Document and Entity Information
Document and Entity Information | 3 Months Ended |
Dec. 31, 2016shares | |
Document Documentand Entity Information [Abstract] | |
Entity Registrant Name | SIFCO INDUSTRIES INC |
Entity Central Index Key | 90,168 |
Current Fiscal Year End Date | --09-30 |
Entity Filer Category | Smaller Reporting Company |
Document Type | 10-Q |
Document Period End Date | Dec. 31, 2016 |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q1 |
Amendment Flag | false |
Entity Common Stock, Shares Outstanding | 5,528,633 |
Trading Symbol | SIF |
Consolidated Condensed Statemen
Consolidated Condensed Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
Net sales | $ 31,473 | $ 27,161 |
Cost of goods sold | 27,305 | 25,053 |
Gross profit | 4,168 | 2,108 |
Selling, general and administrative expenses | 5,303 | 5,620 |
Amortization of intangible assets | 592 | 714 |
(Gain) loss on disposal of operating assets | (6) | 2 |
Operating loss | (1,721) | (4,228) |
Interest income | (14) | (9) |
Interest expense | 678 | 408 |
Foreign currency exchange loss, net | 4 | 14 |
Other income, net | (107) | (107) |
Loss from operations before income tax expense (benefit) | (2,282) | (4,534) |
Income tax expense (benefit) | 327 | (1,936) |
Net loss | $ (2,609) | $ (2,598) |
Net loss per share | ||
Basic (in dollars per share) | $ (0.48) | $ (0.48) |
Diluted (in dollars per share) | $ (0.48) | $ (0.48) |
Weighted-average number of common shares (basic) (in shares) | 5,467 | 5,452 |
Weighted-average number of common shares (diluted) (in shares) | 5,467 | 5,452 |
Consolidated Condensed Stateme3
Consolidated Condensed Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (2,609) | $ (2,598) |
Other comprehensive income (loss): | ||
Foreign currency translation adjustment | (1,048) | (447) |
Retirement plan liability adjustment, net of tax | 234 | 193 |
Interest rate swap agreement adjustment, net of tax | 16 | 0 |
Comprehensive loss | $ (3,407) | $ (2,852) |
Consolidated Condensed Balance
Consolidated Condensed Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 1,019 | $ 471 |
Receivables, net of allowance for doubtful accounts of $591 and $706, respectively | 26,415 | 25,158 |
Inventories, net | 27,247 | 28,496 |
Refundable income taxes | 1,773 | 1,773 |
Prepaid expenses and other current assets | 2,774 | 2,177 |
Total current assets | 59,228 | 58,075 |
Property, plant and equipment, net | 47,147 | 48,958 |
Intangible assets, net | 10,322 | 11,138 |
Goodwill | 11,221 | 11,748 |
Other assets | 222 | 538 |
Total assets | 128,140 | 130,457 |
Current liabilities: | ||
Current maturities of long-term debt | 8,255 | 18,258 |
Revolving credit agreement | 25,337 | 12,751 |
Accounts payable | 13,206 | 14,520 |
Accrued liabilities | 5,715 | 5,234 |
Total current liabilities | 52,513 | 50,763 |
Long-term debt, net of current maturities | 7,075 | 7,623 |
Deferred income taxes | 2,944 | 2,929 |
Pension liability | 8,101 | 8,341 |
Other long-term liabilities | 396 | 431 |
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 and outstanding shares – 5,529 at December 31, 2016 and 5,525 at September 30, 2016 | 5,529 | 5,525 |
Additional paid-in capital | 9,353 | 9,219 |
Retained earnings | 55,877 | 58,476 |
Accumulated other comprehensive loss | (13,648) | (12,850) |
Total shareholders’ equity | 57,111 | 60,370 |
Total liabilities and shareholders’ equity | $ 128,140 | $ 130,457 |
Consolidated Condensed Balance5
Consolidated Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 591 | $ 706 |
Serial preferred shares, no par value | ||
Serial preferred shares, shares authorized | 1,000,000 | 1,000,000 |
Common shares, par value (in dollars per share) | $ 1 | $ 1 |
Common shares, shares authorized | 10,000,000 | 10,000,000 |
Common shares, shares issued | 5,529,000 | 5,525,000 |
Common shares, shares outstanding | 5,529,000 | 5,525,000 |
Consolidated Condensed Stateme6
Consolidated Condensed Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (2,609) | $ (2,598) |
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||
Depreciation and amortization | 2,515 | 2,778 |
Amortization and write-off of debt issuance cost | 273 | 36 |
Gain on disposal of operating assets | (6) | 0 |
LIFO expense | 107 | 34 |
Share transactions under company stock plan | 138 | 317 |
Purchase price inventory adjustment | 0 | 266 |
Other long-term liabilities | 2 | 64 |
Deferred income taxes | 189 | (565) |
Changes in operating assets and liabilities: | ||
Receivables | (1,556) | 6,155 |
Inventories | 818 | 944 |
Refundable taxes | 0 | (1,367) |
Prepaid expenses and other current assets | (197) | 149 |
Other assets | 302 | 303 |
Accounts payable | (1,411) | 1,558 |
Other accrued liabilities | 555 | 360 |
Accrued income and other taxes | 92 | (151) |
Net cash provided by (used for) operating activities of operations | (788) | 8,283 |
Cash flows from investing activities: | ||
Proceeds from disposal of operating assets | 48 | 0 |
Capital expenditures | (457) | (694) |
Other | 0 | (44) |
Net cash used for investing activities of operations | (409) | (738) |
Cash flows from financing activities: | ||
Payments on long term debt | (12,223) | (1,284) |
Proceeds from revolving credit agreement | 29,622 | 3,700 |
Repayments of revolving credit agreement | (17,036) | (9,830) |
Payment of debt issue costs | (498) | 0 |
Short-term debt borrowings | 2,330 | 757 |
Short-term debt repayments | (454) | (226) |
Net cash provided by (used for) financing activities of operations | 1,741 | (6,883) |
Increase in cash and cash equivalents | 544 | 662 |
Cash and cash equivalents at the beginning of the period | 471 | 667 |
Effect of exchange rate changes on cash and cash equivalents | 4 | 8 |
Cash and cash equivalents at the end of the period | 1,019 | 1,337 |
Supplemental disclosure of cash flow information of operations: | ||
Cash paid for interest | (369) | (409) |
Cash paid for income taxes, net | $ (25) | $ (162) |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 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. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. 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 for the period. 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 2016 Annual Report on Form 10-K. The year-end consolidated condensed balance sheet data was derived from audited financial statements and disclosures required by accounting principles generally accepted accounting in the United States. 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 items previously reported in specific financial statement captions have been reclassified to conform to the fiscal 2017 presentation. B. Accounting Policies A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's fiscal 2016 Annual Report on Form 10-K. C. Net Loss per Share The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Net loss per diluted share reflects the effect of the Company’s outstanding restricted shares and performance shares under the treasury stock method. The dilutive effect of the Company’s restricted shares and performance shares were as follows: Three Months Ended 2016 2015 Net loss $ (2,609 ) $ (2,598 ) Weighted-average common shares outstanding (basic) 5,467 5,452 Effect of dilutive securities: Restricted shares (a) — — Weighted-average common shares outstanding (diluted) 5,467 5,452 Net loss per share – basic: (0.48 ) (0.48 ) Net loss per share – diluted: $ (0.48 ) $ (0.48 ) Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 59 22 (a) Due to a loss for the period, zero restricted shares are included because the effect would be anti-dilutive. D. Derivative Financial Instruments The Company entered an interest rate swap agreement on March 29, 2016 to reduce risk related to variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. The agreement was canceled as part of the debt modification on November 9, 2016, as further discussed in Note 4 - Debt. The Company accounted for the interest rate swap termination by recording the loss in accumulated other comprehensive loss as of December 31, 2016. The amount incurred in interest expense was nominal. As part of the new debt arrangement on November 9, 2016, the Company entered into a new interest rate swap on November 30, 2016 to reduce risk related to the variable debt over the life of the new term loan. At December 31, 2016, the Company held one interest rate swap agreement with a notional amount of $ 4,789 . 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 were based upon LIBOR. At December 31, 2016, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note and its mark-to-market valuation is a $15 liability at December 31, 2016. There was no interest rate swap in place at December 31, 2015. E. Impact to Recently Issued Accounting Standards In May 2014, and as subsequently updated (Accounting Standard Update ("ASU") 2016-20 being most recent), the Financial Accounting Standards Board ("FASB") issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods. The Company will adopt the new guidance on October 1, 2018. The Company has started a bottoms up approach to analyze the standard's impact on its revenues by looking at historical policies and practices and identifying the differences from applying the new standard to its revenue streams. The Company has not determined the effect of the standard to its consolidated condensed financial statements. In November 2016, the FASB issued ASU 2016-18 requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods. Early adoption is permitted. The Company is currently evaluating its plans regarding the adoption, but does not feel that this ASU is expected to have a material impact to the consolidated condensed statements. On October 24, 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date. |
Inventories
Inventories | 3 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of: December 31, September 30, Raw materials and supplies $ 6,534 $ 7,724 Work-in-process 10,147 10,459 Finished goods 10,566 10,313 Total inventories $ 27,247 $ 28,496 Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method for 38% and 44% of the Company’s inventories at December 31, 2016 and September 30, 2016, 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 $8,133 and $8,026 higher than reported at December 31, 2016 and September 30, 2016 , respectively. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 3 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows: December 31, September 30, Foreign currency translation adjustment $ (6,671 ) $ (5,623 ) Retirement plan liability adjustment, net of tax (6,963 ) (7,197 ) Interest rate swap agreement adjustment, net of tax (14 ) (30 ) Total accumulated other comprehensive loss $ (13,648 ) $ (12,850 ) |
Debt
Debt | 3 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt Debt consists of: December 31, September 30, Revolving credit agreement $ 25,337 $ 12,751 Foreign subsidiary borrowings 10,184 9,540 Capital lease obligations 416 153 Term loan 4,789 16,429 Less: unamortized debt issuance cost (59 ) (241 ) Term loan less unamortized debt issuance cost 4,730 16,188 Total Debt 40,667 38,632 Less – current maturities (33,592 ) (31,009 ) Total long-term debt $ 7,075 $ 7,623 On November 9, 2016, the Company entered into an Amended and Restated Credit and Security Agreement ("Amended and Restated Agreement") with its lender. The Amended and Restated Agreement matures on June 25, 2020 and consists of secured loans in an aggregate principal amount of up to $39,871 (the "Credit Facility"). The Credit Facility is comprised of (i) a senior secured revolving credit facility of a maximum borrowing amount of $ 35,000 , including swing line loans and letters of credit provided by the lender and (ii) senior secured term loan facility in the amount of $ 4,871 (the "Term Facility"). The new Term Facility is repayable in monthly installments of $ 81 beginning December 1, 2016. The terms of Credit Facility contain both a lockbox arrangement and subjective acceleration clause. As a result, the amounts outstanding on the revolving credit facility are classified as a short-term liability. The amounts borrowed under the Amended and Restated Agreement were used to repay the amounts outstanding under the Company's previous Credit Agreement, for working capital, for general corporate purposes and to pay fees and expenses associated with this transaction. In connection with entering into the Amended and Restated Agreement, the Company terminated its interest rate swap agreement with the lender, as referenced in Note 1 - D. Derivative Financial Instruments. Borrowings will bear interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Amended and Restated Agreement. The revolver has a rate based on LIBOR plus a 3.75% spread and a prime rate, which resulted in a weighted average rate of 4.5% at December 31, 2016 and the term loan has a rate of 4.9% at December 31, 2016, which was based on LIBOR plus a 4.25% spread. This rate becomes an effective fixed rate of 5.8% after giving effect to the interest rate swap agreement. There is also a commitment fee ranging from 0.15% to 0.375% to be incurred on the unused balance. Under the Company's Amended and Restated Agreement, the Company is subject to certain customary covenants. These include, without limitation, covenants that require maintenance of certain specified financial ratios, including that the Company meeting a minimum EBITDA and maintain a minimum fixed charge coverage ratio (to start on September 30, 2017). The Company was in compliance with loan covenants as of December 31, 2016 . On June 26, 2015, the Company entered a Credit and Security Agreement (the "2015 Credit Agreement") with its lender. The credit facility was comprised of (i) a five year revolving credit facility with a maximum borrowing amount of up to $25,000 , which reduced to $20,000 on January 1, 2016, and (ii) a five -year term loan of $20,000 . Amounts borrowed under the credit facility were 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 was repayable in quarterly installments of $714 starting September 30, 2015. The amounts borrowed under the 2015 Credit Agreement were used to repay the Company's previous revolver and term note, to fund the acquisition of the Maniago, Italy location and for working capital and general corporate purposes. The 2015 Credit Agreement also had an accordion feature, which allowed the Company to increase the availability by up to $ 15,000 upon consent of the existing lenders or upon additional lenders being joined to the facility. Borrowings bore interest at the LIBOR rate, prime rate, or the eurocurrency reference rate depending on the type of loan requested by the Company, in each case, plus the applicable margin as set forth in the Credit Agreement. Foreign subsidiary borrowings As of December 31, 2016 and September 30, 2016, the total foreign debt borrowings (excluding capital leases) were $ 10,184 and $ 9,540 , respectively, of which $ 7,178 and $5,833 , respectively is the current portion. Current debt as of December 31, 2016 and September 30, 2016, consist of $ 4,294 and $ 3,262 of short-term borrowings, $ 1,771 and $ 2,014 is the current portion of long-term debt, and $ 1,113 and $ 557 of factoring. Interest rates on the term note are based on Euribor rates which range from 1.0% to 4.0% . The factoring programs are uncommitted, whereby the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are not isolated from the Company, and effective control of the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables. The Company accounts for the pledge of receivables under this agreement as short-term debt and continues to carry the receivables on its consolidated condensed balance sheet. There was $1,113 and $ 557 of short-term borrowings relating to this agreement at December 31, 2016 and September 30, 2016, respectively, are classified within short-term debt. The carrying value of the receivables pledged as collateral were $ 1,561 and $ 1,156 at December 31, 2016 and September 30, 2016. Future payment schedule Payments on long-term debt under the Amended and Restated Agreement and foreign subsidiary borrowings (excluding capital lease obligations, see below) for the remainder of this fiscal year and each of the four succeeding fiscal years are as follows: Minimum long-term debt payments 2017 (January 1 to September 30, 2017) $ 2,063 2018 2,168 2019 2,061 2020 3,039 2021 236 Total Minimum long-term debt payments 9,567 Deferred issuance costs The Company incurred debt issuance costs in connection with its 2015 Credit Agreement in the amount of $724 . However, with the Amended and Restated Agreement, the Company incurred an additional $ 498 of costs and wrote off $241 of debt issuance costs due to debt modification accounting for deferred financing costs as it relates to the term note, which is included in interest expense in the accompanying consolidated condensed financial statements. Total debt issuance cost in the amount of $786 is split between the Term facility and the revolving credit facility. The portion noted above within debt table relates to the Term facility in the amount of $61 , net of amortization of $ 2 at December 31, 2016. The remaining $ 725 of debt issuance cost relates to the revolving credit facility. This portion is shown in the consolidated condensed balance sheet as a deferred charge in other current assets, which was reclassed from other long-term assets due to the classification of the revolving credit facility noted above, net of amortization of $ 131 at December 31, 2016. Capital leases The Company entered into new capital leases as of December 31, 2016 for equipment. The minimum rental commitments under non-cancelable leases are for the remainder of this fiscal year and each of the succeeding fiscal years are as follows: Capital Leases 2017 (January 1 to September 30, 2017) $ 99 2018 116 2019 98 2020 66 2021 65 Thereafter 15 Total minimum lease payments $ 459 Less: Amount representing interest $ (43 ) Present value of minimum lease payments $ 416 Amortization of the cost of equipment under capital leases is included in depreciation expense. Assets recorded under capital leases consist of the following: December 31, September 30, Machinery and equipment $ 521 $ 250 Accumulated depreciation (71 ) (60 ) |
Income Taxes
Income Taxes | 3 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 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 for its continuing operations. 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 2017 was (14)% , compared with 43% for the same period of fiscal 2016. This decrease is primarily attributable to year-to-date U.S. loss with no tax benefit due to a valuation allowance in fiscal 2017. Additionally, in fiscal 2016, the effective tax rate was higher in comparison to fiscal 2017 driven by discrete tax benefits of $ 461 primarily related to tax legislation enacted during the first quarter of fiscal 2016, applied against a year-to-date loss. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company's U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates that the U.S. statutory tax rate. The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy, and various state and local jurisdictions. The Company believes it has appropriate support for its federal income tax returns. |
Retirement Benefit Plans
Retirement Benefit Plans | 3 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Retirement Benefit Plans | Retirement Benefit Plans The Company and certain of its subsidiaries sponsor defined benefit pension plans covering some of its employees. The components of net periodic benefit cost of the Company’s defined benefit plans are as follows: Three Months Ended 2016 2015 Service cost $ 78 $ 70 Interest cost 220 256 Expected return on plan assets (404 ) (408 ) Amortization of net loss 216 210 Net periodic cost $ 110 $ 128 During the three months ended December 31, 2016 and 2015, the Company made no contributions to its defined benefit pension plans. The Company does not anticipate making any additional contributions to fund its defined benefit pension plans during the balance of fiscal 2017. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation 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 less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested 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 award is exercisable no later than ten years from the date of the grant. The performance shares that have been awarded under the 2007 Plan generally provide for the vesting 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. During each future reporting period, such expense may be subject to adjustment based upon the Company's financial performance, which impacts the number of common shares that it expects to vest 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 the grant. The vesting of such shares is determined at the end of the performance period. In the first three months of fiscal 2017, one award for 5 performance shares under the 2007 Plan vested, of which 1 performance shares was tendered back to the Company to cover payroll costs. The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years. If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 252 shares that remain available for award at December 31, 2016 . If any of the outstanding share awards are ultimately earned and vest 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. Stock-based compensation under the 2007 Plan was $158 and $346 during the first three months of fiscal 2017 and 2016, respectively. As of December 31, 2016 , there was $603 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2007 Plan. The Company expects to recognize this cost over the next 1.5 years. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot reasonably estimate future costs, if any, related to these matters; however, it does not believe any such matters are material to its financial condition or results of operations. The Company maintains various liability insurance coverages to protect its assets from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is possible that the Company’s future operating results could be affected by future costs of litigation. The Company is currently a defendant in a class action lawsuit filed in the Superior Court of California, County of Orange, alleging violations of California wage-and-hour laws, rules and regulations pertaining primarily to failure to accurately calculate and pay hourly and overtime wages; failure to provide meal periods; failure to authorize and permit rest periods; failure to indemnify necessary expenditures; failure to timely pay wages; and unfair competition. Although the Company records reserves for legal disputes and other matters in accordance with GAAP, the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, Company has not concluded that a loss is probable, as such an estimate of a loss has not been recorded. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company informed its workforce at its Orange, California ("Orange") location on January 20, 2017 that it would be terminating approximately 24 individuals in efforts to reduce cost. The employees affected will be offered severance benefits (includes separation pay and outplacement) in exchange for signing a Separation Agreement. The terminated employees must execute the Separation Agreement within 45 days from the termination date, otherwise it expires. Employee severance expense is no t expected to be material to the consolidated condensed financial statements. The National collective bargaining agreement that applies to the employees at the Maniago, Italy location, expired on December 31, 2015. Negotiations regarding the agreement were finalized on January 27, 2017. The new collective bargaining agreement is effective from January 1, 2016 to December 31, 2019. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | 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. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. 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 for the period. 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 2016 Annual Report on Form 10-K. The year-end consolidated condensed balance sheet data was derived from audited financial statements and disclosures required by accounting principles generally accepted accounting in the United States. 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 items previously reported in specific financial statement captions have been reclassified to conform to the fiscal 2017 presentation. |
Net Loss per Share | Net Loss per Share The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. |
Derivative Financial Instruments | Derivative Financial Instruments The Company entered an interest rate swap agreement on March 29, 2016 to reduce risk related to variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap is designated as a cash flow hedge. |
Impact to Recently Issued Accounting Standards | Impact to Recently Issued Accounting Standards In May 2014, and as subsequently updated (Accounting Standard Update ("ASU") 2016-20 being most recent), the Financial Accounting Standards Board ("FASB") issued new accounting guidance that creates a single revenue recognition model, while clarifying the principles for recognizing revenue. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods. The Company will adopt the new guidance on October 1, 2018. The Company has started a bottoms up approach to analyze the standard's impact on its revenues by looking at historical policies and practices and identifying the differences from applying the new standard to its revenue streams. The Company has not determined the effect of the standard to its consolidated condensed financial statements. In November 2016, the FASB issued ASU 2016-18 requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods. Early adoption is permitted. The Company is currently evaluating its plans regarding the adoption, but does not feel that this ASU is expected to have a material impact to the consolidated condensed statements. On October 24, 2016, the FASB issued ASU 2016-16, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. This ASU will be effective for the Company for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact it may have on its consolidated condensed financial statements, together with evaluating the adoption date. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Schedule of dilutive effect of company's restricted shares and performance shares | The dilutive effect of the Company’s restricted shares and performance shares were as follows: Three Months Ended 2016 2015 Net loss $ (2,609 ) $ (2,598 ) Weighted-average common shares outstanding (basic) 5,467 5,452 Effect of dilutive securities: Restricted shares (a) — — Weighted-average common shares outstanding (diluted) 5,467 5,452 Net loss per share – basic: (0.48 ) (0.48 ) Net loss per share – diluted: $ (0.48 ) $ (0.48 ) Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 59 22 (a) Due to a loss for the period, zero restricted shares are included because the effect would be anti-dilutive. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of: December 31, September 30, Raw materials and supplies $ 6,534 $ 7,724 Work-in-process 10,147 10,459 Finished goods 10,566 10,313 Total inventories $ 27,247 $ 28,496 |
Accumulated Other Comprehensi19
Accumulated Other Comprehensive Loss (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Components of Accumulated Other Comprehensive Loss | The components of accumulated other comprehensive loss are as follows: December 31, September 30, Foreign currency translation adjustment $ (6,671 ) $ (5,623 ) Retirement plan liability adjustment, net of tax (6,963 ) (7,197 ) Interest rate swap agreement adjustment, net of tax (14 ) (30 ) Total accumulated other comprehensive loss $ (13,648 ) $ (12,850 ) |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Debt consists of: December 31, September 30, Revolving credit agreement $ 25,337 $ 12,751 Foreign subsidiary borrowings 10,184 9,540 Capital lease obligations 416 153 Term loan 4,789 16,429 Less: unamortized debt issuance cost (59 ) (241 ) Term loan less unamortized debt issuance cost 4,730 16,188 Total Debt 40,667 38,632 Less – current maturities (33,592 ) (31,009 ) Total long-term debt $ 7,075 $ 7,623 |
Schedule of Payments of Long-term Debt | Payments on long-term debt under the Amended and Restated Agreement and foreign subsidiary borrowings (excluding capital lease obligations, see below) for the remainder of this fiscal year and each of the four succeeding fiscal years are as follows: Minimum long-term debt payments 2017 (January 1 to September 30, 2017) $ 2,063 2018 2,168 2019 2,061 2020 3,039 2021 236 Total Minimum long-term debt payments 9,567 |
Schedule of Minimum Rental Commitments Under Non-Cancelable Capital Leases | The Company entered into new capital leases as of December 31, 2016 for equipment. The minimum rental commitments under non-cancelable leases are for the remainder of this fiscal year and each of the succeeding fiscal years are as follows: Capital Leases 2017 (January 1 to September 30, 2017) $ 99 2018 116 2019 98 2020 66 2021 65 Thereafter 15 Total minimum lease payments $ 459 Less: Amount representing interest $ (43 ) Present value of minimum lease payments $ 416 |
Schedule of Assets Under Capital Leases | Assets recorded under capital leases consist of the following: December 31, September 30, Machinery and equipment $ 521 $ 250 Accumulated depreciation (71 ) (60 ) |
Retirement Benefit Plans (Table
Retirement Benefit Plans (Tables) | 3 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
Schedule of Components of Net Periodic Benefit Cost | The components of net periodic benefit cost of the Company’s defined benefit plans are as follows: Three Months Ended 2016 2015 Service cost $ 78 $ 70 Interest cost 220 256 Expected return on plan assets (404 ) (408 ) Amortization of net loss 216 210 Net periodic cost $ 110 $ 128 |
Summary of Significant Accoun22
Summary of Significant Accounting Policies - Dilutive Effect of the Company's Restricted Shares and Performance Shares (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Net loss | $ (2,609) | $ (2,598) |
Weighted-average common shares outstanding (basic) (in shares) | 5,467,000 | 5,452,000 |
Effect of dilutive securities: | ||
Weighted-average common shares outstanding (diluted) (in shares) | 5,467,000 | 5,452,000 |
Net loss per share - basic (in dollars per share) | $ (0.48) | $ (0.48) |
Net loss per share - diluted (in dollars per share) | $ (0.48) | $ (0.48) |
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share (in shares) | 59,000 | 22,000 |
Restricted Stock | ||
Effect of dilutive securities: | ||
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share (in shares) | 0 | |
Restricted Stock | ||
Effect of dilutive securities: | ||
Effect of diluted securities | 0 | 0 |
Summary of Significant Accoun23
Summary of Significant Accounting Policies - Derivative Financial Instruments (Details) - Interest Rate Swap $ in Thousands | Dec. 31, 2016USD ($)instrument | Dec. 31, 2015instrument |
Derivative [Line Items] | ||
Number of interest rate swaps | instrument | 1 | 0 |
Cash Flow Hedging | ||
Derivative [Line Items] | ||
Interest rate swap notional amount | $ 4,789 | |
Interest rate swap fair value | $ 15 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials and supplies | $ 6,534 | $ 7,724 |
Work-in-process | 10,147 | 10,459 |
Finished goods | 10,566 | 10,313 |
Total inventories | $ 27,247 | $ 28,496 |
Inventories - Additional Inform
Inventories - Additional Information (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Inventory Disclosure [Abstract] | ||
Percentage of inventories determined using LIFO method | 38.00% | 44.00% |
Additional amount that would have been reported in inventory if FIFO method had been used | $ 8,133 | $ 8,026 |
Accumulated Other Comprehensi26
Accumulated Other Comprehensive Loss - Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Total shareholders' equity | $ 57,111 | $ 60,370 |
Foreign currency translation adjustment | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Total shareholders' equity | (6,671) | (5,623) |
Retirement plan liability adjustment, net of tax | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Total shareholders' equity | (6,963) | (7,197) |
Interest rate swap agreement adjustment, net of tax | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Total shareholders' equity | (14) | (30) |
Total accumulated other comprehensive loss | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||
Total shareholders' equity | $ (13,648) | $ (12,850) |
Debt - Schedule of Debt (Detail
Debt - Schedule of Debt (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Debt Instrument [Line Items] | ||
Total debt | $ 40,667 | $ 38,632 |
Less – current maturities | (33,592) | (31,009) |
Total long-term debt | 7,075 | 7,623 |
Capital Lease Obligations | ||
Debt Instrument [Line Items] | ||
Total debt | 416 | 153 |
Term Loan | ||
Debt Instrument [Line Items] | ||
Long-term debt, gross | 4,789 | 16,429 |
Less: unamortized debt issuance cost | (59) | (241) |
Total debt | 4,730 | 16,188 |
Foreign Subsidiary Borrowings | ||
Debt Instrument [Line Items] | ||
Total debt | 10,184 | 9,540 |
Less – current maturities | (7,178) | (5,833) |
Line of Credit | ||
Debt Instrument [Line Items] | ||
Total debt | $ 25,337 | $ 12,751 |
Debt - Additional Information (
Debt - Additional Information (Details) - USD ($) | Nov. 09, 2016 | Jun. 26, 2015 | Dec. 31, 2016 | Sep. 30, 2016 | Jan. 01, 2016 |
Line of Credit Facility [Line Items] | |||||
Outstanding borrowings | $ 9,567,000 | ||||
Foreign debt borrowings, current | 33,592,000 | $ 31,009,000 | |||
Revolving credit agreement | 25,337,000 | 12,751,000 | |||
Foreign debt borrowings, long-term debt, current portion | 8,255,000 | 18,258,000 | |||
Foreign Subsidiary Borrowings | |||||
Line of Credit Facility [Line Items] | |||||
Outstanding borrowings | 10,184,000 | 9,540,000 | |||
Foreign debt borrowings, current | 7,178,000 | 5,833,000 | |||
Revolving credit agreement | 4,294,000 | 3,262,000 | |||
Foreign debt borrowings, long-term debt, current portion | 1,771,000 | 2,014,000 | |||
Foreign debt borrowings, factoring payable, current | 1,113,000 | 557,000 | |||
Receivables pledged as collateral, carrying value | $ 1,561,000 | $ 1,156,000 | |||
Foreign Subsidiary Borrowings | Euro Interbank Offered Rate (Euribor) | Minimum | |||||
Line of Credit Facility [Line Items] | |||||
Euribor variable interest rates | 1.00% | ||||
Foreign Subsidiary Borrowings | Euro Interbank Offered Rate (Euribor) | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Euribor variable interest rates | 4.00% | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Revolving credit facility, maximum borrowing capacity | $ 39,871 | ||||
Debt issuance costs incurred | 498,000 | ||||
Debt issuance costs related to the term loan and revolving credit facility, gross | $ 786,000 | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | Term Loan | |||||
Line of Credit Facility [Line Items] | |||||
Issued amount of debt | 4,871,000 | ||||
Installment payment | $ 81,000 | ||||
Weighted average interest rate, term loan | 4.90% | ||||
Fixed interest rate after effect of interest rate swap | 5.80% | ||||
Debt issuance costs incurred | $ 61,000 | ||||
Accumulated amortization of debt issuance costs | $ 2,000 | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | Term Loan | London Interbank Offered Rate (LIBOR) | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on LIBOR | 4.25% | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | Line of Credit | |||||
Line of Credit Facility [Line Items] | |||||
Revolving credit facility, maximum borrowing capacity | $ 35,000,000 | ||||
Weighted average interest rate, revolving credit facility | 4.50% | ||||
Revolving line of credit, debt Issuance costs incurred, gross | $ 725,000 | ||||
Revolving line of credit, accumulated amortization of debt issuance costs | $ 131,000 | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | Line of Credit | Minimum | |||||
Line of Credit Facility [Line Items] | |||||
Commitment fee percentage | 0.15% | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | Line of Credit | Maximum | |||||
Line of Credit Facility [Line Items] | |||||
Commitment fee percentage | 0.375% | ||||
2016 Amended and Restated Agreement Credit and Security Agreement | Line of Credit | London Interbank Offered Rate (LIBOR) | |||||
Line of Credit Facility [Line Items] | |||||
Basis spread on LIBOR | 3.75% | ||||
2015 Credit Agreement | |||||
Line of Credit Facility [Line Items] | |||||
Debt issuance costs incurred | $ 724,000 | ||||
Write off of deferred debt issuance cost due to debt modification | $ 241,000 | ||||
2015 Credit Agreement | Term Loan | |||||
Line of Credit Facility [Line Items] | |||||
Issued amount of debt | 20,000,000 | ||||
Installment payment | $ 714,000 | ||||
Debt agreement term | 5 years | ||||
2015 Credit Agreement | Revolving Credit Facility | |||||
Line of Credit Facility [Line Items] | |||||
Revolving credit facility, maximum borrowing capacity | $ 25,000,000 | $ 20,000,000 | |||
Debt agreement term | 5 years | ||||
Percentage of stock of non-U.S. subsidiaries pledged | 65.00% | ||||
Accordion feature, amount of increase in borrowing capacity | $ 15,000,000 |
Debt - Schedule of Payments of
Debt - Schedule of Payments of Long-term Debt (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Maturities of Long-term Debt [Abstract] | |
2017 (January 1 to September 20, 2017) | $ 2,063 |
2,018 | 2,168 |
2,019 | 2,061 |
2,020 | 3,039 |
2,021 | 236 |
Total minimum long-term debt payments | $ 9,567 |
Debt - Schedule of Minimum Rent
Debt - Schedule of Minimum Rental Commitments Under Non-Cancelable Capital Leases (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Capital Leases, Future Minimum Payments, Net Present Value [Abstract] | |
2017 (January 1 to September 30, 2017) | $ 99 |
2,018 | 116 |
2,019 | 98 |
2,020 | 66 |
2,021 | 65 |
Thereafter | 15 |
Total minimum lease payments | 459 |
Less: Amount representing interest | (43) |
Present value of minimum lease payments | $ 416 |
Debt - Schedule of Assets Under
Debt - Schedule of Assets Under Capital Leases (Details) - Machinery and Equipment - USD ($) $ in Thousands | Dec. 31, 2016 | Sep. 30, 2016 |
Capital Leased Assets [Line Items] | ||
Capital lease assets, gross | $ 521 | $ 250 |
Capital lease assets, accumulated depreciation | $ (71) | $ (60) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate, percent | (14.00%) | 43.00% |
Income tax expense (benefit) | $ 461 |
Retirement Benefit Plans - Comp
Retirement Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | ||
Service cost | $ 78 | $ 70 |
Interest cost | 220 | 256 |
Expected return on plan assets | (404) | (408) |
Amortization of net loss | 216 | 210 |
Net periodic cost | $ 110 | $ 128 |
Retirement Benefit Plans - Addi
Retirement Benefit Plans - Additional Information (Details) - USD ($) | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | ||
Contributions amount in defined benefit pension plans | $ 0 | $ 0 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Outstanding share awards earned and issued at greater than the target number of shares | 150.00% | |
Restricted Stock | Minimum | ||
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Stock options, vesting period (in years) | 1 year | |
Restricted Stock | Maximum | ||
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Stock options, vesting period (in years) | 3 years | |
2007 Plan | ||
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Aggregate number of shares that may be awarded (in shares) | 600,000 | |
Stock options, vesting period (in years) | 10 years | |
Outstanding share awards that may be awarded (in shares) | 252,000 | |
Share-based compensation expense | $ 158 | $ 346 |
Total unrecognized compensation cost related to performance and restricted shares | $ 603 | |
Period of recognized compensation cost (in years) | 1 year 6 months | |
2007 Plan | Performance shares | ||
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Performance period (in years) | 3 years | |
Performance shares vested in period (in shares) | 5,000 | |
Performance shares paid for payroll costs (in shares) | 1,000 | |
2007 Plan | Performance shares | Minimum | ||
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Common shares earned pursuant to award (in shares) | 0 | |
2007 Plan | Performance shares | Maximum | ||
Schedule Of Earnings Per Share Basic And Diluted [Line Items] | ||
Common shares earned as percentage of initial target number shares awarded | 150.00% |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event | Jan. 20, 2017employee |
Subsequent Event [Line Items] | |
Number of employees terminated | 24 |
Separation agreement execution period | 45 days |