SIFCO Industries (NYSEAM) Q4 2014 earnings summary

Executive summary

• FY14 net sales rose 3.2% to $119.7M, but net income fell 50.9% to $5.0M as gross margin narrowed and SG&A increased.

• Strategic focus remained on aerospace and energy, with commercial revenue share rising to 55.9% and military share declining to 44.1%.

• Western U.S. aluminum forging integration, Cleveland cost-saving investments and ERP implementation advanced; FY15 capex is projected at $11M–$12M.

Financial highlights

• Net sales were $119.7M, up 3.2% YoY; operating income was $8.1M versus $13.8M in FY13.

• Gross profit declined 7.5% to $25.9M; gross margin was 21.7% versus 24.2%, primarily from an unfavorable energy-components sales mix.

• Continuing-operations income fell 42.6% to $5.6M; net income decreased 50.9% to $5.0M, including a $0.6M discontinued-operations loss.

• Basic/diluted EPS was $0.93/$0.92 versus $1.91/$1.90 in FY13; adjusted EBITDA was $17.6M versus $19.5M.

• Operating cash flow from continuing operations was $11.0M versus $7.8M; capex increased to $9.8M from $3.4M.

Outlook and guidance

• FY15 capital expenditures are expected at $11M–$12M, principally for Orange facility expansion, Western operations integration and production-capability improvements.

• FY15 pricing pressure is expected to continue; projected inflation is not expected to be a significant factor.

• Backlog was $86.7M at September 30, 2014, with $71.7M scheduled for FY15 delivery; orders may be modified or canceled, and backlog may not indicate future sales.

• No FY15 minimum pension funding was required, and no defined-benefit plan contributions were anticipated, subject to actual funded status and regulatory requirements.