SIFCO Industries (NYSEAM) Q4 2010 earnings summary

Executive summary

• FY2010 net sales fell 11.3% YoY to $83.3M; continuing-operations income was $5.4M vs. $7.8M, and net income was $5.4M vs. $8.0M.

• Consolidated operating income declined to $7.9M from $12.5M; diluted EPS was $1.00 vs. $1.51.

• Lower sales across all three segments reflected weak commercial aerospace and industrial demand; cash reserves and available credit were expected to support liquidity through the foreseeable future.

Financial highlights

• Net sales were $83.270M vs. $93.888M; income from continuing operations before tax was $8.394M vs. $12.327M.

• Operating expenses included $0.2M of LIFO expense in FY2010, versus $1.6M of LIFO income in FY2009; FY2009 also included $0.2M net income from discontinued operations.

• Operating cash flow was $9.9M vs. $14.5M; FY2010 included $5.4M net income, $2.5M from non-cash items and a $1.1M inventory reduction.

• Cash and cash equivalents were $18.7M at year-end, with $3.0M in short-term investments; working capital was $35.6M.

Outlook and guidance

• FY2011 capital expenditures were expected to be $4.0M–$5.0M, primarily for production and product-offering capabilities across the segments.

• Expected FY2011 defined-benefit pension contributions were approximately $0.6M; cash on hand, short-term investments, available credit and operating cash flow were expected to meet liquidity needs.

• Commercial aviation outlook was cautiously optimistic following a return to profitability and pre-recession traffic levels; military demand was stable, subject to defense-budget decisions.

• Inflation was not expected to be a significant factor in FY2011.