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SIFCO Industries Inc Reports Operating Results (10-Q)

February 11, 2010 | About:
10qk

10qk

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SIFCO Industries Inc (SIF) filed Quarterly Report for the period ended 2009-12-31.

Sifco Industries Inc has a market cap of $67.9 million; its shares were traded at around $12.8 with a P/E ratio of 8.7 and P/S ratio of 0.7. SIF is in the portfolios of John Buckingham of Al Frank Asset Management, Inc., Chuck Royce of ROYCE & ASSOCIATES.

Highlight of Business Operations:

Net sales in the first quarter of fiscal 2010 decreased 9.5% to $21.3 million, compared with $23.5 million in the comparable period in fiscal 2009. Net income in the first quarter of fiscal 2010 increased $0.4 million to $2.0 million, compared with $1.6 million in the comparable period in fiscal 2009.

Net sales were $16.2 million in the first quarters of both fiscal 2010 and 2009. For purposes of the following discussion, the ACM Group considers aircraft that can accommodate less than 100 passengers to be small aircraft and those that can accommodate 100 or more passengers to be large aircraft. Net sales of airframe components for small aircraft increased $1.3 million to $10.1 million in the first quarter of fiscal 2010, compared with $8.8 million in the comparable period in fiscal 2009. Net sales of turbine engine components for small aircraft, which consist primarily of business and regional jets as well as military transport and surveillance aircraft, decreased $0.7 million to $4.4 million in the first quarter of fiscal 2010, compared with $5.1 million in the comparable period in fiscal 2009. Net sales of airframe components for large aircraft decreased $0.1 million to $1.1 million in the first quarter of fiscal 2010, compared with $1.2 million in the comparable period in fiscal 2009. Net sales of turbine engine components for large aircraft decreased $0.5 million to $0.2 million in the first quarter of fiscal 2010, compared with $0.7 million in the comparable period in fiscal 2009. Commercial product and non-product sales were $0.4 million in the first quarters of both fiscal 2010 and 2009.

Net sales in the first quarter of fiscal 2010 decreased 22.8% to $2.9 million, compared with $3.8 million in the comparable fiscal 2009 period. In the first quarter of fiscal 2010, product net sales, consisting of selective electrochemical metal finishing equipment and solutions, decreased 14.6% to $1.4 million, compared with $1.7 million in the same period in fiscal 2009. This decrease is largely due to excess solutions inventory at one major customer as well as a production decline at another major customer. In the first quarter of fiscal 2010, customized selective electrochemical metal finishing contract service net sales decreased 30.1% to $1.5 million, compared with $2.1 million in the same period in fiscal 2009. The overall weak global economic conditions, particularly a decrease in demand from the ASC Groups major customers in the oil and gas industry, negatively impacted the ASC Groups net sales in fiscal 2009. A portion of the ASC Groups business is conducted in Europe and is denominated in local European currencies, which have strengthened in relation to the U.S. dollar resulting in a favorable currency impact on net sales in the first quarter of fiscal 2010 of approximately $0.1 million.

The Companys operating activities provided $1.9 million of cash in the first quarter of fiscal 2010 compared with $1.9 million of cash consumed by operating activities (of which $1.7 million was consumed by continuing operations) in the first quarter of fiscal 2009. The $1.9 million of cash provided by operating activities in first quarter of fiscal 2010 was primarily due to (i) net income of $2.0 million, (ii) the impact of such non-cash items as depreciation expense, deferred taxes and LIFO expense; (iii) a $0.9 million decrease in refundable income taxes; and (iv) a $0.6 million reduction in accounts receivable and inventory offset by (i) a $1.2 million decrease in accounts payable and (ii) a $0.8 million decrease in accrued liabilities. These changes in the components of working capital were due primarily to factors resulting from normal business conditions of the Company, including (i) the relative timing of collections from customers as may be impacted by the current global economic climate and (ii) the relative timing of payments to suppliers and tax authorities.

Capital expenditures were $1.9 million in the first quarter of fiscal 2010 compared to $1.0 million in the comparable fiscal 2009 period. Fiscal 2010 capital expenditures consist of $1.8 million by the ACM Group and $0.1 million by the ASC Group. In addition to the $1.9 million expended during the first quarter of fiscal 2010, $2.5 million has been committed as of December 31, 2009. The Company anticipates that total fiscal 2010 capital expenditures to be within the range of $5.5 to $6.5 million and will relate principally to the expansion of the ACM Groups production capabilities.

At December 31, 2009, the Company has an $8.0 million revolving credit agreement with a bank, subject to sufficiency of collateral, which expires on October 1, 2010 and bears interest at the banks base rate plus 0.50%. The interest rate was 3.25% at December 31, 2009. A 0.35% commitment fee is incurred on the unused balance of the revolving credit agreement. At December 31, 2009, no amount was outstanding and the Company had $7.9 million available under its $8.0 million revolving credit agreement. The Companys revolving credit agreement is secured by substantially all of the Companys assets located in the U.S. and a guarantee by its U.S. subsidiaries. Under its revolving credit agreement with the bank, the Company is subject to certain customary covenants. These include, without limitation, covenants (as defined) that require maintenance of certain specified financial ratios, including a minimum tangible net worth level and a minimum EBITDA level. The Company was in compliance with all of the covenants in its revolving credit agreement at December 31, 2009.

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