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Shiloh Industries Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: February 25, 2009 12:17PM
Shiloh Industries Inc. (SHLO) filed Quarterly Report for the period ended 2009-01-31. Shiloh Industries Inc. is a full service manufacturer of blanks and stamped components for the automotive and light truck heavy truck and other industrial markets. Their blanks are principally sold to automotive and truck original equipment manufacturers and are used for exterior steel components such as fenders hoods and doors for which quality of fit and finish is critical. Their stampings are principally used as components in mufflers seat frames structural rails window lifts heat shields vehicle brakes and other structural body components. Shiloh Industries Inc. has a market cap of $39.58 million; its shares were traded at around $1.4 with a P/E ratio of 4.9 and P/S ratio of 0.08.
Highlight of Business Operations:
Group Insurance and Workers Compensation Accruals. The Company is self-insured for group insurance and workers compensation and reviews these accruals on a monthly basis to adjust the balances as determined necessary. The Company reviews claims data and lag analysis as the primary indicators of the accruals. Additionally, the Company reviews specific large insurance claims to determine whether there is a need for additional accrual on a case-by-case basis. Changes in the claim lag periods and the specific occurrences could materially impact the required accrual balance period-to-period. The Company carries excess insurance coverage for group insurance and workers compensation claims exceeding a range of $100-150 and $250-500 per plan year, respectively, dependant upon the location where the claim is incurred. At January 31, 2009 and October 31, 2008, the amount accrued for group insurance and workers compensation claims was $3,776 and $4,117, respectively. The Company does not self-insure for any other types of losses.
GROSS MARGIN. Gross margin for the first quarter of fiscal 2009 was a loss of $4,255 compared to gross profit of $10,755 in the first quarter of fiscal 2008, a decrease of $15,010. Gross profit as a percentage of sales was a negative 6.8% in the first quarter of fiscal 2009 compared to 8.0% for the same period a year ago. Gross profit in the first quarter of fiscal 2009 was adversely affected by the reduced volume of sales in the first quarter of fiscal 2009. The effect of reduced sales volume on first quarter 2009 gross profit was approximately $19,300. Gross profit was also adversely affected by increased material costs and lower revenue realized from the sale of engineered scrap during the first quarter of fiscal 2009 compared to the first quarter of fiscal 2008. The effect of increased material cost was approximately $8,300. The factors that reduced gross profit were offset by reduced manufacturing expenses that favorably affected gross profit by approximately $12,600. Manufacturing expenses declined as a result of the actions that the Company initiated in response to the reduction in production volumes of the Companys customers. These actions resulted in reduced personnel and personnel related expenses of approximately $8,500 and reduced expenditures for repairs, supplies and utilities of approximately $2,900. Depreciation and taxes declined by $800.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses of $4,986 in the first quarter of fiscal 2009 were $1,935 less than selling, general and administrative expenses of $6,921 in the same period of the prior year. As a percentage of sales, these expenses were 7.9% of sales in first quarter of fiscal 2009 and 5.1% in the first quarter of fiscal 2008. The decrease in selling, general and administrative expenses reflect lower personnel and personnel related expenses of approximately $1,600, and lower spending in controllable expense areas.
OTHER. Interest expense for the first quarter of fiscal 2009 was $818, compared to interest expense of $1,294 during the first quarter of fiscal 2007. Interest expense decreased from the prior year first quarter as a result of a lower level of average borrowed funds and a lower weighted average interest rate in the first quarter of fiscal 2009 compared to the prior year. Borrowed funds averaged $67,093 during the first quarter of fiscal 2009 and the weighted average interest rate was 3.93%. In the first quarter of fiscal 2008, borrowed funds averaged $72,922 while the weighted average interest rate was 6.43%.
NET INCOME. The net loss for the first quarter of fiscal 2009 was $6,134, or $0.38 per share, diluted. Net income for the first quarter of fiscal 2008 was $1,583, or $0.10 per share, diluted.
In July 2008, the Company entered into a finance agreement with an insurance broker for various insurance policies that bears interest at a fixed rate of 3.24% and requires monthly payments of $78 through April 2009. In July 2007, the Company entered into a finance agreement with an insurance broker for various insurance policies that bore interest at a fixed rate of 5.79% and required monthly payments of $84 through April 2008. As of January 31, 2009 and October 31, 2008, $156 and $389, respectively, remained outstanding under these agreements and were classified as current debt in the Companys consolidated balance sheets.
Stocks Discussed: SHLO,