<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997 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/A. [ ]
Aggregate market value of Common Stock held by non-affiliates of the
registrant as of January 20, 1998 at a closing price of $18.25 per share as
reported by the Nasdaq National Market was approximately $72,689,111. 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 20, 1998 was
13,038,763.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following document are incorporated by reference to Part
III of this Annual Report on Form 10-K: the Proxy Statement for the Registrant's
1998 Annual Meeting of Stockholders (the "Proxy Statement").
<PAGE> 2
Although Note 9 of this Item 8 contains certain amendments, the
complete text of Item 8 is included in this Form 10-K/A pursuant to Rule
12b-15 of the Securities Exchange Act of 1934. Accordingly, Item 8 is hereby
amended and restated in its entirety as follows:
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements
Report of Independent Accountants
Consolidated Balance Sheet at October 31, 1997 and 1996
Consolidated Statement of Income for three years ended October 31, 1997
Consolidated Statement of Cash Flows for the three years ended October 31, 1997
Consolidated Statement of Stockholders' Equity for the three years ended
October 31, 1997
Notes to Consolidated Financial Statements
Financial Statement Schedule for the three years ended October 31, 1997 is
located in Item 14(a) of the Annual Report on Form 10-K:
II - Valuation and Qualifying Accounts and Reserves
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
-14-
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Shiloh Industries, Inc.
In our opinion, the consolidated financial statements listed on the
accompanying index, present fairly, in all material respects, the financial
position of Shiloh Industries, Inc. and its subsidiaries at October 31, 1997 and
1996 and the results of their operations and their cash flows for each of the
three years in the period ended October 31, 1997, 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.
/s/ Price Waterhouse LLP
Cleveland, Ohio
December 11, 1997, except as to Note 17, which is as of January 22, 1998.
-15-
<PAGE> 4
SHILOH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 191,688 $ 1,721,152
Accounts receivable 50,151,099 33,115,765
Inventory 31,148,360 18,626,492
Deferred income taxes 370,467 1,034,092
Prepaid expenses 3,921,449 3,573,160
------------ ------------
Total current assets 85,783,063 58,070,661
------------ ------------
Property, plant and equipment, net 187,178,766 122,293,375
Goodwill 12,643,610 615,318
Other assets 4,020,791 26,029,671
------------ ------------
Total assets $289,626,230 $207,009,025
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 20,995,989 $ 9,719,528
Short term note payable 3,000,000 2,500,000
Accrued income taxes 1,916,333 1,412,499
Other accrued expenses 14,387,519 9,625,343
------------ ------------
Total current liabilities 40,299,841 23,257,370
------------ ------------
Long-term debt 93,400,000 50,433,352
Deferred income taxes 9,307,241 7,161,027
------------ ------------
Total liabilities 143,007,082 80,851,749
------------ ------------
Stockholders' equity
Common stock, par value $.01 per share;
25,000,000 shares authorized; 13,038,763 and
13,011,663 shares issued and outstanding at
October 31, 1997 and 1996, respectively 130,387 130,116
Preferred stock, $.01 per share; 5,000,000 shares
authorized and unissued -- --
Paid-in capital 38,743,406 38,375,152
Retained earnings 107,745,355 87,652,008
------------ ------------
Total stockholders' equity 146,619,148 126,157,276
Commitments and contingent liabilities -- --
Total liabilities and stockholders' equity $289,626,230 $207,009,025
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-16-
<PAGE> 5
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $273,161,251 $ 219,465,925 $ 212,347,916
Cost of sales 214,343,391 173,835,459 173,734,108
----------- ----------- -----------
Gross Profit 58,817,860 45,630,466 38,613,808
Selling, general and administrative expenses 25,556,837 17,086,152 14,340,652
---------- ---------- ----------
Operating income 33,261,023 28,544,314 24,273,156
Interest expense 2,219,003 165,948 898,596
Interest income 57,832 55,408 496,147
Minority interest 394,207 123,162 --
Other income (expense), net 274,081 (81,215) 64,019
---------- ---------- ----------
Income from continuing operations before taxes 31,768,140 28,475,721 23,934,726
Provision for income taxes 11,674,793 10,952,269 9,470,855
---------- ---------- ---------
Income from continuing operations 20,093,347 17,523,452 14,463,871
Loss from discontinued operations, net of income taxes -- (256,139) (288,469)
Loss on sale of discontinued operations, net of
income taxes -- (9,589,213) --
Net income $ 20,093,347 $ 7,678,100 $ 14,175,402
============ ============= =============
Earnings per share:
Income from continuing operations $ 1.54 $ 1.35 $ 1.11
Loss from discontinued operations -- (.02) (.02)
Loss on sale of discontinued operations -- (.74) --
------------ ------------- -------------
Net income per share $ 1.54 $ 0.59 $ 1.09
============ ============= =============
Weighted average number of common shares 13,032,081 13,011,663 13,002,616
</TABLE>
The accompanying notes are an integral part of these financial statements.
-17-
<PAGE> 6
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended October 31,
------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 20,093,347 $ 7,678,100 $14,175,402
Adjustment to reconcile net income from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 11,012,383 7,165,910 6,466,668
Discontinued operations -- 9,845,352 288,469
Minority interest (394,207) (103,162) --
Deferred income taxes 2,809,839 1,290,012 683,979
Deferred pension -- -- 61,827
Loss (gain) on sale of assets (53,065) -- 40,831
Changes in operating assets and liabilities, net of working capital
changes resulting from acquisitions:
Accounts receivable (8,846,145) (3,412,343) (1,757,362)
Inventories (2,539,552) (2,527,297) 2,639,569
Prepaids and other assets (335,682) (1,415,075) 1,690,578
Payables and accruals 9,086,189 3,492,744 1,060,896
Accrued income taxes 503,834 (1,226,016) 1,270,429
----------- ----------- -----------
Net cash provided by continuing operations 31,336,941 20,788,225 26,621,286
Discontinued operations - non cash charges and
working capital changes -- (4,225,697) (1,165,511)
----------- ----------- -----------
Net cash provided by operating activities 31,336,941 16,562,528 25,455,775
----------- ----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (63,164,276) (37,482,394) (25,519,357)
Proceeds from sale of assets 157,134 13,200,000 297,580
Acquisitions, net of cash (13,694,436) (22,577,937) --
----------- ----------- -----------
Net cash used in investing activities (76,701,578) (46,860,331) (25,221,777)
----------- ----------- -----------
Cash Flows From Financing Activities:
Proceeds from short-term borrowings 29,700,000 16,500,000 11,800,000
Repayments of short-term borrowings (29,200,000) (14,000,000) (11,800,000)
Proceeds from long-term borrowings 44,250,000 65,102,310 5,331,042
Repayments of long-term borrowings (1,283,352) (37,975,000) (4,892,836)
Issuance of common stock 368,525 -- 194,696
----------- ----------- -----------
Net cash provided by financing activities 43,835,173 29,627,310 632,902
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (1,529,464) (670,493) 866,900
Cash and cash equivalents at beginning of period 1,721,152 2,391,645 1,524,745
----------- ----------- -----------
Cash and cash equivalents at end of period $ 191,688 $ 1,721,152 $ 2,391,645
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE> 7
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON
STOCK ADDITIONAL
($.01 PAR PAID-IN RETAINED
VALUE) CAPITAL EARNINGS TOTAL
-------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
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
Issuance of 27,100 common shares 271 368,254 -- 368,525
Net Income -- -- 20,093,347 20,093,347
-------- ----------- ------------ ------------
October 31, 1997 $130,387 $38,743,406 $107,745,355 $146,619,148
======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE> 8
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Business:
The Company is a vertically integrated steel processor that supplies
high quality blanks, stampings and processed steel as well as designs and builds
tools for 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
$77,383,879, $63,171,827 and $55,848,345 of toll processing revenue for 1997,
1996 and 1995, 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 ("SFAS") 87. The plans are funded based on the
requirements and limitations of the Employee Retirement Income Security Act of
1974. The majority of employees of the Company participate in discretionary
profit sharing plans administered by the Company. The Company also provides
postretirement benefits to certain employees (Note 11).
GOODWILL
Goodwill represents the excess of cost over the fair value of net
assets of acquired entities and is amortized on a straight-line basis over the
expected benefit period of 30 years. During 1997, 1996 and 1995, goodwill
amortization amounted to $297,544, $20,763 and $23,113, respectively.
Accumulated amortization was $375,545 and $78,001 at October 31, 1997 and 1996,
respectively.
The Company uses an undiscounted cash flow method to review the
recoverability of the carrying 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.
-20-
<PAGE> 9
NOTE 2 - Summary of Significant Accounting Policies - (continued):
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.
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.
STOCK-BASED COMPENSATION
During 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
The Company continues 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 is presented in the notes to the financial statements.
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 February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS No. 128"), was issued. This Statement establishes
standards for computing and presenting earnings per share. The Company will
adopt SFAS 128 in the year ending October 31, 1998. This statement is not
expected to have a significant impact on the earnings per share computation as
historically computed by the Company.
In March 1997, Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS No. 129") was issued.
This Statement establishes standards for disclosing information about an
entity's capital structure. The Company will adopt SFAS No. 129 in the year
ending October 31, 1998. Adoption of SFAS 129 is not expected to have a material
impact on the Company.
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS No. 130") was issued. This Statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The Company
will adopt SFAS No. 130 in the year ending October 31, 1999.
In June 1997, Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131") was issued. This Statement requires that public business enterprises
report information about operating segments in annual financial statements using
the management approach. The Company will adopt SFAS No. 131 in the year ending
October 31, 1999. The Company has not yet determined what, if any, impact this
standard will have on the financial statements.
-21-
<PAGE> 10
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.
Summary operating data of the discontinued operation for the period
ending July 9, 1996 and fiscal year 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Sales $ 10,931,052 $ 16,461,916
Gross profit 2,395,279 4,235,599
Loss before income taxes (756,391) (309,034)
Income tax benefit 244,238 20,565
------------ ------------
Net loss from discontinued operations $ (512,153) $ (288,469)
============ ============
</TABLE>
NOTE 4- Acquisitions
During fiscal 1997, the Company acquired the entities described below,
which were accounted for by the purchase method of accounting:
On August 29, 1997, the Company acquired substantially all the assets
of C & H for an aggregate cash purchase of approximately $10.9 million,
including acquisition costs. C&H, headquartered in Utica, Michigan, provides
tool design and build services for the automotive industry.
On November 1, 1996, the Company acquired substantially all the assets
and assumed certain liabilities of Greenfield for approximately $25.3 million,
including acquisition costs, comprised of approximately $17.3 million of cash
and approximately $7.6 million of assumed liabilities. Greenfield, headquartered
in Canton, Michigan, provides the automotive industry a variety of processes
including tool and die design and build, stamping, assembly, welding,
prototyping operations and mold design and build.
The purchase prices have been allocated to the assets purchased and the
liabilities assumed based upon the fair value on the dates of acquisitions, as
follows:
<TABLE>
<CAPTION>
(In thousands) C&H Greenfield
--- ----------
<S> <C> <C>
Net working capital, other than cash $ 3,364 $ 8,018
Property, plant and equipment 2,764 9,801
Goodwill 4,805 7,519
------- -------
Purchase price $10,933 $25,338
======= =======
</TABLE>
The operating results of these acquired businesses have been included
in the consolidated statement of income from the dates of acquisition.
On the basis of a pro forma consolidation of the results of operations
as if the C&H acquisition had taken place at the beginning of fiscal 1997,
consolidated net sales, net income and earnings per share would have been $288.7
million, $20.2 million and $1.55 per share, respectively, for fiscal 1997. For
the C&H and Greenfield acquisitions combined, pro forma consolidated net sales,
net income and earnings per share would have been $269.7 million, $8.2 million
and $0.63 per share, respectively, for fiscal 1996. Such pro forma amounts are
not necessarily indicative of what the actual results would have been if the
acquisitions had been effective at the beginning of fiscal years 1996 and 1997.
NOTE 5 - 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 $849,554 and $913,070 at October 31, 1997 and 1996, respectively.
-22-
<PAGE> 11
NOTE 6 - Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials $ 14,009,471 $ 11,557,662
Work-in-process 12,873,380 2,797,698
Finished goods 5,431,578 5,475,054
------------ ------------
Total at average cost 32,314,429 19,830,414
LIFO reserve (1,166,069) (1,203,922)
------------ ------------
Total $ 31,148,360 $ 18,626,492
============ ============
</TABLE>
Average cost inventory is net of reserves to reduce certain inventory
from cost to net realizable value. Such reserves aggregated $137,938 and $82,181
at October 31, 1997 and 1996, respectively. Of the total inventory at average
cost at October 31, 1997 and 1996, $21,393,078 and $17,741,751, respectively,
were valued using the LIFO method.
NOTE 7 - Other Assets:
Other assets consist of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
---------- ------------
<S> <C> <C>
Cash surrender value of life insurance $3,242,679 $ 2,990,140
Other 778,112 461,594
Deposit for acquisition -- 22,577,937
---------- -----------
Total $4,020,791 $26,029,671
========== ===========
</TABLE>
NOTE 8 - Property, Plant and Equipment:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
------------- -------------
<S> <C> <C>
Land $ 4,307,018 $ 3,584,572
Buildings and improvements 69,457,521 48,916,332
Machinery and equipment 136,681,671 87,121,959
Furniture and fixtures 7,767,319 4,810,494
Construction in progress 30,695,279 30,787,858
------------- -------------
Total, at cost 248,908,808 175,221,215
Less: Accumulated depreciation (61,730,042) (52,927,840)
------------- -------------
Net property, plant and equipment $ 187,178,766 $ 122,293,375
============= =============
</TABLE>
Depreciation expense was $10,698,783, $7,145,146, and $6,443,556 for
1997, 1996 and 1995, respectively.
During the three years ended October 31, 1997, interest costs of
$1,886,464, $650,629 and $445,648 were capitalized as part of property, plant
and equipment respectively.
The Company had commitments for capital expenditures of approximately
$16.2 million at October 31, 1997.
-23-
<PAGE> 12
NOTE 9 - Financing Arrangements:
Short-term debt consists of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
---------- ----------
<S> <C> <C>
Revolving credit loan - interest at 5.90% at October 31, 1996 $ -- $2,500,000
Revolving credit loan - interest at 6.16% at October 31, 1997 3,000,000 --
---------- ----------
Total $3,000,000 $2,500,000
========== ==========
</TABLE>
Long-term debt consists of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
----------- ------------
<S> <C> <C>
Revolving credit loan - interest at 6.16% at October 31, 1997 $63,000,000 $26,500,000
Revolving credit loan - interest at 6.15% at October 31, 1997 25,000,000 18,500,000
Variable rate industrial development bond, secured by letter of
credit, weighted average interest rate at 3.80% payable on
February 1, 2010 5,400,000 5,433,352
----------- -----------
$93,400,000 $50,433,352
Less: current portion -- --
----------- -----------
$93,400,000 $50,433,352
=========== ===========
</TABLE>
Prior to January 31, 1997, the Company had a $30 million unsecured
revolving credit facility with KeyBank. On January 31, 1997, the Company
increased the Shiloh Facility to $70 million. The term of the Shiloh Facility
extends to February 28, 2001 with an option for successive one year term
extensions available at the Company's request and KeyBank's approval, upon
proper written notification. The Company has the option to select the applicable
interest rate at KeyBank's prime rate or the LIBOR rate plus 1/2 % fixed in
increments of 30, 60 or 90 days. The terms of the agreement require an annual
commitment fee equal to 1/4% on the average unused amount of the Shiloh
Facility.
Prior to February 24, 1997, the Company was acting as an 80% guarantor
for the SOM Facility, a $23 million unsecured revolving credit facility, entered
into by Shiloh of Michigan with KeyBank. On February 24, 1997, the Company
increased the SOM Facility to $28 million and remains an 80% guarantor of the
SOM Facility. The Company is an 80% owner of Shiloh of Michigan. The Company's
joint venture partner continues to guarantee the remaining 20% of the SOM
Facility. The term of the SOM Facility extends to February 28, 1999 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.
Under the Company's revolving credit facilities, including the SOM
Facility, $14 million was unused at October 31, 1997.
At October 31, 1997, the scheduled maturities of all long-term debt
during the next five years is a follows:
<TABLE>
<S> <C>
1998 --
1999 25,000,000
2000 --
2001 63,000,000
2002 --
2003 --
Thereafter 5,400,000
</TABLE>
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
bonds due 2010, which are secured by the Company with a letter of credit. The
funds from these bonds were used to finance a portion of the expansion at the
Company's steel pickling operations in Valley City, Ohio. The entire $5.4
million of such proceeds was borrowed and outstanding as of October 31, 1996.
-24-
<PAGE> 13
Certain of the debt agreements described above contain various
restrictive covenants which 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.
Interest paid amounted to $4,006,614, $1,063,938 and $1,575,547 during 1997,
1996 and 1995, respectively.
NOTE 10 - Leases:
The Company leases certain equipment under operating leases. Rent
expense under operating leases for 1997, 1996 and 1995 was $474,482, $274,441
and $252,791, respectively. Future minimum lease payments under operating leases
are as follows at October 31, 1997:
Operating
----------
1998 $686,188
1999 608,387
2000 546,409
2001 505,777
2002 360,242
----------
Total minimum lease payments $2,707,003
==========
Note 11 - 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, 1997; 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, 1997; 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, 1997. For the valuation of pension
obligations at the end of 1997, the discount rate for all plans was decreased to
7.5% from 8.0% at the end of 1996.
The components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
October 31,
--------------------------------------------------------
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Service cost for the current period $ 899,753 $ 863,168 $ 688,641
Interest cost on projected benefit
obligation 748,406 651,116 623,452
Actual return on assets (1,141,290) (603,488) (1,100,300)
Net amortization and deferrals 470,402 90,722 574,211
----------- ----------- -----------
$ 977,271 $ 1,001,518 $ 786,004
=========== =========== ==========
</TABLE>
-25-
<PAGE> 14
Employee pension funded status was as follows:
<TABLE>
<CAPTION>
October 31, 1997 October 31, 1996
--------------- ---------------
Assets Assets
Exceed Exceed
Actuarial present value of benefit obligations: Accumulated Accumulated
Benefits Benefits
------------- -------------
<S> <C> <C>
Vested employees $ (6,869,940) $(6,180,351)
Non-vested employees (197,640) (180,578)
------------ -----------
Accumulated benefit obligation (7,067,580) (6,360,929)
Additional benefits based on estimated future salary levels (3,689,779) (2,994,145)
------------ -----------
Projected benefit obligation (10,757,359) (9,355,074)
Plan assets at fair value 10,191,992 9,728,033
------------ -----------
Funded status (565,367) 372,959
Unamortized net liability existing at date of adoption of SFAS 87 901,772 988,596
Unrecognized net experience (loss) gain 277,529 (366,087)
Minimum liability --- ---
Unrecognized prior service cost 727,088 515,796
------------ -----------
Pension related asset (liability) $ 1,341,022 $ 1,511,264
============ ===========
</TABLE>
In addition to the defined benefit plans described above, the Company
recorded expense of $1,292,320, $1,118,322 and $1,022,830 during 1997, 1996 and
1995, respectively, with respect to its defined contribution plans.
During 1997, the Company initiated a Supplemental Executive Retirement
Plan (SERP) for key employees of the Company. The Company has agreed to pay each
covered employee a certain sum annually for ten (10) years upon retirement or,
in the event of death, to their designated beneficiary. A benefit is also paid
if the employee terminates employment (other than by discharge for cause).
Compensation expense relating to this plan was $1,359,000 in fiscal 1997. Total
benefits accrued under this plan were $1,359,000 at October 31, 1997.
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.
-26-
<PAGE> 15
The Company's accumulated postretirement benefit obligation (APBO) is comprised
of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
----------- -----------
<S> <C> <C>
Retirees $ (671,455) $ (396,018)
Fully eligible active plan participants (240,655) (274,507)
Other active plan participants (1,787,082) 1,263,562)
APBO (2,699,192) 1,934,087)
Unrecognized transition liability 428,450 455,060
Unrecognized prior service cost --- ---
Unrecognized net loss (gain) 1,351,676 876,833
----------- ----------
Postretirement benefit related liability $ (919,066) $ (602,194)
=========== ==========
</TABLE>
The net periodic postretirement benefit cost included the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Service cost of benefits earned $ 124,242 $ 137,813
Interest cost on APBO 181,827 167,549
Amortization of transition liability 26,610 28,401
Net amortization and deferrals 50,153 66,823
--------------- ---------------
Total $ 382,832 $ 400,586
=============== ===============
</TABLE>
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation at October 31, 1997 was 8.0%,
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 $983,808 at October 31, 1997 and the postretirement benefit cost
by approximately $172,931 for the year then ended. The actuarial present value
of accumulated postretirement benefit obligations was determined using a
weighted average discount rate of 7.5% at October 31, 1997. The 1997 and 1996
net periodic postretirement benefit cost was determined using a weighted average
discount rate of 8.0% and 7.5%, respectively.
-27-
<PAGE> 16
NOTE 12 - 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 become 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 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 commencing on the first anniversary of
the date of grant. On October 22, 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 became exercisable as of the date of grant and will remain
so for a period of 5 years commencing on the first anniversary of the date of
grant. During fiscal year 1997, 27,100 shares were exercised. There were 226,300
options exercisable at October 31, 1997.
The Company applies the intrinsic value based method of accounting for
this plan. Accordingly, no compensation expense has been recognized for its
fixed stock option plan as options are granted at fair market value. The effect
on the Company's net earnings per share for fiscal 1996, had compensation
expense been determined based on fair value of the awards at the date of grant,
was $0.04 per share. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants: dividend yield of 0%; expected
volatility of 26.0%; risk-free interest rate of 6.1%; and expected lives of 4
years.
EXECUTIVE INCENTIVE BONUS PLAN
In 1996, the Company replaced the Executive Bonus Plan with the
Short-Term Incentive Plan (the "Bonus Plan") which provides annual incentive
bonuses to its eligible employees. The Bonus Plan provides for an aggregate
annual bonus pool (the "Aggregate Amount") equal to 5% of the Company's
operating earnings. Incentives up to the Aggregate Amount may be paid to the
individual participants, in the case of the Chief Executive Officer, by the
Board of Directors upon recommendation by the Compensation Committee, and in the
case of other eligible employees, by the Chief Executive Officer as approved by
the Compensation Committee and the Board of Directors. In determining the
individual incentives, in the case of the Chief Executive Officer, 75% of the
incentive depends upon meeting the corporate goal for return on equity and 25%
of the incentive depends upon meeting specific, project-oriented goals. These
goals are established by the Board of Directors. In the case of corporate
executives eligible for the Bonus Plan, 65% of the incentive depends upon
meeting the corporate goal for return on equity and 35% of the incentive depends
upon specific goals established by the Chief Executive Officer. Finally, in the
case of the remaining employees eligible for the Bonus Plan, 50% of the
incentive depends upon meeting the goal for operating return on assets
established by the Chief Executive Officer and 50% of the incentive depends upon
specific goals as established by the Chief Executive Officer. During fiscal
1997, 1996 and 1995, amounts of $750,038, $516,600 and $519,100, respectively,
were paid under the existing bonus plan for that fiscal year.
-28-
<PAGE> 17
NOTE 13 - Income Taxes:
The components of the provision for income taxes on income from
continuing operations were as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Current:
Federal $ 7,276,000 $ 8,570,579 $ 7,455,226
State and local 1,588,954 1,091,678 1,331,650
---------------- ---------------- ----------------
8,864,954 9,662,257 8,786,876
Deferred 2,809,839 1,290,012 683,979
Total ---------------- ---------------- ----------------
$ 11,674,793 $ 10,952,269 $ 9,470,855
================ ================ ================
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities were comprised of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Deferred tax assets:
Bad debt reserves $ 324,135 $ 365,228
Inventory reserves 306,828 349,061
State income and franchise taxes 1,173,166 608,622
Accrued group insurance 224,668 366,800
Personal property tax reserves 561,996 394,999
Accrued vacation reserves 397,243 375,807
Net operating loss carryforwards ---- 241,475
Capital loss carryforwards 4,912,050 5,046,335
Other reserves 459,968 647,304
--------------- --------------
8,360,054 8,395,631
Less: Valuation allowance (4,912,050) (5,046,335)
--------------- --------------
Total deferred tax assets 3,448,004 3,349,296
Deferred tax liabilities:
Fixed assets (11,295,229) (8,712,337)
Pension assets (11,416) (763,894)
Accounts receivable marked to market (725,649) ----
Joint venture investment (256,229) ----
Other (96,255) ----
--------------- --------------
Net deferred tax liability $ (8,936,774) $ (6,126,935)
=============== ==============
</TABLE>
The valuation allowance relates to capital loss carryforwards which are
not expected to be utilized.
-29-
<PAGE> 18
A reconciliation of the statutory federal income tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
Years Ended October 31,
----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal income tax at statutory rate 35.0% 35.0% 35.0%
State and local income taxes 1.8 3.0 3.6
Other --- 0.5 1.0
---- ---- ----
Effective income tax rate 36.8% 38.5% 39.6%
==== ==== ====
</TABLE>
Income taxes paid amounted to $ 8,757,066, $10,942,558 and $8,616,188
for the years 1997, 1996 and 1995, respectively.
At October 31, 1997, the Company had available a capital loss
carryforward of approximately $12,791,797, 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 14 - Related Party Transactions:
The Company had sales to a significant shareholder of $7,042,217,
$5,360,341 and $5,899,935 for the years 1997, 1996 and 1995, respectively. At
October 31, 1997 and 1996, the Company had receivable balances of $1,091,495 and
$845,482 respectively, due from this shareholder.
NOTE 15 - Quarterly Results of Operations (Unaudited):
<TABLE>
<CAPTION>
(Dollars in Thousands)
-----------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
October 31, 1997
<S> <C> <C> <C> <C>
Revenues $ 64,568 $ 70,689 $ 65,460 $ 72,444
Gross Profit 12,577 15,102 14,276 16,863
Operating Income 7,252 8,986 7,556 9,467
Net Income (Loss) 4,530 5,437 4,649 5,477
Net Income (Loss) per Share .35 .42 .36 .42
----------- ----------- ----------- -----------
October 31, 1996
Revenues $ 51,539 $ 58,045 $ 53,578 $ 56,304
Gross Profit 10,006 11,270 10,810 13,544
Operating Income 6,190 7,399 6,538 8,417
Income from Continuing Operations 3,740 4,544 4,053 5,186
Loss from Discontinued Operations (376) (3) --- 123
Income (Loss) on Sale of Discontinued
Operations --- (10,198) --- 609
Net Income (Loss) $ 3,364 $ (5,657) $ 4,053 $ 5,918
----------- ----------- ----------- -----------
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>
-30-
<PAGE> 19
NOTE 16 - 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 17 - Subsequent Events:
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 as determined by a pricing matrix based on
the Company's ratio of Funded Debt to EBITDA. The factor as determined by the
pricing matrix is currently .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%. On January 22,
1998, the Company used $28 million of the Shiloh Facility to retire the
outstanding balance of the SOM Facility.
-31-
<PAGE> 20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO THE ANNUAL
REPORT ON FORM 10-K/A 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: FEBRUARY 24, 1998
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 February 24, 1998
- -----------------------------------------
Dominick C. Fanello
/s/ ROBERT L. GRISSINGER Chairman, President and February 24, 1998
- -----------------------------------------Chief Executive Officer
Robert L. Grissinger and Director (Principal
Executive Officer)
* Treasurer and Chief Financial February 24, 1998
- -----------------------------------------
Craig A. Stacy Officer (Principal Accounting
and Principal Financial Officer)
* Director February 24, 1998
- -----------------------------------------
James C. Fanello
* Director February 24, 1998
- -----------------------------------------
Curtis E. Moll
* Director February 24, 1998
- -----------------------------------------
Dieter Kaesgen
* Director February 24, 1998
- -----------------------------------------
David J. Hessler
* Director February 24, 1998
- -----------------------------------------
Richard S. Gray
* Director February 24, 1998
- -----------------------------------------
James A. Karman
* Director February 24, 1998
- -----------------------------------------
Theodore K. Zampetis
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K/A 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.
By: /s/ ROBERT L. GRISSINGER
-------------------------------
ROBERT L. GRISSINGER,
ATTORNEY-IN-FACT
-36-
