CLEVELAND--(BUSINESS WIRE)--
SIFCO Industries, Inc. (NYSE MKT: SIF) today announced financial results for its third quarter of fiscal 2017, which ended June 30, 2017.
Third Quarter
- Net sales from operations in the third quarter of fiscal 2017 decreased 2.7% to $30.2 million, compared with $31.0 million in the third quarter of fiscal 2016.
- Net loss for the third quarter of fiscal 2017 was $6.2 million, or ($1.13) per diluted share, compared with a loss of $1.0 million or ($0.19) per diluted share, in the third quarter of fiscal 2016.
- Adjusted EBITDA in the third quarter of fiscal 2017 was $2.1 million compared with Adjusted EBITDA of $1.3 million in the third quarter of fiscal 2016.
- Cash flow from operating activities for the third quarter of fiscal 2017 was $2.4 million, compared with cash flow used for operating activities of ($0.4) million in the third quarter of fiscal 2016.
First Nine Months
- Net sales from operations in the first nine months of fiscal 2017 increased 6.5% to $92.9 million, compared with $87.2 million in the first nine months of fiscal 2016.
- Net loss for the first nine months of fiscal 2017 was $10.5 million, or ($1.91), per diluted share, compared with a loss of $3.9 million, or ($0.72) per diluted share, in the first nine months of fiscal 2016.
- Adjusted EBITDA in the first nine months of fiscal 2017 was $6.4 million compared with Adjusted EBITDA of $2.6 million in the first nine months of fiscal 2016.
- Cash flow from operating activities for the nine months ended of fiscal 2017 was $7.7 million, compared with cash flow from operating activities of $11.4 million in the nine months of fiscal 2016.
President and CEO Peter W. Knapper stated, "In the third quarter, we've continued to execute on our plans to turn around our business. The new sales organization structure implemented earlier this year continues to find new opportunities for our business and we will continue to focus on serving our customers, associates, and shareholders. We previously announced the decision to close and consolidate our Alliance, Ohio location to our Cleveland, Ohio location in order to improve utilization and reduce fixed costs while maintaining available capacity to be able to handle significant growth. As a result of this decision, we incurred a $4.4 million non-cash asset impairment charge. In addition we've made the decision to sell the property we own in Ireland, identifying this asset as held for sale. We expect to close this transaction in the first quarter of fiscal 2018 and will use the proceeds to repay debt in accordance with our amended credit agreement."
The Company's Form 10-K for the year ended September 30, 2016 can be accessed through its website: www.sifco.com, or on the Securities and Exchange Commission's website: www.sec.gov.
The Company is engaged in the production of forgings and machined components primarily in the Aerospace and Energy markets. The processes and services and services include heat-treating and machining. The Company operates under one segment.
Use of Non-GAAP Financial Measures
The Company uses certain non-GAAP measures in this release. Adjusted EBITDA is a non-GAAP financial measure and is intended to serve as a supplement to results provided in accordance with accounting principles generally accepted in the United States. SIFCO Industries, Inc. believes that such information provides an additional measurement and consistent historical comparison of the Company’s performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.
Forward-Looking Language
Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, competition and other uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings.
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Third Quarter Ended June 30 |
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Three Months Ended June 30, |
Nine Months Ended June 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net sales | $ | 30,167 | $ | 31,004 | $ | 92,942 | $ | 87,240 | ||||||||
| Cost of goods sold | 26,599 | 28,009 | 81,546 | 78,574 | ||||||||||||
| Gross profit | 3,568 | 2,995 | 11,396 | 8,666 | ||||||||||||
| Selling, general and administrative expenses | 3,918 | 4,157 | 13,617 | 12,907 | ||||||||||||
| Asset impairment | 4,366 | — | 4,366 | — | ||||||||||||
| Amortization of intangible assets | 579 | 633 | 1,744 | 1,961 | ||||||||||||
| (Gain) loss on disposal of operating assets | 3 | — | (3 | ) | 32 | |||||||||||
| Operating loss | (5,298 | ) | (1,795 | ) | (8,328 | ) | (6,234 | ) | ||||||||
| Interest income | (12 | ) | (9 | ) | (42 | ) | (41 | ) | ||||||||
| Interest expense | 464 | 428 | 1,682 | 1,273 | ||||||||||||
| Foreign currency exchange loss (gain), net | (6 | ) | (8 | ) | 11 | 27 | ||||||||||
| Other income, net | (110 | ) | (107 | ) | (324 | ) | (322 | ) | ||||||||
| Loss from operations before income tax expense (benefit) | (5,634 | ) | (2,099 | ) | (9,655 | ) | (7,171 | ) | ||||||||
| Income tax expense (benefit) | 568 | (1,049 | ) | 812 | (3,224 | ) | ||||||||||
| Net loss | $ | (6,202 | ) | $ | (1,050 | ) | $ | (10,467 | ) | $ | (3,947 | ) | ||||
| Net loss per share | ||||||||||||||||
| Basic | $ | (1.13 | ) | $ | (0.19 | ) | $ | (1.91 | ) | $ | (0.72 | ) | ||||
| Diluted | $ | (1.13 | ) | $ | (0.19 | ) | $ | (1.91 | ) | $ | (0.72 | ) | ||||
| Weighted-average number of common shares (basic) | 5,499 | 5,466 | 5,480 | 5,460 | ||||||||||||
| Weighted-average number of common shares (diluted) | 5,499 | 5,466 | 5,480 | 5,460 | ||||||||||||
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Consolidated Condensed Balance Sheets |
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June 30, 2017 |
March 31, 2017 |
September 30, 2016 |
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| (unaudited) | (unaudited) | |||||||||||
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ASSETS |
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| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 1,099 | $ | 1,356 | $ | 471 | ||||||
| Receivables, net of allowance for doubtful accounts of $328, $423, and $706, respectively | 26,408 | 26,190 | 25,158 | |||||||||
| Inventories, net | 23,798 | 25,449 | 28,496 | |||||||||
| Refundable income taxes | 319 | 1,825 | 1,773 | |||||||||
| Prepaid expenses and other current assets | 1,863 | 2,207 | 2,177 | |||||||||
| Assets held for sale | 1,447 | — | — | |||||||||
| Total current assets | 54,934 | 57,027 | 58,075 | |||||||||
| Property, plant and equipment, net | 42,219 | 45,878 | 48,958 | |||||||||
| Intangible assets, net | 7,131 | 9,801 | 11,138 | |||||||||
| Goodwill | 11,874 | 11,349 | 11,748 | |||||||||
| Other assets | 284 | 281 | 538 | |||||||||
| Total assets | $ | 116,442 | $ | 124,336 | $ | 130,457 | ||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: | ||||||||||||
| Current maturities of long-term debt | $ | 7,545 | $ | 7,393 | $ | 18,258 | ||||||
| Revolving credit agreement | 20,387 | 21,573 | 12,751 | |||||||||
| Accounts payable | 14,048 | 15,418 | 14,520 | |||||||||
| Accrued liabilities | 5,325 | 5,877 | 5,234 | |||||||||
| Total current liabilities | 47,305 | 50,261 | 50,763 | |||||||||
| Long-term debt, net of current maturities | 6,241 | 6,660 | 7,623 | |||||||||
| Deferred income taxes | 3,144 | 2,836 | 2,929 | |||||||||
| Pension liability | 7,917 | 8,010 | 8,341 | |||||||||
| Other long-term liabilities | 458 | 465 | 431 | |||||||||
| Shareholders’ equity: | ||||||||||||
| Serial preferred shares, no par value, authorized 1,000 shares | — | — | — | |||||||||
| Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares – 5,596 at June 30, 2017, 5,599 at March 31, 2017 and 5,525 at September 30, 2016 | 5,596 | 5,599 | 5,525 | |||||||||
| Additional paid-in capital | 9,598 | 9,470 | 9,219 | |||||||||
| Retained earnings | 48,009 | 54,211 | 58,476 | |||||||||
| Accumulated other comprehensive loss | (11,826 | ) | (13,176 | ) | (12,850 | ) | ||||||
| Total shareholders’ equity | 51,377 | 56,104 | 60,370 | |||||||||
| Total liabilities and shareholders’ equity | $ | 116,442 | $ | 124,336 | $ | 130,457 | ||||||
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Consolidated Condensed Statements of Cash Flows |
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Nine Months Ended June 30, |
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| 2017 | 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (10,467 | ) | $ | (3,947 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7,526 | 8,021 | ||||||
| Amortization and write-off of debt issuance cost | 382 | 109 | ||||||
| (Gain) loss on disposal of operating assets | (3 | ) | 32 | |||||
| Asset impairment | 4,366 | — | ||||||
| LIFO expense (benefit) | 204 | (144 | ) | |||||
| Share transactions under company stock plan | 450 | (406 | ) | |||||
| Purchase price inventory adjustment | — | 266 | ||||||
| Other | — | (101 | ) | |||||
| Other long-term liabilities | 295 | 201 | ||||||
| Deferred income taxes | 185 | 619 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | (1,062 | ) | 6,660 | |||||
| Inventories | 4,595 | (1,555 | ) | |||||
| Refundable taxes | 1,455 | (91 | ) | |||||
| Prepaid expenses and other current assets | 626 | (268 | ) | |||||
| Other assets | 255 | 32 | ||||||
| Accounts payable | (1,172 | ) | 2,534 | |||||
| Other accrued liabilities | (500 | ) | (79 | ) | ||||
| Accrued income and other taxes | 542 | (508 | ) | |||||
| Net cash provided by operating activities | 7,677 | 11,375 | ||||||
| Cash flows from investing activities: | ||||||||
| Acquisition of business | — | 270 | ||||||
| Proceeds from disposal of operating assets | 70 | — | ||||||
| Capital expenditures | (1,598 | ) | (2,034 | ) | ||||
| Net cash used for investing activities | (1,528 | ) | (1,764 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments on long term debt | (13,659 | ) | (3,866 | ) | ||||
| Proceeds from revolving credit agreement | 63,628 | 35,533 | ||||||
| Repayments of revolving credit agreement | (55,992 | ) | (40,320 | ) | ||||
| Payment of debt issue costs | (498 | ) | — | |||||
| Short-term debt borrowings | 2,649 | 1,904 | ||||||
| Short-term debt repayments | (1,650 | ) | (2,728 | ) | ||||
| Net cash used for financing activities | (5,522 | ) | (9,477 | ) | ||||
| Increase in cash and cash equivalents | 627 | 134 | ||||||
| Cash and cash equivalents at the beginning of the period | 471 | 667 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 1 | 18 | ||||||
| Cash and cash equivalents at the end of the period | $ | 1,099 | $ | 819 | ||||
| Supplemental disclosure of cash flow information of operations: | ||||||||
| Cash paid for interest | $ | (1,224 | ) | $ | (1,059 | ) | ||
| Cash refund for income taxes, net | 1,425 | 2,885 | ||||||
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Consolidated Condensed Statements of Cash Flows |
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Quarter to date June 30, |
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| 2017 | 2016 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (6,202 | ) | $ | (1,050 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,587 | 2,655 | ||||||
| Amortization and write-off of debt issuance cost | 54 | 37 | ||||||
| Loss on disposal of operating assets | 3 | — | ||||||
| Asset impairment | 4,366 | — | ||||||
| LIFO expense (benefit) | (21 | ) | (136 | ) | ||||
| Share transactions under company stock plan | 125 | 236 | ||||||
| Other | — | (101 | ) | |||||
| Other long-term liabilities | 94 | 41 | ||||||
| Deferred income taxes | 153 | 1,261 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | 183 | 221 | ||||||
| Inventories | 2,014 | (1,180 | ) | |||||
| Refundable taxes | 1,507 | 1,283 | ||||||
| Prepaid expenses and other current assets | 304 | 49 | ||||||
| Other assets | 12 | (283 | ) | |||||
| Accounts payable | (2,053 | ) | (2,275 | ) | ||||
| Other accrued liabilities | (1,097 | ) | (801 | ) | ||||
| Accrued income and other taxes | 375 | (345 | ) | |||||
| Net cash provided by operating activities of operations | 2,404 | (388 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Acquisition of business | — | 270 | ||||||
| Proceeds from disposal of operating assets | 22 | — | ||||||
| Capital expenditures | (634 | ) | (858 | ) | ||||
| Net cash used for investing activities of operations | (612 | ) | (588 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payments on long term debt | (752 | ) | (1,305 | ) | ||||
| Proceeds from revolving credit agreement | 18,559 | 16,164 | ||||||
| Repayments of revolving credit agreement | (19,745 | ) | (12,784 | ) | ||||
| Short-term debt borrowings | 319 | 454 | ||||||
| Short-term debt repayments | (432 | ) | (1,681 | ) | ||||
| Net cash used for financing activities of operations | (2,051 | ) | 848 | |||||
| Increase (decrease) in cash and cash equivalents | (259 | ) | (128 | ) | ||||
| Cash and cash equivalents at the beginning of the period | 1,356 | 952 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 2 | (5 | ) | |||||
| Cash and cash equivalents at the end of the period | $ | 1,099 | $ | 819 | ||||
| Supplemental disclosure of cash flow information of operations: | ||||||||
| Cash paid for interest | $ | (434 | ) | $ | (323 | ) | ||
| Cash paid for income taxes, net | 1,480 | 3,070 | ||||||
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The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA: |
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| Dollars in thousands | Three Months Ended | Nine Months Ended | ||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net loss | $ | (6,202 | ) | $ | (1,050 | ) | $ | (10,467 | ) | $ | (3,947 | ) | ||||
| Adjustments: | ||||||||||||||||
| Depreciation and amortization expense | 2,587 | 2,655 | 7,526 | 8,021 | ||||||||||||
| Interest expense, net | 452 | 419 | 1,640 | 1,232 | ||||||||||||
| Income tax expense (benefit) | 568 | (1,049 | ) | 812 | (3,224 | ) | ||||||||||
| EBITDA | (2,595 | ) | 975 | (489 | ) | 2,082 | ||||||||||
| Adjustments: | ||||||||||||||||
| Foreign currency exchange loss, net (1) | (6 | ) | (8 | ) | 11 | 27 | ||||||||||
| Other income, net (2) | (110 | ) | (107 | ) | (324 | ) | (322 | ) | ||||||||
| (Gain) loss on disposal of operating assets (3) | 3 | — | (3 | ) | 32 | |||||||||||
| Inventory purchase accounting adjustments (4) | — | — | — | 266 | ||||||||||||
| Equity compensation (5) | 139 | 227 | 484 | (236 | ) | |||||||||||
| Acquisition transaction-related expenses (6) | — | — | — | (94 | ) | |||||||||||
| LIFO impact (7) | (21 | ) | (136 | ) | 204 | (144 | ) | |||||||||
| Orange expansion (8) | 288 | 388 | 2,171 | 775 | ||||||||||||
| Impairment of long-lived assets (9) | 4,366 | — | 4,366 | — | ||||||||||||
| Executive search (10) | — | — | — | 223 | ||||||||||||
| Adjusted EBITDA | $ | 2,064 | $ | 1,339 | $ | 6,420 | $ | 2,609 | ||||||||
| (1) | Represents the gain or loss from changes in the exchange rates between the functional currency and the foreign currency in which the transaction is denominated. | |
| (2) | Represents miscellaneous non-operating income or expense, primarily rental income from the Company's Irish subsidiary. | |
| (3) | Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company’s books. | |
| (4) | Represents accounting adjustments to value inventory at fair market value associated with the acquisition of a business that was charged to cost of goods sold when the inventory was sold. | |
| (5) | Represents the equity-based compensation benefit and expense recognized by the Company under its 2007 Long-Term Incentive Plan due to granting of awards, awards not vesting and/or forfeitures. | |
| (6) | Represents transaction-related costs such as legal, financial, tax due diligence expenses, valuation services costs, and executive travel that are required to be expensed as incurred. | |
| (7) | Represents the increase in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method. | |
| (8) | Represents costs related to expansion of one of the plant locations that are required to be expensed as incurred. | |
| (9) | Represents impairment charge of long-lived assets incurred at Alliance. See Note 1 within Item 1 of the consolidated condensed financial statements for further discussion. | |
| (10) | Represents cost incurred for executive search as mentioned in its Form 8-K filing on March 18, 2016. | |
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