities is primarily generated from net income
of the Company plus non-cash charges for depreciation and amortization, which,
because of the capital intensive nature of the Company's business, are
substantial. Net cash provided by operating activities during the first nine
months of fiscal 1998 was $33.3 million as compared to $23.0 million for the
comparable period of fiscal 1997, primarily as a result of the significant
decrease in accounts receivable. Net cash provided by operating activities has
historically been used by the Company to fund a portion of its capital
expenditures.
Capital expenditures were $55.9 million during the first nine months of fiscal
1998 and $37.9 million for the comparable period in fiscal 1997. Approximately
$45.2 million of the capital expenditures during the first nine months of fiscal
1998 were for expansions of the Company's current blanking and stamping
facilities as well as new construction at Jefferson Blanking. The Company's
total capital budget for fiscal 1998, including carryover from the previous year
amounts to approximately $68.0 million. These additions are being constructed or
obtained to support increased business and anticipated new business and to
enhance productivity.
Prior to January 22, 1998, the Company had a $70.0 million unsecured revolving
credit facility ("Shiloh Facility") with KeyBank National Association
("KeyBank"). On January 22, 1998, the Company increased the Shiloh Facility to
$135.0 million. The term of the Shiloh Facility extends to January 31, 2003. The
Company has the option to select the applicable interest rate at KeyBank's prime
rate or the LIBOR rate plus a factor determined by a pricing matrix based on the
Company's ratio of Funded Debt to EBITDA. As of July 31, 1998, the factor as
determined by the pricing matrix was 0.175%. The terms of the agreement require
an annual facility fee as determined by a pricing matrix based on the Company's
ratio of Funded Debt to EBITDA. This annual facility fee is currently 0.3%.
Prior to January 22, 1998, the Company was acting as an 80% guarantor for a
$28.0 million unsecured revolving credit facility ("SOM Facility") entered into
by Shiloh of Michigan, L.L.C. with KeyBank.
The Company executed a promissory note as of December 6, 1996 in favor of
Richland Bank in the aggregate principal amount of $4.0 million. Interest
accrues on the outstanding principal balance thereunder at LIBOR rate plus 3/4%.
In March 1995, Medina County, Ohio issued on the behalf of the Company an
aggregate of $5.4 million in principal amount of variable rate industrial
revenue bonds due 2010, which are secured by the Company with a letter of
credit. The funds from these bonds were used to finance a portion of the
expansion at the Company's steel pickling operations in Valley City, Ohio. The
$5.4 million of such proceeds was outstanding as of July 31, 1998.
The Company believes that it currently has sufficient liquidity and available
capital resources to meet its existing needs, and the financial capability to
increase its long-term borrowing level if that becomes appropriate due to
changes in its capital requirements. Total availability under the Company's
unsecured lines of credit and revolving credit facilities is $139.0 million,
$19.6 million of which was unused at July 31, 1998.
The Company has initiated a review of its business processes and information
systems to discover whether these processes and systems are year 2000 compliant.
This review is lead by the "Shiloh Technology Alignment and Reengineering"
(STAR) team that is performing an upgrade of the business operating system and a
continuous review of computer related processes to determine year 2000
compliance. This team is composed of outside
12
<PAGE> 13
consultants who have an expertise in the area of computer systems as well as an
internal project manager and a plant engineer who are dedicated to this project.
The project manager's primary focus is compliance of information systems with a
secondary focus on critical business systems. The primary focus of the plant
engineer is compliance of non-technical business processes and systems. These
non computer related areas include but are not limited to, security, heating,
ventilation, air conditioning, utilities, equipment and machinery having
computer controls.
The Company has also distributed and requested information related to year 2000
compliance from customers and suppliers in an effort to ascertain, what, if any
negative impacts may occur in the event such customers and suppliers are not
year 2000 compliant on January 1, 2000. Based on the efforts that are already
underway as well as those that will continue to be developed, the Company
believes it will have addressed all of the mission critical systems both
computer related and non-computer related that will allow the Company to
continue operations beyond the year 2000. However, there can be no assurance
that the Company's systems, both computer and non-computer related will prove to
be year 2000 compliant. In the event that such systems are not year 2000
compliant there could be a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
FORWARD-LOOKING STATEMENTS
The statements contained in this Report that are not historical facts are
forward-looking statements. These forward- looking statements are subject to
certain risks and uncertainties with respect to the Company's operations in
fiscal 1998 as well as over the long term such as, without limitation, (i) a
downturn in the automotive industry, which is highly cyclical, dependent on
consumer spending and subject to the impact of domestic and international
economic conditions and regulations and policies regarding international trade,
(ii) a labor dispute involving the Company's customers or suppliers (iii) the
ability of the Company to accomplish its strategic objectives with respect to
external expansion through selective acquisitions, internal expansion and the
construction of new facilities and (iv) increases in the price of, or
limitations on the availability of steel, the Company's primary raw material.
Any or all of these risks and uncertainties could cause actual results to differ
materially from those reflected in the forward-looking statements. These
forward-looking statements are based on certain assumptions and analyses made by
the Company in light of its experience and its perception of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate in the circumstances. In addition, such statements are subject
to a number of assumptions, risks and uncertainties, including, without
limitation, the risks and uncertainties identified in this Report, general
economic and business conditions, the business opportunities (or lack thereof)
that may be presented to and pursued by the Company, changes in laws or
regulations and other factors, many of which are beyond the control of the
Company. Investors and prospective investors are cautioned that any such
statements are not guarantees of future performance and that actual results or
developments may differ materially from those projected in the forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
13
<PAGE> 14
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 27 Financial Data Schedule.
b. Reports on Form 8-K: None.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: September 14, 1998 SHILOH INDUSTRIES, INC.
By: /s/ Robert L. Grissinger
-------------------------------------
Robert L. Grissinger,
Chairman, President
and Chief Executive Officer
By: /s/ Craig A. Stacy
-------------------------------------
Craig A. Stacy,
Chief Financial Officer
and Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000904979
<NAME> SHILOH INDUSTRIES INC.
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,279,353
<SECURITIES> 0
<RECEIVABLES> 35,791,480
<ALLOWANCES> 0
<INVENTORY> 40,524,864
<CURRENT-ASSETS> 82,282,132
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 331,213,541
<CURRENT-LIABILITIES> 41,483,169
<BONDS> 0
0
0
<COMMON> 130,805
<OTHER-SE> 160,892,326
<TOTAL-LIABILITY-AND-EQUITY> 331,213,541
<SALES> 220,335,409
<TOTAL-REVENUES> 220,335,409
<CGS> 176,010,373
<TOTAL-COSTS> 195,414,143
<OTHER-EXPENSES> (445,234)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,069,045
<INCOME-PRETAX> 22,297,455
<INCOME-TAX> 8,550,287
<INCOME-CONTINUING> 13,747,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,747,168
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
</TABLE>
