SIFCO Industries, Inc. (“SIFCO”) Announces Third Quarter Fiscal 2021 Financial Results


CLEVELAND–(BUSINESS WIRE)–SIFCO Industries, Inc. (NYSE American: SIF) today announced financial results for its third quarter of fiscal 2021, which ended June 30, 2021.

Third Quarter Results

  • Net sales in the third quarter of fiscal 2021 decreased 8.8% o $25.3 million, compared with $27.8 million for the same period in fiscal 2020.
  • Net income for the third quarter of fiscal 2021 was $0.3 million, or $0.04 per diluted share, compared with net income of $2.3 million, or $0.39 per diluted share, in the third quarter of fiscal 2020.
  • EBITDA was $2.3 million in the third quarter of fiscal 2021, compared with $4.3 million in the third quarter of fiscal 2020.
  • Adjusted EBITDA in the third quarter of fiscal 2021 was $2.4 million, compared with Adjusted EBITDA of $2.8 million in the third quarter of fiscal 2020.

Year to Date Results

  • Net sales in the first nine months of fiscal 2021 decreased 10.9% to $75.3 million, compared with $84.5 million for the same period in fiscal 2020.
  • Net income for the first nine months of fiscal 2021 was $1.8 million, or $0.29 per diluted share, compared with net income of $4.2 million, or $0.72 per diluted share, in the first nine months of fiscal 2020.
  • EBITDA was $7.2 million in the first nine months of fiscal 2021, compared with $10.3 million in the first nine months of fiscal 2020.
  • Adjusted EBITDA in the first nine months of fiscal 2021 was $5.5 million, compared with Adjusted EBITDA of $8.0 million in the first nine months of fiscal 2020.

Other Highlights

CEO Peter W. Knapper stated, “The SIFCO team continues to focus on safety, delivery, quality, cost, and continuous improvement. While the Company saw more of an impact in its third quarter of fiscal 2021 from the effects of the COVID-19 pandemic due to the longer lead times for certain of our products, we continue to work with and support our customers as the A&E markets begin to react to the recovery that is underway.”

Use of Non-GAAP Financial Measures

The Company uses certain non-GAAP measures in this release. EBITDA and Adjusted EBITDA are non-GAAP financial measures and are intended to serve as supplements 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, concerns with or threats of, or the consequences of, pandemics, contagious diseases or health epidemics, including COVID-19, competition and other uncertainties the Company, its customers, and the industry in which they operate have experienced and continue to experience, detailed from time to time in the Company’s Securities and Exchange Commission filings.

The Company’s Annual Report on Form 10-K for the year ended September 30, 2020 and other reports filed with the Securities & Exchange Commission can be accessed through the Company’s website: www.sifco.com, or on the Securities and Exchange Commission’s website: www.sec.gov.

SIFCO Industries, Inc. is engaged in the production of forgings and machined components primarily for the aerospace and energy markets. The processes and services include forging, heat-treating, coating, and machining.

Third Quarter ended June 30,

(Amounts in thousands, except per share data)

(Unaudited)

 

Three Months Ended

June 30,

 

Nine Months Ended

June 30,

 

2021

 

2020

 

2021

 

2020

Net sales

$

25,330

 

 

$

27,777

 

 

$

75,274

 

 

$

84,521

 

Cost of goods sold

22,040

 

 

23,628

 

 

65,317

 

 

70,771

 

Gross profit

3,290

 

 

4,149

 

 

9,957

 

 

13,750

 

Selling, general and administrative expenses

2,912

 

 

2,864

 

 

10,336

 

 

10,393

 

Amortization of intangible assets

248

 

 

408

 

 

765

 

 

1,224

 

Loss on disposal of operating assets

 

 

55

 

 

 

 

98

 

Gain on insurance recoveries

 

 

(1,683

)

 

(2,495

)

 

(2,683

)

Operating income

130

 

 

2,505

 

 

1,351

 

 

4,718

 

Interest expense

143

 

 

183

 

 

478

 

 

697

 

Foreign currency exchange loss, net

1

 

 

12

 

 

22

 

 

12

 

Other loss (income), net

(232

)

 

27

 

 

(129

)

 

(58

)

Income before income tax expense (benefit)

218

 

 

2,283

 

 

980

 

 

4,067

 

Income tax expense (benefit)

(36

)

 

33

 

 

(776

)

 

(101

)

Net income

$

254

 

 

$

2,250

 

 

$

1,756

 

 

$

4,168

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

Basic

$

0.04

 

 

$

0.40

 

 

$

0.31

 

 

$

0.74

 

Diluted

$

0.04

 

 

$

0.39

 

 

$

0.29

 

 

$

0.72

 

 

 

 

 

 

 

 

 

Weighted-average number of common shares (basic)

5,779

 

 

5,676

 

 

5,753

 

 

5,656

 

Weighted-average number of common shares (diluted)

6,006

 

 

5,807

 

 

5,960

 

 

5,768

 

Consolidated Condensed Balance Sheets

(Amounts in thousands, except per share data)

(Unaudited)

 

 

June 30,

2021

 

September 30,

2020

 

(unaudited)

 

 

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

247

 

 

$

427

 

Receivables, net of allowance for doubtful accounts of $120 and $249, respectively

20,206

 

 

23,225

 

Other receivables

 

 

1,547

 

Contract assets

14,666

 

 

11,997

 

Inventories, net

15,864

 

 

15,569

 

Refundable income taxes

103

 

 

103

 

Prepaid expenses and other current assets

1,596

 

 

2,338

 

Total current assets

52,682

 

 

55,206

 

Property, plant and equipment, net

43,788

 

 

44,201

 

Operating lease right-of-use assets, net

16,174

 

 

17,021

 

Intangible assets, net

1,137

 

 

1,890

 

Goodwill

3,493

 

 

3,493

 

Other assets

86

 

 

137

 

Total assets

$

117,360

 

 

$

121,948

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current maturities of long-term debt

$

9,828

 

 

$

7,144

 

Revolver

9,825

 

 

12,870

 

Short-term operating lease liabilities

800

 

 

991

 

Accounts payable

12,244

 

 

14,002

 

Accrued liabilities

6,889

 

 

8,290

 

Total current liabilities

39,586

 

 

43,297

 

Long-term debt, net of current maturities

2,903

 

 

4,606

 

Long-term operating lease liabilities, net of short-term

15,624

 

 

16,188

 

Deferred income taxes

556

 

 

1,400

 

Pension liability

9,611

 

 

10,165

 

Other long-term liabilities

743

 

 

769

 

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 5,989 at June 30, 2021 and 5,916 at September 30, 2020

5,989

 

 

5,916

 

Additional paid-in capital

11,025

 

 

10,736

 

Retained earnings

44,095

 

 

42,339

 

Accumulated other comprehensive loss

(12,772

)

 

(13,468

)

Total shareholders’ equity

48,337

 

 

45,523

 

Total liabilities and shareholders’ equity

$

117,360

 

 

$

121,948

 

Non-GAAP Financial Measures

Presented below is certain financial information based on the Company’s EBITDA and Adjusted EBITDA. References to “EBITDA” mean earnings (losses) from continuing operations before interest, taxes, depreciation and amortization, and references to “Adjusted EBITDA” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and Adjusted EBITDA.

Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in the United States of America (“GAAP”). The Company presents EBITDA and Adjusted EBITDA because management believes that they are useful indicators for evaluating operating performance and liquidity, including the Company’s ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions. Although the Company uses EBITDA and Adjusted EBITDA for the reasons noted above, the use of these non-GAAP financial measures as analytical tools has limitations. Therefore, reviewers of the Company’s financial information should not consider them in isolation, or as a substitute for analysis of the Company’s results of operations as reported in accordance with GAAP. Some of these limitations include:

  • Neither EBITDA nor Adjusted EBITDA reflects the interest expense, or the cash requirements necessary to service interest payments on indebtedness;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such replacements;
  • The omission of the substantial amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA; and
  • Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to the Company to invest in the growth of its businesses. Management compensates for these limitations by not viewing EBITDA or Adjusted EBITDA in isolation and specifically by using other GAAP measures, such as net income (loss), net sales, and operating income (loss), to measure operating performance. Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under GAAP, and neither should be considered as an alternative to net loss or cash flow from operations determined in accordance with GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.

The following table sets forth a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:

Dollars in thousands

Three Months Ended

 

Nine Months Ended

 

June 30,

 

June 30,

 

2021

 

2020

 

2021

 

2020

Net income

$

254

 

 

$

2,250

 

 

$

1,756

 

 

$

4,168

 

Adjustments:

 

 

 

 

 

 

 

Depreciation and amortization expense

1,980

 

 

1,845

 

 

5,710

 

 

5,576

 

Interest expense, net

143

 

 

183

 

 

478

 

 

697

 

Income tax expense (benefit)

(36

)

 

33

 

 

(776

)

 

(101

)

EBITDA

2,341

 

 

4,311

 

 

7,168

 

 

10,340

 

Adjustments:

 

 

 

 

 

 

 

Foreign currency exchange loss, net (1)

1

 

 

12

 

 

22

 

 

12

 

Other loss (income), net (2)

(232

)

 

27

 

 

(129

)

 

(58

)

Loss on disposal of assets (3)

 

 

55

 

 

 

 

98

 

Gain on insurance recoveries (4)

 

 

(1,683

)

 

(2,495

)

 

(2,683

)

Equity compensation (5)

85

 

 

37

 

 

378

 

 

262

 

LIFO impact (6)

248

 

 

(5

)

 

582

 

 

(16

)

Adjusted EBITDA

$

2,443

 

 

$

2,754

 

 

$

5,526

 

 

$

7,955

 

(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, such as pension costs, grant income or extinguishment of debt.

(3)

Represents the difference between the proceeds from the sale of operating equipment and the carrying values shown on the Company’s books.

(4)

Represents the difference between the insurance proceeds received for the damaged property and the carrying values shown on the Company’s books for the assets that were damaged in the fire at the Orange location.

(5)

Represents the equity-based compensation expense recognized by the Company under the 2016 Plan due to granting of awards, awards not vesting and/or forfeitures.

(6)

Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method.

Reference to the above activities can found in the consolidated financial statements included in Item 8 of the Company’s Annual Report on Form 10-K.

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