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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 9/30/96 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) DENTIFICATION 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
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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.
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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.)
As of November 29, 1996 -- $32,948,632
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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.)
As of November 30, 1996 -- 5,135,401
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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 1996 Annual Report to Shareholders (Part I, III, IV)
Portions of the Proxy Statement for Annual Meeting of Shareholders on
January 28, 1997
(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 engages in international technology transfer and also has marketing
expertise to provide worldwide sourcing and distribution of overseas
manufacturers. 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'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 Company feels, however, that its focus on quality
and customer service help to give it an advantage in the markets it serves.
Defense orders can be quite volatile year to year. The decline in
defense spending had negatively impacted both sales and income of the Company
over the recent past. Defense orders received in 1996 were $17.8 million
compared to $4.4 million in 1995. Defense-related orders received in fiscal 1994
were approximately $11.5 million (including $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 performance of the domestic and international air transport
industries directly and significantly impact our performance. The restructuring
and down turn in the airline industry, over the past few years, has negatively
impacted the sales and income of the Company by increasing price competition for
the available business. Recently there has been a strong resurgence in the
performance of the worldwide airlines industry. The Air Transport Association
predicts a continuation of record profit levels for the industry.
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
$5.0
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million, $3.9 million and $3.8 million, respectively. Sales to the Company's
next two largest customers were $2.6 million and $2.0 million. Four of the
aforementioned companies serve the airline transportation market and one ($2.0
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 mentioned
above 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.
The Company's backlog of orders was as follows:
9/30/96 9/30/95
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($000 omitted)
Specialty products and services $13,400 $ 9,000
Forgings 29,500 19,600
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$ 42,900 $28,600
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Approximately 2% of 1996's backlogs are on hold, and 12% are scheduled
for delivery beyond fiscal year 1997.
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 16, respectively, of the 1996
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.
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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.
EMPLOYEES
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The number of the Company's employees increased from 615 at the
beginning of the fiscal year to 684 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, 1996 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. 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.
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).
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; and Tacoma, Washington. Selective Plating also
leases sales office space in Saint-Maur, France.
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 pages 1, 7 and 11 of the Annual Report to Shareholders for the year ended
September 30, 1996. As of November 1, 1996, the Company had 814 shareholders of
record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated herein by reference
to page 7 of the Annual Report to Shareholders for the year ended September 30,
1996.
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, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 are incorporated herein by
reference to pages 8 through 16, inclusive, of the Annual Report to Shareholders
for the year ended September 30, 1996.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES 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 28, 1997.
EXECUTIVE OFFICERS AND KEY EMPLOYEES 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 30, 1996.
Name Age Title and Business Experience
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Charles H. Smith, Jr. (1) 76 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) 48 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) 76 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 56 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, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT
(continued)
EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT (CONTINUED)
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Name Age Title and Business Experience
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Hudson D. Smith (1) 45 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.
Timothy V. Crean 47 Managing Director of the SIFCO Turbine
Components Group since October 1995, and
Managing Director of SIFCO Turbine
Components, Ltd. since November 1986.
Mara L. Babin, Esq. 46 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 28, 1997.
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 28, 1997.
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:
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The following consolidated financial statements and related notes of
the Registrant and its subsidiaries contained on pages 8 through 16, inclusive,
of the Annual Report to Shareholders for the year ended September 30, 1996, are
incorporated herein by reference.
Consolidated Balance Sheets - September 30, 1996 and 1995.
Consolidated Statements of Income for the Years Ended September 30,
1996, 1995 and 1994.
Consolidated Statements of Shareholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the Years Ended September
30, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements for the Years Ended
September 30, 1996, 1995 and 1994.
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, 1996, 1995 and
1994.
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) 1996 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
# Incorporated herein by reference to Form 10-K, September
30, 1995
(b) (1) Reports on Form 8-K
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No reports on Form 8-K were filed during the last quarter of
the fiscal year ended September 30, 1996.
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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: /s/ Richard A. Demetter
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Richard A. Demetter
Chief Accounting Officer
Date: December 18, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below on December 18, 1996 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
/s/ 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 24, 1996. 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 24, 1996.
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SCHEDULE II
SIFCO INDUSTRIES, INC.
AND SUBSIDIARIES
ALLOWANCES FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30 1996, 1995, AND 1994
($000 omitted)
1996 1995 1994
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BALANCE
BEGINNING OF PERIOD $ 726 $ 538 $ 868
Additions
Charged to costs and expenses 43 86 54
Deductions - accounts
determined to be uncollectible (117) (19) (438)
Recoveries of fully reserved accounts 68 --- ---
Exchange rate changes and other (11) 121 54
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BALANCE
END OF PERIOD $ 709 $ 726 $ 538
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