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Shiloh Industries Inc. Reports Operating Results (10-Q)

May 26, 2009 | About:

Shiloh Industries Inc. (SHLO) filed Quarterly Report for the period ended 2009-04-30.

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 $34.67 million; its shares were traded at around $2.12 with and P/S ratio of 0.07.

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 April 30, 2009 and October 31, 2008, the amount accrued for group insurance and workers compensation claims was $3,060 and $4,117, respectively. The Company does not self-insure for any other types of losses.

GROSS PROFIT. Gross profit for the second quarter of fiscal 2009 was a loss of $1,142 compared to gross profit of $12,248 in the second quarter of fiscal 2008, a decrease of $13,390. Gross profit as a percentage of sales was a negative 1.8% in the second quarter of fiscal 2009 compared to 9.4% for the same period a year ago. Gross profit in the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008 was adversely affected by the lower volume of sales in the quarter and the absence of the related gross profit of approximately $17,700. Gross profit was also adversely affected by increased material costs and lower revenue realized from the sale of engineered scrap during the second quarter of fiscal 2009 compared to the second quarter of fiscal 2008. The effect of increased material cost was approximately $9,200. These reductions of gross profit were offset by reduced manufacturing expenses that favorably affected gross profit by approximately $13,400. 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 $8,200 and reduced expenditures for repairs, supplies and utilities of approximately $3,450. Depreciation and taxes declined by $1,750.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were $4,857 in the second quarter of fiscal 2009, a decrease of $1,760 from $6,617 in the same period of the prior year. As a percentage of sales, these expenses were 7.8% of sales in the second quarter of fiscal 2009 and 5.1% of sales in the second quarter of fiscal 2008. The decrease in selling, general, and administrative expenses reflect lower personnel and personnel-related expenses of approximately $580, and lower spending in controllable expense areas of approximately $1,180, also in response to the current automotive market conditions.

OTHER. Interest expense for the second quarter of fiscal 2009 was $568, compared to interest expense of $971 during the second quarter of fiscal 2008. Interest expense decreased from the prior year second quarter as a result of a decrease in the interest rate and a lower level of average borrowed funds in the second quarter of fiscal 2009 compared to the prior year. Borrowed funds averaged $58,488 during the second quarter of fiscal 2009 and the weighted average interest rate was 3.07%. In the second quarter of fiscal 2008, borrowed funds averaged $76,752 while the weighted average interest rate was 4.52%.

GROSS PROFIT. Gross profit for the first six months of fiscal 2009 was a loss of $5,397 compared to gross profit of $23,003 in the first half of fiscal 2008, a decrease of $28,400. Gross profit as a percentage of sales was a negative 4.3% in the first half of fiscal 2009 compared to 8.7% in the same period a year ago. For the first six months of fiscal 2009 gross profit was reduced as a result of lower sales volume compared to the prior year first six-month period. The effect of reduced sales on gross profit was approximately $37,000. Gross profit was also adversely affected by increased material costs and lower revenue realized from the sale of engineered scrap during the first half of fiscal 2009 compared to the first half of fiscal 2008. The effect of increased material cost was approximately $17,500. These reductions of gross profit were offset by reduced manufacturing expenses that favorably affected gross profit by approximately $26,100. 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 $16,700 and reduced expenditures for repairs, supplies and utilities of approximately $7,000. Depreciation and taxes declined by $2,400.

OTHER. For the first six months of fiscal 2009, interest expense was $1,387, a decrease of $878 from interest expense of $2,265 in the first six months of fiscal 2008. The decrease in interest expense compared to the prior year six-month period resulted from a lower level of average borrowed funds and a decrease in the interest rate. Borrowed funds averaged $62,643 during the first six months of fiscal 2009 and the weighted average interest rate was 3.55%. For the first six months of fiscal 2008, borrowed funds averaged $76,492 while the weighted average interest rate was 5.41%.

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