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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended 9/30/95 Commission file number 1-5978
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SIFCO Industries, Inc., and Subsidiaries
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 34-0553950
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
970 East 64th Street, Cleveland Ohio 44103
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (216) 881-8600
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Shares, $1 Par Value American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
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(TITLE OF CLASS)
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 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 FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. ___
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF
THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.)
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As of December 12, 1995 -- $11,643,158
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (APPLICABLE ONLY TO
CORPORATE REGISTRANTS.)
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As of November 30, 1995 -- 5,104,438
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT
IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2) ANY PROXY OR
INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b) OR
(c) UNDER THE SECURITIES ACT OF 1933. (THE LISTED DOCUMENTS SHOULD BE CLEARLY
DESCRIBED FOR IDENTIFICATION PURPOSES.)
Portions of the 1995 Annual Report to Shareholders (Part I, III, IV)
Portions of the Proxy Statement for Annual Meeting of Shareholders on January
30, 1996
(Part I,II,III)
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PART I
ITEM 1. BUSINESS
THE COMPANY
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SIFCO Industries, Inc., an Ohio corporation (the "Company"), was
incorporated in 1916. The executive offices of the Company are located at 970
East 64th Street, Cleveland, Ohio 44103, and its telephone number is (216)
881-8600.
The Company is engaged in the production and sale of a variety of
metal-working processes, services and products produced primarily to the
specific design requirements of its customers. The processes include forging,
heat treating, welding, machining and electroplating; and the products include
forgings, machined forgings and other machined metal parts, remanufactured
component parts for turbine engines, and electroplating solutions and
equipment. The Company's operations are conducted in two segments: (1)
specialty products and (2) forgings.
SPECIALTY PRODUCTS
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The Company's specialty products segment consists of the repair and
remanufacture of jet engine and industrial turbine components; precision
machining for aerospace applications, including subassemblies and finished
replacement parts; and equipment, solutions and contract services in selective
electroplating for aerospace, defense and industrial markets.
FORGINGS
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The Company's forging segment consists of the production and some
finishing of forgings in numerous alloys for application in the aerospace and
several sophisticated industrial markets, utilizing a variety of processes,
including conventional and near-net shape hot forging and cold forging
techniques. The Company engages in international technology transfer and also
has marketing expertise to provide worldwide sourcing and distribution of
forgings of overseas manufacturers. The Company's forged products include: OEM
and aftermarket parts for aircraft engines; structural airframe components; and
land-based gas turbine engine parts; construction, ordnance and nuclear power
components; valves and other parts for oil drilling and mining equipment; and
low and high pressure closures for boilers.
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COMPETITION; PRINCIPAL CUSTOMERS; BACKLOG
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There is active competition among many companies, large and small, in
every one of the services and products offered by the Company. The Company,
however, believes that it offers a wider variety of services than most of its
competitors and is more experienced than most in meeting the exact requirements
and technical specifications of its customers, particularly those in the
aerospace and turbine components repair markets. In addition, the Company has
the ability to use its management and marketing expertise to provide worldwide
sourcing and selling capabilities.
There is excess capacity in many segments of the forging industry which
the Company believes has the effect of increasing competition and limits the
ability to raise prices. The decline in defense spending that has also
negatively impacted both sales and income of the Company over the last three
years seems to have stabilized. Defense orders received in 1995 were $4.4
million. Defense-related orders received in fiscal 1994 were approximately
$4.5 million, excluding $7.0 million for a retrofit of the CH-46 helicopter.
This compares to $6.0 million in 1993, $8.3 million in 1992 and $15.3 million
in 1991.
The restructuring in the airline industry has also negatively impacted
the sales and income of the Company by increasing price competition for the
available business. A reduction in the number of airlines could result in
fewer new aircraft being ordered as the remaining airlines purchase the used
aircraft from the airlines no longer in business. On the other hand, older
aircraft require repairs more frequently than newer aircraft, and this could
have a positive effect on the Company. The airline industry's long term
outlook is still for continued growth in air travel which would suggest the
need for newer aircraft and growth in the requirement for repairs. The Company
is not able to quantify the interplay of these factors.
The Company believes it can partially compensate for these factors
mentioned above by its efforts to broaden its product lines and develop new
geographic markets, customers and technologies.
The identity and rankings of the Company's principal customers vary
from year to year, and the Company relies on its ability to adapt its services
and operations to changing requirements rather than on any high volume
production of a particular item or group of items for a particular customer or
customers. Sales to the Company's three largest customers were approximately
$3.6 million, $3.2 million and $3.0 million, respectively. Sales to the
Company's next two largest customers were $2.2 million and $1.9 million. Four
of the aforementioned companies serve the airline transportation market and one
($2.2 million) the aerospace market. The Company believes that the total loss
of sales of its largest customer or two or more of the four remaining customers
would result in a materially adverse impact on the business and income of the
Company. Although there is no assurance that this will continue, historically
as one or more major customers have reduced their purchases, one or more other
customers have increased purchases avoiding a materially adverse impact on the
business or financial results of the Company.
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The Company's backlog of orders was as follows:
9/30/95 9/30/94
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($000 omitted)
Specialty products and services 9,000 $ 8,000
Forgings 19,600 19,000
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$ 28,600 $27,000
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Approximately 7% of 1995's backlogs are on hold, and 6% are scheduled
for delivery beyond fiscal year 1996.
No material part of the Company's business is seasonal.
Information concerning the Company's business and its reportable
business segments as set forth on pages 5, 6 and 15, respectively, of the 1995
Annual Report to Shareholders is incorporated herein by reference.
RESEARCH AND DEVELOPMENT; PATENTS; RAW MATERIALS
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The forging, machining, development of remanufacturing processes, or
other preparation of prototype parts to customers' specifications for use in
their research and development of new parts or designs has been an ordinary
portion of the Company's business. Apart from such work, the Company has spent
no material amount of time or money on research and development activities; and
the accounting records of the Company do not differentiate between work on
orders for customer research and development and work on other customer orders.
The Company uses in its business various trademarks, trade names,
patents, trade secrets and licenses. While a number of these are important to
it, the Company does not consider that a material part of its business is
dependent on any one or a group of them.
The Company has many sources for the raw materials, primarily high
quality steel, investment castings and chemicals essential to this business.
Suppliers of such materials are located in many areas throughout the country.
The Company does not depend on a single source for the supply of its materials
and believes that its sources are adequate for its business.
ENVIRONMENTAL REGULATIONS
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In common with other companies engaged in similar businesses, the
Company has been required to comply with various laws and regulations relating
to the protection of the environment. The costs of such compliance have not
had, and are not presently expected to have, a material effect on the capital
expenditures, earnings or competitive position of the Company and its
subsidiaries under existing regulations and interpretations.
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EMPLOYEES
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The number of the Company's employees increased from 581 at the
beginning of the fiscal year to 615 at the end of the fiscal year.
ITEM 2. PROPERTIES
The Company's fixed assets include the plants described below and a
substantial quantity of machinery and equipment, most of which is general
purpose machinery and equipment using special jigs, tools and fixtures and in
many instances having automatic control features and special adaptions. The
Company's plants, machinery and equipment are in good operating condition, are
well-maintained and substantially all of its facilities are in regular use.
The Company considers the present level of fixed assets capitalized as of
September 30, 1995 suitable and adequate given the current product offerings
for the respective business segments' operations in the current business
environment. The square footage numbers set forth in the following paragraphs
are approximations.
The Specialty Products segment has seven plants with a total of 259
thousand square feet. Selective Plating has three plants, one of which is
located in Independence, Ohio (34 thousand square feet); a leased facility in
Brooklyn, Ohio (14 thousand square feet); and a leased facility in Redditch,
England (10 thousand square feet). Four of these plants with a total of 201
thousand square feet are for the repair and remanufacture jet engine and
industrial turbine components. Two of these plants are located in Cork,
Ireland (100 thousand square feet), one in Minneapolis, Minnesota (59 thousand
square feet) and one in Tampa, Florida (42 thousand square feet). A portion of
the Minneapolis plant is also the site of the Company's machining operations.
The Company also leases space for sales offices and/or its contract
plating services in Norfolk, Virginia; Hartford (East Windsor), Connecticut;
Los Angeles (San Dimas), California; Ft. Lauderdale, Florida; and Tacoma,
Washington. Selective Plating also leases sales office space in Saint-Maur,
France and Singapore.
The Forging segment has one plant of 223 thousand square feet located
in Cleveland, Ohio. This facility is also the site of the Company's corporate
headquarters.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The information required by Item 5 is incorporated herein by reference
to page 7 and Note 2 on page 13 of the Annual Report to Shareholders for the
year ended September 30, 1995. As of December 12, 1995, the Company had 839
shareholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 4 is incorporated herein by reference
to page 7 of the Annual Report to Shareholders for the year ended September 30,
1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by Item 7 is incorporated herein by reference
to pages 5 and 6 of the Annual Report to Shareholders for the year ended
September 30, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 are incorporated herein by
reference to pages 8 through 15, inclusive, of the Annual Report to
Shareholders for the year ended September 30, 1995.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 as to Directors of the Registrant,
is incorporated herein by reference to the information set forth on pages 4
through 6 of the Proxy Statement for the Annual Meeting of Shareholders to be
held January 30, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
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The Executive Officers of the Company are elected annually to serve
for one-year terms or until their successors are elected and qualified. The
officers listed below were elected January 31, 1995.
Name Age Title and Business Experience
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Charles H. Smith, Jr. (1) 75 Director since 1941; Chairman of the
Board; Mr. Smith previously served the
Company as its Chief Executive Officer
from January 1943 until February 1983.
Jeffrey P. Gotschall (1) 47 Director since October 1986; Chief
Executive Officer since July 1990;
President since October 1989 and Chief
Operating Officer from October 1986 to
July 1990; Mr. Gotschall previously
served the Company from October 1986
through September 1989 as Executive
Vice President and from May 1985
through February 1989 as President of
SIFCO Turbine Component Services.
George D. Gotschall (1) 75 Director from 1950 to 1958 and
continuously since 1962; Mr. Gotschall
is Assistant Secretary of the Company
and previously served the Company until
February 1983 as Vice President--
International and Treasurer.
Richard A. Demetter 55 Vice President-Finance since January
1979; Chief Financial Officer since
January 1984, and previously Controller
from November 1976 to January 1984.
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PART III (CONTINUED)
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Name Age Title and Business Experience
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Hudson D. Smith (1) 44 Director since 1988. Treasurer of the
Company since 1983; Vice President and
General Manager of SIFCO Forge Group
since February 1995; General Manager of
SIFCO Forge Group's Cleveland Operations
from October 1989 through January 1995;
Group General Sales Manager of SIFCO
Forge Group from July 1985 through
September 1989.
Mara L. Babin, Esq. 45 Secretary since July 1980, and General
Counsel since 1985, Ms. Babin is a
partner in the law firm of Squire,
Sanders & Dempsey and has been an
attorney with the firm since 1975.
(1) Charles H. Smith, Jr. and George D. Gotschall are brothers-in-law.
Hudson D. Smith is the son of Charles H. Smith, Jr. Jeffrey P. Gotschall is
the son of George D. Gotschall.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to pages 10 through 15 of the Proxy Statement for the Annual Meeting
of Shareholders to be held January 30, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to the information set forth on pages 2 through 8 of the Proxy
Statement for the Annual Meeting of Shareholders to be held January 30, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
The following consolidated financial statements and related notes of
the Registrant and its subsidiaries contained on pages 8 through 15, inclusive,
of the Annual Report to Shareholders for the year ended September 30, 1995, are
incorporated herein by reference.
Consolidated Balance Sheets - September 30, 1995 and 1994.
Consolidated Statements of Income for the Years Ended September 30,
1995, 1994 and 1993.
Consolidated Statements of Shareholders' Equity for the Years Ended
September 30, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the Years Ended September
30, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements for the Years Ended
September 30, 1995, 1994 and 1993.
Report of Independent Public Accountants.
(a) (2) Financial Statement Schedules:
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Report of Independent Public Accountants on the Financial Statement
Schedules.
Schedule II -- Allowance for Doubtful Accounts for the Years
Ended September 30, 1995, 1994 and 1993.
All schedules, other than Schedules II are omitted since the
information is not required or is otherwise furnished.
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PART IV (continued)
(a) (3) Exhibits:
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** (3) Second Amended Articles of Incorporation, as amended,
and Amended Code of Regulations.
*** (4) Instruments defining the rights of security holders.
Reference is made to Exhibit (3) above and to Note 2,
page 10 of the 1986 Annual Report to Shareholders.
**** (9) Voting Trust Agreement, as amended.
(10) Material Contracts:
*****) (a) 1989 Stock Option Plan
(b) Incentive Compensation Plan, as amended and restated
(c) Deferred Compensation Program, as amended and restated
****) (d) Form of Indemnification Agreement between the
Registrant and each of its Directors and Executive
Officers
*) (e) 1994 Phantom Stock Plan
(13) 1995 Annual Report to Shareholders
***** (21) Subsidiaries of the Registrant
(23) Consent of Arthur Andersen LLP
(24) Powers of Attorney
*) Incorporated herein by reference to Exhibit A to the
Proxy Statement for the Annual Meeting of
Shareholders held January 31, 1995.
**) Incorporated herein by reference to Form 10-K,
September 30, 1986
***) Incorporated herein by reference to Form 10-K,
September 30, 1987
****) Incorporated herein by reference to Form 10-K,
September 30, 1988
*****) Incorporated herein by reference to Form 10-K,
September 30, 1989
(b) (1) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of
the fiscal year ended September 30, 1995.
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SIFCO INDUSTRIES, INC.
By: Richard A. Demetter
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Richard A. Demetter
Chief Accounting Officer
Date: December 18, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below on December 18, 1995 by the following
persons on behalf of the Registrant in the capacities indicated.
/*/ Charles H. Smith, Jr. /*/ Richard S. Gray
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Charles H. Smith, Jr. Richard S. Gray
Chairman of the Board; Director
Director
/*/ Jeffrey P. Gotschall /*/ William R. Higgins
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Jeffrey P. Gotschall William R. Higgins
President; Chief Executive Officer; Director
Director
/*/ Richard A. Demetter /*/ David V. Ragone
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Richard A. Demetter David V. Ragone
Vice President-Finance; Chief Financial Officer Director
/*/ George D. Gotschall /*/ Thomas J. Vild
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George D. Gotschall Thomas J. Vild
Assistant Secretary; Director Director
/*/ Hudson D. Smith /*/ J. Douglas Whelan
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Hudson D. Smith J. Douglas Whelan
Treasurer; Director Director
/*/ Richard A. Demetter
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Richard A. Demetter
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(Attorney in Fact)
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON THE FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders of
SIFCO Industries, Inc.
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in SIFCO Industries, Inc. and
Subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated October 31, 1995. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed in the index of financial statement schedules
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not
part of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
October 31, 1995.
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SCHEDULE II
SIFCO INDUSTRIES, INC.
AND SUBSIDIARIES
ALLOWANCES FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30 1995, 1994, AND 1993
($000 omitted)
1995 1994 1993
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BALANCE
BEGINNING OF PERIOD $ 538 $ 868 $ 838
Additions
Charged to costs and expenses 86 54 362
Deductions - accounts
determined to be uncollectible (19) (438) (305)
Exchange rate changes and other 121 54 (27)
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BALANCE
END OF PERIOD $ 726 $ 538 $ 868
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EXHIBIT INDEX
Exhibits
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(10)(b) Incentive Compensation Plan, as amended and restated
(13) 1995 Annual Report to Shareholders
(23) Consent of Arthur Anderson & Co.
(24) Powers of Attorney
(27) Financial Data Schedule