10-Q

 

 

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 EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2011

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES 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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

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 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes  ¨    No  x

The number of the Registrant’s Common Shares outstanding at December 31, 2011 was 5,290,328.

 

 

 


 

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
December 31,
 
     2011     2010  

Net sales

   $ 28,510      $ 21,396   

Operating expenses:

    

Cost of goods sold

     22,045        16,421   

Selling, general and administrative expenses

     3,969        3,176   

Amortization of intangible assets

     815        57   
  

 

 

   

 

 

 

Total operating expenses

     26,829        19,654   
  

 

 

   

 

 

 

Operating income

     1,681        1,742   

Interest income

     (7     (22

Interest expense

     94        20   

Foreign currency exchange (gain) loss, net

     (22     4   

Other income, net

     (117     (117
  

 

 

   

 

 

 

Income before income tax provision

     1,733        1,857   

Income tax provision

     547        651   
  

 

 

   

 

 

 

Net income

   $ 1,186      $ 1,206   
  

 

 

   

 

 

 

Net income per share

    

Basic

   $ 0.22      $ 0.23   

Diluted

   $ 0.22      $ 0.23   

Weighted-average number of common shares (basic)

     5,299        5,259   

Weighted-average number of common shares (diluted)

     5,325        5,290   

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)

 

     December 31,
2011
    September 30,
2011
 
     (unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 6,784      $ 6,431   

Receivables, net

     20,850        20,739   

Inventories, net

     17,069        10,239   

Refundable income taxes

     19        281   

Deferred income taxes

     1,378        1,500   

Prepaid expenses and other current assets

     1,040        468   
  

 

 

   

 

 

 

Total current assets

     47,140        39,658   

Property, plant and equipment, net

     32,193        27,558   

Intangible assets, net

     16,791        8,506   

Goodwill

     6,830        3,493   

Other assets

     916        796   
  

 

 

   

 

 

 

Total assets

   $ 103,870      $ 80,011   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities:

    

Current maturities of long-term debt

   $ 2,002      $ 30   

Accounts payable

     8,239        9,778   

Accrued liabilities

     3,426        4,626   
  

 

 

   

 

 

 

Total current liabilities

     13,667        14,434   

Long-term debt, net of current maturities

     24,702        1,186   

Deferred income taxes

     2,004        2,233   

Other long-term liabilities

     8,551        8,749   

Shareholders’ equity:

    

Serial preferred shares, no par value, authorized 1,000 shares

     0        0   

Common shares, par value $1 per share, authorized 10,000 shares; issued shares – 5,334 at December 31, 2011 and 5,335 at September 30, 2011; outstanding shares – 5,299 at December 31, 2011 and September 30, 2011

     5,334        5,335   

Additional paid-in capital

     7,254        7,032   

Retained earnings

     55,308        54,122   

Accumulated other comprehensive loss

     (12,590     (12,702

Common shares held in treasury at cost, 35 shares at December 31, 2011 and 36 shares at September 30, 2011

     (360     (378
  

 

 

   

 

 

 

Total shareholders’ equity

     54,946        53,409   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 103,870      $ 80,011   
  

 

 

   

 

 

 

See notes to unaudited consolidated condensed financial statements.

 

3


SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

 

     Three Months Ended
December 31,
 
     2011     2010  

Cash flows from operating activities:

    

Net income

   $ 1,186      $ 1,206   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     1,660        620   

LIFO provision

     159        42   

Share transactions under company stock plan

     239        54   

Other

     (54     (6

Changes in operating assets and liabilities:

    

Receivables

     3,662        1,085   

Inventories

     (3,175     678   

Refundable income taxes

     262        572   

Prepaid expenses and other current assets

     (374     (126

Accounts payable

     (1,883     (1,640

Accrued liabilities

     (203     (379

Other

     (187     (53
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,292        2,053   

Cash flows from investing activities:

    

Acquisition of business

     (24,809     (22,674

Capital expenditures

     (526     (630
  

 

 

   

 

 

 

Net cash used for investing activities

     (25,335 )      (23,304

Cash flows from financing activities:

    

Proceeds from term note

     10,000        0   

Repayments of term note

     (500     0   

Proceeds from revolving credit agreement

     25,886        11,674   

Repayments of revolving credit agreement

     (12,270     0   

Proceeds from other debt

     2,400        0   

Dividends paid

     (1,060     (789

Other

     (28     (28
  

 

 

   

 

 

 

Net cash provided by financing activities

     24,428        10,857   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     385        (10,394

Cash and cash equivalents at the beginning of the period

     6,431        18,671   

Effect of exchange rate changes on cash and cash equivalents

     (32     (12
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

   $ 6,784      $ 8,265   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information of continuing operations:

    

Cash paid for interest

   $ (87   $ (13

Cash paid for income taxes, net

     (115     (63

See notes to unaudited consolidated condensed financial statements.

 

4


SIFCO Industries, Inc. and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

(Dollars in thousands, except share and per share data)

1.         Summary of Significant Accounting Policies

A. Principles of Consolidation

The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated.

The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiary. 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 rates 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 in the unaudited consolidated condensed financial statements.

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 2011 Annual Report on Form 10-K. 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 may have been reclassified in order to conform to current period classifications.

B. Net Income Per Share

The Company’s net income per basic share has been computed based on the weighted-average number of common shares outstanding. Net income per diluted share reflects the effect of the Company’s outstanding stock options under the treasury stock method. The dilutive effect of the Company’s stock options was 26,000 and 31,000 shares for the three months ended December 31, 2011 and 2010, respectively. However, during periods when operating losses may occur, outstanding stock options would not be included in the calculation of net loss per diluted share because such inclusion would be anti-dilutive.

C. Derivative Financial Instruments

The Company uses an interest rate swap agreement to reduce risk related to variable-rate debt, which is subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. At December 31, 2011, the Company held one interest rate swap agreement with a notional amount of $9,500. Cash flows related to the interest rate swap agreement are included in interest expense. The Company’s interest rate swap agreement and its variable-rate term debt are based upon LIBOR. During the first quarter of fiscal year 2012, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note interest risk. The following table reports the effects of the mark-to-market valuation of the Company’s interest rate swap agreement for the three months ended December 31, 2011:

 

Interest rate swap agreement market adjustment

   $ (72

Tax effect of interest rate swap agreement market adjustment

     27   
  

 

 

 

Net interest rate swap agreement market adjustment

   $ (45
  

 

 

 

2.         Inventories

Inventories consist of:

 

     December 31,
2011
     September 30,
2011
 

Raw materials and supplies

   $ 5,451       $ 4,216   

Work-in-process

     6,915         3,194   

Finished goods

     4,703         2,829   
  

 

 

    

 

 

 

Total inventories

   $ 17,069       $ 10,239   
  

 

 

    

 

 

 

 

5


Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method for 48% and 54% of the Company’s inventories at December 31, 2011 and September 30, 2011, 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 $8,132 and $7,974 higher than reported at December 31, 2011 and September 30, 2011, respectively.

3.         Goodwill and Intangible Assets

The Company’s intangible assets by major asset class subject to amortization consist of:

 

December 31, 2011

   Estimated
Useful Life
     Original
Cost
     Accumulated
Amortization
     Net Book
Value
 

Intangible assets:

           

Trade name

     10 years       $ 1,900       $ 112       $ 1,788   

Non-compete agreement

     5 years         1,300         132         1,168   

Below market lease

     5 years         900         190         710   

Customer relationships

     10 years         13,200         825         12,375   

Order backlog

     1 year         2,200         1,450         750   

Transition services agreement

     < 1 year         23         23         0   
     

 

 

    

 

 

    

 

 

 

Total intangible assets

      $ 19,523       $ 2,732       $ 16,791   
     

 

 

    

 

 

    

 

 

 

 

September 30, 2011

   Estimated
Useful Life
     Original
Cost
     Accumulated
Amortization
     Net Book
Value
 

Intangible assets:

           

Trade name

     10 years       $ 900       $ 73       $ 827   

Non-compete agreement

     5 years         500         81         419   

Below market lease

     5 years         900         145         755   

Customer relationships

     10 years         6,800         548         6,252   

Order backlog

     1 year         1,300         1,047         253   

Transition services agreement

     < 1 year         23         23         0   
     

 

 

    

 

 

    

 

 

 

Total intangible assets

      $ 10,423       $ 1,917       $ 8,506   
     

 

 

    

 

 

    

 

 

 

Included in the intangible assets at December 31, 2011 are intangible assets acquired in connection with the purchase of the forging business and substantially all related operating assets from GEL Industries, Inc. (DBA Quality Aluminum Forge, Inc.) on October 28, 2011, as discussed more fully in Note 11. These acquired intangible assets consist of:

 

     Estimated
Useful Life
     Original
Cost
 

Intangible assets:

     

Trade name

     10 years       $ 1,000   

Non-compete agreement

     5 years         800   

Customer relationships

     10 years         6,400   

Order backlog

     1 year         900   
     

 

 

 

Total intangible assets

      $ 9,100   
     

 

 

 

 

6


The amortization expense on identifiable intangible assets for the three months ended December 31, 2011 and 2010 was $815 and $57, respectively. Amortization expense associated with the identified intangible assets is expected to be as follows:

 

     Amortization
Expense
 

Fiscal year 2012

   $ 2,952   

Fiscal year 2013

     2,025   

Fiscal year 2014

     1,950   

Fiscal year 2015

     1,950   

Fiscal year 2016

     1,724   

The Company’s goodwill is not being amortized, but is subject to an annual impairment test. All of the goodwill is expected to be deductible for tax purposes. Changes in the net carrying amount of goodwill were as follows:

 

Balance at September 30, 2011

   $ 3,493   

Goodwill acquired during the year

     3,337   
  

 

 

 

Balance at December 31, 2011

   $ 6,830   
  

 

 

 

 

4. Comprehensive Income and Accumulated Other Comprehensive Loss

Total comprehensive income is as follows:

 

     Three Months Ended
December 31,
 
     2011     2010  

Net income

   $ 1,186      $ 1,206   

Foreign currency translation adjustment, net of tax

     (45     (25

Interest rate swap agreement adjustment, net of tax

     (45     0   

Net retirement plan liability adjustment, net of tax

     202        204   
  

 

 

   

 

 

 

Total comprehensive income

   $ 1,298      $ 1,385   
  

 

 

   

 

 

 

The components of accumulated other comprehensive loss are as follows:

 

     December 31,
2011
    September 30,
2011
 

Foreign currency translation adjustment, net of tax

   $ (5,815   $ (5,770

Net retirement plan liability adjustment, net of tax

     (6,730     (6,932

Interest rate swap agreement adjustment, net of tax

     (45     0   
  

 

 

   

 

 

 

Total accumulated other comprehensive loss

   $ (12,590 )    $ (12,702
  

 

 

   

 

 

 

 

5. Long-Term Debt

Long-term debt consists of:

 

     December 31,
2011
     September 30,
2011
 

Revolving credit agreement

   $ 14,800       $ 1,184   

Term loan

     9,500         0   

Promissory note

     2,400         0   

Capital lease obligations

     0         28   

Other

     3         4   
  

 

 

    

 

 

 
     26,703         1,216   

Less – current maturities

     2,001         30   
  

 

 

    

 

 

 

Total long-term debt

   $ 24,702       $ 1,186   
  

 

 

    

 

 

 

 

7


In October 2011, the Company entered into an amendment to its existing credit agreement (the “Credit Agreement Amendment”) with its bank increasing the maximum borrowing amount from $30.0 million to $40.0 million, of which $10.0 million is a five (5) year term loan and $30.0 million is a five (5) year revolving loan, secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 65% of the stock of its non-U.S. subsidiaries. The term loan is repayable in quarterly installments of $0.5 million starting December 1, 2011.

The term loan has a Libor-based variable interest rate that was 2.3% at December 31, 2011 and which becomes an effective fixed rate of 2.9% after giving effect to an interest rate swap agreement. Borrowing under the revolving loan bears interest at a rate equal to Libor plus 0.75% to 1.75%, which percentage fluctuates based on the Company’s leverage ratio of outstanding indebtedness to EBITDA. The loans are subject to certain customary financial covenants including, without limitation, covenants that require the Company to not exceed a maximum leverage ratio and to maintain a minimum fixed charge coverage ratio. There is also a commitment fee ranging from 0.10% to 0.25% to be incurred on the unused balance. The Company was in compliance with all applicable loan covenants as of December 31, 2011.

In connection with the acquisition of the QAF business, as discussed more fully in Note 11, the Company issued a non-interest bearing promissory note to the seller, which note is payable by the Company in November, 2013.

 

6. Government Grants

In the past, the Company received grants from certain government entities as an incentive to invest in facilities, research and employees. Remaining grants, principally capital in nature, are amortized into income over the estimated useful lives of the related assets. The unamortized portion of deferred grant revenue recorded in other long-term liabilities at December 31, 2011 and September 30, 2011 was $354 and $375, respectively. The Company’s grants are denominated primarily in Euros. The Company adjusts its deferred grant revenue balance in response to currency exchange rate fluctuations for as long as such grants are treated as obligations.

 

7. Income Taxes

For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year. This estimated effective rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate through the first three months of fiscal 2012 is 32%, compared to 35% for the same period in fiscal 2011, and differs from the U.S. federal statutory rate due primarily to (i) the impact of U.S. state and local income taxes, (ii) a domestic production activities deduction, (iii) application of tax credits and (iv) the recognition of U.S. federal income taxes on undistributed earnings of non-U.S. subsidiaries. The income tax provision consists of the following:

 

     Three Months Ended
December 31,
 
     2011     2010  

Current income tax provision:

    

U.S. federal

   $ 427      $ 538   

U.S. state and local

     74        75   

Non-U.S

     68        43   
  

 

 

   

 

 

 

Total current tax provision

     569        656   

Deferred income tax provision (benefit):

    

U.S. federal

     (16     (4

Non-U.S

     (6     (1
  

 

 

   

 

 

 

Total deferred tax provision

     (22     (5
  

 

 

   

 

 

 

Income tax provision

   $ 547      $ 651   
  

 

 

   

 

 

 

The Company is subject to income taxes in the U.S. federal jurisdiction, and various state, local and non-U.S. jurisdictions. The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for fiscal years prior to 2006.

 

8


At December 31, 2011 and September 30, 2011, the Company recorded liabilities of $94 and $96, respectively, for uncertain tax positions and any related interest and penalties. The Company classifies any interest and penalties related to uncertain tax positions in income tax expense. A summary of activity related to the Company’s uncertain tax positions is as follows:

 

Balance at September 30, 2011

   $ 96   

Interest adjustment

     (2
  

 

 

 

Balance at December 31, 2011

   $ 94   
  

 

 

 

 

8. Retirement Benefit Plans

The Company and certain of its subsidiaries sponsor defined benefit pension plans covering most of its employees. The components of net periodic benefit cost of the Company’s defined benefit plans are as follows:

 

     Three Months  Ended
December 31,
 
     2011     2010  

Service cost

   $ 71      $ 81   

Interest cost

     247        264   

Expected return on plan assets

     (351     (348

Amortization of prior service cost

     12        29   

Amortization of net loss

     210        175   
  

 

 

   

 

 

 

Net periodic benefit cost

   $ 189      $ 201   
  

 

 

   

 

 

 

Through December 31, 2011, the Company has made contributions in the amount of $202 to its defined benefit pension plans. The Company anticipates making $972 of additional contributions to fund its defined benefit pension plans during the balance of fiscal 2012.

 

9. Stock-Based Compensation

In previous periods, the Company has awarded stock options under its shareholder approved 1995 Stock Option Plan (“1995 Plan”) and 1998 Long-term Incentive Plan (“1998 Plan”). No further options may be awarded under either the 1995 Plan or the 1998 Plan. Option exercise price is not less than fair market value on date of grant and options are exercisable no later than ten years from date of grant. All options awarded under both plans are fully vested as of December 31, 2011.

Aggregate option activity is as follows:

 

     Number of
Share
Options
     Weighted-
Average
Exercise
Price
     Weighted-
Average
Remaining
Contractual
Term (Years)
     Aggregate
Intrinsic
Value
 

September 30, 2011

     43,000       $ 3.86         

Options exercised

     0            
  

 

 

          

December 31, 2011

     43,000       $ 3.86         2.5       $ 690   
  

 

 

          

Vested and exercisable at December 31, 2011

     43,000       $ 3.86         2.5       $ 690   

As of December 31, 2011, there was no unrecognized compensation cost related to the stock options granted under either the 1995 or 1998 Plans.

The Company has awarded performance and restricted shares under its shareholder approved 2007 Long-Term Incentive Plan (“2007 Plan”). The aggregate number of shares that may be awarded under the 2007 Plan is 600,000 less any shares previously awarded and subject to an adjustment for the forfeiture of any unissued shares. In addition, shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2007 Plan may be made in multiple forms including stock options, stock appreciation rights, restricted or unrestricted stock, and performance related shares. Any such awards are exercisable no later than ten years from date of grant.

 

9


The performance shares that have been awarded under the 2007 Plan generally provide for the issuance of the Company’s common shares upon the Company achieving certain defined financial performance objectives during a period up to three years following the making of such award. The ultimate number of common shares of the Company that may be earned pursuant to an award ranges from a minimum of no shares to a maximum of 150% of the initial target number of performance shares awarded, depending on the level of the Company’s achievement of its financial performance objectives.

With respect to such performance shares, compensation expense is being accrued at (i) 100% of the target levels for recipients of the performance shares awarded during fiscal 2012, (ii) 100% of the target levels for recipients of the performance shares awarded during fiscal 2011 and (iii) approximately 140% of the target levels for recipients of the performance shares awarded during fiscal 2010. During each future reporting period, such expense may be subject to adjustment based upon the Company’s subsequent estimate of the number of common shares that it expects to issue upon the completion of the performance period. The performance shares were valued at the closing market price of the Company’s common shares on the date of grant, and such value was recorded as unearned compensation. The vesting of such shares is determined at the end of the performance period.

During fiscal 2011, the Company awarded restricted shares to certain of its directors. The restricted shares were valued at the closing market price of the Company’s common shares on the date of grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one (1) year.

If all outstanding share awards are ultimately earned and issued at the target number of shares, then at December 31, 2011 there are approximately 429,800 shares that remain available for award. If any of the outstanding share awards are ultimately earned and issued at greater than the target number of shares, up to a maximum of 150% of such target, then a fewer number of shares would be available for award.

Compensation expense related to all performance and restricted shares awarded under the 2007 Plan was $238 and $54 during the first three months of fiscal 2012 and 2011, respectively. As of December 31, 2011, there was $1,610 of total unrecognized compensation cost related to the performance and restricted shares awarded under the 2007 Plan. The Company expects to recognize this cost over the next 2.8 years.

The following is a summary of activity related to the target number of shares awarded and the actual number of shares earned under the 2007 Plan:

 

     Number of
Shares
    Weighted
Average Fair
Value at Date
of Grant
 

Outstanding at September 30, 2011

     135,480      $ 13.25   

Restricted shares earned (2011 award)

     (1,780     16.30   

Performance shares awarded

     38,500        18.84   

Performance shares earned (2009 award)

     (8,938     5.99   

Performance shares not earned (2009 award)

     (29,062     5.99   
  

 

 

   

Outstanding at December 31, 2011

     134,200      $ 16.87   
  

 

 

   

 

10. Business Segments

The Company identifies reportable segments based upon distinct products manufactured and services performed. The Forged Components Group (“Forge Group”) consists of the production, heat-treatment, surface-treatment, non-destructive testing and some machining of both conventional and precision forged components in various steel, titanium and aluminum alloys utilizing a variety of processes for application principally in the aerospace and power generation industries. The Turbine Component Services and Repair Group (“Repair Group”) consists primarily of the repair and remanufacture of small aerospace and industrial turbine engine components, and is also involved in providing precision component machining and industrial coating of turbine engine components. The Applied Surface Concepts Group (“ASC Group”) is a provider of specialized selective plating processes and services used to apply metal coatings to a selective area of a component. The Company’s reportable segments are separately managed.

 

10


The following table summarizes certain information regarding segments of the Company:

 

     Three Months Ended
December 31,
 
     2011     2010  

Net sales:

    

Forged Components Group

   $ 22,688      $ 15,690   

Turbine Component Services and Repair Group

     2,038        2,400   

Applied Surface Concepts Group

     3,784        3,306   
  

 

 

   

 

 

 

Consolidated net sales

   $ 28,510      $ 21,396   
  

 

 

   

 

 

 

Operating income (loss):

    

Forged Components Group

   $ 2,186      $ 2,073   

Turbine Component Services and Repair Group

     (133     60   

Applied Surface Concepts Group

     351        219   

Corporate unallocated expenses

     (723     (610
  

 

 

   

 

 

 

Consolidated operating income

     1,681        1,742   

Interest expense (income), net

     87        (2

Foreign currency exchange (gain) loss, net

     (22     4   

Other income, net

     (117     (117
  

 

 

   

 

 

 

Consolidated income before income tax provision

   $ 1,733      $ 1,857   
  

 

 

   

 

 

 

Depreciation and amortization expense:

    

Forged Components Group

   $ 1,428      $ 385   

Turbine Component Services and Repair Group

     77        74   

Applied Surface Concepts Group

     81        84   

Corporate unallocated expenses

     74        77   
  

 

 

   

 

 

 

Consolidated depreciation and amortization expense

   $ 1,660      $ 620   
  

 

 

   

 

 

 

LIFO expense for the Forged Components Group

   $ 159      $ 42   
     December 31,
2011
    September 30,
2011
 

Identifiable assets

    

Forged Components Group

   $ 82,137      $ 58,361   

Turbine Component Services and Repair Group

     3,738        3,758   

Applied Surface Concepts Group

     6,468        6,217   

Corporate

     11,527        11,675   
  

 

 

   

 

 

 

Consolidated total assets

   $ 103,870      $ 80,011   
  

 

 

   

 

 

 

 

11. Business Acquisition

On October 28, 2011, through its wholly-owned subsidiary, Forge Acquisition, LLC – now known as Quality Aluminum Forge, LLC (“QAF”), the Company completed the purchase of the forging business and substantially all related operating assets from GEL Industries, Inc. (DBA Quality Aluminum Forge). The forging business is operated in QAF’s Orange and Long Beach, California facilities, all of which are leased. The purchase price for the forging business and related operating assets was approximately $24.8 million payable in cash, subject to certain adjustments related principally to the delivered working capital level and/or indemnification holdback provisions under the purchase agreement. In addition, the Company has assumed certain current operating liabilities of the forging business.

The QAF purchase transaction is accounted for under the purchase method of accounting. The Company has not yet completed the purchase accounting related to the QAF acquisition. The final purchase price allocation will be allocated to the assets acquired and liabilities assumed based upon their fair values when appraisals, other studies and additional information become available.

 

11


The preliminary allocation of the purchase price and the estimated goodwill and intangible assets, all of which belong to the Forge Group, are as follows:

 

     October 28,
2011
 

Assets acquired:

  

Accounts receivable

   $ 3,801   

Inventory

     3,823   

Property and equipment

     4,965   

Intangible assets

     9,100   

Goodwill

     3,337   

Other

     200   
  

 

 

 
     25,226   

Liabilities assumed:

  

Accounts payable and accrued liabilities

     417   
  

 

 

 

Total purchase price

   $ 24,809   
  

 

 

 

On December 10, 2010, through its wholly-owned subsidiary, TWF Acquisition, LLC – now known as T&W Forge, LLC (“TWF”), the Company completed the purchase of the forging business and substantially all related operating assets from T&W Forge, Inc. (“T&W Forge”). TWF operates in T&W Forge’s Alliance, Ohio facility under a long-term lease arrangement, with an option to purchase the facility at a nominal price. The TWF purchase transaction is accounted for under the purchase method of accounting.

The results of operation of QAF and TWF from their respective dates of acquisition are included in the Company’s unaudited consolidated condensed statements of operations and are reported in the Forge Group. The following unaudited pro forma information presents a summary of the results of operations for the Company including QAF and TWF as if the acquisitions had occurred on October 1, 2011 and 2010, respectively:

 

     Three Months Ended
December 31,
 
     2011      2010  

Net sales

   $ 30,023       $ 28,706   

Net income

     1,454         1,552   

Net income per share (basic)

     0.27         0.30   

Net income per share (diluted)

     0.27         0.29   

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) the impact on business conditions in general, and on the demand for product in the aerospace and power generation industries in particular, of the global economic outlook, including the availability of capital and liquidity from banks and other providers of credit; (2) future business environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business which may be lost; (4) successful development of turbine component repair processes and/or procurement of new repair process licenses from turbine engine manufacturers and/or the Federal Aviation Administration; (5) metals and commodities price increases and the Company’s ability to recover such price increases; (6) successful development and market introduction of new products and services (7) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turboprop engines; (8) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (9) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (10) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted and (11) the ability to successfully integrate businesses that may be acquired into the Company’s operations.

 

12


The Company 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 both conventional and precision forging, heat-treating, coating, welding, precision component machining and selective plating. The products include conventional and precision forged components, machined forged components, other machined metal components, remanufactured component parts for turbine engines, and selective plating solutions and equipment. The Company’s operations are conducted in three business segments: (1) Forged Components Group, (2) Turbine Component Services and Repair Group, and (3) Applied Surface Concepts Group. The Company endeavors to plan and evaluate its businesses’ operations while taking into consideration certain factors including the following – (i) the projected build rate for commercial, business and military aircraft as well as the engines that power such aircraft, (ii) the projected build rate for industrial gas turbine engines, (iii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft as well as the engines that power such aircraft, and (iv) anticipated exploration and production activities relative to oil and gas products, etc.

A. Results of Operations

Three Months Ended December 31, 2011 compared with Three Months Ended December 31, 2010

Net sales in the first quarter of fiscal 2012 increased 33.2% to $28.5 million, compared with $21.4 million in the comparable period in fiscal 2011. Net income in the first quarters of both fiscal 2012 and fiscal 2011 was $1.2 million. On October 28, 2011, the Company completed the purchase of the forging business and substantially all related operating assets of QAF.

Forged Components Group (“Forge Group”)

The Forge Group consists of the production, heat-treatment, surface-treatment, non-destructive testing, and machining of both conventional and precision forged components in various steel, titanium and aluminum alloys utilizing a variety of processes for application principally in the aerospace and power generation industries. The Forge Group’s results for the first quarter of fiscal 2012 include the results of QAF from the date of its acquisition. The Forge Group’s results for the first quarter of fiscal 2011 include the results of TWF from the date of its acquisition. Net sales in the first quarter of fiscal 2012 increased 44.6% to $22.7 million, compared with $15.7 million in the comparable period of fiscal 2011. The Forge Group produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military transport and surveillance aircraft; (ii) airframe applications for a variety of aircraft; (iii) armored military vehicles; (iv) industrial gas turbine engines for power generation units; and (v) other commercial applications. Net sales comparative information for the first quarter of fiscal 2012 and 2011, respectively, is as follows:

 

(Dollars in millions)    Three Months  Ended
December 31,
     Increase
(Decrease)
 

Net Sales

   2011      2010     

Aerospace components for:

        

Fixed wing aircraft

   $ 10.7       $ 7.2       $ 3.5   

Rotorcraft

     6.7         7.2         (0.5

Components for power generation units

     4.7         0.7         4.0   

Commercial product sales and other revenue

     0.6         0.6         0.0   
  

 

 

    

 

 

    

 

 

 

Total

   $ 22.7       $ 15.7       $ 7.0   
  

 

 

    

 

 

    

 

 

 

The increase in net sales of forged components for fixed wing aircraft during the first quarter of fiscal 2012, compared with the comparable period in fiscal 2011, is principally due to the impact of the acquisition of QAF during the first quarter of fiscal 2012. The increase in net sales of engine components for power generation units is due to the impact of the acquisition of TWF during the first quarter of fiscal 2011. Net sales of aerospace components for rotorcraft decreased in the first quarter of fiscal 2012 principally due to the reduced sales volumes to one customer that was in the process of adjusting its inventory levels of certain components.

The Forge Group’s aerospace components have both military and commercial applications. Net sales of such components that solely have military applications were $7.8 million in the first quarter of fiscal 2012, compared with $7.6 million in the comparable period in fiscal 2011. Demand for additional military helicopters and related replacement components are the primary driver of sales demand of components that are for military applications.

 

13


The Forge Group’s selling, general and administrative expenses increased $1.3 million to $2.4 million, or 10.4% of net sales, in the first quarter of fiscal 2012, compared with $1.1 million, or 7.1% of net sales, in the comparable period in fiscal 2011. The increase in selling, general and administrative expenses is principally due to (i) a $0.8 million increase in amortization of intangible assets related to the acquisitions of TWF and QAF, and (ii) the impact of the acquisitions of TWF and QAF on relative spending levels. The Forge Group’s selling, general and administrative expenses in the first quarter of fiscal 2012, before the impact of the $0.8 million increase in amortization of intangible assets, was $1.6 million, or 7.1% of net sales.

The Forge Group’s operating income increased $0.1 million to $2.2 million in the first quarter of fiscal 2012, compared with $2.1 million in the comparable period in fiscal 2011. The following is a comparison of operating income on both a LIFO and FIFO basis:

 

(Dollars in millions)    Three Months  Ended
December 31,
     Increase
(Decrease)
 

Operating Income

   2011      2010     

Operating income

   $ 2.2       $ 2.1       $ 0.1   

LIFO expense

     0.2         0.1         0.1   
  

 

 

    

 

 

    

 

 

 

Operating income without LIFO expense

   $ 2.4       $ 2.2       $ 0.2   
  

 

 

    

 

 

    

 

 

 

Operating income in the first quarter of fiscal 2012 was favorably impacted by the additional product sales volumes that resulted principally from the acquisitions of TWF and QAF, which was partially offset by (i) the negative impact of the aforementioned $0.8 million increase in the amortization of intangible assets, (ii) $0.2 million recognition of the cost of the inventory fair value write-up related to the acquisition of QAF and (iii) higher labor, outside work and overhead costs principally related to the mix of product sold – a higher concentration of products sales with a higher value-added content in the first quarter of fiscal 2012, compared with the same period in fiscal 2011.

The following changes in the components of the Forge Group’s manufacturing expenditures in the first quarter of fiscal 2012, a significant portion of which was due to the acquisitions of both TWF and QAF, compared with the same period in fiscal 2011, also impacted operating income:

 

(Dollars in millions)    Three Months  Ended
December 31,
     Increase
(Decrease)
 

Manufacturing expenditures

   2011      2010     

Overhead:

        

Utilities

   $ 1.1       $ 0.9         0.2   

Repairs, maintenance and supplies

     1.1         0.8         0.3   

Depreciation

     0.6         0.3         0.3   

Tooling

     0.7         0.4         0.3   

Manufacturing costs in the first quarter of fiscal 2012, compared with the same period in fiscal 2011, increased due to (i) an increase in manufacturing expenditures required to support the additional product sales volume and (ii) an increase in depreciation expense, both of which were primarily attributable to the acquisitions of TWF and QAF. These higher costs were partially offset by a decrease in the cost of natural gas in the first quarter of fiscal 2012, compared with the same period in fiscal 2011.

The Forge Group’s backlog as of December 31, 2011 was $110.3 million, of which $90.9 million was scheduled for delivery over the next twelve months, compared with $92.2 million as of September 30, 2011, of which $74.3 million was scheduled for delivery over the next twelve months. . $15.8 million of the Forge Group’s backlog as of December 31, 2011 is attributable to the impact of the recently acquired QAF business. All orders are subject to modification or cancellation by the customer with limited charges. Delivery lead times for certain raw materials (e.g. aerospace grades of steel) have continued to lengthen due to increased demand and the Forge Group believes that such lead time increase may ultimately result in a fundamental shift in the ordering pattern of its customers. The Forge Group believes that a likely result of such a shift is that customers may place orders further in advance than they previously did, which may result in an increase, relative to comparable prior year periods, in the Forge Group’s backlog. Accordingly, such backlog increase, to the extent it may occur, is not necessarily indicative of actual sales expected for any succeeding period.

 

14


Turbine Component Services and Repair Group (“Repair Group”)

Net sales in the first quarter of fiscal 2012, which consists principally of component repair services (including precision component machining and industrial coatings) for small aerospace turbine engines, decreased 15.1% to $2.0 million, compared with $2.4 million in the comparable fiscal 2011 period.

During the first quarter of fiscal 2012, the Repair Group’s selling, general and administrative expenses were $0.4 million, or 18.0% of net sales, compared with $0.4 million, or 14.3% of net sales, in the comparable fiscal 2011 period.

The Repair Group’s operating income decreased $0.2 million to a loss of $0.1 million in the first quarter of fiscal 2012, compared with income of $0.1 million in the comparable period in fiscal 2011. Operating income in the first quarter of fiscal 2012 was negatively impacted by the lower product sales volumes in relation to the fixed portion of the Repair Group’s operating cost structure.

The Repair Group’s backlog was $1.2 million as of both December 31, 2011 and September 30, 2011. At December 31, 2011, $0.3 million of the total backlog was scheduled for delivery over the next twelve months.

Applied Surface Concepts Group (“ASC Group”)

Net sales in the first quarter of fiscal 2012 increased 14.5% to $3.8 million, compared with $3.3 million in the comparable fiscal 2011 period. For purposes of the following discussion, (i) product net sales consist of selective plating equipment and solutions and (ii) contract service net sales consist of customized selective plating services. Net sales comparative information for the first quarter of fiscal 2012 and 2011, respectively, is as follows:

 

(Dollars in millions)    Three Months  Ended
December 31,
     Increase
(Decrease)
 

Net Sales

   2011      2010     

Product

   $ 1.9       $ 1.8       $ 0.1   

Contract service

     1.8         1.5         0.3   

Other

     0.1         0.0         0.1   
  

 

 

    

 

 

    

 

 

 

Total

   $ 3.8       $ 3.3       $ 0.5   
  

 

 

    

 

 

    

 

 

 

The increase in product net sales in the first quarter of fiscal 2012, compared with the same period in fiscal 2011, is attributed to an increase in net sales volumes of selective plating equipment, as well as certain recently launched new products. The increase in contract service net sales in the first quarter of fiscal 2012, compared with the same period in fiscal 2011, is attributed to an increase in the volume of sales to customers in the power generation and oil and gas industries. A portion of the ASC Group’s business is conducted in Europe and is denominated in local European currencies. Fluctuations in currency exchange rates during the first quarter fiscal 2012, compared with the same period in fiscal 2011, had a nominal impact on net sales.

The ASC Group’s selling, general and administrative expenses were $1.3 million, or 35.2% of net sales, in the first quarter of fiscal 2012, compared with $1.1 million, or 34.0% of net sales in the comparable fiscal 2011 period, due primarily to an increase in sales promotion efforts and the filling of an open sales position.

The ASC Group’s operating income in the first quarter of fiscal 2012 was $0.4 million, compared with $0.2 million in the same period in fiscal 2011. This improvement in operating income is principally due to (i) the favorable impact on margins from increased sales volumes; (ii) lower material cost as a percentage of net sales due principally to product mix and (iii) the achievement of certain efficiencies resulting in reduced labor costs that occurred in the first quarter of fiscal 2012, compared to the same period in fiscal 2011.

The ASC Group’s backlog as of December 31, 2011 was not material, which is consistent with the nature of its business.

Corporate Unallocated Expenses

Corporate unallocated expenses, consisting of corporate salaries and benefits, legal and professional and other expenses that are not related to and, therefore, not allocated to the business segments, were $0.7 million in the first quarter of fiscal 2012, compared with $0.6 million in the same period in fiscal 2011, due to higher (net) general spending in a number of corporate related areas, none of which is individually significant.

 

15


Other/General

Interest expense was $0.1 million in the first quarter of fiscal 2012, compared to a nominal amount in the same period in fiscal 2011. In connection with the October 2011 acquisition of the QAF business, the Company borrowed $12.4 million from its revolving credit agreement and $10.0 million on a term note, and issued a $2.4 million promissory note to the seller of the QAF business. The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first quarters of both fiscal 2012 and 2011:

 

     Weighted Average
Interest Rate
Three Months Ended
December 31,
    Weighted Average
Outstanding Balance
Three Months Ended
December 31,
 
     2011     2010     2011      2010  

Revolving credit agreement

     1.3     1.4   $ 10.0 million       $ 11.7 million   

Term note

     2.9     N/A      $ 9.8 million         N/A   

Promissory note

     0.0     N/A      $ 2.4 million         N/A   

Other income, net consists principally of $0.1 million of rental income earned from the lease of the Cork, Ireland facility.

B. Liquidity and Capital Resources

Cash and cash equivalents increased $0.4 million to $6.8 million at December 31, 2011 from $6.4 million at September 30, 2011. At December 31, 2011, essentially all of the $6.8 million of the Company’s cash and cash equivalents were in the possession of its non-U.S. subsidiaries. Distributions from the Company’s non-U.S. subsidiaries to the Company may be subject to statutory restriction, adverse tax consequences or other limitations.

The Company’s operating activities provided $1.3 million of cash in the first quarter of fiscal 2012 compared with $2.1 million of cash provided by operating activities in the first quarter of fiscal 2011. The $1.3 million of cash provided by operating activities in the first quarter of fiscal 2012 was primarily due to (i) net income of $1.2 million; (ii) $2.0 million from the impact of such non-cash items as depreciation and amortization expense, deferred taxes, equity based compensation expense and LIFO expense; (iii) a $3.7 million decrease in accounts receivable and (iv) a $0.3 million reduction in refundable income taxes. These items were partially offset by (i) a $3.2 million increase in inventories and (ii) a $2.0 million decrease in accounts payable and accrued liabilities. These changes in the components of working capital do not take into consideration the impact of the opening balance sheet related to the acquisition of QAF and were due primarily to factors resulting from normal business conditions of the Company, including (i) to support growth in business, (ii) the relative timing of collections from customers and (iii) the relative timing of payments to suppliers and tax authorities.

Capital expenditures were $0.5 million in the first quarter of fiscal 2012 compared with $0.6 million in the comparable fiscal 2011 period. Capital expenditures during the first quarter of fiscal 2012 consist of $0.4 million by the Forge Group and $0.1 million by the Repair Group. In addition to the $0.5 million expended during the first quarter of fiscal 2012, $0.6 million has been committed as of December 31, 2011. The Company anticipates that total fiscal 2012 capital expenditures will be within the range of $3.0 to $4.5 million and will relate principally to the expansion of the Forge Group’s production capabilities.

As described more fully in note 11 to the unaudited consolidated condensed financial statements, the Company acquired a forging business in October 2011 for approximately $24.8 million at closing. The acquisition was financed by borrowing approximately $22.4 million from its bank, which borrowing consisted of a new $10.0 million term loan and drawing approximately $12.4 million from its revolving credit facility. The balance of the acquisition was financed by the Company issuing a $2.4 million promissory note to the seller.

In October 2011, the Company entered into an amendment to its existing credit agreement (the “Credit Agreement Amendment”) with its bank increasing the maximum borrowing amount from $30.0 million to $40.0 million, of which $10.0 million is a five (5) year term loan and $30.0 million is a five (5) year revolving loan, secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 65% of the stock of its non-U.S. subsidiaries. The term loan is repayable in quarterly installments of $0.5 million starting December 1, 2011.

The term loan has a variable interest rate based on Libor, which becomes an effective fixed rate of 2.9% after giving effect to an interest rate swap agreement. Borrowing under the revolving loan bears interest at a rate equal to Libor plus 0.75% to 1.75%, which percentage fluctuates based on the Company’s leverage ratio of outstanding indebtedness to EBITDA. The

 

16


bank loans are subject to certain customary financial covenants including, without limitation, covenants that require the Company to not exceed a maximum leverage ratio and to maintain a minimum fixed charge coverage ratio. There is also a commitment fee ranging from 0.10% to 0.25% to be incurred on the unused balance. The promissory note issued to the seller is non-interest bearing and is due in November of 2013.The Company was in compliance with all applicable loan covenants as of December 31, 2011.

The Company believes that cash flows 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 2012.

C. Impact of Newly Issued Accounting Standards

In December 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, and as a result entities are required to continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU 2011-05. This update is effective for public companies with fiscal years beginning after December 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements and disclosures.

Item 4. Controls and Procedures

As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of the Company’s internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of December 31, 2011 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective. Accordingly, management has concluded that the unaudited consolidated condensed financial statements in this Form 10-Q fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented.

During the first quarter period ended December 31, 2011, the following occurred:

 

   

On October 28, 2011, the Company acquired the forging business and related assets from GEL Industries, Inc., which operated under its own set of systems and internal controls. The Company is maintaining those systems and much of the internal control environment until such time that it is able to incorporate the acquired processes into the Company’s own control environment. The Company expects to be substantially complete with the incorporation of the acquired operations, as they relate to systems and internal controls, into its control environment during fiscal 2012.

There were no other changes to the Company’s internal controls over financial reporting during the quarter ended December 31, 2011, which would be expected to have a material effect on financial reporting.

 

17


Part II. Other Information

Item 6. (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    Credit and Security Agreement among Fifth Third Bank and SIFCO Industries, Inc. (and subsidiaries) dated December 10, 2010, filed as Exhibit 4.23 to the Company’s Form 8-K dated December 10, 2010 and incorporated herein by reference
       4.2    First Amendment and Joinder to Credit and Security Agreement among Fifth Third Bank and SIFCO Industries, Inc. (and subsidiaries) dated October 28, 2011, filed as Exhibit 4.2 to the Company’s Form 8-K dated October 28, 2011 and incorporated herein by reference
       9.1    Voting Trust Agreement dated January 30, 2007, filed as Exhibit 9.3 of the Company’s Form 10-Q dated December 31, 2006, and incorporated herein by reference
       9.2   

Voting Trust Extension Agreement (effectively) dated January 31, 2010, filed as Exhibit 9.2 of the Company’s

Form 10-Q dated December 31, 2009, and incorporated herein by reference

     10.1    SIFCO Industries, Inc. 1998 Long-term Incentive Plan, filed as Exhibit 10.3 of the Company’s Form 10-Q dated June 30, 2004, and incorporated herein by reference
     10.2    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
     10.3    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/A dated December 31, 2000, and incorporated herein by reference
     10.4    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/A dated December 31, 2000, and incorporated herein by reference
     10.5    Separation Pay Agreement between Frank A. Cappello and SIFCO Industries, Inc. dated December 16, 2005, filed as Exhibit 10.14 of the Company’s Form 10-K dated September 30, 2005, and incorporated herein by reference
     10.6    Amendment No. 1 to Change in Control Severance Agreement between the Company and Frank Cappello, dated February 5, 2007, filed as Exhibit 10.17 of the Company’s Form 10-Q dated December 31, 2006 and incorporated herein by reference
     10.7    Amendment No. 1 to Change in Control Severance Agreement between the Company and Remigijus Belzinskas, dated February 5, 2007, filed as Exhibit 10.18 of the Company’s Form 10-Q dated December 31, 2006 and incorporated herein by reference
     10.8    SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2008 Annual Meeting to Shareholders dated December 14, 2007, and incorporated herein by reference
     10.9    Letter Agreement between the Company and Jeffrey P. Gotschall, dated August 12, 2009 filed as Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2009 and incorporated herein by reference

 

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Exhibit
No.

 

Description

     10.10   Interim Chief Executive Officer Agreement, dated as of August 31, 2009, by and among SIFCO Industries, Inc., Aviation Component Solutions and Michael S. Lipscomb and incorporated herein by reference
     10.11   Amended and Restated Change in Control and Severance Agreement, between James P. Woidke and SIFCO Industries, Inc., dated April 27, 2010 filed as Exhibit 10.15 of the Company’s Form 8-K dated April 30, 2010, and incorporated herein by reference
     10.12   Asset Purchase Agreement between T&W Forge, Inc and TWF Acquisition, LLC (a wholly-owned subsidiary of SIFCO Industries Inc.) dated December 10, 2010 filed as Exhibit 10.14 to the Company’s Form 8-K dated December 10, 2010, and incorporated herein by reference
     10.13   Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and incorporated herein by reference
     10.14   Asset Purchase Agreement between GEL Industries, Inc (DBA Quality Aluminum Forge) and Forge Acquisition, LLC (a wholly-owned subsidiary of SIFCO Industries Inc.) dated October 28, 2011, filed as Exhibit 10.16 to the Company’s Form 8-K dated October 28, 2011, and incorporated herein by reference
     14.1   Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 10-K dated September 30, 2003, 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
  *101   The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 filed with the SEC on February 9, 2012, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended December 31, 2011 and 2010, (ii) Consolidated Condensed Balance Sheets at December 31, 2011 and September 30, 2011, (iii) Consolidated Condensed Statements Cash Flow for the fiscal periods ended December 31, 2011 and 2010, and (iv) the Notes to the Consolidated Condensed Financial Statements.

 

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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: February 9, 2012      

/s/ Michael S. Lipscomb

           Michael S. Lipscomb
           President and Chief Executive Officer
           (Principal Executive Officer)

 

Date: February 9, 2012      

/s/ Frank A. Cappello

           Frank A. Cappello
           Vice President-Finance and
           Chief Financial Officer
           (Principal Financial Officer)

 

 

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