SEC Company Response from SIFCO INDUSTRIES INC (SIF) (CIK 0000090168) (SIF) — Jan 11, 2005
SIFCO INDUSTRIES INC (SIF) (CIK 0000090168)
Date: Jan. 11, 2005 · CIK: 0000090168 · Accession: 0000950152-05-000146
AI Filing Summary & Sentiment
Letter
<PAGE> January 10, 2005 Mr. Michael Fay Branch Chief U.S. Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street, N.W. Washington, D.C. 20549
RE: SIFCO INDUSTRIES, INC. FILE NO. 1-5978 SEPTEMBER 30, 2004 FORM 10-K
Dear Mr. Fay:
This letter is written in response to the SEC's letter to SIFCO Industries, Inc. dated January 4, 2005.
In response to the SEC's comments, SIFCO responds as follows:
- RESPONSE TO COMMENT 1 - SIFCO's September 30, 2004 Form 10-K notes in "Item 1. Business; B. Principal Products and Services; 1. Turbine Component Services and Repair Group -
- In the Operations discussion (Page 2), SIFCO notes that it is required to obtain licenses that certify its ability to repair specific turbine engine components. The discussion states that SIFCO has elected to obtain licenses primarily from the OEM. This is because, although FAA licenses are more easily obtained than OEM approvals, FAA approvals may have a marketability issue associated with them.
- In the Competition discussion (Page 4), SIFCO notes that with the entry of the OEM into the (turbine engine repair and overhaul) market, there has been reluctance on the part of the OEM to issue, to independent component repair companies (like SIFCO), additional licenses authorizing repairs to newer model aerospace turbine engine components. In that same section SIFCO describes that it has been able to partially overcome this trend through close collaboration between itself and the OEM. Such collaboration, in certain circumstances, also involves the commercial airline(s) that purchase and operate the engines produced by the OEM because commercial airlines are motivated to ensure that alternative sources for turbine engine component repairs exist to provide them with a competitive source for such component repair services. To clarify this further, SIFCO will expand its discussion in future filings to include the involvement of commercial airlines in such collaboration.
Based on the above noted items, SIFCO believes that its disclosure in Operations (Pg. 2) and Competition (Pg. 4)" provides the appropriate level of discussion to enable the reader to understand the state of the repair approval environment in which SIFCO currently operates. To the extent that the environment may change in the future, SIFCO will revise this discussion accordingly.
- RESPONSE TO COMMENT 2:
- SIFCO will include a discussion of its policy for receivables and inventory allowances in its "Summary of Significant Accounting Policies" financial statement footnote in its future filings. At the SEC's request, SIFCO provides the attached supplemental Schedule
<PAGE>
II that has been expanded to reflect all of SIFCO's reserve accounts that are deemed to be material.
- SIFCO provides manufacturing and repair products and services that are generally required to meet product specifications that have been established by parties other than SIFCO and, therefore, SIFCO only warranties that its manufacturing and repair products and services will meet such established (third party) specifications. SIFCO evaluates its warranty obligation based on historical claim activity and the existence of any known outstanding warranty claims. SIFCO has historically not had any significant warranty claims and therefore at September 30, 2004 (and in recent prior periods) its warranty claim reserve level was immaterial.
- RESPONSE TO COMMENT 3 - SIFCO's revolving credit agreement has not become due as a result of a material adverse change. SIFCO will make a similar disclosure in future filings.
At the SEC's request, SIFCO makes the following statements acknowledging its understanding that:
- The Company is responsible for the adequacy and accuracy of the disclosure in the (September 30, 2004) filing;
- Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any actions with respect to the filing; and
- The Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
SIFCO will be pleased to discuss these matters further with you, and to provide additional information in response to specific questions that may arise upon the SEC's review of this response. If you have any questions regarding this response, please feel free to contact me directly at (216) 432-6278 at your earliest convenience.
Sincerely,
/s/ Frank A. Cappello
---------------------
Frank A. Cappello
Vice President - Finance
and Chief Financial Officer
Show Raw Text
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<TEXT>
<PAGE>
January 10, 2005
Mr. Michael Fay
Branch Chief
U.S. Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SIFCO INDUSTRIES, INC.
FILE NO. 1-5978
SEPTEMBER 30, 2004 FORM 10-K
Dear Mr. Fay:
This letter is written in response to the SEC's letter to SIFCO Industries, Inc.
dated January 4, 2005.
In response to the SEC's comments, SIFCO responds as follows:
- RESPONSE TO COMMENT 1 - SIFCO's September 30, 2004 Form 10-K notes in
"Item 1. Business; B. Principal Products and Services; 1. Turbine
Component Services and Repair Group -
- In the Operations discussion (Page 2), SIFCO notes that it
is required to obtain licenses that certify its ability to
repair specific turbine engine components. The discussion
states that SIFCO has elected to obtain licenses primarily
from the OEM. This is because, although FAA licenses are
more easily obtained than OEM approvals, FAA approvals may
have a marketability issue associated with them.
- In the Competition discussion (Page 4), SIFCO notes that
with the entry of the OEM into the (turbine engine repair
and overhaul) market, there has been reluctance on the part
of the OEM to issue, to independent component repair
companies (like SIFCO), additional licenses authorizing
repairs to newer model aerospace turbine engine components.
In that same section SIFCO describes that it has been able
to partially overcome this trend through close collaboration
between itself and the OEM. Such collaboration, in certain
circumstances, also involves the commercial airline(s) that
purchase and operate the engines produced by the OEM because
commercial airlines are motivated to ensure that alternative
sources for turbine engine component repairs exist to
provide them with a competitive source for such component
repair services. To clarify this further, SIFCO will expand
its discussion in future filings to include the involvement
of commercial airlines in such collaboration.
Based on the above noted items, SIFCO believes that its disclosure in
Operations (Pg. 2) and Competition (Pg. 4)" provides the appropriate
level of discussion to enable the reader to understand the state of
the repair approval environment in which SIFCO currently operates. To
the extent that the environment may change in the future, SIFCO will
revise this discussion accordingly.
- RESPONSE TO COMMENT 2:
- SIFCO will include a discussion of its policy for
receivables and inventory allowances in its "Summary of
Significant Accounting Policies" financial statement
footnote in its future filings. At the SEC's request, SIFCO
provides the attached supplemental Schedule
<PAGE>
II that has been expanded to reflect all of SIFCO's reserve
accounts that are deemed to be material.
- SIFCO provides manufacturing and repair products and
services that are generally required to meet product
specifications that have been established by parties other
than SIFCO and, therefore, SIFCO only warranties that its
manufacturing and repair products and services will meet
such established (third party) specifications. SIFCO
evaluates its warranty obligation based on historical claim
activity and the existence of any known outstanding warranty
claims. SIFCO has historically not had any significant
warranty claims and therefore at September 30, 2004 (and in
recent prior periods) its warranty claim reserve level was
immaterial.
- RESPONSE TO COMMENT 3 - SIFCO's revolving credit agreement has not
become due as a result of a material adverse change. SIFCO will make a
similar disclosure in future filings.
At the SEC's request, SIFCO makes the following statements acknowledging its
understanding that:
- The Company is responsible for the adequacy and accuracy of the
disclosure in the (September 30, 2004) filing;
- Staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any actions with respect
to the filing; and
- The Company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
SIFCO will be pleased to discuss these matters further with you, and to provide
additional information in response to specific questions that may arise upon the
SEC's review of this response. If you have any questions regarding this
response, please feel free to contact me directly at (216) 432-6278 at your
earliest convenience.
Sincerely,
/s/ Frank A. Cappello
---------------------
Frank A. Cappello
Vice President - Finance
and Chief Financial Officer
Cc: J. Robinson (Grant Thornton)
M. Lipscomb (SIFCO Audit Committee)
<PAGE>
SIFCO INDUSTRIES, INC. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts For the Years Ended
September 30, 2004, 2003 and 2002
(amounts in thousands)
<TABLE>
<CAPTION>
ADDITIONS
(REDUCTIONS)
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------ -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 2004
Deducted from asset accounts:
Allowance for doubtful accounts 1,045 (104) 0 (311)(a) 630
Return and allowance reserve 334 (193) 0 (5)(b) 136
Inventory obsolescence reserve 1,479 173 0 (366)(c) 1,286
Inventory LIFO reserve 3,230 288 0 0 3,518
Asset impairment reserve 1,772 0 0 (219)(d) 1,553
Valuation allowance for deferred taxes 3,430 699 0 0 4,129
Accrual for estimated liability
Workers' compensation reserve 1,099 344 0 (326)(e) 1,117
YEAR ENDED SEPTEMBER 30, 2003
Deducted from asset accounts:
Allowance for doubtful accounts 1,250 115 0 (320)(a) 1,045
Return and allowance reserve 428 321 0 (415)(b) 334
Inventory obsolescence reserve 2,655 279 0 (1,455)(c) 1,479
Inventory LIFO reserve 3,114 116 0 0 3,230
Asset impairment reserve 756 1,309 0 (293)(d) 1,772
Valuation allowance for deferred taxes 1,723 1,707 0 0 3,430
Accrual for estimated liability
Workers' compensation reserve 1,029 311 0 (241)(e) 1,099
YEAR ENDED SEPTEMBER 30, 2002
Deducted from asset accounts:
Allowance for doubtful accounts 1,422 481 (1)(f) (652)(a) 1,250
Return and allowance reserve 272 175 0 (17)(b) 428
Inventory obsolescence reserve 1,888 3,936 0 (3,169)(c) 2,655
Inventory LIFO reserve 2,884 230 0 0 3,114
Asset impairment reserve 0 1,168 0 (412)(d) 756
Valuation allowance for deferred taxes 161 1,562 0 0 1,723
Accrual for estimated liability
Workers' compensation reserve 1,497 182 (55) (595)(e) 1,029
</TABLE>
(a) Accounts determined to be uncollectible, net of recoveries
(b) Actual returns received
(c) Inventory sold or otherwise disposed
(d) Equipment sold or otherwise disposed
(e) Payment of workers' compensation claims
(f) Exchange rate changes
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