<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 April 30, 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
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SHILOH INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 51-0347683
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Suite 350, 1013 Centre Road, Wilmington, Delaware 19805
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(Address of principal executive offices - zip code)
(302) 998-0592
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(Registrant's telephone number, including area code)
N/A
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(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 June 11, 1998 was 13,080,263
shares.
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SHILOH INDUSTRIES, INC.
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INDEX
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Page
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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
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
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PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
SHILOH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
April 30, October 31,
ASSETS 1998 1997
- ------ --------- -----------
<S> <C> <C>
Cash and cash equivalents $ 1,047,285 $ 191,688
Accounts receivable 51,737,133 50,151,099
Inventory 29,390,193 31,148,360
Deferred income taxes 370,467 370,467
Prepaid expenses 3,768,627 3,921,449
------------ ------------
Total current assets 86,313,705 85,783,063
------------ ------------
Property, plant and equipment, net 221,869,214 187,178,766
Goodwill 11,889,711 12,643,610
Other assets 4,222,443 4,020,791
------------ ------------
Total assets $324,295,073 $289,626,230
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 21,551,834 $ 20,995,989
Short term note payable -- 3,000,000
Accrued income taxes 4,460,317 1,916,333
Other accrued expenses 13,740,145 14,387,519
------------ ------------
Total current liabilities 39,752,296 40,299,841
------------ ------------
Long-term debt 117,400,000 93,400,000
Deferred income taxes 9,307,241 9,307,241
------------ ------------
Total liabilities 166,459,537 143,007,082
------------ ------------
Stockholders' equity
Common stock 130,689 130,387
Paid-in capital 39,196,494 38,743,406
Retained earnings 118,508,353 107,745,355
------------ ------------
Total stockholders' equity 157,835,536 146,619,148
------------ ------------
Commitments and contingent liabilities -- --
Total liabilities and stockholders' equity $324,295,073 $289,626,230
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<TABLE>
<CAPTION>
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three months ended April 30, Six Months ended April 30,
----------------------------- --------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 82,037,736 $ 70,689,021 $155,967,744 $135,256,520
Cost of sales 64,879,401 55,587,229 123,781,699 107,577,497
------------ ------------ ------------ ------------
Gross Profit 17,158,335 15,101,792 32,186,045 27,679,023
Selling, general and administrative expenses 6,785,455 6,115,932 12,922,242 11,441,195
------------ ------------ ------------ ------------
Operating income 10,372,880 8,985,860 19,263,803 16,237,828
Interest expense 1,080,071 564,948 2,075,146 741,695
Interest income 53,972 31,640 58,233 55,801
Minority interest 47,455 103,479 130,041 198,760
Other income, net 83,594 25,514 95,468 197,004
------------ ------------ ------------ ------------
Income from continuing operations before
income taxes 9,477,830 8,581,545 17,472,399 15,947,698
Provision for income taxes 3,639,487 3,144,418 6,709,401 5,980,387
------------ ------------ ------------ ------------
Net income (loss) $ 5,838,343 $ 5,437,127 $ 10,762,998 $ 9,967,311
============ ============ ============ ============
Earnings per share:
Basic earnings per share $ .45 $ .42 $ .83 $ .77
Basic weighted average number of common
shares: 13,045,579 13,038,763 13,042,115 13,025,138
Diluted earnings per share $ .45 $ .42 $ .82 $ .76
Diluted weighted average number of common
shares: 13,122,257 13,051,139 13,100,819 13,045,365
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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<TABLE>
<CAPTION>
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months ended April 30,
--------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ 10,762,998 $ 9,967,311
Adjustments to reconcile net income from
continuing operations to net cash provided by
operating activities:
Depreciation and amortization 7,288,786 4,921,697
Minority interest (130,041) (198,760)
Loss (gain) on sale of assets 785 (39,090)
Changes in operating assets and liabilities
net of effects of business acquired:
Accounts receivable (1,586,034) (5,200,951)
Inventories 1,758,167 (2,585,918)
Prepaids and other assets 81,211 (491,993)
Payables and accruals (91,529) 2,197,379
Accrued income taxes 2,658,310 2,335,003
------------ ------------
Net cash provided by operating activities 20,742,653 10,904,678
------------ ------------
Cash Flows From Investing Activities:
Capital expenditures (41,226,119) (22,825,748)
Proceeds from sale of assets -- 171,877
Acquisition of business -- (3,185,267)
------------ ------------
Net cash used in investing activities (41,226,119) (25,839,138)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings -- 13,500,000
Repayments of short-term borrowings (3,000,000) (14,500,000)
Proceeds from long-term borrowings 24,000,000 16,250,000
Repayments of long-term borrowings -- (33,352)
Issuance of common stock 339,063 298,100
------------ ------------
Net cash provided by financing activities 21,339,063 15,514,748
Net increase (decrease) in cash and cash equivalents 855,597 580,288
Cash and cash equivalents at beginning of period 191,688 1,721,152
------------ ------------
Cash and cash equivalents at end of period $ 1,047,285 $ 2,301,440
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Basis of Presentation and Business
- -------------------------------------------
The condensed consolidated financial statements have been prepared by Shiloh
Industries, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
in the condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of such financial statements.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures are adequate to make the information
presented not misleading, it is suggested that these condensed consolidated
financial statements be read in conjunction with the audited financial
statements and the notes thereto included in the Company's 1997 Annual Report to
Shareholders.
Revenues and operating results for the six months ended April 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2 - Inventories:
- ---------------------
Inventories consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 11,336,020 $ 14,009,471
Work-in-process 12,545,671 12,873,380
Finished goods 6,584,571 5,431,578
------------ ------------
Total at average cost 30,466,262 32,314,429
LIFO reserve (1,076,069) (1,166,069)
------------ ------------
Total $ 29,390,193 $ 31,148,360
============ ============
</TABLE>
NOTE 3 - Property, Plant and Equipment:
- ---------------------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
---- ----
<S> <C> <C>
Land $ 5,658,030 $ 4,307,018
Buildings and improvements 81,498,869 69,457,521
Machinery and equipment 147,179,127 136,681,671
Furniture and fixtures 9,722,644 7,767,319
Construction in progress 45,940,070 30,695,279
------------- -------------
Total, at cost 289,998,740 248,908,808
Less: Accumulated depreciation (68,129,526) (61,730,042)
------------- -------------
Net property, plant and equipment $ 221,869,214 $ 187,178,766
============= =============
</TABLE>
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NOTE 4 - Financing Arrangements:
- --------------------------------
Short-term debt consists of the following:
<TABLE>
<CAPTION>
April 30, 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
============== ==============
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
-------------- --------------
<S> <C> <C>
Revolving credit loan - interest at 6.0333% at April 30, 1998 $112,000,000 $ 63,000,000
Revolving credit loan - interest at 6.1875% at April 30, 1997 --- 25,000,000
Variable rate industrial development bond, secured by letter of
credit, weighted average interest rate at 3.69% payable on
February 1, 2010 5,400,000 5,400,000
$ $ 93,400,000
Less: current portion --- ---
------------ -------------
Total $117,400,000 $ 93,400,000
============ =============
</TABLE>
Prior to January 22, 1998, the Company had a $70 million unsecured revolving
credit facility ("Shiloh Facility") with KeyBank National Association
("KeyBank"). On January 22, 1998, the Company increased the Shiloh Facility to
$135 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 April 30, 1998, the factor as
determined by the pricing matrix was .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 .3%.
Prior to January 22, 1998, the Company was acting as an 80% guarantor for a $28
million unsecured revolving credit facility ("SOM Facility") entered into by
Shiloh of Michigan with KeyBank. On January 22, 1998, the Company used $28
million of the Shiloh Facility to retire the outstanding balance of the SOM
Facility.
The Company executed a promissory note as of December 6, 1996 in favor of
Richland Bank in the aggregate principal amount of $4.0 million. Interest
accrues on the outstanding principal balance thereunder at LIBOR rate plus 3/4%.
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 $21.6 million at April 30, 1998.
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NOTE 5 - Other Information:
- ---------------------------
During the six months ended April 30, 1998 and 1997, cash payments for interest
amounted to $2.1 million and $1.5 million respectively, while cash payments, net
of refunds, for income taxes amounted to $4.1 million and $3.6 million,
respectively. The provision for income taxes was $6.7 million for the first six
months of fiscal 1998 compared with $6.0 million for the comparable period in
fiscal 1997, representing effective tax rates of 38.4% and 37.5%, respectively.
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. The Company, as of November 14, 1997, had granted options to certain
officers and employees to purchase an aggregate of 389,900 shares at prices
ranging from $11.00 to $18.625 per share. No additional stock options have been
granted subsequent to November 14, 1997.
During the six months ended April 30, 1998, 30,200 shares of the granted options
were exercised. As a result of such issuance of common stock, the Company
received $339,063 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.
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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., 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 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 LLC"), is a Michigan LLC and is principally managed and operated by Bing.
On March 31, 1998, the Company,
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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 APRIL 30, 1998
COMPARED TO THREE MONTHS ENDED APRIL 30, 1997
REVENUES. Revenues increased by $11.3 million, or 16.0%, to $82.0 million for
the second quarter of fiscal 1998 from $70.7 million for the comparable period
in fiscal 1997. The increase in revenues is primarily due to the inclusion of
$4.8 million of revenues from C&H, which was acquired in August 1997. Revenues
from the blanking and stamping and the other steel processing operations for the
second quarter of fiscal 1998 increased approximately 18.6% and 8.7%,
respectively, from the comparable period in fiscal 1997. The percentage of
revenues from directly owned steel processed increased slightly to 72.0% for the
second quarter of fiscal 1998 from 71.6% for the comparable period in fiscal
1997. The percentage of revenues from toll processed steel decreased slightly to
28.0% for the second quarter of fiscal 1998 from 28.4% 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 large percentage of the
overall quarter growth coming from directly owned steel processing sales.
GROSS PROFIT. Gross profit increased by $2.1 million, or 13.6%, to $17.2 million
for the second quarter of fiscal 1998 from $15.1 million for the comparable
period in fiscal 1997. Gross margin decreased to 20.9% for the second quarter of
fiscal 1998 from 21.4% for the comparable period in fiscal 1997. The slight
decline in gross margins is primarily attributed to the increase in directly
owned steel processing revenue of .4%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 10.9% to $6.8 million for the second quarter
of fiscal 1998 from $6.1 million for the comparable period in fiscal 1997. As a
percentage of revenues, selling, general and administrative expenses decreased
to 8.3% for the second quarter of fiscal 1998 from 8.7% for the comparable
period in fiscal 1997. The largest component of this increase, in dollars,
principally is a result of the inclusion of C&H for the second quarter of 1998.
OTHER. The Company incurred interest expense of $1.1 million in the second
quarter of fiscal 1998 due primarily to increased average borrowings during the
period and the Company had $.6 million of interest expense in the comparable
period of fiscal 1997. Interest expense of approximately $.7 million relating to
expansion of several facilities was capitalized during the period. The provision
for income taxes was $3.6 million in the second quarter of fiscal 1998 compared
with $3.1 million for the comparable period in fiscal 1997, representing
effective tax rates of 38.4% and 36.6%, respectively. The lower rate in the
second quarter of fiscal 1997 reflects the utilization of certain state tax
credits.
NET INCOME. Net income from continuing operations for the second quarter of
fiscal 1998 increased by $.4 million, or 7.4%, to $5.8 million from $5.4 million
for the comparable period in fiscal 1997. This increase was primarily the result
of net income improvements at the Company's blanking and stamping divisions.
10
<PAGE> 11
SIX MONTHS ENDED APRIL 30, 1998
COMPARED TO SIX MONTHS ENDED APRIL 30, 1997
REVENUES. Revenues increased by $20.7 million, or 15.3%, to $156.0 million for
the first six months of fiscal 1998 from $135.3 million for the comparable
period in fiscal 1997. The increase in revenues is primarily due to the
inclusion of $9.4 million of revenues from C&H. The remaining increase is
attributed to a significant volume increase at our Sectional Stamping division.
Revenues from the blanking and stamping and the other steel processing
operations for the first six months of fiscal 1998 increased approximately 19.9%
and 2.8%, respectively, from the comparable period in fiscal 1997. The
percentage of revenues from directly owned steel decreased to 71.9% for the
first six months of fiscal 1998 from 73.0% for the comparable period in fiscal
1997. Revenues from toll processed steel increased to 28.1% for the first six
months of fiscal 1998 from 27.0% 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 $4.5 million, or 16.3%, to $32.2 million
for the first six months of fiscal 1998 from $27.7 million for the comparable
period in fiscal 1997. Gross margin increased to 20.6% for the first six months
of fiscal 1998 from 20.5% for the comparable period in fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $1.5 million, or 12.9% to $12.9 million for
the first six months of fiscal 1998 from $11.4 million for the comparable period
in fiscal 1997. As a percentage of revenues, selling, general and administrative
expenses decreased to 8.3% for the first six months of fiscal 1998 from 8.5% 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 start-up costs of Jefferson Blanking during the first six
months of fiscal 1998.
OTHER. Interest expense increased to $2.1 million for the first six months of
fiscal 1998 from $.7 million for the comparable period in fiscal 1997 due
primarily to increased average borrowings during the first six months of fiscal
1998 that were primarily in connection with the acquisition of C&H and
significant capital expenditures made during fiscal 1997 and 1998. Interest
expense of approximately $1.3 million relating to expansion of several
facilities was capitalized during the first six months of fiscal 1998. The
provision for income taxes was $6.7 million for the first six months of fiscal
1998 compared with $6.0 million for the comparable period in fiscal 1997,
representing effective tax rates of 38.4% and 37.5%, respectively.
NET INCOME. Net income from continuing operations for the first six months of
fiscal 1998 increased by $.8 million, or 8.0%, to $10.8 million from $10.0
million for the comparable period in fiscal 1997. This increase was primarily
the result of net income improvements at the Company's blanking and stamping
divisions.
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LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1998, the Company had $46.6 million of working capital,
representing a current ratio of 2.17 to 1 and a debt-to-capitalization ratio of
42.7%. 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 1998.
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 six
months of fiscal 1998 was $20.6 million as compared to $10.9 million for the
comparable period of fiscal 1997. Net cash provided by operating activities has
historically been used by the Company to fund a portion of its capital
expenditures.
Capital expenditures were $41.2 million during the first six months of fiscal
1998 and $22.8 million for the comparable period in fiscal 1997. Approximately
$37.0 million of the capital expenditures during the first half 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 million unsecured revolving
credit facility ("Shiloh Facility") with KeyBank National Association
("KeyBank"). On January 22, 1998, the Company increased the Shiloh Facility to
$135 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 April 30, 1998, the factor as
determined by the pricing matrix was .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 .3%.
Prior to January 22, 1998, the Company was acting as an 80% guarantor for a $28
million unsecured revolving credit facility ("SOM Facility") entered into by
Shiloh of Michigan with KeyBank. On January 22, 1998, the Company used $28
million of the Shiloh Facility to retire the outstanding balance of the SOM
Facility.
The Company executed a promissory note as of December 6, 1996 in favor of
Richland Bank in the aggregate principal amount of $4.0 million. Interest
accrues on the outstanding principal balance thereunder at LIBOR rate plus 3/4%.
In 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 April 30, 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,
$21.6 million of which was unused at April 30, 1998.
The Company has initiated a review of its management and information systems to
discover whether such systems are year 2000 compliant. Although the Company has
not completed such a review, the Company does not anticipate that significant
compliance efforts will be required. The Company is unable to determine the
extent to which year 2000 issues will impact its suppliers with respect to
orders and shipments of material used
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<PAGE> 13
by the Company, however, the Company does not anticipate that year 2000
compliance issues of its suppliers, if any, will have a material adverse effect
on the Company's business, prospects, financial condition or 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 either 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.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On March 26, 1998, at the Annual Meeting of Stockholders of Shiloh Industries,
Inc., the stockholders took the following actions:
(1) Elected as Class I Directors all nominees designated in the
Proxy Statement dated February 24, 1998; and
(2) Approved the amendments to the 1993 Key Employee Stock
Incentive Plan; and
(3) Approved the appointment of the independent certified public
accountants of the Company for the current fiscal year.
The Directors were elected pursuant to the following vote:
BROKER
NOMINEE FOR WITHHELD NON-VOTE
- ------- --- -------- --------
James C. Fanello 12,576,678 12,657 --
Dieter Kaesgen 12,576,654 12,681 --
James A. Karman 12,576,654 12,681 --
The approval of the amendments to the 1993 Key Employee Stock Incentive Plan was
approved by the following vote:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
- --- ------- ------- --------
11,811,376 572,684 4,382 --
The approval of appointment of Price Waterhouse as independent certified public
accountants to the Company for its current fiscal year was approved by the
following vote:
BROKER
FOR AGAINST ABSTAIN NON-VOTE
- --- ------- ------- --------
12,583,891 2,074 3,370 --
14
<PAGE> 15
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10 1993 Key Employee Stock Incentive Plan,
as amended, is incorporated herein by
reference to Exhibit A of the Company's
Proxy Statement on Schedule 14A for the
fiscal year ended October 31, 1997
(Commission File No. 0-21964).
Exhibit 27 Financial Data Schedule.
b. Reports on Form 8-K: None.
15
<PAGE> 16
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: June 15, 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
16
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