Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______________ to __________________
Commission file number 1-5978
SIFCO INDUSTRIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0553950
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
970 East 64th Street, Cleveland Ohio 44103
- ------------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(216) 881-8600
----------------------------------------------------
(Registrant's telephone number, including area code)
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 and 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
The number of the Registrant's Common Shares outstanding at July 31, 2003 was
5,127,733.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- -----------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales $ 22,574 $ 20,167 $ 58,428 $ 61,252
Operating expenses:
Cost of goods sold 19,167 17,489 53,150 56,970
Selling, general and administrative expenses 3,045 3,369 10,194 11,741
---------- ---------- -------- --------
Total operating expenses 22,212 20,858 63,344 68,711
---------- ---------- -------- --------
Operating income (loss) 362 (691) (4,916) (7,459)
Interest income (8) (36) (53) (201)
Interest expense 217 219 631 648
Foreign currency exchange loss (gain), net 60 (149) 287 3
Other income, net (150) (60) (214) (207)
---------- ---------- -------- --------
Income (loss) before income tax provision 243 (665) (5,567) (7,702)
(benefit)
Income tax provision (benefit) 11 (214) 41 (2,228)
---------- ---------- -------- --------
Net income (loss) $ 232 $ (451) $ (5,608) $ (5,474)
========== ========== ======== ========
Net income (loss) per share (basic) $ 0.04 $ (0.09) $ (1.07) $ (1.05)
Net income (loss) per share (diluted) $ 0.04 $ (0.09) $ (1.07) $ (1.05)
Weighted-average number of common shares (basic) 5,254 5,208 5,256 5,217
Weighted-average number of common shares (diluted) 5,252 5,233 5,256 5,239
See notes to unaudited consolidated condensed financial statements.
2
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, SEPTEMBER 30,
2003 2002
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 4,726 $ 7,583
Receivables, net 16,207 14,505
Inventories 10,767 10,701
Refundable income taxes 1,481 1,423
Prepaid expenses and other current assets 746 1,501
----------- --------
Total current assets 33,927 35,713
Property, plant and equipment, net 25,916 29,106
Other assets:
Goodwill, net 2,574 2,574
Other assets 1,190 946
----------- --------
Total other assets 3,764 3,520
----------- --------
Total assets $ 63,607 $ 68,339
=========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,451 $ 1,440
Accounts payable 7,231 4,130
Accrued liabilities 9,705 9,618
----------- --------
Total current liabilities 18,387 15,188
Long-term debt, net of current maturities 10,279 11,093
Other long-term liabilities 3,549 4,323
Shareholders' equity:
Serial preferred shares, no par value, authorized 1,000 shares -- --
Common shares, par value $1 per share, authorized 10,000 shares;
issued 5,332 and 5,358 shares at June 30, 2003 and
September 30, 2002, respectively; outstanding 5,242 and 5,258
shares at June 30, 2003 and September 30, 2002, respectively 5,322 5,358
Additional paid-in capital 6,780 6,936
Retained earnings 28,021 33,629
Accumulated other comprehensive loss (7,862) (7,034)
Unearned compensation - restricted common shares (395) (562)
Common shares held in treasury at cost, 80 and 100 shares at
June 30, 2003 and September 30, 2002, respectively (474) (592)
----------- --------
Total shareholders' equity 31,392 37,735
----------- --------
Total liabilities and shareholders' equity $ 63,607 $ 68,339
=========== ========
See notes to unaudited consolidated condensed financial statements.
3
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED
JUNE 30,
--------------------------
2003 2002
---- ----
Cash flows from operating activities:
Net loss $ (5,608) $ (5,474)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 3,242 3,650
Loss (gain) on disposal of property, plant and equipment 3 (5)
Deferred income taxes -- (9)
Asset impairment charges 1,175 4,088
Changes in operating assets and liabilities:
Receivables (1,702) 4,014
Inventories (67) 1,038
Refundable income taxes (58) --
Prepaid expenses and other current assets (280) (197)
Other assets (244) (427)
Accounts payable 3,101 (1,610)
Accrued liabilities 87 (3,308)
Other long-term liabilities (712) (47)
-------- --------
Net cash provided (used) by operating activities (1,063) 1,713
Cash flows from investing activities:
Capital expenditures (1,355) (4,324)
Decrease in funds held by trustee for capital project -- 92
Proceeds from sale of property, plant and equipment 143 24
Other 128 68
-------- --------
Net cash used for investing activities (1,084) (4,140)
Cash flows from financing activities:
Proceeds from revolving credit agreement 19,242 19,379
Repayments of revolving credit agreement (18,919) (21,633)
Repayments of long-term debt (1,140) (1,130)
Proceeds from other indebtedness 14 --
Repurchase of common shares -- (143)
Share transactions under employee stock plan 93 69
-------- --------
Net cash used for financing activities (710) (3,458)
-------- --------
Decrease in cash and cash equivalents (2,857) (5,885)
Cash and cash equivalents at the beginning of the period 7,583 13,787
-------- --------
Cash and cash equivalents at the end of the period $ 4,726 $ 7,902
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ (566) $ (656)
Cash paid for income taxes, net (10) (800)
See notes to unaudited consolidated condensed financial statements.
4
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF BUSINESS
The unaudited consolidated condensed financial statements included herein
include the accounts of SIFCO Industries, Inc. and its wholly owned subsidiaries
(the "Company"). All significant intercompany accounts and transactions have
been eliminated. In the opinion of management, all adjustments, which include
only normal recurring adjustments necessary for a fair presentation of the
results of operations, financial position, and cash flows for the periods
presented, have been included. These unaudited consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and related notes included in the Company's fiscal 2002 Annual Report
on Form 10-K/A. The results of operations for any interim period are not
necessarily indicative of the results to be expected for other interim periods
or the full year. Certain prior period amounts have been reclassified in order
to conform to current period classifications.
B. NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets". This standard is effective for fiscal years beginning after
December 15, 2001. The Company adopted this standard on October 1, 2002, the
beginning of the first quarter of the Company's fiscal year 2003. The standard
changes financial accounting and reporting for acquired goodwill and indefinite
life intangible assets. SFAS No. 142 provides that intangible assets with finite
useful lives will continue to be amortized and goodwill and intangible assets
with indefinite lives will not be amortized, but rather will be tested for
impairment upon adoption and on an annual basis thereafter. The Company
completed the initial impairment test and concluded that goodwill was not
impaired as of October 1, 2002. Other than the cessation of goodwill
amortization, the adoption of SFAS No. 142 did not have an impact on the
Company's financial position or results of operations.
The following table presents pro forma net income (loss) and net income (loss)
per share information, as if SFAS No. 142 had been adopted on October 1, 2001.
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -----------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) as reported $ 232 $ (451) $ (5,608) $ (5,474)
Goodwill amortization -- 21 -- 72
Trademark amortization -- 2 -- 6
----------- ------------ ------------ --------------
Pro forma net income (loss) $ 232 $ (428) $ (5,608) $ (5,396)
=========== ============ ============ ==============
Basic net income (loss) per share:
Net income (loss) as reported $ 0.04 $ (0.09) $ (1.07) $ (1.05)
Goodwill amortization -- 0.01 -- 0.02
Trademark amortization -- -- -- --
----------- ------------ ------------ --------------
Pro forma net income (loss) $ 0.04 $ (0.08) $ (1.07) $ (1.03)
=========== ============ ============ ==============
Diluted net income (loss) per share:
Net income (loss) as reported $ 0.04 $ (0.09) $ (1.07) $ (1.05)
Goodwill amortization -- 0.01 -- 0.02
Trademark amortization -- -- -- --
----------- ------------ ------------ --------------
Pro forma net income (loss) $ 0.04 $ (0.08) $ (1.07) $ (1.03)
=========== ============ ============ ==============
5
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This standard addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement cost. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from
acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. This standard
requires entities to record the fair value of a liability for an asset
retirement obligation in the period incurred. SFAS No. 143 is effective for
fiscal years beginning after June 15, 2002 and was adopted by the Company
effective October 1, 2002. The adoption of this standard did not have a material
impact on the Company's financial position or results of operations.
In September 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". This statement superceded SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of" and the
accounting and reporting provisions of Accounting Principals Board Opinion No.
30, "Reporting Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", related to the disposal of a segment of a business.
This statement amends certain provisions of Accounting Research bulletin No. 51,
"Consolidated Financial Statements". SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and was adopted by the Company effective
October 1, 2002. The adoption of this standard did not have a material impact on
the Company's financial position or results of operations.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This standard addresses financial and
accounting and reporting for costs associated with exit or disposal activities
and replaces Emerging Issues Task Force No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" ("EITF No. 94-3"). SFAS
No. 146 requires that a liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF No. 94-3, a
liability for exit costs is recognized at the date of an entity's commitment to
an exit plan. Beginning January 1, 2003, the Company recognizes liabilities
associated with exit or disposal activities as they are incurred in accordance
with SFAS No. 146.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure - an Amendment of FASB Statement No.
123". SFAS No. 148 provides alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
compensation. It also requires prominent disclosure in the significant
accounting policy note of both annual and interim financial statements of the
method of accounting for stock-based compensation and the related pro forma
disclosures when the intrinsic value method continues to be used. The statement
is effective for fiscal years beginning after December 15, 2002, and disclosure
provisions are effective for the first fiscal quarters beginning after December
15, 2002. The Company adopted the disclosure provisions of SFAS 148 in the
quarter ended December 31, 2002. The adoption of this standard did not have a
material impact on the Company's financial position or results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003. The Company does not expect the adoption of this
standard to have a material impact on the Company's financial position or
results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments, which under previous
guidance, issuers could account for as equity. The new standard requires that
those financial instruments be classified as liabilities in statements of
financial position. This new standard is effective for interim periods beginning
after June 15, 2003. The Company does not expect the adoption of this standard
to have a material impact on the Company's financial position or results of
operations.
6
C. STOCK-BASED COMPENSATION
The Company employs the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). The following pro forma information regarding net income and earnings
per share was determined as if the Company had accounted for its stock options
under the fair value method prescribed by SFAS No. 123. For purposes of pro
forma disclosure, the estimated fair value of the stock options is amortized
over the options' vesting period. The pro forma information is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- --------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) as reported $ 232 $ (451) $ (5,608) $ (5,474)
Add: Stock-based compensation expense included in
reported net loss, net of related tax effects -- -- -- --
Less: Stock-based compensation expense
determined under fair value based method
for all awards, net of related tax effects 35 25 103 76
------- -------- --------- --------
Pro forma net income (loss) as if the fair value
based method had been applied to all awards $ 197 $ (476) $ (5,711) $ (5,550)
======= ======== ========= ========
Net income (loss) per share:
Basic - as reported $ 0.04 $ (0.09) $ (1.07) $ (1.05)
Basic - pro forma $ 0.04 $ (0.09) $ (1.09) $ (1.06)
Diluted - as reported $ 0.04 $ (0.09) $ (1.07) $ (1.05)
Diluted - pro forma $ 0.04 $ (0.09) $ (1.09) $ (1.06)
2. INVENTORIES
Inventories consist of:
JUNE 30, SEPTEMBER 30,
2003 2002
--------- -------------
Raw materials and supplies $ 3,108 $ 3,411
Work-in-process 3,454 3,525
Finished goods 4,205 3,765
--------- -------------
Total inventories $ 10,767 $ 10,701
========= =============
Inventories are stated at the lower of cost or market. Cost is determined using
the last-in, first-out ("LIFO") method for 31% and 35% of the Company's
inventories at June 30, 2003 and September 30, 2002, respectively. Cost is
determined using the specific identification cost method for 29% and 33% of the
Company's inventories at June 30, 2003 and September 30, 2002, respectively. The
first-in, first-out ("FIFO") method is used for the remainder of the
inventories. If the FIFO method had been used for the inventories for which cost
is determined using the LIFO method, inventories would have been $3,128 and
$3,114 higher than reported at June 30, 2003 and September 30, 2002,
respectively.
3. LONG-TERM DEBT
In February 2003, the Company entered into an agreement with its lending bank to
amend certain provisions of its credit agreements. The amendment waives the
interest coverage ratio covenant through the period ended December 31, 2003. The
amendment modifies certain other financial covenants and the corresponding
interest rate. As a consequence, the term note's three-month LIBOR based
effective borrowing rate increased to 9.49%, the revolving credit agreement's
borrowing rate increased to the bank's base rate plus 0.5% and the commitment
fee on the standby letter of credit backing up the industrial development bond
increased to 2.75% effective February 13, 2003. Also, the amount available under
the revolving credit agreement was reduced to $6,000, subject to sufficiency of
collateral.
7
In May 2003, the Company entered into an agreement with its lending bank to
further amend certain provisions of its credit agreements. The amendment waives
the interest coverage ratio covenant through the period ended December 31, 2004
and extends the maturity date of the Company's $6,000 revolving credit agreement
to June 30, 2004. This amendment also provides for a $1,000 reduction of
borrowing availability subject to the passage of time or the occurrence of a
certain event.
In July 2003, the Company entered into an agreement with its lending bank to
extend the maturity date of the Company's $6,000 revolving credit agreement to
September 30, 2004. The amendment also extended the maturity date of the standby
letter of credit that backs up the Company's industrial development bond to May
16, 2005.
4. COMPREHENSIVE LOSS AND ACCUMULATED OTHER COMPREHENSIVE LOSS
Total comprehensive loss is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) $ 232 $ (451) $ (5,608) $ (5,474)
Foreign currency translation adjustment 79 143 146 89
Unrealized gain (loss) on interest rate swap
agreement, net of income tax provision of $29
and $50 in 2002, respectively 55 (76) 98 22
Currency exchange contract adjustment (695) 1,889 (1,035) 1,466
Minimum pension liability adjustment (37) -- (37) (74)
------------ --------- --------- ---------
Total comprehensive loss $ (366) $ 1,505 $ (6,436) $ (3,971)
============ ========= ========= =========
The components of accumulated other comprehensive loss are as follows:
JUNE 30, SEPTEMBER 30,
2003 2002
------------ ---------
Foreign currency translation adjustment $ (6,861) $ (7,007)
Interest rate swap agreement adjustment (460) (558)
Currency exchange contract adjustment --- 1,035
Minimum pension liability adjustment (541) (504)
------------ ---------
Total accumulated other comprehensive loss $ (7,862) $ (7,034)
============ =========
8
5. BUSINESS SEGMENTS
The Company identifies reportable segments based upon distinct products
manufactured and services provided. The Turbine Component Services and Repair
Group ("Repair Group") consists primarily of the repair and remanufacture of jet
engine (aerospace) and heavy industrial turbine engine components. The Repair
Group is also involved in precision component machining for aerospace
applications. The Aerospace Component Manufacturing Group consists of the
production, heat treatment and some machining of forgings in various alloys
utilizing a variety of processes for application in the aerospace industry. The
Metal Finishing Group is a provider of specialized selective electrochemical
metal finishing processes and services used to apply metal coatings to a
selective area of a component. The Company's reportable segments are separately
managed.
Segment information is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ----------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net sales:
Turbine Component Services and Repair Group $ 11,114 $ 9,059 $ 29,074 $ 28,210
Aerospace Component Manufacturing Group 8,965 8,525 22,144 25,365
Metal Finishing Group 2,495 2,583 7,210 7,677
----------- ------------ ----------- ----------
Consolidated net sales $ 22,574 $ 20,167 $ 58,428 $ 61,252
=========== ============ =========== ==========
Operating income (loss):
Turbine Component Services and Repair Group $ (407) $ (1,148) $ (4,765) $ (7,315)
Aerospace Component Manufacturing Group 1,075 575 686 177
Metal Finishing Group 281 271 566 943
Corporate unallocated expenses (587) (389) (1,403) (1,264)
----------- ------------ ----------- ----------
Consolidated operating income (loss) 362 (691) (4,916) (7,459)
Interest expense, net 209 183 578 447
Foreign currency exchange loss, net 60 (149) 287 3
Other income, net (150) (60) (214) (207)
----------- ------------ ----------- ----------
Consolidated income (loss) before income tax
provision (benefit) $ 243 $ (665) $ (5,567) $ (7,702)
=========== ============ =========== ==========
All of the Company's net goodwill of $2,574 at June 30, 2003 and September 30,
2002 is attributable to the Company's Metal Finishing Group.
6. RETIREMENT BENEFIT PLAN
The Company and certain of its subsidiaries sponsor defined benefit pension
plans covering most of its employees. In January 2003, the Company's Board of
Directors adopted a resolution effective February 28, 2003, to cease the accrual
of future benefits under the SIFCO Industries, Inc. Salaried Retirement Plan
("Plan"), which covers substantially all non-union employees of the Company's
U.S. operations. The Plan will otherwise continue. Because the unrecognized
actuarial losses exceeded the curtailment gain, there was no income or expense
recognized during the nine months ended June 30, 2003 related to these changes.
In conjunction with the changes to the Plan, the Company made certain
enhancements to the defined contribution plan that is available to substantially
all non-union U.S. employees of the Company and its U.S. subsidiaries.
7. ASSET IMPAIRMENT AND OTHER CHARGES
During fiscal 2002, the Company's Repair Group incurred charges related to
severance and other employee benefits to be paid to approximately 76 personnel
associated with the reduction of certain of its capacity for the repairing of
jet engine turbine components. As of September 30, 2002, the Company had a
severance accrual of $752. During the first nine months of fiscal 2003,
severance and other employee benefit payments totaling approximately $534 were
made in connection with this reduction. During the third quarter of fiscal 2003,
the Company's Repair Group reevaluated its personnel requirements and determined
that it would not terminate 12 personnel initially identified to be terminated.
As a result of this decision,
9
$218 of the $752 severance accrual outstanding at September 30, 2002 was
reversed during the third quarter of fiscal 2003. The reversal was recorded in
selling, general and administrative expenses in the Consolidated Condensed
Statements of Operations.
During the second quarter of fiscal 2003, as a result of the current downturn in
the commercial aviation industry and the resulting reduction in demand for third
party jet engine turbine component repair services, such as those provided by
the Company, the Repair Group decided to cease operations at one of its
component repair facilities and to optimize its remaining component repair
capacity through consolidation of operations. The Company expects to complete
these actions by September 2003. As a result of this decision, the Repair Group
anticipates incurring $635 of severance and other employee benefit charges to be
paid to 60 personnel, of which the Repair Group incurred $171 and $430 during
the second and third quarters of fiscal 2003, respectively, and which is
recorded in selling, general and administrative expenses in the Consolidated
Condensed Statements of Operations. As of June 30, 2003, payments totaling $540
have been made for these expenses and all but 9 of the personnel have been
terminated. In connection with these decisions, asset impairment charges
totaling $1,175 related to machinery and equipment were recorded in selling,
general and administrative expenses in the Consolidated Condensed Statements of
Operations during the second quarter of fiscal 2003. The machinery and equipment
write-downs relate to items that are expected to be disposed as a consequence of
the Repair Group's decision to cease operations at one facility and to
consolidate other operations. Fair value of these assets was determined based on
estimated cash flows.
The following table summarizes the remaining liabilities for qualified exit
costs at June 30, 2003 and activity for the nine month period then ended:
BALANCE AT TOTAL 2003 2003 BALANCE AT
SEPTEMBER 30, 2003 CASH NON-CASH JUNE 30,
2002 CHARGES PAYMENTS CHARGES 2003
------------- ---------- ----------- ----------- ----------
Severance and other employee benefits $ 752 $ 602 $ 1,074 $ (218) $ 62
Asset impairments -- 1,175 -- 1,175 --
------------- ---------- ----------- ----------- ----------
Total $ 752 $ 1,777 $ 1,074 $ 957 $ 62
============= ========== =========== =========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations may contain various forward-looking statements and includes
assumptions concerning the Company's operations, future results and prospects.
These forward-looking statements are based on current expectations and are
subject to risk and uncertainties. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, the Company
provides this cautionary statement identifying important economic, political and
technological factors, among others, the absence or effect of which could cause
the actual results or events to differ materially from those set forth in or
implied by the forward-looking statements and related assumptions. Such factors
include the following: (1) future business environment, including capital and
consumer spending; (2) competitive factors, including the ability to replace
business which may be lost due to increased direct involvement by the jet engine
manufacturers in turbine component services and repair markets; (3) successful
procurement of certain repair materials and new repair process licenses from jet
engine manufacturers and/or the Federal Aviation Administration; (4) fluctuating
foreign currency (primarily the euro) exchange rates; (5) successful development
and market introductions of new products, including an advanced coating
technology and the continued development of heavy industrial turbine repair
processes; (6) regressive pricing pressures on the Company's products and
services, with productivity improvements as the primary means to maintain
margins; (7) success with the further development of strategic alliances with
certain turbine engine manufacturers for turbine component repair services; (8)
the long-term impact on the aerospace industry of the September 11, 2001
terrorist attacks on the United States, including collection risks due to the
failure of airlines, engine overhaul companies and other aerospace related
industries; reduced number of aircraft in service; and the accelerated declining
use of older model jet engines such as the JT8D; (9) successful replacement of
declining demand for repair services for turboprop engine components with
component repair services for small turbojet engines utilized in the business
and regional aircraft markets; (10) continued reliance on several major
customers for revenues; (11) the Company's ability to continue to have access to
its revolving credit facility, including the Company's ability to (i) continue
to comply with the terms of its credit agreements, including financial
covenants, (ii) continue to enter into amendments to its credit agreement
containing financial covenants, which it and its bank lender find mutually
acceptable, or (iii) continue to obtain waivers from its bank lender with
respect to its compliance with the covenants contained in its credit
10
agreement; (12) the difficulty in predicting the timing and outcome of legal
proceedings; and (13) stable governments, business conditions, laws, regulations
and taxes in economies where business is conducted.
SIFCO Industries, Inc. and its subsidiaries engage in the production and sale of
a variety of metalworking processes, services and products produced primarily to
the specific design requirements of its customers. The processes and services
include forging, heat-treating, coating, welding, machining and selective
electrochemical metal finishing. The products include forgings, machined forged
parts and other machined metal parts, remanufactured component parts for turbine
engines, and selective electrochemical metal finishing solutions and equipment.
A. RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2003 COMPARED WITH NINE MONTHS ENDED JUNE 30, 2002
Net sales in the first nine months of fiscal 2003 decreased 4.6% to $58.4
million, compared with $61.3 million for the comparable period in fiscal 2002.
Loss before income tax provision in the first nine months of fiscal 2003 was
$5.6 million, compared with loss before income tax benefit of $7.7 million for
the comparable period in fiscal 2002. For the first nine months of fiscal 2003
the Company incurred a net loss of $5.6 million, or $1.07 per share (diluted),
compared with a net loss of $5.5 million, or $1.05 per share (diluted) for the
comparable period in fiscal 2002.
TURBINE COMPONENT SERVICES AND REPAIR GROUP ("REPAIR GROUP")
The Repair Group's net sales in the first nine months of fiscal 2003 increased
3.1% to $29.1 million, compared with $28.2 million in the same fiscal 2002
period. Component manufacturing and repair net sales decreased $1.4 million in
the first nine months of fiscal 2003, compared with the same period in fiscal
2002. Demand for precision component machining and for component repairs for
large jet and heavy industrial turbine engines decreased in the first nine
months of fiscal 2003, compared with the same period in fiscal 2002. This
reflects a reduction in component repairs for older model large jet engines
partially offset by increased demand for component repairs for newer model large
jet engines. The reduced utilization of older generation aircraft that
negatively impacted the Company in fiscal 2002 continued during the first nine
months of fiscal 2003. Despite the increase in component repairs for newer model
large jet engines, the commercial airline industry in general continues to
experience reduced commercial flight demand, which determines the need for
component repairs to newer model jet engines. However, higher demand for
component repairs for small jet engines partially offset the decline in demand
for component repairs for larger jet engines. Net sales associated with the
demand for replacement parts, which often complement component repair services
provided to customers, were up $2.3 million in the first nine months of fiscal
2003 compared with the same period in fiscal 2002. The increase in replacement
parts net sales is attributable to a change in product mix with certain major
customers.
During the first nine months of fiscal 2003, the Repair Group's selling, general
and administrative expenses decreased $0.8 million to $4.8 million, or 16.5% of
net sales, from $5.6 million, or 19.7% of net sales, in the same period in
fiscal 2002. Included in the $4.8 million of selling, general and administrative
expenses in the first nine months of fiscal 2003 were charges aggregating $1.2
million related to equipment impairment and $0.4 million of severance charges
related to the further consolidation of the Repair Group's operations during
fiscal 2003. Included in the $5.6 million of selling, general and administrative
expenses in the first nine months of fiscal 2002 were $1.4 million of charges
related to goodwill and equipment impairment, a $0.3 million increase in a
contingency reserve related to a vendor dispute, and $0.2 million of severance
charges associated with the reduction of the Repair Group's capacity for the
repairing of components related to older generation jet engines. The remaining
selling, general and administrative expenses of $3.2 million, or 11.1% of net
sales, in the first nine months of fiscal 2003 were $0.5 million less than the
remaining $3.7 million, or 13.2% of net sales, of such expenses in the same
period in fiscal 2002.
The Repair Group's operating loss in the first nine months of fiscal 2003
decreased $2.5 million to $4.8 million from a $7.3 million loss in the same
period in fiscal 2002. Included in the operating loss in the first nine months
of fiscal 2003 were charges aggregating $1.2 million related to the impairment
of equipment and $0.4 million of severance charges. Included in the operating
loss in the first nine months of fiscal 2002 were charges aggregating $4.1
million related to inventory write-downs ($2.7 million), the impairment of
goodwill ($0.7 million) and the impairment of equipment ($0.7 million); and the
$0.2 million of severance charges. During the first quarter of fiscal 2002, the
Repair Group performed an evaluation of its existing operations in light of the
anticipated impacts on its business of the September 11, 2001 terrorist attacks.
The principal result of this evaluation process was the decision to optimize the
Repair Group's multiple operations by reducing certain of its capacity for the
repairing of components related to older generation jet engines, principally the
JT8D. As a result of this decision, the Repair Group recognized, during the
first nine months of fiscal 2002, the aforementioned charges. In addition,
during the first nine months of fiscal 2002, the Repair Group increased, by $0.3
million, a contingency reserve
11
related to a vendor dispute. The Repair Group's $3.2 million operating loss,
before the $1.6 million of aforementioned impairment and severance charges,
during the first nine months of fiscal 2003 is an increase of $0.5 million, when
compared to the $2.7 million operating loss, before the $4.6 million of
aforementioned impairment, severance, and contingency charges, during the first
nine months of fiscal 2002. The increased operating loss, before the
aforementioned charges in both nine month periods, was primarily due to the
negative impact on margins of the reduced sales volumes for component
manufacturing and repair services, which was partially off-set by improved
margins on increased volumes of replacement parts.
During the first nine months of fiscal 2003, the euro had strengthened against
the U.S. dollar when compared to the same period in fiscal 2002. The Repair
Group's non-U.S. operations have a significant portion of its operating costs
denominated in euros and, therefore, as the euro strengthens, such costs are
negatively impacted. During the first nine months of fiscal 2003, the Repair
Group was able to hedge much of its exposure to the strengthening euro thereby
mitigating the negative impact on its operating results. Such exposure was
hedged through the end of the third quarter of fiscal 2003. Had the Repair Group
not hedged such exposure, its operating loss would have been greater by
approximately $2.0 million during the first nine months of fiscal 2003.
In an effort to curtail the Repair Group's operating losses, which stem
primarily from its current excess capacity for component repairs, the Company
announced in March of 2003 its plans to cease operations at its Tampa, Florida
component repair facility and to continue to optimize its remaining component
repair capacity through consolidation of operations and other productivity
improvement efforts.
AEROSPACE COMPONENT MANUFACTURING GROUP ("ACM GROUP")
Net sales in the first nine months of fiscal 2003 decreased 12.7% to $22.1
million, compared with $25.4 million in the same fiscal 2002 period. In the
first nine months of fiscal 2003, the ACM Group experienced net sales declines
in all product categories, compared with the same period in fiscal 2002.
Approximately $1.8 million of this decrease is attributable to a decline in the
net sales of commercial aircraft airframe components, as a direct consequence of
reduced flight schedules, cancellation of aircraft orders, workforce reductions,
and continued poor financial performance of the airline industry in general. Net
sales of military airframe and engine components in the first nine months of
fiscal 2003 declined $0.4 million, compared with the same period of fiscal 2002.
Net sales of engine components for small jet engines, consisting primarily of
the AE series latest generation jet engines built by Rolls-Royce Corporation for
business and regional jets, as well as military transport and surveillance
aircraft, decreased $0.4 million in the first nine months of fiscal 2003,
compared with the same period in fiscal 2002. Net sales of components for
helicopters declined $0.3 million and net sales of components for large
commercial jet engines declined $0.2 million in the first nine months of fiscal
2003, compared with the same period in fiscal 2002. Net sales of non-aerospace
related products decreased $0.2 million in the first nine months of fiscal 2003,
compared with the same period in fiscal 2002.
Selling, general and administrative expenses in the first nine months of fiscal
2003 were $1.7 million, or 7.8% of net sales, compared with $2.7 million, or
10.7% of net sales, in the comparable period in fiscal 2002. The primary factor
impacting the ACM Group's selling, general and administrative expenses in the
first nine months of fiscal 2002 was a $0.9 million charge incurred in
connection with the settlement, during the second quarter of fiscal 2002, of an
employment action and a related claim that the Company had filed against its
insurance carrier for its failure to provide coverage. Selling, general and
administrative expenses in the first nine months of fiscal 2002, before this
legal contingency accrual, were $1.9 million. Selling, general and
administrative expenses were favorably impacted in the first nine months of
fiscal 2003 by a reduction in the ACM Group's bad debt expense, compared with
the comparable period in fiscal 2002.
The ACM Group's operating income was $0.7 million in the first nine months of
fiscal 2003, compared with operating income of $0.2 million in the comparable
period of fiscal 2002. Operating results in the first nine months of fiscal 2002
were negatively impacted by the $0.9 million legal contingency accrual discussed
above. Operating results were favorably impacted in the first nine months of
fiscal 2003 by a $0.7 million decrease in variable tooling expenses. The balance
of the change in operating income is primarily attributable to the interplay
between overall lower net sales in relation to fixed manufacturing, selling,
general and administrative expenses in the first nine months of fiscal 2003.
The ACM Group's backlog as of June 30, 2003, was $22.2 million, compared with
$24.9 million as of September 30, 2002. At June 30, 2003, $20.7 million of the
total backlog is scheduled for delivery over the next twelve months. All orders
are subject to modification or cancellation by the customer with limited
charges. The ACM Group believes that the backlog may not be indicative of actual
sales for any succeeding period.
12
METAL FINISHING GROUP
Net sales in the first nine months of fiscal 2003 decreased 6.1 % to $7.2
million, compared with $7.7 million in the comparable fiscal 2002 period. In the
first nine months of fiscal 2003, product net sales, consisting of selective
electrochemical metal finishing equipment and solutions, declined 5.4% to $4.1
million, compared with $4.3 million in the comparable period in fiscal 2002. The
majority of the decline in net sales of selective electrochemical metal
finishing equipment and solutions in the first nine months of fiscal 2003 is
attributable to the overall depressed economic conditions in the aerospace,
power generation, pulp and paper, and railroad industries. These declines were
partially offset by modest increased net sales to petroleum exploration and
military customers. In the first nine months of fiscal 2003, contract service
net sales decreased 8.4% to $3.0 million, compared with $3.3 million in the
comparable period in fiscal 2002. Contract service net sales to customers in the
power generation industry declined approximately $0.5 million. This decline was
partially offset by a $0.3 million increase in contract service net sales to
customers in the automotive industry.
Selling, general and administrative expenses were $2.3 million and $2.2 million
in the first nine months of fiscal 2003 and 2002, respectively, or 31.7% and
28.8% of net sales, respectively. In the first nine months of fiscal 2003,
selling, general and administrative expense were negatively impacted by a $0.1
million increase in employee compensation and benefit expenses and a $0.1
million increase in legal and professional, advertising and other selling,
general and administrative expenses. These increases were offset by a $0.1
million decrease in employee incentive expense.
The Metal Finishing Group's operating income in the first nine months of fiscal
2003 was $0.6 million, compared with operating income of $0.9 million in the
comparable period of fiscal 2002. Operating results were favorably impacted by a
$0.2 million decrease in employee incentive expense in the first nine months of
fiscal 2003, compared with the comparable period of fiscal 2002. Operating
income was negatively impacted in the first nine months of fiscal 2003 by
approximately $0.1 million in increased legal and professional, advertising and
other selling, general and administrative expenses. The balance of the decrease
in operating income is primarily attributable to the interplay between overall
lower net sales in relation to fixed manufacturing, selling, general and
administrative expenses in the first nine months of fiscal 2003.
CORPORATE UNALLOCATED EXPENSES
Corporate unallocated expenses, consisting of corporate salaries and benefits,
legal and professional and other corporate expenses, were $1.4 million in the
first nine months of fiscal 2003, compared with $1.3 million in the comparable
period in fiscal 2002. In the first nine months of fiscal 2003, corporate
unallocated expenses were negatively impacted by higher legal and professional
expenses of $0.2 million. This increase in corporate unallocated expenses was
offset in part by lower consulting expenses.
OTHER/GENERAL
Interest income was $0.1 million in the first nine months of fiscal 2003,
compared with $0.2 million in the comparable period in fiscal 2002. The
reduction of interest income is attributable to lower average cash and cash
equivalent balances outstanding and to lower interest rates available from
short-term investments during the first nine months of fiscal 2003, compared
with the comparable period in fiscal 2002. Interest expense was $0.6 million in
both the first nine months of fiscal 2003 and 2002. Term note interest expense
decreased slightly in the first nine months of fiscal 2003, compared with the
same period in fiscal 2002. The decline in the weighted average term note
outstanding balance in the first nine months of fiscal 2003, compared with the
comparable period in fiscal 2002, was partially offset by an increase in the
weighted average interest rate payable under the term note. Revolving credit
agreement interest expense increased slightly in the first nine months of fiscal
2003, compared with the same period in fiscal 2002. The decline in the interest
rate payable under the revolving credit agreement was offset by an increase in
the weighted average revolving credit agreement outstanding balance in the first
nine months of fiscal 2003, compared with the same period in fiscal 2002.
Industrial development bond interest expense declined in the first nine months
of fiscal 2003, compared with the same period in fiscal 2002. Both the weighted
average outstanding balance and interest rate payable under the industrial
development bonds decreased in the first nine months of fiscal 2003, compared
with the same period in fiscal 2002.
Foreign currency exchange loss was $0.3 million in the first nine months of
fiscal 2003, compared with nil in the comparable period in fiscal 2002. This
loss is the result of foreign currency exchange rate fluctuations, resulting
primarily from the decline in the value of the U.S. dollar in relation to the
euro, on the Company's monetary assets and liabilities that are denominated in a
foreign currency.
13
In the first nine months of fiscal 2003, the income tax benefit related to the
Company's U.S. and non-U.S. subsidiary losses was offset by a valuation
allowance based upon an assessment of the Company's ability to realize such
benefits. In assessing the Company's ability to realize its net deferred tax
assets, management considered the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. Future reversal of the valuation allowance will be
achieved either when the tax benefit is realized or when it has been determined
that it is more likely than not that the benefit will be realized through future
taxable income.
THREE MONTHS ENDED JUNE 30, 2003 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2002
Net sales in the third quarter of fiscal 2003 increased 11.9% to $22.6 million,
compared with $20.2 million in the comparable period in fiscal 2002. Income
before income tax provision was $0.2 million in the third quarter of fiscal
2003, compared with a loss before income tax benefit of $0.7 million in the
comparable period in fiscal 2002. In the third quarter of fiscal 2003, the
Company generated net income of $0.2 million, or $0.04 per share (diluted),
compared with a net loss of $0.5 million, or $0.09 per share (diluted) in the
comparable period in fiscal 2002.
TURBINE COMPONENT SERVICES AND REPAIR GROUP ("REPAIR GROUP")
The Repair Group's net sales in the third quarter of fiscal 2003 increased 22.7%
to $11.1 million, from $9.1 million in the same fiscal 2002 period. Component
manufacturing and repair net sales increased $0.2 million in the third quarter
of fiscal 2003, compared with the same period in fiscal 2002. Demand for
precision component machining and for component repairs for large jet engines
increased in the third quarter of fiscal 2003 compared with the same period in
fiscal 2002. This reflects an increase in component repairs for newer model
large jet engines partially offset by a reduced demand for component repairs for
the older model large jet engines. Despite the increase in component repairs for
newer model large jet engines, the commercial airline industry in general
continues to experience reduced commercial flight demand, which determines the
need for component repairs for newer model jet engines. The reduced utilization
of older generation aircraft that negatively impacted the Company in fiscal 2002
continued in the third quarter of fiscal 2003. Demand for component repairs to
smaller jet engines increased slightly in the third quarter of fiscal 2003,
compared to the same period in fiscal 2002. Demand for component repairs for
heavy industrial turbine engines decreased in the third quarter of fiscal 2003,
compared to the same period in fiscal 2002. Net sales associated with the demand
for replacement parts, which often complement repair services provided to
customers, increased $1.8 million in the third quarter of fiscal 2003, compared
with the same period in fiscal 2002. The increase in replacement parts net sales
is attributable to a change in product mix with certain major customers.
During the third quarter of fiscal 2003, the Repair Group's selling, general and
administrative expenses decreased $0.4 million to $1.1 million, or 9.9% of net
sales, from $1.5 million, or 17.0% of net sales, in the same period in fiscal
2002. In the third quarter of fiscal 2003, the Company incurred $0.2 million of
severance charges related to the further consolidation of the Repair Group's
operations during fiscal 2003. In the third quarter of fiscal 2002, the Company
incurred a $0.3 million increase in a contingency reserve related to a vendor
dispute and $0.2 million of severance charges associated with the reduction of
the Repair Group's capacity for the repairing of components related to older
generation jet engines. The remaining selling, general and administrative
expenses of $0.9 million, or 8.0% of net sales, in the third quarter of fiscal
2003 were $0.2 million less than the remaining $1.1 million, or 11.9% of net
sales, of such expenses in the same period in fiscal 2002.
The Repair Group's operating loss in the third quarter of fiscal 2003 decreased
$0.8 million to $0.4 million from a $1.2 million loss in the same period in
fiscal 2002. Included in the operating loss for the third quarter of fiscal 2003
were $0.2 million of severance charges. Included in the operating loss for the
third quarter of fiscal 2002 were charges aggregating $0.5 million for a $0.3
million increase in a contingency reserve related to a vendor dispute and $0.2
million of severance charges. The Repair Group's $0.2 million operating loss,
before the $0.2 million of severance charges, in the third quarter of fiscal
2003, is an improvement of $0.5 million, when compared with a $0.7 million
operating loss, before the $0.5 million of increased contingency and severance
charges, in the comparable period of fiscal 2002. The improvement in operating
results during the third quarter of fiscal 2003 compared to the same period in
fiscal 2002 was primarily due to the positive impact on margins of the increased
sales volumes for replacement parts.
During the third quarter of fiscal 2003, the euro had strengthened against the
U.S. dollar, compared to the same period in fiscal 2002. The Repair Group's
non-U.S. operations have a significant portion of its operating costs
denominated in euros and, therefore, as the euro strengthens, such costs are
negatively impacted. During the third quarter of fiscal 2003, the Repair Group
was able to hedge much of its exposure to the strengthening euro thereby
mitigating the negative impact on its operating results. Such exposure was
hedged through the end of the third quarter of fiscal 2003. Had the Repair Group
not hedged such exposure, its operating loss would have been greater by
approximately $0.9 million during the third quarter of fiscal 2003.
14
In an effort to curtail the Repair Group's operating losses, which stem
primarily from its current excess capacity for component repairs, the Company
announced in March of 2003 its plans to discontinue operations at its Tampa,
Florida component repair facility and to continue to optimize its remaining
component repair capacity through consolidation of operations and other
productivity improvement efforts.
AEROSPACE COMPONENT MANUFACTURING GROUP ("ACM GROUP")
Net sales in the third quarter of fiscal 2003 increased 5.2% to $9.0 million,
compared with $8.5 million in the same fiscal 2002 period. An increase in the
net sales of military airframe and engine components due to the timing of
military related procurement resulted in a $1.4 million increase in net sales in
the third quarter of fiscal 2003, compared with the same period in fiscal 2002.
Net sales of engine components for small jet engines, consisting primarily of
the AE series latest generation jet engines built by Rolls-Royce Corporation for
business and regional jets, as well as military transport and surveillance
aircraft, decreased $0.7 million. Net sales of commercial airframe components
declined $0.3 million as a direct consequence of reduced flight schedules,
cancellation of aircraft orders, workforce reductions, and continued poor
financial performance of the airline industry. Net sales of components for
helicopters declined $0.2 million. This decline was offset by a $0.1 million
increase in net sales of components for large jet engines and a $0.1 million
increase in net sales of non-aerospace related products.
Selling, general and administrative expenses were $0.6 million, or 6.9% of net
sales, in the third quarter of fiscal 2003, compared with $0.7 million, or 8.3%
of net sales, in the comparable period in fiscal 2002. Selling, general and
administrative expenses were favorably impacted in the third quarter of fiscal
2003 by a $0.1 million decrease in the ACM Group's bad debt expense, compared
with the comparable period in fiscal 2002.
The ACM Group's operating income in the third quarter of fiscal 2003 was $1.1
million, compared with $0.6 million in the same period in fiscal 2002. Operating
results were favorably impacted in the third quarter of fiscal 2003 by $0.2
million decrease in variable tooling expense and by a $0.1 million decrease in
bad debt expense. The balance of the decrease in operating income is primarily
attributable to the interplay between overall lower net sales in relation to
fixed manufacturing, selling, general and administrative expenses in the third
quarter of fiscal 2003.
METAL FINISHING GROUP
Net sales in the third quarter of fiscal 2003 decreased 3.4% to $2.5 million,
compared with $2.6 million in the comparable fiscal 2002 period. In the third
quarter of fiscal 2003, product net sales, consisting of selective
electrochemical metal finishing equipment and solutions decreased 6.9% to $1.3
million, compared with $1.4 million in the comparable period in fiscal 2002. The
majority of the decline in net sales of selective electrochemical metal
finishing equipment and solutions in the third quarter of fiscal 2003 is
attributable to the overall depressed economic conditions in the aerospace, pulp
and paper, power generation, and railroad industries. These declines were
partially offset by modest increases in net sales to customers in the medical
industry. Contract service net sales were $1.1 million in both the third
quarters of fiscal 2003 and 2002. Contract service net sales to customers in the
military and power generation industries declined approximately $0.1 million
each. These declines were offset by increases in contract service net sales to
customers in the automotive and petroleum exploration industries of $0.1 million
each.
Selling, general and administrative expenses were $0.7 million in the third
quarters of fiscal 2003 and 2002, or 29.6% and 28.5% of net sales, respectively.
In the third quarter of fiscal 2003, a $0.1 million decrease in employee
compensation, benefits and incentive expenses was offset by a $0.1 million
increase in legal and professional and other selling, general and administrative
expenses.
The Metal Finishing Group's operating income was $0.3 million in both the third
quarters of fiscal 2003 and 2002. Operating income in the third quarter of
fiscal 2003 was favorably impacted by a $0.1 million decrease in employee
compensation, benefits and incentive expenses in the third quarter of fiscal
2003, compared with the comparable period of fiscal 2002. This was offset by a
$0.1 million increase in legal and professional, advertising and other selling,
general and administrative expenses in the third quarter of fiscal 2003,
compared with the comparable period of fiscal 2002.
CORPORATE UNALLOCATED EXPENSES
Corporate unallocated expenses, consisting of corporate salaries and benefits,
legal and professional and other corporate expenses, were $0.6 million in the
third quarter of fiscal 2003, compared with $0.4 million in the comparable
period of fiscal 2002. In the third quarter of fiscal 2003, corporate
unallocated expenses were negatively impacted by higher legal and professional
expenses of $0.2 million.
15
OTHER/GENERAL
Interest income was $0.01 million in the third quarter of fiscal 2003, compared
with $0.04 million in the comparable period of fiscal 2002. The decline in
interest income is attributable to lower average cash and cash equivalent
balances outstanding and to lower interest rates available from short-term
investments during the third quarter of fiscal 2003, compared with the
comparable period in fiscal 2002. Interest expense was $0.2 million in both the
third quarters of fiscal 2003 and 2002. Term note interest expense increased
slightly in the third quarter of fiscal 2003, compared with the same period in
fiscal 2002. The decline in the weighted average term note outstanding balance
in the third quarter of fiscal 2003, compared with the same period in fiscal
2002, was offset by an increase in the weighted average interest rate payable
under the term note. Revolving credit agreement interest expense also increased
slightly in the third quarter of fiscal 2003. The decline in the interest rate
payable under the revolving credit agreement was offset by an increase in the
weighted average revolving credit agreement outstanding balance in the third
quarter of fiscal 2003, compared with the same period in fiscal 2002. Industrial
development bond interest declined in the third quarter of fiscal 2003, compared
with the same period in fiscal 2002. Both the weighted average outstanding
balance and interest rate payable under the industrial development revenue
bond's decreased in the third quarter of fiscal 2003, compared with the same
period in fiscal 2002.
Foreign currency exchange loss was $0.1 million in the third quarter of fiscal
2003, compared with income of $0.1 million in the comparable period in fiscal
2002. This loss is the result of foreign currency exchange rate fluctuations,
resulting primarily from the decline in the value of the U.S. dollar in relation
to the euro, on the Company's monetary assets and liabilities that are
denominated in a foreign currency.
In the third quarter of fiscal 2003, the income tax benefit related to the
Company's U.S. and non-U.S. subsidiary losses was offset by a valuation
allowance based upon an assessment of the Company's ability to realize such
benefits. In assessing the Company's ability to realize its net deferred tax
assets, management considered the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. Future reversal of the valuation allowance will be
achieved either when the tax benefit is realized or when it has been determined
that it is more likely than not that the benefit will be realized through future
taxable income.
B. LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased to $4.7 million at June 30, 2003 from $7.6
million at September 30, 2002. At present, essentially all of the Company's cash
and cash equivalents are in the possession of its non-U.S. subsidiaries and
relate to undistributed earnings. During the first nine months of fiscal 2003,
the Company received a distribution of $1.5 million from its non-U.S.
subsidiaries. This distribution was utilized to repay a portion of the
outstanding balance under the Company's revolving credit agreement. Effective
October 1, 2000, the Company began to accrue U.S. income taxes on the
undistributed earnings of its non-U.S. subsidiaries in anticipation that
distributions from such earnings, to the extent they may occur in the future,
would result in an additional income tax liability. Distributions from the
Company's non-U.S. subsidiaries to the Company may be subject to statutory
restrictions, adverse tax consequences or other limitations.
Cash flow activity for the first nine months of fiscal 2003 is presented in the
Consolidated Condensed Statements of Cash Flows. During the first nine months of
fiscal 2003, cash was provided by a $0.4 million decrease in the Metal Finishing
Group's accounts receivable due to lower sales and improved cash collections.
This was offset by a $1.6 million and $0.3 million increase in the Repair and
ACM Groups' accounts receivables, respectively, that is primarily attributable
to higher third quarter fiscal 2003 net sales compared with fourth quarter
fiscal 2002 net sales. The Metal Finishing and Repair Groups' inventories
increased $0.1 million and $0.4 million, respectively. The Repair Group's
inventories increased in response to orders scheduled for shipment in the next
six months. The ACM Group's inventories decreased $0.5 million due to higher
third quarter fiscal 2003 net sales. The $3.2 million net increase in
consolidated accounts payable and accrued liabilities is attributable to (i)
$1.4 million increase in the ACM Group's accounts payable and accrued
liabilities due primarily to the impact of extended payment terms negotiated
with vendors; (ii) $1.7 million increase in the Repair Group's accounts payable
attributable primarily to the increase in purchases of inventory to support the
sale of replacement parts and the effect of foreign currency exchange rate
fluctuations on obligations that are payable in a foreign currency (primarily
the euro). Working capital was $15.5 million at June 30, 2003, compared with
$20.5 million at September 30, 2002. The current ratio was 1.8 and 2.4 at June
30, 2003 and September 30, 2002, respectively.
Capital expenditures were $1.4 million in the first nine months of fiscal 2003,
compared with $4.3 million in the comparable period in fiscal 2002. Capital
expenditures in the first nine months of fiscal 2003 consisted primarily of
equipment to expand and diversify the Repair Group's repair capabilities,
including heavy industrial turbine engine component repair. The Company
anticipates that total fiscal 2003 capital expenditures will not exceed $2.2
million and will be concentrated in the Repair Group. At June 30, 2003, the
Company had outstanding commitments for capital expenditures totaling $0.5
million.
16
The Company and certain of its subsidiaries sponsor defined benefit pension
plans covering most of its employees. In January 2003, the Company's Board of
Directors adopted a resolution effective February 28, 2003, to cease the accrual
of future benefits under the SIFCO Industries, Inc. Salaried Retirement Plan
("Plan"), which covers substantially all non-union employees of the Company's
U.S. operations. The Plan will otherwise continue. Because the unrecognized
actuarial losses exceeded the curtailment gain, there was no income or expense
recognized during the nine months ended June 30, 2003 related to these changes.
In conjunction with the changes to the Plan, the Company made certain
enhancements to the defined contribution plan that is available to substantially
all non-union U.S. employees of the Company and its U.S. subsidiaries.
At June 30, 2003, the Company has a 15-year industrial development bond, which
was issued with an original face amount of $4.1 million and was used to expand
the Repair Group's Tampa, Florida facility. The industrial development bond
requires annual principal payments ranging from $0.2 million in fiscal 2004 to
$0.4 million in fiscal 2013. The interest rate is reset weekly, based on
prevailing tax-exempt money market rates. The interest rate at June 30, 2003 was
1.14%. The outstanding balance of the industrial development bond at June 30,
2003 was $3.0 million. The bank's commitment fee on the standby letter of credit
backing up the industrial development bond was 2.75% at June 30, 2003.
At June 30, 2003, the Company has a term note payable in quarterly installments
of $0.3 million through February 2005, with the remaining balance of $3.9
million due May 1, 2005. The term note has a variable interest rate, which after
giving effect to an interest rate swap agreement with the same bank, becomes an
effective fixed rate note, subject to adjustment based upon the level of certain
financial ratios. At June 30, 2003, the term note's three-month LIBOR based
effective borrowing rate was 9.49%. The outstanding balance of the term note at
June 30, 2003 was $6.0 million.
At June 30, 2003, the Company has a $6.0 million revolving credit agreement,
subject to sufficiency of collateral, that expires on June 30, 2004 and bears
interest at the bank's base rate plus 0.5%. The interest rate was 4.50% at June
30, 2003. A 0.375% commitment fee is incurred on the unused balance of the
revolving credit agreement. At June 30, 2003, the outstanding balance under the
revolving credit agreement was $2.7 million.
Under its credit agreements, the Company is subject to certain customary
covenants. These include, without limitation, covenants (as defined) that limit
the amount of annual capital expenditures and require the maintenance of certain
specified financial ratios, including minimum tangible net worth level, a
maximum liability to tangible net worth ratio and an interest coverage ratio.
During the first nine months of fiscal 2003, the Company entered into agreements
with its bank to waive (i) the interest coverage ratio covenant for the period
ended September 30, 2002 through the period ended December 31, 2004 (ii) the
minimum tangible net worth covenant for the period ending September 30, 2002;
and (iii) the capital expenditure limitation for the period ended September 30,
2002. These agreements also modified certain financial covenants and the
corresponding interest rates as well as extended the maturity date of the
Company's $6.0 million revolving credit agreements to June 30, 2004. Under the
most recent amendment, borrowing availability may be reduced by $1.0 million
subject to the passage of time or the occurrence of a certain event. The Company
was in compliance with all applicable covenants at June 30, 2003.
In July 2003, the Company entered into an agreement with its lending bank to
extend the maturity date of the Company's $6.0 million revolving credit
agreement to September 30, 2004. The amendment also extended the maturity date
of the standby letter of credit that backs up the Company's industrial
development bond to May 16, 2005.
The Company's long-term debt as a percentage of equity at June 30, 2003 and
September 30, 2002 was 32.7% and 29.4%, respectively. At June 30, 2003, taking
into consideration the outstanding balance under the revolving credit agreement
and outstanding letters of credit, the Company had $3.3 million available
against its $6.0 million revolving credit agreement.
The Company believes that cash flow from its operations together with existing
cash reserves and the funds available under its revolving credit agreement will
be sufficient to meet its working capital requirements through the end of fiscal
year 2003. However, no assurances can be given as to the sufficiency of the
Company's working capital to support the Company's operations. If the existing
cash reserves, cash flow from operations and funds available under the revolving
credit agreement are insufficient; if working capital requirements are greater
than currently estimated; and/or if the Company is unable to satisfy the
covenants set forth in its credit agreements, the Company may be required to
adopt one or more alternatives, such as reducing or delaying capital
expenditures, restructuring indebtedness, selling assets or operations, or
issuing additional shares of capital stock in the Company. There can be no
assurance that any of these actions could be accomplished, or if so, on terms
favorable to the Company, or that they would enable the Company to continue to
satisfy its working capital requirements.
17
C. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets". This standard is effective for fiscal years beginning after
December 15, 2001. The Company adopted this standard on October 1, 2002, the
beginning of the first quarter of the Company's fiscal year 2003. The standard
changes financial accounting and reporting for acquired goodwill and indefinite
life intangible assets. SFAS No. 142 provides that intangible assets with finite
useful lives will continue to be amortized and goodwill and intangible assets
with indefinite lives will not be amortized, but rather will be tested for
impairment upon adoption and on an annual basis thereafter. The Company
completed the initial impairment test and concluded that goodwill was not
impaired as of October 1, 2002. Other than the cessation of goodwill
amortization, the adoption of SFAS No. 142 did not have an impact on the
Company's financial position or results of operations.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". This standard addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement cost. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from
acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. This standard
requires entities to record the fair value of a liability for an asset
retirement obligation in the period incurred. SFAS No. 143 is effective for
fiscal years beginning after June 15, 2002 and was adopted by the Company
effective October 1, 2002. The adoption of this standard did not have a material
impact on the Company's financial position or results of operations.
In September 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". This statement superceded SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets to be Disposed of" and the
accounting and reporting provisions of Accounting Principals Board Opinion No.
30, "Reporting Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
events and Transactions", related to the disposal of a segment of a business.
This statement amends certain provisions of Accounting Research bulletin No. 51,
"Consolidated Financial Statements". SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001 and was adopted by the company effective
October 1, 2002. The adoption of this standard did not have a material impact on
the Company's financial position or results of operations.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This standard addresses financial and
accounting and reporting for costs associated with exit or disposal activities
and replaces Emerging Issues Task Force No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" ("EITF No. 94-3"). SFAS
No. 146 requires that a liability for costs associated with an exit or disposal
activity to be recognized when the liability is incurred. Under EITF No. 94-3, a
liability for exit costs as defined in EITF No. 94-3 is recognized at the date
of an entity's commitment to an exit plan. Beginning January 1, 2003, the
Company recognizes liabilities associated with exit or disposal activities as
incurred in accordance with SFAS No. 146.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure an Amendment of FASB Statement No. 123".
SFAS No. 148 provides alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation. It also requires prominent disclosure in the significant
accounting policy note of both annual and interim financial statements of the
method of accounting for stock-based compensation and the related pro forma
disclosures when the intrinsic value method continues to be used. The statement
is effective for fiscal years beginning after December 15, 2002, and disclosure
provisions are effective for the first fiscal quarter beginning after December
15, 2002. The Company adopted the disclosure provisions of SFAS 148 in the
quarter ended December 31, 2002. The adoption of this standard did not have a
material impact on the Company's financial position and results of operations.
On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statements 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003. The Company does not expect the adoption of this
standard to have a material impact on the Company's financial position or
results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments, which under previous
guidance, issuers could account for as equity. The new standard requires that
those financial instruments be classified as liabilities in statements of
financial position. This new standard is effective for interim periods beginning
after June 15,
18
2003. The Company does not expect the adoption of this standard to have a
material impact on the Company's financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of business, the Company is subject to foreign currency
and interest risk. The risks primarily relate to the sale of the Company's
products and services in transactions denominated in non-U.S. dollar currencies
(primarily the euro); the payment in local currency of wages and other costs
related to the Company's non-U.S. operations (primarily the euro); and changes
in interest rates on the Company's long-term debt obligations. The Company does
not hold or issue financial instruments for trading purposes.
The Company believes that inflation has not materially affected its results of
operations during the first nine months of fiscal 2003, and does not expect
inflation to be a significant factor in the balance of fiscal 2003.
FOREIGN CURRENCY RISK
The U.S. dollar is the functional currency for all of the Company's U.S.
operations. Effective October 1, 2001, the Company changed the functional
currency of its Irish subsidiary from the local currency to the U.S. dollar. The
functional currency was changed because a substantial majority of the
subsidiary's transactions are now denominated in U.S. dollars. For these
operations, all gains and losses from completed currency transactions are
included in income currently. For the Company's other non-U.S. subsidiaries, the
functional currency is the local currency. Assets and liabilities are translated
into U.S. dollars at the rate of exchange at the end of the period and revenues
and expenses are translated using average rates of exchange. Foreign currency
translation adjustments are reported as a component of accumulated other
comprehensive loss. Foreign currency transaction gains and losses are included
in earnings.
Historically, the Company has been able to mitigate the impact of foreign
currency risk by means of hedging such risk through the use of foreign currency
exchange contracts. However, such risk is mitigated only for the periods for
which the Company has foreign currency exchange contracts in effect, and only to
the extent of the U.S. dollar amounts of such contracts. While the Company had
foreign currency forward exchange contracts outstanding during the nine months
ended June 30, 2003, at June 30, 2003, there were no such contracts outstanding.
The Company will continue to evaluate its foreign currency risk, if any, and the
effectiveness of using similar hedges in the future to mitigate such risk.
At June 30, 2003, the Company's assets and liabilities denominated in British
pounds and the euro were as follows (amounts in thousands):
BRITISH POUNDS EURO
-------------- ----
Cash and cash equivalents 505 1,550
Accounts receivable 429 675
Accounts payable 90 471
Accrued liabilities 100 3,509
INTEREST RATE RISK
The Company's primary interest rate risk exposure results from the variable
interest rate mechanisms associated with the Company's long-term debt consisting
of a term note payable to the Company's bank, a revolving credit agreement and
industrial development variable rate demand revenue bonds. These interest rate
exposures are managed in part by an interest rate swap agreement to fix the
interest rate of the term note payable to the Company's bank. If interest rates
were to increase or decrease by 100 basis points (1%) from June 30, 2003 rates,
and assuming no changes in the amounts outstanding under the revolving credit
agreement and industrial development variable rate demand revenue bonds, the
Company's annual interest expense would increase or decrease by approximately
$0.1 million, respectively.
ITEM 4. CONTROLS AND PROCEDURES
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Chairman and Chief
Executive Officer of the Company and the Chief Financial Officer of the Company,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15 as of the end of
the period covered by this report. Based upon that evaluation, the Chairman and
Chief
19
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings.
There has been no significant change in our internal control over financial
reporting that occurred during the period covered by this report that has
materially affected, or that is reasonably likely to materially affect our
internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In connection with an employment action against the Company filed by an employee
that was settled in March 2002, the Company filed a complaint in Cuyahoga County
Court of Common Pleas against the Company's insurance carrier on the grounds
that it has refused to provide indemnity to the Company for this employment
action. The Company's complaint sought a declaratory judgment that the insurance
carrier owes a duty to indemnify the Company with respect to this action. In
March 2002, the Company received a Ruling on its Motion for Summary Judgment
denying the Company's complaint. Management of the Company believed that the
Court's Ruling on its Motion for Summary Judgment was not consistent with
existing case law and, therefore, the Company appealed this decision to the
Cuyahoga County Court of Appeals. However, because the outcome of this appeal
was uncertain and the initial Ruling was unfavorable, the Company provided $0.9
million in its second quarter fiscal 2002 financial statements, the full amount
of this contingent obligation. In November 2002, the Cuyahoga County Court of
Appeals reversed the Summary Judgment. In February 2003, the insurance carrier
filed a Notice of Appeal with the Ohio Supreme Court and asked the Court to
exercise its discretionary jurisdiction and hear an appeal of the Court of
Appeals' November 2002 decision. In July 2003, the Ohio Supreme Court on its own
initiative dismissed the insurance Carrier's appeal as being improvidently
allowed. The insurance carrier has until August 4, 2003 to file a Motion of
Reconsideration.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
No change.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed with this report or are incorporated herein by
reference to a prior filing in accordance with Rule 12b-32 under the Securities
and Exchange Act of 1934 (Asterisk denotes exhibits filed with this report.).
Exhibit No. Description
- ----------- -----------
3.1 Third Amended Articles of Incorporation of SIFCO Industries,
Inc., filed as Exhibit 3(a) of the Company's Form 10-Q dated
March 31, 2002, and incorporated herein by reference
3.2 SIFCO Industries, Inc. Amended and Restated Code of
Regulations dated January 29, 2002, filed as Exhibit 3(b) of
the Company's Form 10-Q dated March 31, 2002, and incorporated
herein by reference
4.1 Amended and Restated Reimbursement Agreement dated April 30,
2002 Between SIFCO Industries, Inc. and National City Bank,
filed as Exhibit 4(a) of the Company's Form 10-Q dated March
31, 2002, and incorporated herein by reference
4.2 Amended and Restated Credit Agreement Between SIFCO
Industries, Inc. and National City Bank dated April 30, 2002,
filed as Exhibit 4(b) of the Company's Form 10-Q dated March
31, 2002, and incorporated herein by reference
4.3 Promissory Note (Term Note) dated April 14, 1998 Between SIFCO
Industries, Inc. and National City Bank, filed as Exhibit 4(c)
of the Company's Form 10-Q dated March 31, 2002, and
incorporated herein by reference
4.4 Loan Agreement Between Hillsborough County Industrial
Development Authority and SIFCO Industries, Inc., dated as of
May 1, 1998, filed as Exhibit 4(d) of the Company's Form 10-Q
dated March 31, 2002, and incorporated herein by reference
4.5 Consolidated Amendment No. 1 to Amended and Restated Credit
Agreement, Amended and Restated Reimbursement Agreement and
Promissory Note dated November 26, 2002 Between SIFCO
Industries, Inc. and National City Bank, filed as Exhibit 4.5
of the Company's Form 10-K dated September 30, 2002, and
incorporated herein by reference
4.6 Consolidated Amendment No. 2 to Amended and Restated Credit
Agreement, Amended and Restated Reimbursement Agreement and
Promissory Note dated February 13, 2003 Between SIFCO
Industries, Inc. and National City Bank, filed as Exhibit 4.6
of the Company's Form 10-Q dated December 31, 2002, and
incorporated herein by reference
4.7 Consolidated Amendment No. 3 to Amended and Restated Credit
Agreement, Amended and Restated Reimbursement Agreement and
Promissory Note dated May 13, 2003 Between SIFCO Industries,
Inc. and National City Bank, filed as Exhibit 4.7 of the
Company's Form 10-Q dated March 31, 2003, and incorporated
herein by reference
* 4.8 Consolidated Amendment No. 4 to Amended and Restated Credit
Agreement, Amended and Restated Reimbursement Agreement and
Promissory Note dated July 28, 2003 between SIFCO Industries,
Inc and National City Bank
10.1 1989 Key Employee Stock Option Plan, filed as Exhibit B of the
Company's Form S-8 dated January 9, 1990 and incorporated
herein by reference
10.2 Deferred Compensation Program for Directors and Executive
Officers (as amended and restated April 26, 1984), filed as
Exhibit 10(b) of the Company's Form 10-Q dated March 31, 2002,
and incorporated herein by reference
10.3 SIFCO Industries, Inc. 1998 Long-term Incentive Plan, filed as
Appendix A of the Company's Schedule 14A dated December 21,
1998, and incorporated herein by reference
21
10.4 SIFCO Industries, Inc. 1995 Stock Option Plan, filed as
Exhibit 10(d) of the Company's Form 10-Q dated March 31, 2002,
and incorporated herein by reference
10.5 Change in Control Severance Agreement between the Company and
Frank Cappello, dated September 28, 2000, filed as Exhibit 10
(g) of the Company's Form 10-Q dated December 31, 2000 and
incorporated herein by reference
10.6 Change in Control Severance Agreement between the Company and
Hudson Smith, dated September 28, 2000, filed as Exhibit 10
(h) of the Company's Form 10-Q dated December 31, 2000 and
incorporated herein by reference
10.7 Change in Control Severance Agreement between the Company and
Remigijus Belzinskas, dated September 28, 2000, filed as
Exhibit 10 (i) of the Company's Form 10-Q dated December 31,
2000 and incorporated herein by reference
10.8 Change in Control Agreement between the Company and Frank
Cappello, dated November 9, 2000, filed as Exhibit 10 (j) of
the Company's Form 10-Q dated December 31, 2000 and
incorporated herein by reference
10.9 Change in Control Severance Agreement between the Company and
Timothy V. Crean, dated July 30, 2002, filed as Exhibit 10.9
of the Company's Form 10-K dated September 30, 2002 and
incorporated herein by reference
10.10 Change in Control Severance Agreement between the Company and
Jeffrey P. Gotschall, dated July 30, 2002, 10.10 filed as
Exhibit 10.10 of the Company's Form 10-K dated September 30,
2002 and incorporated herein by reference
*31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) / 15d-14(a)
*31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) / 15d-14(a)
*32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350
*32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 2003.
22
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, thereto duly authorized.
SIFCO Industries, Inc.
(Registrant)
Date: August 4, 2003 /s/ Jeffrey P. Gotschall
-------------------------
Jeffrey P. Gotschall
Chairman of the Board and
Chief Executive Officer
Date: August 4, 2003 /s/ Frank A. Cappello
---------------------
Frank A. Cappello
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
23