UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2017~~2023



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-5978

SIFCO Industries, Inc.

(Exact name of registrant as specified in its charter)



~~Ohio~~

	~~34-0553950~~
Ohio		34-0553950
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

970 East 64th Street, Cleveland Ohio		44103
(Address of principal executive offices)		(Zip Code)

(216) 881-8600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer		☐			Accelerated filer		☐

~~Large accelerated filer~~		¨	~~Accelerated filer~~	¨

Non-accelerated filer	¨☒		Smaller reporting company			ý☒

					Emerging growth company		¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares

SIF

NYSE American

The number of the Registrant’s Common Shares, par value $1.00, outstanding at ~~December~~March 31, ~~2017~~2023 was ~~5,644,414.~~

6,107,648.

Part I. Financial Information

Item 1. Financial Statements

SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Operations

(Unaudited)

(Amounts in thousands, except per share data)


	Three Months Ended December 31,							Three Months Ended March 31,				Six Months Ended March 31,
	2017			2016				2023		2022		2023		2022
Net sales	$	24,251		$	31,473		Net sales	$	19,242	$	24,568	$	40,541	$	43,815
Cost of goods sold	22,222			27,305			Cost of goods sold	17,522		23,109		37,560		42,347
Gross profit	2,029			4,168			Gross profit	1,720		1,459		2,981		1,468
Selling, general and administrative expenses	4,072			5,303			Selling, general and administrative expenses	3,849		2,680		7,129		6,216

Amortization of intangible assets	425			592			Amortization of intangible assets	63		65		124		190
Gain on disposal of operating assets	(1,400		)	(6		)
Loss (gain) on disposal of operating assets							Loss (gain) on disposal of operating assets	14		(2)		3		(2)

Operating loss	(1,068		)	(1,721		)	Operating loss	(2,206)		(1,284)		(4,275)		(4,936)
Interest income	(9		)	(14		)
Interest expense	444			678
Foreign currency exchange (gain) loss, net	(36		)	4

Interest expense, net							Interest expense, net	339		193		614		307
Gain on debt extinguishment							Gain on debt extinguishment	—		(5,106)		—		(5,106)
Foreign currency exchange loss, net							Foreign currency exchange loss, net	12		3		9		9
Other income, net	(316		)	(107		)	Other income, net	(218)		(36)		(35)		(68)
Loss from operations before income tax expense	(1,151		)	(2,282		)
(Loss) income before income tax expense (benefit)							(Loss) income before income tax expense (benefit)	(2,339)		3,662		(4,863)		(78)
Income tax expense (benefit)	(240		)	327			Income tax expense (benefit)	28		23		93		(26)
Net loss	$	(911	)	$	(2,609	)


Net loss per share
Net (loss) income							Net (loss) income	$	(2,367)	$	3,639	$	(4,956)	$	(52)

Net (loss) income per share							Net (loss) income per share
Basic	$	(0.17	)	$	(0.48	)	Basic	$	(0.40)	$	0.62	$	(0.84)	$	(0.01)
Diluted	$	(0.17	)	$	(0.48	)	Diluted	$	(0.40)	$	0.61	$	(0.84)	$	(0.01)

Weighted-average number of common shares (basic)	5,502			5,467			Weighted-average number of common shares (basic)	5,940		5,840		5,918		5,819
Weighted-average number of common shares (diluted)	5,502			5,467			Weighted-average number of common shares (diluted)	5,940		5,961		5,918		5,819

See notes to unaudited consolidated condensed financial statements.

SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Comprehensive ~~Loss~~(Loss) Income

(Unaudited)

(Amounts in thousands)

Three Months Ended
December 31,
2017 2016
Net loss $ (911 ) $ (2,609 )
Other comprehensive income (loss):
Foreign currency translation adjustment 296
(1,048 )
Retirement plan liability adjustment 162
234
Interest rate swap agreement adjustment 20
16
Comprehensive loss $ (433 ) $ (3,407 )


	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023		2022
Net (loss) income	$	(2,367)	$	3,639	$	(4,956)	$	(52)
Other comprehensive (loss) income:
Foreign currency translation adjustment, net of tax	74		(136)		416		(259)
Retirement plan liability adjustment, net of tax	74		119		152		238
Other	—		—		1		—
Comprehensive (loss) income	$	(2,219)	$	3,622	$	(4,387)	$	(73)

See notes to unaudited consolidated condensed financial statements.

SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Balance Sheets

(Amounts in thousands, except per share data)


	December 31, 2017			September 30, 2017				March 31, 2023		September 30, 2022
	(unaudited)							(unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	1,131		$	1,399		Cash and cash equivalents	$	316	$	1,174
Receivables, net of allowance for doubtful accounts of $298 and $330, respectively	24,590			25,894
Other receivables	2,969			—
Receivables, net of allowance for doubtful accounts of $113 and $111, respectively							Receivables, net of allowance for doubtful accounts of $113 and $111, respectively	17,395		16,515

Contract assets							Contract assets	10,636		10,172

Inventories, net	19,362			20,381			Inventories, net	11,276		8,969
Refundable income taxes	100			292			Refundable income taxes	97		97

Prepaid expenses and other current assets	1,824			1,644			Prepaid expenses and other current assets	1,689		1,851
Assets held for sale	1,076			2,524

Total current assets	51,052			52,134			Total current assets	41,409		38,778
Property, plant and equipment, net	38,855			39,508			Property, plant and equipment, net	38,543		39,272
Operating lease right-of-use assets, net							Operating lease right-of-use assets, net	14,793		15,167
Intangible assets, net	6,432			6,814			Intangible assets, net	395		477
Goodwill	12,305			12,170			Goodwill	3,493		3,493
Other assets	225			261			Other assets	80		79

Total assets	$	108,869		$	110,887		Total assets	$	98,713	$	97,266
LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Current maturities of long-term debt	$	8,084		$	7,560		Current maturities of long-term debt	$	4,336	$	4,379
Revolving credit agreement	18,755			18,557
Revolver							Revolver	13,003		11,163
Short-term operating lease liabilities							Short-term operating lease liabilities	833		792
Accounts payable	11,739			12,817			Accounts payable	14,869		10,387
Accrued liabilities	7,136			6,791			Accrued liabilities	5,937		5,868

Total current liabilities	45,714			45,725			Total current liabilities	38,978		32,589
Long-term debt, net of current maturities	4,509			5,151
Deferred income taxes	2,548			3,266
Long-term debt, net of current maturities, net of unamortized debt issuance costs							Long-term debt, net of current maturities, net of unamortized debt issuance costs	3,309		3,508
Long-term operating lease liabilities, net of short-term							Long-term operating lease liabilities, net of short-term	14,416		14,786
Deferred income taxes, net							Deferred income taxes, net	72		137
Pension liability	6,059			6,184			Pension liability	4,815		4,812
Other long-term liabilities	148			430			Other long-term liabilities	684		744

Shareholders’ equity:							Shareholders’ equity:
Serial preferred shares, no par value, authorized 1,000 shares	—			—			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 –5,644 at December 31, 2017 and 5,596 at September 30, 2017	5,644			5,596
Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares 6,108 at March 31, 2023 and 6,040 at September 30, 2022							Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares 6,108 at March 31, 2023 and 6,040 at September 30, 2022	6,108		6,040
Additional paid-in capital	9,664			9,519			Additional paid-in capital	11,455		11,387
Retained earnings	43,356			44,267			Retained earnings	27,000		31,956
Accumulated other comprehensive loss	(8,773		)	(9,251		)	Accumulated other comprehensive loss	(8,124)		(8,693)
Total shareholders’ equity	49,891			50,131			Total shareholders’ equity	36,439		40,690
Total liabilities and shareholders’ equity	$	108,869		$	110,887		Total liabilities and shareholders’ equity	$	98,713	$	97,266

See notes to unaudited consolidated condensed financial statements.

SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited, Amounts in thousands)


	Six Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(4,956)	$	(52)

Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	3,198		3,210
Amortization of debt issuance costs	20		20
Loss (gain) on disposal of operating assets	3		(2)
Loss on insurance proceeds received for non-property claim	110		—

LIFO effect	(199)		383
Share transactions under company stock plan	136		199

Inventory valuation accounts	(1,657)		(189)

Gain on extinguishment of debt	—		(5,106)
Other long-term liabilities	(256)		(107)
Deferred income taxes	(64)		(15)
Changes in operating assets and liabilities:
Receivables	(383)		1,441
Contract assets	(464)		(239)
Inventories	(29)		(2,409)

Prepaid expenses and other current assets	145		490
Other assets	317		4
Accounts payable	3,918		387
Other accrued liabilities	(390)		(1,191)
Accrued income and other taxes	178		(20)

Net cash used for operating activities	(373)		(3,196)

Cash flows from investing activities:

Proceeds from disposal of operating assets	16		2
Capital expenditures	(1,435)		(1,493)

Net cash used for investing activities	(1,419)		(1,491)

Cash flows from financing activities:
Proceeds from long-term debt	—		1,402
Payments on long-term debt	(525)		(696)
Proceeds from revolving credit agreement	37,832		41,912
Repayments of revolving credit agreement	(35,991)		(38,004)



Short-term debt borrowings	2,356		1,623
Short-term debt repayments	(2,856)		(1,755)


Net cash provided by financing activities	816		4,482
Decrease in cash and cash equivalents	(976)		(205)
Cash and cash equivalents at the beginning of the period	1,175		346
Effect of exchange rate changes on cash and cash equivalents	117		(17)
Cash and cash equivalents at the end of the period	$	316	$	124

Supplemental disclosure of cash flow information of operations:
Cash paid for interest	$	(550)	$	(249)
Cash paid for income taxes, net	$	(16)	$	(15)
Non-cash investing activities:
Additions to property, plant & equipment - incurred but not yet paid	$	319	$	422

Three Months Ended
December 31,
2017 2016
Cash flows from operating activities:
Net loss $ (911 ) $ (2,609 )
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization 2,191
2,515
Amortization and write-off of debt issuance cost 53
273
Gain on disposal of operating assets (1,400 ) (6 )
LIFO expense 52
107
Share transactions under company stock plan 194
138
Other long-term liabilities (234 ) 2
Deferred income taxes (756 ) 189
Changes in operating assets and liabilities:
Receivables 1,415
(1,556 )
Inventories 1,041
818
Refundable taxes 194
—
Prepaid expenses and other current assets (228 ) (197 )
Other assets 35
302
Accounts payable (1,474 ) (1,411 )
Other accrued liabilities (222 ) 555
Accrued income and other taxes 508
92
Net cash provided (used) by operating activities 458
(788 )
Cash flows from investing activities:
Proceeds from disposal of operating assets 25
48
Capital expenditures (703 ) (457 )
Net cash used for investing activities (678 ) (409 )
Cash flows from financing activities:
Payments on long term debt (743 ) (12,223 )
Proceeds from revolving credit agreement 17,901
29,622
Repayments of revolving credit agreement (17,703 ) (17,036 )
Payment of debt issue costs —
(498 )
Short-term debt borrowings 1,600
2,330
Short-term debt repayments (1,105 ) (454 )
Net cash provided (used) for financing activities (50 ) 1,741
(Decrease) Increase in cash and cash equivalents (270 ) 544
Cash and cash equivalents at the beginning of the period 1,399
471
Effect of exchange rate changes on cash and cash equivalents 2
4
Cash and cash equivalents at the end of the period $ 1,131
$ 1,019
Supplemental disclosure of cash flow information of operations:
Cash paid for interest $ (366 ) $ (369 )
Cash refund (paid) for income taxes, net 183
(25 )

See notes to unaudited consolidated condensed financial statements.

SIFCO Industries, Inc. and Subsidiaries

Consolidated Condensed Statements of Shareholders’ Equity

(Unaudited, Amounts in thousands)


	Six Months Ended March 31, 2023
	Common			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount









Balance - September 30, 2022	6,040	$	6,040	$	11,387	$	31,956	$	(8,693)	$	40,690

Comprehensive (loss) income	—	—		—		(4,956)		569		(4,387)


Performance and restricted share expense	—	—		207		—		—		207
Share transactions under equity-based plans	68	68		(139)		—		—		(71)
Balance - March 31, 2023	6,108	$	6,108	$	11,455	$	27,000	$	(8,124)	$	36,439


	Three Months Ended March 31, 2023
	Common			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount
Balance - December 31, 2022	6,072	$	6,072	$	11,406	$	29,367	$	(8,272)	$	38,573




Comprehensive (loss) income	—	—		—		(2,367)		148		(2,219)

Performance and restricted share expense	—	—		85		—		—		85
Share transactions under equity-based plans	36	36		(36)		—		—		—
Balance - March 31, 2023	6,108	$	6,108	$	11,455	$	27,000	$	(8,124)	$	36,439


	Six Months Ended March 31, 2022
	Common			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount









Balance - September 30, 2021	5,987	$	5,987	$	11,118	$	41,596	$	(9,079)	$	49,622

Comprehensive loss	—	—		—		(52)		(21)		(73)


Performance and restricted share expense	—	—		306		—		—		306
Share transactions under equity-based plans	53	53		(160)		—		—		(107)
Balance - March 31, 2022	6,040	$	6,040	$	11,264	$	41,544	$	(9,100)	$	49,748


	Three Months Ended March 31, 2022
	Common			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
	Shares	Amount
Balance - December 31, 2021	6,003	$	6,003	$	11,156	$	37,905	$	(9,083)	$	45,981




Comprehensive income (loss)	—	—		—		3,639		(17)		3,622

Performance and restricted share expense	—	—		145		—		—		145
Share transactions under equity-based plans	37	37		(37)		—		—		—
Balance - March 31, 2022	6,040	$	6,040	$	11,264	$	41,544	$	(9,100)	$	49,748

See notes to unaudited consolidated condensed financial statements.

SIFCO Industries, Inc. and Subsidiaries

Notes to Unaudited Consolidated Condensed Financial Statements

(Amounts in thousands, except per share data)


1.	~~Summary of Significant Accounting Policies~~

1.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~~(collectively, the "Company"). All significant intercompany accounts and transactions have been ~~eliminated.~~eliminated in consolidation.

The U.S. dollar is the functional currency for all of the Company’s operations in the United States ("U.S. ~~operations~~") and its ~~Irish~~non-operating subsidiaries. For these operations, all gains and losses from completed currency transactions are included in ~~income currently.~~income. 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 ~~2017~~2022 Annual Report on Form 10-K. The year-end consolidated balance sheet data was derived from the audited financial statements and disclosures required by accounting principles generally accepted ~~accounting~~ in the ~~United States ("~~U.S.~~").~~ 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.

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 2017~~ Annual Report on Form 10-K ~~except~~ for the ~~following:~~year ended September 30, 2022.

~~Income taxes~~

On December 22, 2017, the U.S. enacted the Tax Cut and Jobs Act (the "Act") which, among other items, reduces the U.S. corporate tax rate effective January 1, 2018 from 35% to 21%, creates a participation exemption regime for future distributions of foreign earnings, imposes a one-time transition tax on a taxpayer’s foreign subsidiaries’ earnings not previously subject to U.S. taxation and creates new taxes on certain foreign-sourced earnings. On the same day of the Act, the Securities and Exchange Commission (the "SEC") issued Staff Bulletin 118 ("SAB 118"). SAB 118 expresses views of the SEC regarding ASC Topic 740, Income taxes ("ASC 740") in the reporting period that includes the enactment date of the Act. The SEC staff issuing SAB 118 recognized that a company’s review of certain income tax effects of the Act may be incomplete at the time the financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year from the day of enactment.

The Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations. This income will effectively be taxed at a 10.5% tax rate in general. Because of the complexity of the new provisions, the Company is continuing to evaluate how the provisions will be accounted for under the U.S. generally accepted accounting principles wherein companies are allowed to make an accounting policy election to either (i) account for GILTI as a component of tax expense in the period in which the Company is subject to the rules (the “period cost method”), or (ii) account for GILTI in the Company’s measurement of deferred taxes (the “deferred method”). Currently, the Company has not elected a method and will only do so after its completion of the analysis of the GILTI provisions and its election method will depend, in part, on analyzing its global income to determine whether the Company expects to have future material U.S. inclusions in its taxable income related to GILTI and, if so, the impact that is expected.

~~Refer to Note 5, Income Taxes.~~

C. Net ~~Loss~~(Loss) Income per Share

The Company’s net ~~loss~~(loss) income per basic share has been computed based on the weighted-average number of common shares outstanding. ~~Due to the~~During a period of net loss, ~~for each reporting period, no~~zero restricted and performance shares are included in the calculation of ~~basic or~~ diluted earnings per share because the effect would be anti-dilutive. ~~The dilutive~~In a period of net income, the net income per diluted share reflects the effect of the ~~Company’s~~Company's outstanding restricted shares and performance shares ~~were~~under the treasury stock method. The dilutive effect is as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023		2022


Net (loss) income	$	(2,367)	$	3,639	$	(4,956)	$	(52)

Weighted-average common shares outstanding (basic and diluted)	5,940		5,840		5,918		5,819
Effect of dilutive securities:

Restricted shares	—		100		—		—
Performance shares	—		21		—		—
Weighted-average common shares outstanding (diluted)	5,940		5,961		5,918		5,819


Net (loss) income per share – basic:	$	(0.40)	$	0.62	$	(0.84)	$	(0.01)







Net (loss) income per share – diluted:	$	(0.40)	$	0.61	$	(0.84)	$	(0.01)

Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share	196		196		186		307

D. Going Concern

As required by Accounting Standard Codification ("ASC") ASC Topic 205-40, Presentation of Financial Statements - Going Concern, management assesses the Company's ability to continue as a going concern for one year from the financial statement issuance at each annual and interim reporting period.

Three Months Ended
December 31,
2017 2016
Net loss $ (911 ) $ (2,609 )

Weighted-average common shares outstanding (basic and diluted) 5,502
5,467

Net loss per share – basic and diluted:
Net loss per share (0.17 ) $ (0.48 )

Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 110
59

~~D. Derivative Financial Instruments~~

The accompanying consolidated condensed financial statements have been prepared assuming the Company will continue as a going concern. The Company ~~entered into~~has debt maturing in December 2023 and an ~~interest rate swap agreement on March 29, 2016~~alternate financing arrangement has yet to ~~reduce risk related~~be executed. This condition raises substantial doubt about the Company’s ability to ~~variable-rate debt, which was subject to changes in market rates of interest. The interest rate swap was designated~~continue as a ~~cash flow hedge.~~ going concern.

The ~~agreement was canceled~~Company is evaluating available financial alternatives, including obtaining acceptable alternative financing. The Company cannot provide assurances that it will be able to provide the post closing deliverables as ~~part~~established under the Seventh Amendment of the Credit Agreement or be successful in restructuring of existing debt ~~modification on November 9, 2016, as further discussed in Note 4,~~ ~~Debt. The Company accounted~~obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the ~~interest rate swap termination by recording~~refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements. The consolidated condensed financial statements do not include any adjustments to the carrying amount and classification of assets, liabilities, and reported expense that may be necessary if the Company was unable to continue as a going concern. See Note 7, Debt and Subsequent Event and Note 13, Subsequent Events.

E. Recent Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent updates. ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in ~~accumulated other comprehensive loss as~~leases, loan commitments and standby letters of ~~December 31, 2016. The amount incurred in interest expense was nominal. As part~~credit. Upon initial recognition of the ~~new Credit Facility, described further in Note 4,~~ ~~Debt,~~ ~~on November 9, 2016,~~exposure, the ~~Company entered into a new interest rate swap on November 30, 2016~~expected credit loss model requires entities to ~~reduce risk related to~~estimate the ~~variable debt~~credit losses expected over the life of ~~the new term loan. At December 31, 2017, the Company held one interest rate swap agreement~~an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with a notional amount of $3,816. 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, 2017 and September 30, 2017, the Company’s interest rate swap agreement qualified as a fully effective cash flow hedge against the Company’s variable-rate term note. The mark-to-market valuation was a $24 asset and a $4 asset at December 31, 2017 and September 30, 2017, respectively.

~~E. Impact of Recently Issued Accounting Standards~~

~~In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, “Leases~~ ~~(Topic 842).” This~~similar risk characteristics should be grouped together when estimating expected credit losses. ASU requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The standard requires a modified retrospective transition for capital and operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it2016-13 does not prescribe a specific method to make the estimate, so its application will require ~~transition accounting for leases that expire prior to the date of initial adoption. The~~significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, ~~2018,~~2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of ASU 2016-02 and anticipates that the adoption will impact the consolidated condensed balance sheets due to the recognition of the right-to-use asset and lease liability related to its current operating leases.

~~In May 2014,~~However, in November 2019, the FASB issued ASU ~~2014-09, “Revenue from Contracts with Customers~~2019-10, "Financial Instruments - Credit Loss (Topic ~~606).” ASU 2014-09 completes~~326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)," which defers the ~~joint effort~~effective date for public filers that qualify as a smaller reporting company ("SRC"), as defined by the ~~FASB~~Securities and ~~International Accounting Standards Board~~Exchange Commission, to ~~improve~~fiscal years after December 15, 2022, including interim periods within those fiscal years. Because SIFCO is considered a SRC, the Company is not required to implement until October 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company's results within the consolidated statements of operations and financial ~~reporting by creating common revenue recognition guidance for GAAP and International Financial Reporting Standards.~~ condition.

In March ~~2016,~~2020, the FASB issued ASU ~~2016-08, “Revenue~~2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from ~~Contracts~~the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. This ASU, along with ~~Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The~~recently issued ASU ~~2016-08~~2021-01, which further clarifies the ~~implementation~~scope of Topic 848, is available immediately and may be implemented in any period prior to the guidance expiration on ~~principal versus agent considerations. In April 2016,~~December 31, 2022. ASU 2020-04 was effective beginning on March 12, 2020, and the ~~FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” This ASU 2016-10 clarifies~~Company may elect to apply the implementation guidance on identifying performance obligations. These ASUs, along with subsequent updates, apply to all companies that enter into contracts with customers to transfer goods or services, and are effective for public entities for interim and annual reporting periods beginning afteramendments prospectively through December 15, 2017. The Company will adopt the new guidance on October 1, 2018. The Company is executing a bottom 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.31, 2022. The Company has ~~determined that many of its long-term agreements contain variable consideration clauses~~not applied any optional expedients and ~~is in the process of quantifying the impact~~exceptions to its consolidated financial statements. In addition, some of the Company's agreements have clauses which may require the Company to recognize revenue over time. The majority of the Company's current revenue is recognized at a point-in-time. As such, SIFCO continuesdate, and will continue to evaluate the impact of the ~~standard on its financial reporting, disclosures~~guidance and ~~related systems~~whether it will apply the optional expedients and ~~internal controls. The Company has engaged a third party~~exceptions.

F. Reclassification

Certain amounts in prior years have been reclassified to ~~assist with its efforts.~~

F. ~~Recently Adopted Accounting Standards~~

conform to the fiscal 2023 consolidated condensed statement presentation. In ~~March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting,~~ which amends existing guidance related to accounting for employee share-based payments affecting the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. This guidance is effective for

fiscal ~~years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. ASU 2016-09 was adopted by~~2023, the Company ~~effective October 1, 2017.~~

2.Inventories

Inventories consist of:


	March 31, 2023		September 30, 2022
Raw materials and supplies	$	2,185	$	2,968
Work-in-process	5,201		3,356
Finished goods	3,890		2,645
Total inventories, net	$	11,276	$	8,969

For a portion of the ~~tax effects~~Company's inventory, cost is determined using the last-in, first-out ("LIFO") method. Approximately 21% and 42% of ~~exercised or vested awards to be treated as discrete items in~~ the ~~reporting period in which they occur, which was applied prospectively, beginning October 1, 2017 by~~Company’s inventories at March 31, 2023 and September 30, 2022, respectively, use the ~~Company. Due to~~LIFO method. An actual valuation of inventory under the ~~Company having recorded a domestic valuation allowance,~~LIFO method is made at the ~~tax impact upon adoption~~end of this ASU was not material to the consolidated condensed financial statements. Lastly, the guidance requires that excess tax benefits should be classified along with other income tax cash flows as an operating activityeach fiscal year based on the ~~statement~~inventory levels and costs existing at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of ~~cash flows,~~expected year-end inventory levels and costs. Because the actual results may vary from these estimates, the annual results may differ from interim results as they are subject to adjustments based on the differences between the estimates and the actual results. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories, which differs from the Company’s historical classification of excess tax benefits as cash inflows from financing activities. The Company elected to apply this provision using the prospective transition method.

~~In July 2015, the FASB issued ASU No. 2015-11,~~ ~~Simplifying the Measurement of Inventory, which provides new guidance to simplify the measurement of inventory valuation~~are stated at the lower of cost or net realizable ~~value.~~value ("NRV"). If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $9,741 and $9,939 higher than reported at March 31, 2023 and September 30, 2022, respectively. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. The ~~adoption~~Company estimates net realizable value, excess and obsolescence and shrink reserves for its inventory based upon historical experience, historical and projected sales trends and the age of ~~this ASU in the first quarter ended December~~inventory on hand. As of March 31, ~~2017 had no impact on the Company's consolidated condensed financial statements.~~


2.	~~Inventories~~

~~Inventories consist of:~~

December 31,
2017 September 30,
2017
Raw materials and supplies $ 4,867
$ 6,108
Work-in-process 7,129
7,650
Finished goods 7,366
6,623
Total inventories $ 19,362
$ 20,381

~~Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (“LIFO”) method for 40% and 38% of the Company’s inventories at December 31, 2017~~2023 and September 30, ~~2017,~~2022, our inventory valuation allowances were $3,753 and $5,084, respectively.

3.Long-lived Assets

The ~~first-in, first-out (“FIFO”~~Company reviews the carrying value of its long-lived assets ("asset groups") ~~method~~, including property, plant and equipment, when events and circumstances indicate a triggering event has occurred. This review is ~~used~~performed using estimates of future undiscounted cash flows, which include proceeds from disposal of the asset group. As required by ASC 360 ("Topic 360"), should the carrying value of a asset group exceed the estimated undiscounted future cash flows, then the asset group is considered impaired and an impairment charge is recorded for the ~~remainder~~amount by which the carrying value of the ~~inventories. If~~asset group exceeds its fair value.

The Company continuously monitors for indicators of impairment to determine if further testing is necessary. In the ~~FIFO method had been used~~second quarter, the Company evaluated triggering events and did not identify any indicators that the asset groups might be impaired.

4.Goodwill

The Company tests its goodwill for impairment in the ~~inventories for which cost is~~fourth fiscal quarter, and in interim periods if certain events occur indicating that the carrying amount of goodwill may be impaired. In the second quarter, the Company evaluated triggering events and determined ~~using the LIFO method, inventories would have been $8,371 and $8,319 higher than reported at~~ ~~December 31, 2017~~ ~~and~~ ~~September 30, 2017, respectively.~~interim testing was not required.

3. 5. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:


	March 31, 2023		September 30, 2022
Foreign currency translation adjustment	$	(5,780)	$	(6,196)
Retirement plan liability adjustment, net of tax	(2,357)		(2,509)
Interest rate swap agreement, net of tax	13		12
Total accumulated other comprehensive loss	$	(8,124)	$	(8,693)

December 31,
2017 September 30,
2017
Foreign currency translation adjustment $ (4,311 ) $ (4,607 )
Retirement plan liability adjustment, net of tax (4,486 ) (4,648 )
Interest rate swap agreement adjustment, net of tax 24
4
Total accumulated other comprehensive loss $ (8,773 ) $ (9,251 )

6. Leases

The components of lease expense were as follows:


	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023		2022

Finance lease expense:
Amortization of right-of use assets on finance leases	$	18	$	2	$	29	$	14
Interest on lease liabilities	2		—		4		—
Operating lease expense	416		429		839		828

Variable lease cost	25		30		50		60

Total lease expense	$	461	$	461	$	922	$	902

The following table presents the impact of leasing on the consolidated condensed balance sheet.


	Classification in the consolidated condensed balance sheets	March 31, 2023		September 30, 2022
Assets:
Finance lease assets	Property, plant and equipment, net	$	187	$	202
Operating lease assets	Operating lease right-of-use assets, net	14,793		15,167
Total lease assets		$	14,980	$	15,369

Current liabilities:
Finance lease liabilities	Current maturities of long-term debt	$	64	$	61
Operating lease liabilities	Short-term operating lease liabilities	833		792
Non-current liabilities:
Finance lease liabilities	Long-term debt, net of current maturities	113		131
Operating lease liabilities	Long-term operating lease liabilities, net of short-term	14,416		14,786
Total lease liabilities		$	15,426	$	15,770

Supplemental cash flow and other information related to leases were as follows:


	March 31, 2023		March 31, 2022
Other Information

Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$	844	$	834
Operating cash flows from finance leases	4		—
Financing cash flows from finance leases	30		15
Right-of-use assets obtained in exchange for new lease liabilities:

Operating leases	60		—


	March 31, 2023		September 30, 2022
Weighted-average remaining lease term (years):
Finance leases	3.3		3.6
Operating leases	13.0		13.5
Weighted-average discount rate:
Finance leases	4.9	%	4.7	%
Operating leases	5.9	%	5.9	%

4. ~~Debt~~Future minimum lease payments under non-cancellable leases at March 31, 2023 were as follows:


	Finance Leases		Operating Leases
Year ending September 30,
2023 (excluding the six months ended March 31, 2023)	$	35	$	833
2024	68		1,686
2025	37		1,683
2026	30		1,681
2027	21		1,693
Thereafter	—		14,297
Total lease payments	$	191	$	21,873
Less: Imputed interest	(14)		(6,624)
Present value of lease liabilities	$	177	$	15,249

7. Debt and Subsequent Event

Debt consists of:


	March 31, 2023		September 30, 2022
Revolving credit agreement	$	13,003	$	11,163
Foreign subsidiary borrowings	6,982		7,101
Finance lease obligations	177		192
Other, net of unamortized debt issuance costs $(15) and $(20), respectively	486		594



Total debt	20,648		19,050

Less – current maturities	(17,339)		(15,542)
Total long-term debt	$	3,309	$	3,508

December 31,
2017
September 30,
2017
Revolving credit agreement $ 18,755

$ 18,557
Foreign subsidiary borrowings 8,492
8,346
Capital lease obligations 328
352

Term loan 3,815

4,060
Less: unamortized debt issuance cost (42 ) (47 )
Term loan less unamortized debt issuance cost 3,773
4,013
Total debt 31,348
31,268

Less – current maturities (26,839 )
(26,117 )
Total long-term debt $ 4,509

$ 5,151

Credit Agreement and Security Agreement

The Credit Agreement contains affirmative and negative covenants and events of default. On ~~November 9, 2016,~~March 23, 2022, the Company entered into ~~an Amended~~the Sixth Amendment (the "Sixth Amendment") to the Credit Agreement and ~~Restated~~the Second Amendment (the "Second Amendment") to the Export Credit ~~and Security~~ Agreement ~~("Credit Facility")~~ with its ~~Lender.~~lender. The total collateral at March 31, 2023 and September 30, 2022 was $21,304 and $22,711, respectively, and the revolving commitment was $35,000 for both periods. Total availability at March 31, 2023 and September 30, 2022 was $2,524 and $9,403, respectively, which exceeds both the collateral and total commitment threshold. Since the availability was greater than 10.0% of the revolving commitment as of September 30, 2022, no covenant calculations were required. As of March 31, 2023, the Company was not in compliance with covenant requirements as a result of the Event of Default described below. The Company has a letter of credit balance of $1,970 as of March 31, 2023 and September 30, 2022, respectively. The Credit ~~Facility matures on June 25, 2020 and consisted~~Agreement under the Sixth Amendment had a maturity date of ~~secured loans in an aggregate principal amount~~February 19, 2024. The maturity is modified to December 31, 2023 under the Seventh Amendment (the "Seventh Amendment") to the Credit Agreement, which is discussed below.

The Sixth Amendment amended the Credit Agreement to, among other things, (i) revise the fixed charge coverage ratio ("FCCR") to exclude the first $1,500 of ~~up to $39,871. The Credit Facility was comprised of (i) a senior secured revolving credit facility of a maximum borrowing amount of $35,000, including swing line loans and letters~~unfunded capital expenditures through April 20, 2023, (ii) increase the letter of credit ~~provided by~~sub-limit from $2,000 to $3,000, (iii) modify the ~~Lender~~reference rate from the London interbank offered rate ("LIBOR") to the secured overnight financing rate ("SOFR") and ~~(ii) senior secured term loan facility in~~(iv) revise the ~~amount of $4,871 (the "Term Facility"). The Term Facility is repayable in monthly installments of $81, which commenced December 1, 2016. The terms~~property, plant and equipment component of the Credit Facility contain both a lock-box 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 borrowedborrowing base under the Credit ~~Facility were used~~Agreement. The Second Amendment amends the Export Credit Agreement to ~~repay~~replace the ~~amounts outstanding~~reference rate from LIBOR to SOFR under the ~~Company's previous~~Export Credit ~~Agreement, for working capital, for general corporate purposes~~Agreement.

The revolving credit agreement (or "revolver"), as amended, has a rate based on SOFR plus a 2.25% spread, which was 7.0% at March 31, 2023 and to pay fees and expenses associated with this transaction. In connection with entering into the Credit Facility, the Company terminated its interest rate swap agreement with the Lender, as referenced in Note 1, ~~Summary of Significant Accounting Policies - Derivative Financial Instruments~~.

Borrowings 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 Credit Facility. The revolver has a rate based on LIBOR plus a ~~3.75%~~2.25% spread, ~~and a prime rate,~~ which ~~resulted in a weighted average rate of 5.4%~~was 4.9% at ~~December 31, 2017 and the term loan~~September 30, 2022. The Export Credit Agreement as amended has a rate ~~of 5.6%~~based on SOFR plus a 1.75% spread, which was 6.5% at ~~December~~March 31, ~~2017, which was~~2023 and a rate 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~~1.75% spread, which was 4.4% at September 30, 2022. The Company also has a commitment fee ~~ranging from 0.15% to 0.375%~~of 0.25% under the Credit Agreement as amended to be incurred on the unused ~~balance.~~balance of the revolver.

On February 6, 2023, the Company received a Notice of Event of Default and Reservation of Rights (the “Notice”) from its Lender, with respect to (i) that certain Credit Agreement dated as of August 8, 2018; and (ii) that certain Export Credit Agreement dated as of December 17, 2018. The ~~Company entered into its First Amendment Agreement ("First Amendment")~~Notice indicated that the Loan Parties to the Credit ~~Facility on February 16, 2017.~~Agreements have informed Lender of the occurrence of Events of Defaults under the Credit Agreements as a result of the failure to deliver the required Borrowing Base Certificates thereunder and other Events of Default. The ~~First Amendment assigned its~~Notice indicated further that Lender ~~as Administrative Agent~~is in the process of evaluating the Existing Defaults and ~~assigned a portion~~reserves all of its rights and remedies under the Credit ~~Facility to a participating Lender.~~

~~Under the Company's Credit Facility,~~Agreements and any other Loan Documents with respect thereto. The failure by the Company ~~is subject~~ to ~~certain customary loan covenants. These include, without limitation, covenants~~provide timely borrowing base certificates and monthly financial reports for the periods of December 2022, January 2023 and February 2023 in accordance with the terms of the Credit Agreements were a result of information access limitations experienced due to the cybersecurity incident that ~~require maintenance of certain specified financial ratios, including that~~occurred on December 30, 2022. As a secondary default, the Company meeting a minimum EBITDA and the maintenance of a minimum fixed charge coverage ratio. In the event of a default, we may not be able to access our revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities.

On August 4, 2017, the Company entered into its Second Amendment Agreement ("Second Amendment") with its Lender to (i) amend certain definitions within its Credit Facility to, among other things, effect the changes described herein and to reset the Fixed Charge Coverage Ratio (as defined in the Credit Facility) to build to a trailing four quarters in each of the fiscal 2018 quarters, commencing with the quarter ended December 31, 2017; (ii) replace certain of its financial covenants outlined in the description of Credit Facility and amend its financial covenants with a revised minimum EBITDA for the four fiscal quarters ending September 30, 2017 andfailed to maintain a ~~fixed charge coverage ratio commencing on~~FCCR not less than 1.1 to 1.0 for the periods of December ~~31, 2017; (iii) reduce its maximum revolving amount of $35,000 to $30,000;~~2022, January 2023, February 2023 and ~~(iv)~~March 2023. The secondary default voided the availability spring minimum threshold and triggered the FCCR covenant compliance. See Note 12, Commitments & Contingencies.

On April 28, 2023, the Company ~~must use~~and its ~~cash proceeds from~~subsidiary guarantors entered into a Forbearance Agreement (the "Forbearance Agreement") with J.P. Morgan Chase Bank, N.A. in respect to the ~~sale~~Event of Default under the Credit Agreement. Pursuant to the Forbearance Agreement, (i) the Reserves under the Borrowing Base in the ABL Credit Agreement are reduced to $2,000; (ii) the aggregate outstanding principal balance of the ~~Irish building discussed in Note 10,~~ ~~Assets Held for Sale~~Revolving Exposure under the ABL Credit Agreement and ~~Disposal~~ ~~to reduce~~Export Revolving Loan may not at any time exceed the ~~Term Facility by $700~~lesser of $19,000 and ~~use~~ the remaining proceeds to reduce the revolver. On November 28, 2017, the Company obtained a consent letter from its Lender which extended to December 31, 2017 the date to consummate such sale of the Irish property.

Borrowing Base.

On ~~February 8, 2018,~~August 9, 2023, the Company entered into the Seventh Amendment to the Credit Agreement and the Third Amendment ~~Agreement~~ (the ~~“Third Amendment”~~"Third Amendment") to the Export Credit Agreement with its ~~Credit Facility with the Agent and Lenders under~~lender. The Seventh Amendment amends the Credit ~~Facility, in which the Company and the Agent and the Lenders agreed~~Agreement to, among other things, (i) ~~amend~~reduce the ~~interest rate pricing spreads,~~Revolving Credit Agreement to $23,000, thereby reducing the total revolving commitment to $30,000; (ii) ~~add an owned real property location~~advances the loan maturity date to December 31, 2023; (iii) provides a waiver of Existing Defaults and concludes the forbearance period as ~~part~~described under the Forbearance Agreement dated April 28, 2023; (iv) the aggregate outstanding principal balance of the ~~collateral~~Revolving Exposure under the ABL Credit Agreement and ~~sell~~Export Revolving Loan may not at any time exceed the lesser of Revolving Commitment, less the Availability Block, if applicable, the Borrowing Base, and in combination with the Export Revolving Loan under the Export Credit Agreement to $18,000 through September 30, 2023 and $19,000 thereafter; (v) the Reserves under the Borrowing Base in the ABL Credit Agreement are reduced to $1,500 through September 30, 2023 and $2,000 thereafter. The Second Amendment amends the Export Credit Agreement to (i) modify the loan maturity date to December 31, 2023 and (ii) provides waiver of Existing Defaults and concludes the forbearance period as described under the Forbearance Agreement dated April 28, 2023. Lender’s agreement is subject to satisfaction of certain ~~identified assets at our closed location in Alliance, (iii) adjust~~post closing deliverables, including: (i) one or more proposed term sheets which provide for the ~~calculation~~refinancing of ~~EBITDA and certain financial covenants,~~

~~and (iv) revise the financial covenants by adding a new minimum EBITDA test for a specific location and changing the timing~~all of the ~~tests~~Obligations, in each case in an amount sufficient to repay the Obligations in full, by no later than September 19, 2023; (ii) a Confidential Information Memorandum, by no later than September 20, 2023; and ~~some~~(iii) a duly executed term sheet providing for the refinancing of all of the ~~covenant levels. The Company is~~Obligations in ~~compliance with its loan covenants as of December 31, 2017. Absent~~an amount sufficient to repay the ~~Third Amendment, the Company would not have been~~Obligations in ~~compliance with its financial loan covenant as of December 31, 2017.~~

full, by no later than October 8, 2023.

Foreign subsidiary borrowings in USD

~~As of December 31, 2017 and September 30, 2017, the total foreign~~Foreign debt borrowings (excluding capital leases) were $8,492 and $8,346, respectively, of which $6,298 and $5,805, respectively is the current portion. Current debt as of December 31, 2017 and September 30, 2017, consist of $3,369 and $2,618 of short-term borrowings, $1,222 and $1,340 is the current portion of long-term debt, and $1,707 and $1,847 of factoring. consists of:


	March 31, 2023		September 30, 2022
Term loan	$	3,819	$	3,818
Short-term borrowings	2,275		2,289
Factor	888		994
Total debt	$	6,982	$	7,101

Less – current maturities	(4,041)		(4,078)
Total long-term debt	$	2,941	$	3,023

Receivables pledged as collateral	$	480	$	792

Interest rates on ~~the term note~~foreign borrowings are based on Euribor rates, which range from ~~1.0%~~0.5% to ~~4.0%~~6.4%.

The ~~factoring programs are uncommitted, whereby~~Company's Maniago, Italy ("Maniago") location obtained borrowings from one lender in the ~~Company offers receivables~~first six months of fiscal 2022. The loan was for ~~sale to an unaffiliated financial institution, which are then subject to acceptance by~~$1,141 with repayment terms of six years. Under the ~~unaffiliated financial institution. Following the sale and transfer~~terms of the borrowing, repayments are made quarterly in the amount of $56, beginning on December 31, 2022.

The Company factors receivables ~~to the unaffiliated financial institution, the receivables are not isolated~~ from ~~the Company, and effective control~~one of ~~the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables.~~its customers. 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. The carrying value of the receivables pledged as collateral were $3,658 and $3,548 at December 31, 2017 and September 30, 2017, respectively.~~sheets.

Debt issuance costs

The Company ~~incurred~~had debt issuance costs ~~related to the prior Credit Agreement in the amount~~ of $724. The Company incurred an additional $562 of debt issuance costs in November 2016 and August 2017 and wrote off a combined amount of $323 of debt issuance costs during fiscal 2017 due to the debt modification accounting for deferred financing costs as it relates to the Term Facility and due to the Second Amendment. The costs$86, which are included in interest expense in the accompanying consolidated condensed financial statements. Total debt issuance cost in the amount of $768 is split between the Term Facility and the revolving credit facility. The portion noted above within the debt table relates to the Term Facility in the amount of $61, net of amortization of $19 at December 31, 2017. The remaining $707 of debt issuance cost relates to the revolving credit facility. This portion is shown in the consolidated condensed balance ~~sheet~~sheets as a deferred charge in other current assets, net of amortization of ~~$217~~$60 and $46 at ~~December~~March 31, ~~2017.~~2023 and September 30, 2022, respectively.

5.Other

On April 10, 2020, the Company entered into an unsecured promissory note under the Paycheck Protection Program (the “PPP Loan”). The PPP Loan had an aggregate principal amount of $5,025. The loan proceeds were used for payroll payments and the SBA granted full forgiveness on January 25, 2022. The Company elected to treat the PPP Loan as debt under FASB Topic 470. As such, the Company derecognized the liability in the second quarter of fiscal 2022 when the loan was forgiven. As of March 31, 2023 and September 30, 2022 the PPP loan balance was $0.

8. 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 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~~six months of fiscal ~~2018~~2023 was ~~21%~~(1.9)%, compared with ~~(14)%~~33.3% for the same period of fiscal ~~2017. This increase is~~2022. The decrease in the effective rate was primarily ~~driven by discrete tax benefits~~attributable to changes in jurisdictional mix of ~~$718 primarily related to tax legislation enacted during the first quarter of fiscal 2018 and tax impacts related to the sale of the Cork, Ireland building discussed further in Note 10,~~ ~~Assets Held for Sale and Disposal, partially offset by an increase in year-to-date non-U.S.~~ income in ~~the first quarter of~~ fiscal ~~2018~~2023 compared with the ~~first quarter~~same period of fiscal ~~2017.~~2022. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the ~~Company's~~Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates ~~that~~than the U.S. statutory tax rate.

In the first quarter of fiscal 2018, the U.S. enacted the Act which, among other items, reduces the U.S. corporate tax rate effective January 1, 2018 from 35% to 21%, creates a participation exemption regime for future distributions of foreign earnings, imposes a one-time transition tax on a taxpayer’s foreign subsidiaries’ earnings not previously subject to U.S. taxation and creates new taxes on certain foreign-sourced earnings. The decrease in the U.S. federal corporate tax rate from 35% to 21% results in a blended statutory tax rate of 24.5% for the fiscal year ending September 30, 2018. The new taxes for certain foreign-sourced earnings under the Act are effective for the Company after the fiscal year ending September 30, 2018.

The Company revalued its gross U.S. deferred taxes and the related valuation allowance, as a result of the Act. The revaluation, which is considered complete, resulted in a discrete tax benefit of $198 during the first quarter of fiscal 2018. Other provisions of the Act, including the one-time transition tax, are considered provisional as final transition impacts of the Act may differ from the above estimate, due to changes in interpretations of the Act, any legislative action to address questions that arise because of the Act, or any updates or changes to estimates the company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries. As a result of the valuation allowance in the U.S. on tax attribute carryforwards, as of the first quarter of fiscal 2018 no charge to tax expense was recorded related to the one-time transition tax. Additionally, the Company released $305 of valuation allowance in the first quarter of fiscal 2018 on a portion of its U.S. deferred tax assets as a result of deferred tax liabilities for indefinite lived intangible assets now available as a source of income as a result of the Act. The change in assessment of the realization of deferred taxes as a result of the Act is provisional as of the first quarter of fiscal 2018 as the Company will continue to analyze the necessary information and evaluate assumptions made in its assessment of the realization of its deferred tax assets.

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.~~


6.	~~Retirement Benefit Plans~~

9. Retirement Benefit Plans

The Company and certain of its subsidiaries sponsor defined benefit pension plans covering some of its employees. The components of the net periodic benefit cost of the Company’s defined benefit plans are as follows:


	Three Months Ended December 31,							Three Months Ended March 31,				Six Months Ended March 31,
	2017			2016				2023		2022		2023		2022
Service cost	$	63		$	78		Service cost	$	6	$	11	$	12	$	21
Interest cost	240			220			Interest cost	274		178		549		357
Expected return on plan assets	(402		)	(404		)	Expected return on plan assets	(277)		(340)		(554)		(681)

Amortization of net loss	161			216			Amortization of net loss	77		119		153		238
Net periodic cost	$	62		$	110

Net periodic pension cost (benefit)							Net periodic pension cost (benefit)	$	80	$	(32)	$	160	$	(65)

During the ~~three~~six months ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, the Company made no$13 and $0 in contributions, respectively, to its defined benefit pension plans. The Company anticipates making ~~$45 of additional~~$43 in cash contributions to fund its defined benefit pension plans ~~during~~for the balance of fiscal ~~2018~~2023, and will use carryover balances from previous periods that have been available for use as a credit to reduce the amount of cash contributions that the Company is required to make to certain defined benefit plans in fiscal ~~2018.~~2023. The Company's ability to elect to use such carryover balance will be determined based on the actual funded status of each defined benefit pension plan relative to the plan's minimum regulatory funding requirements. The Company does not anticipate making cash contributions above the minimum funding requirement to fund its defined benefit pension plans during the balance of fiscal ~~2018.~~2023.


7.	~~Stock-Based Compensation~~

10. Stock-Based Compensation

The Company has ~~awarded~~outstanding equity awards under the Company's 2007 Long-Term Incentive Plan (the "2007 Plan") and the Company's 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (as further amended, the "2016 Plan"), and awards performance and restricted shares under ~~its shareholder approved amended and restated 2007 Long-Term Incentive Plan ("2007 Plan") to~~ the 2016 ~~Long-Term Incentive Plan ("2016 Plan"). The amendment increased the aggregate number of shares that may be awarded under the 2016 Plan to~~ ~~646~~ 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 2016 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.~~Plan.

The performance shares that have been awarded under both plans 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~~ ~~200%~~ ~~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 based on the probability of meeting the performance target. 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.

~~During~~In the first ~~three~~six months of fiscal ~~2018,~~2023, the Company granted ~~119~~86 shares under the 2016 Plan to certain key employees. The ~~award was~~awards were split into two tranches, ~~68 performance~~comprised of 27 performance-based shares and ~~51 shares of~~59 time-based restricted shares, with a grant date fair value of ~~$6.70.~~$2.84 per share. The ~~award vests~~awards vest over three years. ~~5 performance~~There were 3 shares ~~and 3 time-based~~forfeited during the six month period ended March 31, 2023.

In the first six months of fiscal 2023, the Company granted its non-employee directors 38 restricted shares ~~were forfeited.~~

~~The Company has awarded~~under the 2016 Plan, with a grant date fair value of $3.48 per share, which vest over one year. One award for 42 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.vested in January 2023.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately ~~302~~300 shares that remain available for award at ~~December~~March 31, ~~2017.~~2023. 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 ~~200%~~150% of such target, then a fewer number of shares would be available for award.

Stock-based compensation under the 2016 Plan was ~~$194~~$207 and ~~$158~~$306 during the first ~~three~~six months of fiscal ~~2017~~2023 and ~~2016,~~2022, respectively. As of ~~December~~March 31, ~~2017,~~2023, there was ~~$1,242~~$436 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan. The Company expects to recognize this cost over the next ~~1.8~~1.4 years.


8.	~~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.

11. Revenue

The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and other military applications; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) commercial space, semiconductor and other commercial applications.

Revenue is ~~currently~~recognized when performance obligations under the terms of the contract with a ~~defendant in a class action lawsuit filed in the Superior Court~~customer of California, County of Orange, arising from employee wage-and-hour claims under California law for alleged meal period, rest break, hourly and overtime wage calculation, timely wage payment and necessary expenditure indemnification violations; and unfair competition. Although the Company ~~records reserves for legal disputes and other matters~~are satisfied. A portion of the Company's contracts are from purchase orders ("PO's"), which continue to be recognized as of a point in ~~accordance with generally accepted accounting principles in~~time when products are shipped from the ~~United States~~Company's manufacturing facilities or at a later time when control of ~~America ("GAAP"),~~ the ~~ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given~~products transfers to the ~~current status of this matter,~~customer. Under the revenue standard, the Company ~~recorded an estimated loss~~recognizes certain revenue over time as it satisfies the performance obligations because the conditions of ~~$385~~transfer of control to the applicable customer are as follows:

•Certain military contracts, which relate to the provisions of ~~September 30, 2017~~specialized or unique goods to the U.S. government with no alternative use, include provisions within the contract that are subject to the Federal Acquisition Regulation ("FAR"). The FAR provision allows the customer to unilaterally terminate the contract for convenience and requires the customer to pay the Company for costs incurred plus reasonable profit margin and take control of ~~which $10 was paid as~~any work in process.

•For certain commercial contracts involving customer-specific products with no alternative use, the contract may fall under the FAR clause provisions noted above for military contracts or may include certain provisions within their contract that the customer controls the work in process based on contractual termination clauses or restrictions of ~~September 30, 2017~~the Company's use of the product and the ~~remaining balance is expected~~Company possesses a right to ~~be paid within the second quarter of fiscal 2018.~~payment for work performed to date plus reasonable profit margin.


9.	~~Restructuring Costs~~

~~The Company completed the closure of the Alliance, Ohio ("Alliance") location in October 2017. Orders after September 30, 2017 are processed and manufactured by the Cleveland, Ohio location.~~ As a result of control transferring over time for these products, revenue is recognized based on progress toward completion of the ~~closure, Alliance~~performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products to be provided. The Company elected to use the cost to cost input method of progress based on costs incurred ~~non-cash charges~~for these contracts because it best depicts the transfer of goods to the customer based on incurring costs on the contracts. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.

The following table represents a breakout of total revenue by customer type:


	Three Months Ended March 31,				Six Months Ended March 31,
	2023		2022		2023		2022
Commercial revenue	$	11,361	$	9,506	$	21,542	$	17,866
Military revenue	7,881		15,062		18,999		25,949
Total	$	19,242	$	24,568	$	40,541	$	43,815

The following table represents revenue by end market:


	Three Months Ended March 31,				Six Months Ended March 31,
Net Sales	2023		2022		2023		2022
Aerospace components for:
Fixed wing aircraft	$	8,855	$	10,071	$	19,581	$	19,960
Rotorcraft	3,513		4,371		7,894		7,914
Energy components for power generation units	5,101		4,346		9,724		8,003
Commercial product and other revenue	1,773		5,780		3,342		7,938
Total	$	19,242	$	24,568	$	40,541	$	43,815

The following table represents revenue by geographic region based on the Company's selling operation locations:


	Three Months Ended March 31,				Six Months Ended March 31,
Net Sales	2023		2022		2023		2022
North America	$	14,353	$	20,426	$	31,647	$	36,288
Europe	4,889		4,142		8,894		7,527
Total	$	19,242	$	24,568	$	40,541	$	43,815

In addition to the disaggregated revenue information provided above, approximately 49% and 62% of total net sales for the six months ended March 31, 2023 and 2022, respectively, was recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time.

Contract Balances

The following table contains a roll forward of contract assets and contract liabilities for the period ended March 31, 2023:



Contract assets - Beginning balance, October 1, 2022	$	10,172
Additional revenue recognized over-time	20,230
Less amounts billed to the customers	(19,766)
Contract assets - Ending balance, March 31, 2023	$	10,636



Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2022	$	(807)
Payments received in advance of performance obligations	(1,428)
Performance obligations satisfied	1,019
Contract liabilities (included within Accrued liabilities) - Ending balance, March 31, 2023	$	(1,216)

There were no impairment losses recorded on contract assets as of March 31, 2023 and September 30, ~~2017. The~~2022.

Remaining performance obligations

As of March 31, 2023, the Company has $96,674 of remaining ~~estimated exit costs~~performance obligations, the majority of which are anticipated to be ~~expensed as incurred, which included workforce reduction costs. Workforce reduction costs incurred at September~~completed within the next twelve months.

12. Commitments and Contingencies

On December 30, ~~2017 were approximately $215,~~2022, the Company became aware of ~~which~~ a ~~$15 was paid by September 30, 2017 and~~cyber security issue involving unauthorized access to the ~~remainder was paid in the first quarter of fiscal 2018.~~

~~10.~~ ~~Assets Held for Sale and Disposal~~

Company's system (the "Cyber Incident"). The Company immediately began an investigation and engaged cyber security experts to assist with the assessment of the incident and to help determine what data was impacted. The Company's investigation uncovered that the threat actor had ~~assets held for sale~~gained access to certain areas of the Company's systems on or about December 27, 2022. With the assistance of outside cyber security experts, the Company located and closed the unauthorized access to our systems and identified compromised information, and notified those impacted in accordance with state and federal requirements. The

Company undertook a number of other measures to demonstrate our continued support and commitment to data privacy and protection and coordinated with law enforcement.

The Company maintains $3,000 of cybersecurity insurance coverage to limit our exposure to losses such as itthose related to the ~~Cork, Ireland building~~Cyber Incident. The Company recorded costs in selling, general and administrative expense associated with the ~~Alliance building~~Cyber Incident of $1,000 during the three months ended March 31, 2023. The Company recorded costs of $110 to other expense (income), net of $3,000 insurance recovery and ~~certain machinery~~$1,000 to selling, general and ~~equipment. In~~administrative expense in the ~~first quarter~~six months ended March 31, 2023, resulting in net costs of ~~fiscal 2018,~~$1,000 and $1,110 in the three and six months ended March 31, 2023, respectively. The Company received the $3,000 of insurance proceeds on February 20, 2023. At March 31, 2023, the Company signed a purchase agreement with a buyer for the sale of the building located in Cork, Ireland. The sale transaction was finalized on December 15, 2017 for cash proceeds of approximately $3,078, resulting in an approximate gain of $1,521. The cash proceeds were received by our legal counsel and have not been transferredrecorded $1,000 related to the Company as of December 31, 2017. As such, the $2,969, (the cash proceeds of the sale, net of legal and professional fees paid) is separately shown within other receivables to the consolidated condensed balance sheets as of December 31, 2017. The net cash proceeds after legal and professional fees and taxes have been considered, are expected to be used to be used to pay down the Term Facility and revolving credit facility as further discussedCyber Incident in ~~Note 4,~~ ~~Debt.~~

~~The Alliance building and machinery and equipment are recorded as assets held for sale in~~accounts payable on the consolidated condensed balance sheets.

The ~~assets held for sale balance at December 31, 2017~~Company has incurred, and ~~September 30, 2017~~may continue to incur, certain expenses related to this attack, including expenses associated with additional remediation measures and further investigation of this matter. The Company will accrue these costs as incurred.

13. Subsequent Events

The Company has evaluated subsequent events through August 14, 2023, the date the financial statements were ~~$1,076~~available to be issued, and ~~$2,524, respectively. The balance at December 31, 2017 represents~~has determined that the ~~Alliance building~~following subsequent events require disclosure in the financial statements.

Forbearance Agreement

On April 28, 2023, the Company and ~~certain machinery and equipment that continues~~its subsidiary guarantors entered into a Forbearance Agreement with J.P. Morgan Chase Bank, N.A. in respect to ~~meet the asset held for sale classification due~~its Credit Agreement in response to the ~~circumstances~~Notice of ~~the closure~~Event of ~~Alliance~~Default and ~~expected plan to sell. The Alliance assets fair value are stated at its orderly liquidation value. The Company expects to sell these assets within the next 12 months.~~Reservation of Rights notice received on February 6, 2023. See Note 7, Debt and Subsequent Event for more information.


~~11.~~	~~Subsequent Events~~

Credit Agreement Amendment

On ~~February 8, 2018,~~August 9, 2023, the Company entered into ~~its~~the Seventh Amendment to the Credit Agreement and the Third Amendment to the Export Credit Agreement with its ~~lender. See Note 4,~~ ~~Debt~~lender which waived the Event of Default, ended the forbearance period, and provided for further ~~discussion on~~changes to the ~~Third Amendment.~~agreements. See Note 7, Debt and Subsequent Event for more information.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain various forward-looking statements and includes assumptions concerning the Company’s operations, future results and prospects. The words "will," "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-looking statements. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides this cautionary statement identifying important economic, political and technological factors, among others, the absence or effect of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the following: (1) the impact on business conditions in general, and on the demand for ~~products~~product in the ~~Aerospace~~aerospace and ~~Energy ("A~~energy (or "A&E") industries in particular, of the global economic outlook, including the continuation of military spending at or near current levels and the availability of capital and liquidity from banks, the financial markets and other providers of credit; (2) the future business

environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business that may be ~~lost;~~lost at comparable margins; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient ~~turbine~~turboprop engines; (7) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; ~~and~~ (10) the ability to successfully integrate businesses that may be acquired into the Company’s ~~operations.~~operations; (11) cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners; (12) our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations; (13) the ability to maintain a qualified workforce; (14) the adequacy and availability of our insurance coverage; (15) our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers; (16) our ability to realize amounts in our backlog; (17) investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings; (18) extraordinary or force majeure events affecting the business or operations of our business (19) the continued long term impact of the COVID-19 pandemic and related residual negative impact on the global economy, which may exacerbate the above factors and/or impact our results of operations and financial condition; and (20) in connection with its entry into the Seventh

Amendment to its Credit Agreement and Third Amendment to its Export Credit Agreement, the Company is evaluating available financial alternatives, including obtaining acceptable alternative financing. The Company has obtained lender waiver on Existing Defaults and concluded the forbearance period as described under the Forbearance Agreement dated April 28, 2023. If the Company is unable to find alternative financing as contemplated by the terms of the Seventh Amendment, the lender under the Credit Agreement may choose to accelerate repayment. The Company cannot provide assurances that it will be able to provide the post closing deliverables as established under the Seventh Amendment of the Credit Agreement or be successful in restructuring of existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements.

The Company ~~is engaged~~engages in the production of forgings and machined components primarily for the A&E and commercial space markets. The processes and services provided by the Company include forging, heat-treating, machining, subassembly, and test. The Company operates under one business segment.

The Company endeavors to continue to plan and evaluate its business operations while taking into consideration certain factors including the following: (i) the projected build rate for commercial, business and military aircraft, as well as the engines that power such aircraft; (ii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft; ~~and~~ (iii) the projected build rate and repair for industrial ~~turbines.~~turbines; and (iv) commercial space.

The Company operates within a cost structure that includes a significant fixed component. Therefore, higher net sales volumes are expected to result in greater operating income because such higher volumes allow the business operations to better leverage the fixed component of their respective cost structures. Conversely, the opposite effect is expected to occur at lower net sales and related production volumes.

A. Results of Operations

Overview

The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and ~~armored~~other military ~~vehicles;~~applications; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) commercial space, semiconductor and other commercial applications.

Impact of COVID-19 & Other Factors

The ~~Company finalized the closure of its Alliance, Ohio ("Alliance") location in October 2017. Orders after September 30, 2017 are being processed~~lingering impact and ~~manufactured by its Cleveland, Ohio ("Cleveland") location. As a result~~residual effects of the ~~closure~~COVID-19 pandemic, along with other factors such as ongoing geopolitical tensions, strains on supply chains and inflationary impacts continue to impact the United States and other countries in which the Company operates. During fiscal 2022, the ongoing impact of ~~Alliance, impairment costs~~the COVID-19 pandemic continued to effect the Company’s results of operations. Given the long lead times for certain of the Company's products, the Company has continued to see an impact related to the effects of COVID-19 on orders and ~~restructuring costs were recorded in fiscal 2017. The remaining estimated exit costs are to be expensed as incurred, which include workforce reduction costs of $0.2 million, which were paid~~deliveries in the first ~~quarter~~six months of fiscal ~~2018. Certain machinery~~2023. While the exact timing and ~~equipment~~pace of recovery in our markets continues to be indeterminable, commercial air travel is steadily recovering. While the long-term outlook remains positive given the nature of the industry, there continues to be uncertainty with the respect to when commercial air traffic will return to pre-COVID-19 levels.

Additionally, our operations are subject to global economic and geopolitical risks. For example, while the ~~building remain classified~~Company does not have a presence in these regions, the ongoing conflict between Russia and Ukraine has impacted economic activity as ~~assets held for sale~~well as the availability and price of raw materials and energy. The Company continues to actively monitor these factors and seeks to find ways to mitigate the impact on its operations.

Backlog of Orders

SIFCO’s total backlog at March 31, 2023 was $96.7 million, compared with $72.0 million as of ~~December~~March 31, ~~2017.~~2022. Orders may be subject to modification or cancellation by the customer with limited charges. Recovery in the A&E markets coupled with extended raw material lead times has resulted in increased bookings. Backlog information may not be indicative of future sales.

~~The Company completed the sale of the Cork, Ireland building on December 15, 2017.~~

~~Three~~Six Months Ended ~~December~~March 31, ~~2017~~2023 compared with ~~Three~~Six Months Ended ~~December~~March 31, ~~2016~~

2022

Net Sales

Net sales comparative information for the first six months of fiscal 2023 and 2022 is as follows:


(Dollars in millions)	Six Months Ended March 31,				Increase/ (Decrease)
Net Sales	2023		2022
Aerospace components for:
Fixed wing aircraft	$	19.6	$	20.0	$	(0.4)
Rotorcraft	7.9		7.9		—
Energy components for power generation units	9.7		8.0		1.7
Commercial product and other revenue	3.3		7.9		(4.6)
Total	$	40.5	$	43.8	$	(3.3)

Net sales for the first ~~three~~six months of fiscal ~~2018~~2023 decreased ~~23.0%~~$3.3 million to ~~$24.3~~$40.5 million, compared with ~~$31.5~~$43.8 million in the comparable period of fiscal ~~2017. Net sales comparative~~2022. In general, the production of the Company's products have lead times of varying lengths. The cybersecurity incident, due to information ~~for~~access limitations and system constraints, impacted domestic operations and the ~~first three months~~timing of shipments in the second quarter of fiscal ~~2018~~2023. Year over year, the cybersecurity incident and ~~2017 is as follows:~~

(Dollars in millions) Three Months Ended
December 31,
Increase/(Decrease)

Net Sales 2017 2016
Aerospace components for:
Fixed wing aircraft $ 12.5
$ 14.6
$ (2.1 )
Rotorcraft 5.6
4.9
0.7
Energy components for power generation units 6.1
7.8
(1.7 )
Commercial product and other revenue 0.1
4.2
(4.1 )
Total $ 24.3
$ 31.5
$ (7.2 )

~~The~~extended raw material lead times largely drove the decrease in ~~commercial product~~sales. The Company's foreign operations were not impacted by the cybersecurity incident and ~~other revenue sales~~ is ~~largely driven by a decrease~~reflected in the ~~Hellfire II missile program due~~sales to timing of orders. The decrease in fixed wing aircraft sales is primarily due to changes in build demand of Rolls Royce AE Engines due to a buffering plan for a customer plant closure which increased sales in fiscal 2017. Energy components forthe power generation ~~units~~market that it primarily serves. Fixed wing sales decreased ~~by $1.7~~$0.4 million compared with the same period last year ~~of which $1.2 million related~~primarily due to 767 and 737 programs. Rotorcraft sales were flat compared with the ~~closure of the Alliance location and $0.5~~same period last year. The energy components for power generation units increased by $1.7 million due to ~~planned refurbishment~~growth in the steam turbine markets. Commercial products and other revenue decreased $4.6 million in the first six months of ~~a hammer at~~fiscal 2023 compared to the ~~Maniago, Italy ("Maniago") location.~~

~~Rotorcraft sales increased $0.7 million~~same period in fiscal 2022, primarily due to ~~recovery~~the cybersecurity incident impact to domestic operations and timing of ~~sales from~~shipments, raw material lead times and the timing of orders related to a ~~customer that had previously taken measures of inventory destocking in the comparable period.~~munitions program.

Commercial net sales were ~~56.6%~~53.1% of total net sales and military net sales were ~~43.4%~~46.9% of total net sales in the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~53.6%~~40.8% and ~~46.4%~~59.2%, respectively, in the comparable period in fiscal ~~2017.~~2022. Military net sales decreased by ~~$4.0~~$6.9 million to ~~$10.6~~$19.0 million in the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$14.6~~$25.9 million in the comparable period of fiscal ~~2017,~~2022, primarily due to ~~the~~ timing in order placement related to a munitions program and information access limitations and system constraints as a result of the ~~Hellfire II missile program. Commercial~~cybersecurity incident. Commercial net sales ~~decreased $3.2~~increased $3.7 million to ~~$13.7~~$21.5 million in the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$16.9~~$17.9 million in the comparable period of fiscal ~~2017~~2022, primarily due to ~~changes~~an increase in ~~program build rates~~the power generation steam turbine market and ~~closure of the Alliance location mentioned above.~~ commercial space.

Cost of Goods Sold

Cost of goods sold decreased by ~~$5.1~~$4.8 million, or ~~18.6%~~11.3%, to ~~$22.2~~$37.6 million, or ~~91.6%~~92.7% of net sales, during the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$27.3~~$42.3 million or ~~86.8%~~96.7% of net sales, in the comparable period of fiscal ~~2017.~~2022. The decrease ~~was~~is primarily due ~~primarily~~ to lower ~~volumes as previously mentioned, lower labor costs~~volume, reduction of ~~$1.6~~NRV reserve of $1.2 million and lower ~~scrap~~labor and idle expense of $0.6 million and $0.4 million, respectively partially offset by higher utility costs of $0.3 million.

Gross Profit

Gross profit ~~decreased $2.1~~increased $1.5 million to ~~$2.0~~$3.0 million ~~during~~in the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$4.2~~$1.5 million gross profit in the comparable period of fiscal ~~2017.~~2022. Gross ~~margin~~profit percent of sales was ~~8.4%~~7.3% during the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~13.2%~~3.3% in the comparable period in fiscal ~~2017.~~2022. The ~~decrease~~increase in gross profit compared to prior fiscal year was primarily due to product mix, reduction of NRV reserve $1.2 million and lower ~~sales volume~~labor and ~~mix.~~idle expense of $0.6 million and $0.4 million, respectively partially offset by higher utility costs of $0.3 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were ~~$4.1~~$7.1 million, or ~~16.8%~~17.6%, of net sales during the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$5.3~~$6.2 million, or ~~16.8%~~14.2%, of net sales in the comparable period of fiscal ~~2017.~~2022. The ~~decrease~~increase in selling, general and administrative expenses is primarily due to ~~$1.0 million in lower expansion~~incremental IT costs related to ~~one~~the cybersecurity incident of ~~the Company's plant locations~~$1.0 million. See Note 12, Commitments and ~~$0.1 million in lower sales commissions attributed to changes in the Company's sales organization.~~Contingencies for further discussion.

Amortization of Intangibles ~~and Asset Impairment of Long-lived Assets~~

Amortization of intangibles ~~decreased $0.2~~was $0.1 million ~~to $0.4 million during~~in the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$0.6~~$0.2 million in the comparable period of fiscal ~~2017. The decrease was due to~~2022.

Other/General

In the ~~impairment~~first six months of ~~certain definite-lived intangible assets~~fiscal 2022, the Company recognized a gain on extinguishment of debt related to the ~~Alliance location in~~PPP loan that was forgiven by the ~~third quarter of fiscal 2017.~~

~~Other/General~~

Interest expense decreased $0.2 million to $0.4 million in the first three months of fiscal 2018, compared with $0.7 million in the same period in fiscal 2017. The decrease is primarily due to a $0.2 million prior period write-off of deferred financing costs associated with the Company’s Amended and Restated Credit and Security Agreement ("Credit Facility") with its lender in fiscal 2017.SBA for $5.1 million. See Note 4, 5, Debt and Subsequent Event for further ~~information.~~discussion.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first ~~three~~six months of both fiscal ~~2018~~2023 and ~~2017. The Company entered into an interest rate swap in the prior year as discussed in Note 1,~~ ~~Summary of Significant Accounting Policies - Derivatives Financial Instruments~~ ~~of the notes to the unaudited consolidated condensed statements:~~2022:


	Weighted Average Interest Rate Three Months Ended December 31,				Weighted Average Outstanding Balance Three Months Ended December 31,			Weighted Average Interest Rate Six Months Ended March 31,				Weighted Average Outstanding Balance Six Months Ended March 31,
	2017		2016		2017	2016		2023		2022		2023	2022
Revolving credit agreement	5.4	%	4.4	%	$ 19.6 million	$ 20.3 million	Revolving credit agreement	6.3	%	1.8	%	$ 11.8 million	$ 9.9 million
Term note	5.8	%	4.6	%	$ 3.9 million	$ 9.7 million
Foreign term debt	2.7	%	4.2	%	$ 8.1 million	$ 10.3 million	Foreign term debt	4.2	%	3.2	%	$ 7.2 million	$ 6.3 million
Other debt							Other debt	1.5	%	0.5	%	$ 0.5 million	$ 3.2 million

Other income, net, consists principally of $0.3 million of rental income earned from the lease of the Company's Cork, Ireland ("Irish building") facility and grant income realized due to the sale of the Irish building in the first three months of fiscal 2018 compared with $0.1 million in the first three months of fiscal 2017. The Company also had a gain of $1.4 million in the first three months of fiscal 2018 compared with a nominal amount in the first three months of fiscal 2017. The majority of the gain recognized was due to the sale of the Irish building. See Note 10, ~~Assets Held for Sale and Disposal~~ ~~for further discussion on the sale of the Irish building in the first three months of fiscal 2018.~~

Income Taxes

The Company’s effective tax rate inthrough the first ~~three~~six months of fiscal ~~2018~~2023 was ~~21%~~(1.9)%, compared with ~~(14)%~~33% for the same period of fiscal 2022. The decrease in the ~~comparable period~~effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal ~~2017. This increase is primarily driven by discrete tax benefits of $0.7 million, primarily related to tax legislation enacted in~~2023 compared with the ~~first quarter~~same period of fiscal 2018 and tax impacts related to the sale of the Irish building, partially offset by an increase in year-to-date non-U.S. income in the first quarter of fiscal 2018 compared to the first quarter in fiscal 2017.2022. The effective tax rate differs from the U.S. federal statutory rate due primarily ~~due~~ to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

The Company revalued its gross U.S. deferred taxes and the related valuation allowance, as a result of the Act. The revaluation, which is considered complete, resulted in a discrete tax benefit of $0.2 million during the first quarter of fiscal 2018. Other provisions of the Act, including the one-time transition tax, are considered provisional as final transition impacts of the Act may differ from the above estimate, due to changes in interpretations of the Act, any legislative action to address questions that arise because of the Act, or any updates or changes to estimates the company has utilized to calculate the transition impacts, including impacts from changes to current year earnings estimates and foreign exchange rates of foreign subsidiaries. As a result of the valuation allowance in the U.S. on tax attribute carryforwards, as of the first quarter of fiscal 2018 no charge to tax expense was recorded related to the one-time transition tax. Additionally, the Company released $0.3 million of valuation allowance in the first quarter of fiscal 2018 on a portion of its U.S. deferred tax assets as a result of deferred tax liabilities for indefinite lived intangible assets now available as a source of income as a result of the Act. The change in assessment of the realization of deferred taxes as a result of the Act is provisional as of the first quarter of fiscal 2018 as the Company will continue to analyze the necessary information and evaluate assumptions made in its assessment of the realization of its deferred tax assets.

Net Loss

Net loss was ~~$0.9~~$5.0 million during the first ~~three~~six months of fiscal ~~2018,~~2023, compared with a net loss of ~~$2.6~~$0.1 million in the comparable period of fiscal ~~2017.~~ 2022. The decrease compared with prior year is primarily due to PPP forgiveness, lower volume and higher selling, general and administrative expenses.

Three Months Ended March 31, 2023 compared with Three Months Ended March 31, 2022

Net ~~loss~~Sales

Net sales for the second quarter of fiscal 2023 decreased 21.7% to $19.2 million, compared with $24.6 million in the comparable period of fiscal 2022. The cybersecurity incident, due to information access limitations and system constraints, impacted domestic operations and the timing of shipments in the second quarter of fiscal 2023. Extended raw material lead times in fiscal 2023 also contributed to the decrease in sales. Net sales comparative information for the second quarter of fiscal 2023 and 2022 is as follows:


(Dollars in millions)	Three Months Ended March 31,				Increase (Decrease)
Net Sales	2023		2022
Aerospace components for:
Fixed wing aircraft	$	8.8	$	10.1	$	(1.3)
Rotorcraft	3.5		4.4		(0.9)
Energy components for power generation units	5.1		4.3		0.8
Commercial product and other revenue	1.8		5.8		(4.0)
Total	$	19.2	$	24.6	$	(5.4)

The reduction in commercial product and other revenues of $4.0 million was due to information access limitations and system constraints as a result of the cybersecurity impact to domestic operations and shipments, extended raw material lead times and timing of orders for a munitions program partially offset by an increase in sales related to the commercial space industry. Fixed wing sales decreased $1.3 million compared with the same period last year primarily due to F18 and 737 programs. Rotorcraft sales decreased $0.9 million compared with the same period last year primarily due to V22 and H60 programs and procurement delays caused by prolonged long term agreement negotiations with certain customers. This was partially offset by an increase of $0.8 million in power generation sales driven by growth in the steam turbine market.

Commercial net sales were 59.0% of total net sales and military net sales were 41.0% of total net sales in the second quarter of fiscal 2023, compared with 38.7% and 61.3%, respectively, in the comparable period of fiscal 2022. Military net sales

decreased by $7.2 million to $7.9 million in the second quarter of fiscal 2023, compared with $15.1 million in the comparable period of fiscal 2022, primarily due to the ~~decrease~~timing of orders for a munitions program and F18 and H60 programs. Commercial net sales increased $1.9 million to $11.4 million in ~~selling,~~the second quarter of fiscal 2023, compared with $9.5 million in the comparable period of fiscal 2022 primarily due to increase in sales related the commercial space, 737, 767 and 787 programs.

Cost of Goods Sold

Cost of goods sold was $17.5 million, or 91.1% of net sales, during the second quarter of fiscal 2023, compared with $23.1 million or 94.1% of net sales, in the comparable period of fiscal 2022, primarily due to lower volume, reduction of NRV reserve of $0.4 million partially offset by higher idle expense and utility costs of $0.5 million and $0.2 million, respectively.

Gross Profit

Gross profit increased $0.2 million to $1.7 million during the second quarter of fiscal 2023, compared with $1.5 million in the comparable period of fiscal 2022. Gross margin was 8.9% during the second quarter of fiscal 2023, compared with 5.9% in the comparable period in fiscal 2022. The increase in gross margin was primarily due to lower costs incurred as noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $3.8 million, or 20.0% of net sales, during the second quarter of fiscal 2023, compared with $2.7 million, or 10.9% of net sales, in the comparable period of fiscal 2022. The increase is primarily due to IT incident costs of $1.0 million and higher salary and benefit costs of $0.1 million.

Amortization of Intangibles

Amortization of intangibles was $0.1 million in the second quarter of fiscal 2023 compared with $0.1 million in the second quarter of fiscal 2022.

Other/General

Included in other income, net, in the second quarter of fiscal 2022 is the PPP loan for forgiveness of $5.1 million. See Note 5, Debt and Subsequent Event for further discussion.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s Credit Agreement in the second quarter of both fiscal 2023 and 2022:


	Weighted Average Interest Rate Three Months Ended March 31,				Weighted Average Outstanding Balance Three Months Ended March 31,
	2023		2022		2023	2022
Revolving credit agreement	6.7	%	1.8	%	$ 12.4 million	$ 11.1 million
Foreign term debt	4.9	%	5.0	%	$ 7.1 million	$ 6.6 million
Other debt	1.4	%	1.8	%	$ 0.5 million	$ 0.8 million

Income Taxes

The Company's effective tax rate in the second quarter of fiscal 2023 was (1.2)%, compared with 1% for the same period of fiscal 2022. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income during the three months ended March 31, 2023 compared to the same period of fiscal 2022. 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 than the U.S. statutory tax rate.

Net (Loss) Income

Net loss was $2.4 million during the second quarter of fiscal 2023, compared with net income of $3.6 million in the comparable period of fiscal 2022. The net income in fiscal 2022 is primarily attributed to the gain on loan extinguishment related to the ~~sale of~~PPP loan noted above, partially offset by the ~~Irish building and the tax benefits realized as~~higher costs noted above.

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 itmanagement 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 to EBITDA and Adjusted EBITDA:


Dollars in thousands	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2023		2022		2023		2022
Net (loss) income	$	(2,367)	$	3,639	$	(4,956)	$	(52)
Adjustments:
Depreciation and amortization expense	1,626		1,596		3,198		3,210
Interest expense, net	339		193		614		307
Income tax expense (benefit)	28		23		93		(26)
EBITDA	(374)		5,451		(1,051)		3,439
Adjustments:
Foreign currency exchange (gain) loss, net (1)	12		3		9		9
Other (income), net (2)	(328)		(36)		(146)		(68)
Loss (gain) on disposal of assets (3)	14		(2)		3		(2)


Gain on extinguishment of debt (4)	—		(5,106)		—		(5,106)
Equity compensation (5)	85		145		207		306


LIFO impact (6)	(461)		207		(199)		383
IT incident costs (7)	1,086		—		1,087		—


Adjusted EBITDA	$	34	$	662	$	(90)	$	(1,039)

Dollars in thousands Three Months Ended
December 31,
2017 2016
Net loss $ (911 ) $ (2,609 )
Adjustments:
Depreciation and amortization expense 2,191
2,515
Interest expense, net 435
664
Income tax expense (benefit) (240 ) 327
EBITDA 1,475
897
Adjustments:
Foreign currency exchange (gain) loss, net (1) (36 ) 4
Other income, net (2) (316 ) (107 )
Gain on disposal of operating assets (3) (1,400 ) (6 )
Equity compensation (4) 194
158
LIFO impact (5) 52
107
Orange expansion (6) —
953
Adjusted EBITDA $ (31 ) $ 2,006
(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.


~~(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, primarily rental income from the Company's Irish subsidiary and in the three months ended 2018, grant income was realized as it relates to the Company's Irish subsidiary.


~~(3)~~	~~Represents the difference between the proceeds from the sale of operating equipment and sale of the Ireland building and the carrying value shown on the Company’s books.~~


~~(4)~~	~~Represents the equity-based compensation benefit and expense recognized by the Company under its 2007 Long-Term Incentive Plan due to granting of awards, awards not vesting and/or forfeitures.~~


~~(5)~~	~~Represents the increase in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method.~~


~~(6)~~	~~Represents costs related to expansion of one of the plant locations that are required to be expensed as incurred.~~

(2)Represents miscellaneous non-operating income or expense, such as pension costs and foreign energy tax credits.

(3)Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company's books or asset impairment of long-lived assets.

(4)Represents the gain on extinguishment of debt and interest for the amount forgiven by the SBA as it relates to the PPP loan.

(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.

(7)Represents incremental information technology costs as it relates to the cybersecurity incident and loss on insurance recovery.

B. Liquidity and Capital Resources

The main sources of liquidity for the Company have been cash flows from operations and borrowings under our Credit Agreement. The Company's liquidity could be negatively affected if the Company is unable to find alternative financing prior to the expiration of the Credit Agreement, by customers extending payment terms to the Company and/or the decrease in demand for our products. The Company and management will continue to assess and actively manage liquidity needs. See "Results of Operation" for further discussion of the lingering impacts of COVID-19. See Note 7, Debt and Subsequent Event.

Cash and cash equivalents ~~were $1.1~~was $0.3 million at ~~December~~March 31, ~~2017 compared with $1.4~~2023 and $1.2 million at September 30, ~~2017.~~2022. At ~~December~~March 31, ~~2017, approximately $0.9 million~~2023, the majority of the Company’s cash and cash equivalents ~~was~~were in the possession of its non-U.S. subsidiaries. Distributions from the Company's non-U.S. subsidiaries to the Company may be subject to adverse tax consequences.

Operating Activities

The Company’s operating activities ~~from operations provided $0.5~~used $0.4 million of cash in the first ~~three~~six months of fiscal ~~2018, compared with $0.8 million of cash used by operating activities in the first three months of fiscal 2017. The cash provided by operating activities in the first three months of fiscal 2018 was~~2023, primarily due to ~~depreciation~~operating results and amortization of $2.2 million, offset by a gain on sale of Irish building and other assets of $1.4 million, a net source of working capital of $1.3 million, and $0.7 million of other non-cash items, such as equity based compensation, deferred income taxes and LIFO effect, partially offset by a net loss of $0.9 million. The cash provided for working capital was primarily due to a $1.4 million decreasean increase in accounts ~~receivables and $1.0 million decrease in inventory.~~payable of $3.9 million.

The Company’s operating activities used ~~$0.8~~$3.2 million of cash in the first ~~three~~six months of fiscal ~~2017. The cash used by operating activities in the first three months of fiscal 2017 was~~2022, primarily due to ~~a net loss~~operating results, an increase in inventory of ~~$2.6~~$2.4 million, and a ~~net use~~reduction of ~~working capital~~accrued liabilities of ~~$1.4~~$1.2 million, partially offset by ~~$2.5 million of depreciation~~accounts receivable collections and ~~amortization and $0.7 million of other non-cash items, such as equity based compensation and LIFO effect. The cash used for working capital was primarily due to~~ a ~~$1.6 million~~slight increase in accounts ~~receivables as a result to higher sales.~~payable.

Investing Activities

Cash used for investing activities was ~~$0.7~~$1.4 million in the first ~~three~~six months of fiscal ~~2018,~~2023, compared with ~~$0.4~~$1.5 million in the first ~~three~~six months of fiscal ~~2017. In addition to the $0.7 million expended during the first three months of fiscal 2018, $0.4 million was committed for future capital expense~~2022. Capital commitments as of ~~December~~March 31, ~~2017.~~2023 were $0.5 million. The Company anticipates that the remaining total fiscal ~~2018~~2023 capital expenditures will be within the range of ~~$3.5~~$0.5 million to ~~$4.0~~$1.0 million and will relate principally to the further enhancement of production and product offering capabilities and drive operating cost reductions.

Financing Activities

Cash ~~used~~provided by financing activities was $0.8 million in the first six months of fiscal 2023, compared with $4.5 million in the first six months of fiscal 2022.

As discussed in Note 7, Debt and Subsequent Event, the Company's Maniago location obtained borrowings from a lender during the first six months of fiscal 2022 for approximately $1.1 million with a six year term. The proceeds of this loan were to be used for working capital purposes. The Company had $0.5 million of net short-term debt repayments in the first six months of fiscal 2023 compared with net short-term debt repayments of $0.1 million in the first ~~three~~six months of fiscal ~~2018, compared with cash provided by financing activities of $1.7 million in the first three months of fiscal 2017.~~

The Company had repayments of $0.7 million of long-term debt, of which $0.2 million is a repayment under its term loan and repayments of $0.5 million under its foreign long-term loan, compared to $12.2 million in repayments in the comparable prior period of which $11.6 million of repayments related to the term loan after entering into the November 9, 2016 Credit Facility and $0.6 million under its foreign long-term loan in fiscal 2017. The principal reason for the term loan repayment in the prior period was due to the modification of the debt structure, as discussed herein.2022.

The Company had net borrowings ~~from~~to the revolver under the Credit ~~Facility~~Agreement of ~~$0.2~~$1.8 million in the first ~~three~~six months of fiscal ~~2018,~~2023 compared with ~~$12.6 million of~~ net borrowings of $3.9 million in the first ~~three~~six months of fiscal ~~2017. The net borrowings in the first three months in fiscal 2017 were used to repay long-term debt.~~2022.

On November 9, 2016, the Company entered into a Credit Facility with its Lender. The new Credit Facility matures on June 25, 2020 and consisted of senior secured loans in the aggregate principal amount of up to $39.9 million. The Credit Facility was comprised of (i) a senior secured revolving credit facility of a maximum borrowing amount of $35.0 million, including swing line loans and letters of credit provided by the Lender and (ii) senior secured term loan facility in the amount of $4.9 million (the “Term Facility”). The new Term Facility is repayable in monthly installments of $0.1 million which began December 1, 2016. The terms of the Credit Facility contain both a lock-box arrangement and a 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 Credit Facility were used to repay the amounts previously outstanding under the Company’s previous Credit Agreement and for working capital, general corporate purposes and to pay fees and expenses associated with this transaction. In connection with entering into the Credit Facility, the Company terminated its interest rate swap agreement with the Lender. See Note 1, ~~Summary of Significant Accounting Policies - Derivative Financial Instruments~~ ~~for further discussion.~~

Borrowings bears 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 Facility. 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 5.4% at December 31, 2017 and the term loan has a rate of 5.6% at December 31, 2017, 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.

The Company entered into its First Amendment Agreement ("First Amendment") to the Credit Facility on February 16, 2017. The First Amendment assigned its Lender as Administrative Agent and assigned portion of its Credit Facility to another participating Lender.

Under the Company's Credit ~~Facility,~~Agreement, the Company is subject to certain customary loan ~~covenants. These include, without limitation,~~ covenants ~~that require maintenance~~regarding availability as discussed in Note 7, Debt and Subsequent Event. The availability at March 31, 2023 was $2.5 million, which was greater than the 10.0% of ~~certain specified financial ratios, including that~~the Revolving Commitment as of March 31, 2023. If availability falls below the 10% level or an event of default occurs, the Company ~~meeting a minimum EBITDA and~~is required to meet the ~~maintenance of a minimum~~ fixed charge coverage ratio ~~to commence on September 30, 2017. In the event of a default, we may~~covenant, which must not be ~~able~~less than 1.1 to ~~access our revolver, which could impact the ability to fund working capital needs, capital expenditures~~1.0.

As noted in Note 7, Debt and ~~invest in new business opportunities.~~

~~On August 4, 2017,~~Subsequent Event, on March 23, 2022, the Company entered ~~into~~ its ~~Second~~Sixth Amendment ~~Agreement ("Second Amendment") with its lender to (i) amend certain definitions within its~~which amends the Credit ~~Facility~~Agreement to, among other things, ~~effect~~(i) revise the ~~changes described herein~~fixed coverage ratio to exclude the first $1.5 million of unfunded capital expenditures through April 20, 2023, (ii) increase the letter of credit sub-limit from $2.0 million to $3.0 million, (iii)

modify the reference rate from the London interbank offered rate ("LIBOR") to the secured overnight financing rate ("SOFR") under the Credit Agreement, and (iv) revise the property, plant and equipment component of the borrowing base under the Credit Agreement. Additionally, the Export Credit Agreement was amended by the Second Amendment, which replaces the reference rate from LIBOR to ~~reset the Fixed Charge Coverage Ratio (as defined~~SOFR in the Export Credit ~~Facility)~~Agreement.

As noted in Note 7, Debt and Subsequent Event on February 6, 2023, the Company received a Notice from its Lender, with respect to ~~build~~(i) that certain Credit Agreement dated as of August 8, 2018; and (ii) that certain Export Credit Agreement dated as of December 17, 2018. The Notice indicated that the Loan Parties to ~~a trailing four quarters in each~~the Credit Agreements have informed Lender of the ~~fiscal 2018 quarters, commencing~~occurrence of Events of Defaults under the Credit Agreements as a result of the failure to deliver the required Borrowing Base Certificates thereunder and other Events of Default. The Notice indicated further that Lender is in the process of evaluating the Existing Defaults and reserves all of its rights and remedies under the Credit Agreements and any other Loan Documents with respect thereto. The failure by the Company to provide timely borrowing base certificates and monthly financial reports for the periods of December 2022, January 2023 and February 2023 in accordance with the ~~quarter ended~~terms of the Credit Agreements were a result of information access limitations experienced due to the cybersecurity incident that occurred on December ~~31, 2017; (ii) replace certain of its financial covenants outlined in~~30, 2022. As a secondary default, the ~~description of Credit Facility and amend its financial covenants with a revised minimum EBITDA for the four fiscal quarters ending September 30, 2017 and~~Company failed to maintain a ~~fixed charge coverage ratio commencing~~ FCCR not less than 1.1 to 1.0 for the periods of December 2022, January 2023, February 2023 and March 2023. The secondary default voided the availability spring minimum threshold and triggered the FCCR covenant compliance. See Note 12, Commitments & Contingencies.

As noted in Note 7, Debt and Subsequent Event on ~~December 31, 2017; (iii) reduce its maximum revolving amount of $35,000 to $30,000; and (iv)~~April 28, 2023, the Company ~~must use~~and its ~~cash proceeds from~~subsidiary guarantors entered into a Forbearance Agreement with J.P. Morgan Chase Bank, N.A. in respect to the ~~sale~~Event of Default under the Credit Agreement. Pursuant to the Forbearance Agreement, during the forbearance period defined therein: (i) the Reserves under the Borrowing Base in the ABL Credit Agreement are reduced to $2.0 million; (ii) the aggregate outstanding principal balance of the ~~Irish building discussed~~Revolving Exposure under the ABL Credit Agreement and Export Revolving Loan may not at any time exceed the lesser of $19.0 million and the Borrowing Base.

As noted in Note ~~10,~~ ~~Assets Held for Sale~~7, Debt and Disposal to reduce the Term Facility by $700 and use the remaining proceeds to reduce the revolver. On November 28, 2017, the Company obtained a consent letter from its Lender which extended to December 31, 2017 the date to consummate such sale of the Irish property.

~~On February 8, 2018,~~Subsequent Event, on August 9, 2023, the Company entered into the Seventh Amendment to the Credit Agreement and the Third Amendment to the Export Credit Agreement ~~(the “Third Amendment”) to~~with its ~~Credit Facility with the Agent and Lenders under~~lender. The Seventh Amendment amends the Credit ~~Facility, in which the Company and the Agent and the Lenders agreed~~Agreement to, among other things, (i) ~~amend~~reduce the ~~interest rate pricing spreads,~~Revolving Credit Agreement to $23.0 million, thereby reducing the total revolving commitment to $30.0 million; (ii) ~~add an owned real property location~~modifies the loan maturity date to December 31, 2023; (iii) provides waiver of Existing Defaults and concludes the forbearance period as ~~part~~described under the Forbearance Agreement dated April 28, 2023; (iv) the aggregate outstanding principal balance of the ~~collateral~~Revolving Exposure under the ABL Credit Agreement and ~~sell certain identified assets~~Export Revolving Loan may not at ~~our closed location~~any time exceed the lesser of Revolving Commitment, less the Availability Block, if applicable, the Borrowing Base, and in ~~Alliance, (iii) adjust~~combination with the ~~calculation of EBITDA and certain financial covenants, and (iv) revise~~Export Revolving Loan under the ~~financial covenants by adding a new minimum EBITDA test for a specific location and changing~~Export Credit Agreement $19.0 million. The Second Amendment amends the ~~timing of~~Export Credit Agreement to (i) modify the ~~tests and some of the covenant levels. The Company is in compliance with its~~ loan ~~covenants as of~~maturity date to December 31, ~~2017. Absent~~2023 and (ii) provides waiver of Existing Defaults and concludes the ~~Third Amendment,~~forbearance period as described under the ~~Company would not have been in compliance with its financial loan covenant as of December 31, 2017.~~

~~The Company incurred debt issuance costs and certain costs were written off during the first quarter of fiscal 2017. See Note 4,~~ ~~Debt~~ ~~for further discussion.~~Forbearance Agreement dated April 28, 2023.

Future cash flows from the Company’s operations ~~will~~may be used to pay down amounts outstanding under the Credit ~~Facility. The cash proceeds from the sale of the Irish building approximate $3.1 million, of which $2.4 million, net proceeds after taxes~~Agreement and ~~fees, will be used to pay down the Credit Facility, $0.7 million will reduce Term Facility and the remaining balance is expected to reduce the revolving credit facility.~~its foreign related debts. The Company believes it has adequate cash/liquidity available to finance its operations from the combination of (i) the Company’s expected cash flows from operations and (ii) funds available under the Credit ~~Facility.~~Agreement for its domestic locations. In fiscal year 2022, the Company was able to obtain new financing at its Maniago location to provide Maniago with sufficient liquidity.

Additionally, the credit and capital markets saw significant volatility during the course of the pandemic. Tightening of the credit market and standards, as well as capital market volatility caused by various factors, including the continued long term effects of COVID-19 and/or ongoing geopolitical tensions, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement, in the event the Company seeks additional liquidity sources. Capital market uncertainty and volatility, together with the Company’s market capitalization and status as a smaller reporting company could also negatively impact our ability to obtain equity financing.

C. ~~Critical~~Recent Accounting Standards Not Yet Adopted

For recent accounting standards not yet adopted refer to Note 1, Summary of Significant Accounting Policies ~~and Estimates~~

~~The~~- Recent Accounting Standards Not Yet Adopted for further detail. Additionally, the Company's ~~disclosures of critical~~significant accounting policies and procedures are explained in ~~its~~the Management's Discussion and Analysis section of the Company's Annual Report on Form 10-K for the year ended September 30, ~~2017 have not materially changed since that report was filed, except for the following:~~2022.

~~Income taxes~~

On December 22, 2017, the U.S. enacted the Tax Cut and Jobs Act (the "Act") which, among other items, reduces the U.S. corporate tax rate effective January 1, 2018 from 35% to 21%, creates a participation exemption regime for future distributions of foreign earnings, imposes a one-time transition tax on a taxpayer’s foreign subsidiaries’ earnings not previously subject to U.S. taxation and creates new taxes on certain foreign-sourced earnings. On the same day of the Act, the Securities and Exchange Commission (the "SEC") issued Staff Bulletin 118 ("SAB 118"). SAB 118 expresses views of the SEC regarding ASC Topic 740, Income taxes ("ASC 740") in the reporting period that includes the enactment date of the Act. The SEC staff issuing SAB 118 recognized that a Company’s review of certain income tax effects of the Act may be incomplete at the time the financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year from the day of enactment.

~~D. Impact of Recently Issued Accounting Standards~~

~~In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, “Leases~~ (Topic 842).” This ASU requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet and aligns many of the underlying principles of the new lessor model with those in Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The standard requires a modified retrospective transition for capital and operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial adoption. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of ASU 2016-02 and anticipates that the adoption will impact the consolidated condensed balance sheets due to the recognition of the right-to-use asset and lease liability related to its current operating leases.

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers~~ ~~(Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common~~

~~revenue recognition guidance for GAAP and International Financial Reporting Standards. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” The ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.~~” This ASU 2016-10 clarifies the implementation guidance on identifying performance obligations. These ASUs, along with subsequent updates, apply to all companies that enter into contracts with customers to transfer goods or services, and are effective for public entities for interim and annual reporting periods beginning after December 15, 2017. The Company will adopt the new guidance on October 1, 2018. The Company is executing a bottom 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 determined that many of its long-term agreements contain variable consideration clauses and is in the process of quantifying the impact to its consolidated financial statements. In addition, some of the Company's agreements have clauses which may require the Company to recognize revenue over time. The majority of the Company's current revenue is recognized at a point-in-time. As such, SIFCO continues to evaluate the impact of the standard on its financial reporting, disclosures and related systems and internal controls. The Company has engaged a third party to assist with its efforts.

~~E. Recently Adopted Accounting Standards~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting,~~ which amends existing guidance related to accounting for employee share-based payments affecting the income tax consequences of awards, classification of awards as equity or liabilities, and classification on the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. ASU 2016-09 was adopted by the Company effective October 1, 2017.

This guidance requires all excess tax benefits and tax deficiencies be recognized as income tax expense or benefit in the income statement and also requires a policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company changed its policy to recognize the impact of forfeitures when they actually occur. There was no impact to the consolidated condensed financial statements as of October 1, 2017. Also, this guidance requires cash paid by an employer when directly withholding shares for tax withholding purposes to be classified in the consolidated condensed statement of cash flows as a financing activity, which differs from the Company's previous method of classification of such cash payments as an operating activity. The Company applied this provision retrospectively, and for the first quarter of fiscal 2017, impact between operating activities to financing activities was nominal. This guidance also requires the tax effects of exercised or vested awards to be treated as discrete items in the reporting period in which they occur, which was applied prospectively, beginning October 1, 2017 by the Company. Due to the Company having recorded a domestic valuation allowance, the tax impact upon adoption of this ASU was not material to the consolidated condensed financial statements. Lastly, the guidance requires that excess tax benefits should be classified along with other income tax cash flows as an operating activity on the statement of cash flows, which differs from the Company’s historical classification of excess tax benefits as cash inflows from financing activities. The Company elected to apply this provision using the prospective transition method.

~~In July 2015, the FASB issued ASU No. 2015-11,~~ ~~Simplifying the Measurement of Inventory~~, which provides new guidance to simplify the measurement of inventory valuation at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of this ASU in the first quarter ended December 31, 2017 had no impact on the Company's consolidated condensed financial statements.

Item 4. Controls and Procedures

As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or

submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of the Company’s internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of ~~December~~March 31, ~~2017~~2023 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective, as a result of the continuing

existence of the material ~~weaknesses~~weakness in the Company's internal controls over financial reporting described in Item 9A of the Company's ~~2017~~ Annual Report.

In the first quarter of fiscal 2023, the Company identified the following material ~~weakness is~~weakness:

•On December 30, 2022, the Company experienced a ~~deficiency, or combination~~cybersecurity incident that led to a disruption of its domestic operations. As a result of the cyber incident and its residual effects, the Company identified deficiencies in its oversight and backup and recovery controls that represent a material weakness in internal control over financial ~~reporting, such that there~~reporting. See Note 12, Commitments and Contingencies.

The Company is ~~a reasonable possibility that a material misstatement~~in the process of ~~our annual or interim financial statements will not be prevented or detected~~designing and ~~corrected on a timely basis. The following~~implementing improved controls to remediate the material weaknesses ~~related~~that continued to ~~our control environment existed~~exist as of ~~December~~March 31, ~~2017.~~2023.

~~Key controls within IT general and application controls for domestic operations were not operating effectively.~~

~~Key controls within business and IT processes were not designed and operating effectively at Maniago.~~

~~Due to a lack of resources in accounting personnel, the Company did not evaluate a complex accounting issue in a timely manner.~~

The control environment deficiencies described above could have resulted in a failure to prevent or detect a material misstatement in our financial statements due to the omission of information or inappropriate conclusions regarding information required to be recorded, processed, summarized, and reported in the Company’s SEC reports. Notwithstanding the identified material weaknesses, management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

Remediation Plan for Material Weakness in Internal Control over Financial Reporting

Management and the Company's Board of Directors are committed to improving the Company's overall system of internal controls over financial reporting.

To address the material ~~weaknesses~~weakness identified in our control environment, ~~management~~the Company is taking the following ~~actions~~actions:

With respect to ~~remediate~~cybersecurity controls, the ~~material weaknesses:~~

~~Implement robust security~~Company has redeployed enhanced endpoint protection and ~~access reviews at a level of precision necessary to ensure they are timely~~detection tools, implemented new back-up protocols and ~~appropriate, including monitoring activities for users with privileged access. The Company is making progress and will continue to explore other~~increased oversight on its information technology ~~tools with additional detective and monitoring controls~~systems.

The actions we are taking are subject to ~~mitigate this risk.~~

~~Management is unable to remediate~~ongoing senior management review as well as oversight by the Company’s Maniago IT general controls for fiscal year 2018. However, management will continue to perform a quarterly evaluation of business process control effectiveness, implement periodic monitoring controls over its financial review procedures, and deploy additional resources to enhance its internal controls over financial reporting.

~~Management will evaluate the structure~~Audit Committee of the ~~finance organization and consider adding resources to further strengthen its internal controls over financial reporting.~~

~~With the oversight of senior management and the Company's~~ Board of Directors, the Company continues to take steps and additional measures to remediate the underlying causes of the identified material weaknesses, including but not limited to (i) evaluating our information technology systems or invest in improvements to our technology sufficient to generate accurate, transparent, and timely financial information, and (ii) continue to strengthen organizational structure by holding individuals accountable for their internal control responsibilities.

Directors. Although we ~~expect~~plan to ~~make meaningful progress in our~~complete this remediation ~~plan during fiscal year 2018,~~as quickly as possible, we cannot, at this time, estimate how long it will ~~take to complete the process or the costs of actions required. There is no assurance that the aforementioned plans will be sufficient and that additional steps may not be necessary.~~take.

Changes in Internal Control over Financial Reporting

As of March 31, 2023, management has designed and ~~other Remediation~~implemented additional controls to remediate the previously reported material weaknesses in Item 9A on Form 10-K for the fiscal year ended September 30, 2022 and in Item 4 on Form 10-Q for the first quarter ended December 31, 2022.

•Lack of precise review controls associated with the valuation of inventory at the Orange location and long-lived asset impairment triggering event indicators in the fourth quarter at the Orange location were not sufficient in preventing material errors.

Management, with the oversight of the Audit Committee, took the following steps as part of our remediation efforts:

•Implemented additional review controls related to certain accounting matters with manual calculations and financial statements disclosures to ensure appropriate valuation of inventory and identification and conclusion of indicators of impairment per ASC 360.

Given the remediation efforts noted above, testing of applicable controls completed during the second quarter and the determination that controls are designed and operating effectively, management has concluded that the material weakness in Item 9A on Form 10-K for the fiscal year ended September 30, 2022 has been remediated as of March 31, 2023.

Except as for the remediation items described in Item 4 related to prior year findings, there have been no changes in the ~~Company’s~~Company's internal controls over financial reporting during the ~~Company’s~~Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company's internal controls over financial reporting.

Part II. Other Information

Items ~~1A,~~1, 2, 3, 4 and 45 are not applicable or the answer to such items is negative; therefore, the items have been omitted and no reference is required in this Quarterly Report.

Item ~~1. Legal Proceedings~~1A. Risk Factors

~~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~~is subject to ~~these matters~~various risks and 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. For a more complete description of our outstanding material legal proceedings, see Note 8, ~~Commitments and Contingencies~~.

~~Item 5. Other Information~~

~~On February 8, 2018, the Company entered into its Third Amendment Agreement ("Third Amendment") to its Credit Facility, as further~~uncertainties, including those described ~~under~~in Part I, ~~– Financial Information –~~ Item ~~2. Management’s~~1A, “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended September 30, 2022. Except as set forth below, there have been no material changes to our risk factors since the Company's Annual Report on Form 10-K for the year ended September 30, 2022. Investors should consider the risks described below and all of the other information set forth in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations, ~~– B. Liquidity~~” in evaluating our business and ~~Capital Resources~~prospects. If any of ~~this Quarterly Report~~the risks described herein occurs, our business, financial condition or results of operations could be negatively affected. Additional risks and uncertainties, including risks not currently known or that are currently deemed immaterial may also adversely affect our business financial conditions or results of operations.

The price and availability of oil and other energy sources worldwide could adversely impact our results of operations. Unexpected pricing of fuel or a shortage of, or disruption in, the supply of fuel or other energy sources could have a material adverse effect on ~~Form 10-Q,~~our and our customers' business, results of operations and financial condition.

Our results of operations can be directly affected, positively and negatively, by volatility in the cost and availability of energy, which is ~~incorporated herein~~subject to global supply and demand and other factors beyond our control. The ongoing conflict between Russia and Ukraine has impacted global energy markets, particularly in Europe, leading to high volatility and increasing prices for crude oil, natural gas and other energy supplies. Our customers' businesses are significantly impacted by ~~reference.~~ the availability and pricing of fuel. Weather-related events, natural disasters, terrorism, wars, political disruption or instability involving oil-producing countries, changes in governmental or cartel policy concerning crude oil or aircraft fuel production, labor strikes, cyberattacks or other events affecting refinery production, transportation, taxes, marketing, environmental concerns, market manipulation, price speculation and other unpredictable events may drive actual or perceived fuel supply shortages. In particular, the recent conflict between Russia and Ukraine has caused shortages in the availability of fuel. In the event that the supply of natural gas from Russia stops or is significantly reduced, there may be supply disruptions, increased prices, shutdowns of manufacturing facilities, or further rationing of energy supply within countries where we and/or our customers do business, which could have a material adverse impact on our and our customers' business or results of operations in those countries.

SIFCO relies on our suppliers to meet the quality and delivery expectations of our customers.

The ability to deliver SIFCO's products on schedule is dependent upon a variety of factors, including execution of internal performance plans, availability of raw materials, internal and supplier produced parts and structures, conversion of raw materials into parts and assemblies, and performance of suppliers and others. We rely on numerous third-party suppliers for raw materials and a large proportion of the components used in our production process. Certain of these raw materials and components are available only from single sources or a limited number of suppliers, or similarly, customers’ specifications may require SIFCO to obtain raw materials and/or components from a single source or certain suppliers. Many of our suppliers are small companies with limited financial resources and manufacturing capabilities. We do not currently have the ability to manufacture these components ourselves. Consequently, we risk disruptions in our supply of key products and components if our suppliers fail or are unable to perform because of shortages in raw materials, operational problems, strikes, natural disasters, health crises (such as the COVID-19 or other pandemics) or other factors. We have and may continue to experience delays in the delivery of such products as a result of increased demands and pressures on the supply chain, customs, labor issues, geopolitical pressures, disruptions associated with the COVID-19 or other pandemics, changes in political, economic, and social conditions, weather, laws and regulations. Unfavorable fluctuations in price, international trade policies, quality, delivery, and availability of these products could continue to adversely affect the Company's ability to meet demands of customers and cause negative impacts to the Company's cost structure, profitability and its cash flow. It is unclear how our supply chain could be further impacted by COVID-19, including the spread of new variants, and there are many unknowns including how long we will be impacted, the severity of the impacts and the probability of a recurrence of COVID-19 or similar regional or global pandemics. If we were unsuccessful in obtaining those products from other sources or at comparable cost, a disruption in our supply chain could adversely affect our sales, earnings, financial condition, and liquidity.

We may have disputes with our vendors arising from, among other things, the quality of products and services or customer concerns about the vendor. If any of our vendors fail to timely meet their contractual obligations or have regulatory compliance

or other problems, our ability to fulfill our obligations may be jeopardized. Economic downturns can adversely affect a vendor’s ability to manufacture or deliver products. Further, vendors may also be enjoined from manufacturing and distributing products to us as a result of litigation filed by third parties, including intellectual property litigation. If SIFCO were to experience difficulty in obtaining certain products, there could be an adverse effect on its results of operations and on its customer relationships and our reputation. Additionally, our key vendors could also increase pricing of their products, which could negatively affect our ability to win contracts by offering competitive prices.

Any material supply disruptions could adversely affect our ability to perform our obligations under our contracts and could result in cancellation of contracts or purchase orders, penalties, delays in realizing revenues, and payment delays, as well as adversely affect our ongoing product cost structure.

Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact results of operations and financial condition.

Although we continue to review and enhance our systems and cybersecurity controls, SIFCO has experienced and expects to continue to experience cybersecurity threats, including threats to our information technology infrastructure and attempts to gain access to the Company’s sensitive information, as do our customers, suppliers and subcontractors. Although we maintain information security policies and procedures to prevent, detect, and mitigate these threats, information system disruptions, equipment failures or cybersecurity attacks, such as unauthorized access, malicious software and other intrusions, could still occur and may lead to potential data corruption, exposure of proprietary and confidential information. Further, while SIFCO works cooperatively with its customers, suppliers and subcontractors to seek to minimize the impacts of cyber threats, other security threats or business disruptions, in addition to our internal processes, procedures and systems, it must also rely on the safeguards put in place by those entities.

Any intrusion, disruption, breach or similar event may cause operational stoppages, fines, penalties, diminished competitive advantages through reputational damages and increased operational costs. The costs related to cyber or other security threats or disruptions may not be fully mitigated by insurance or other means.

If the Company's backups are not up-to-date or the Company is unable to recover and restore backups in a timely manner, this may result in an adverse effect on results of operations and financial condition.

If the Company fails to secure alternative financing, it may not be able to support operations.

In connection with its entry into the Seventh Amendment to its Credit Agreement and Third Amendment to its Export Credit Agreement, the Company is ~~included~~evaluating available financial alternatives, including obtaining acceptable alternative financing. Through the referenced amendments, the Company has obtained a lender waiver on Existing Defaults and concluded the forbearance period as ~~Exhibit 10.11~~described under the Forbearance Agreement dated April 28, 2023. If the Company is unable to ~~this Quarterly Report on Form 10-Q.~~find alternative financing in accordance with the Seventh Amendment, the lender of the Credit Agreement may choose to accelerate repayment. The Company cannot provide assurances that it will be able to provide the post closing deliverables as established under the Seventh Amendment of the Credit Agreement or be successful in restructuring of existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements.

Item 6. (a) Exhibits

The following exhibits are filed with this report or are incorporated herein by reference to a prior filing in accordance with Rule 12b-32 under the Securities and Exchange Act of 1934 (Asterisk denotes exhibits filed with this report.)



Exhibit No.						Description
2.1						Stock Purchase Agreement between Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated March 16, 2015 filed as Exhibit 2.1 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference
2.2						Amendment to the Stock Purchase Agreement Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated June 30, 2015 filed as Exhibit 2.2 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference
3.1						Third Amended Articles of Incorporation of SIFCO Industries, Inc., filed as Exhibit 3(a) of the Company’s Form 10-Q dated March 31, 2002, and incorporated herein by reference
3.2						SIFCO Industries, Inc. Amended and Restated Code of Regulations dated January 28, 2016, filed as Exhibit 3.2 of the Company’s Form 10-K dated September 30, 2015, and incorporated herein by reference
9.1						Voting Trust Agreement dated January 31, 2013, filed as Exhibit 9.1 to the Company’s Form 10-Q dated February 11, 2013 and incorporated herein by reference
9.2						Voting Trust Extension Agreement dated January 15, 2015, filed as Exhibit 9.2 to the Company's Form 10-Q dated February 3, 2015 and incorporated herein by reference
9.3						Voting Trust Agreement dated January 31, 2017, filed as Exhibit 9.3 to the Company's Form 10-Q dated ~~January~~December 31, ~~2017~~2016 and incorporated herein by reference
~~10.1~~9.4						Voting Trust Extension Agreement dated January 18, 2019, filed as Exhibit 9.4 to the Company's Form 10-Q dated February 14, 2019, and incorporated herein by reference
9.5						Voting Trust Extension Agreement dated January 27, 2021, filed as Exhibit 9.5 to the Company's Form 10-Q dated February 5, 2021, and incorporated herein by reference
10.1						SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2008 Annual Meeting to Shareholders dated December 14, 2007, and incorporated herein by reference
10.2						Letter Agreement between the Company and Jeffrey P. Gotschall, dated August 12, 2009 filed as Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2009 and incorporated herein by reference
10.3						Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and incorporated herein by reference
10.4						Change in ~~Control~~control Agreement and Separation Agreement between the Company and Peter W. Knapper, effective June 29, ~~2016,~~2022, filed as Exhibit ~~10.2~~10.1 to the Company's Form 8-K dated June ~~17, 2016,~~29, 2022 and incorporated herein by ~~reference~~reference.
10.5						Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.6 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference


10.6
~~10.6~~	Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.7 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference
10.7		~~Award agreement between the Company and Peter W. Knapper, granted June 29, 2016, filed as Exhibit 10.1 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference~~
~~10.8~~	~~Amended and Restated~~ Credit ~~and Security~~ Agreement, dated November 9, 2016, by and among SIFCO Industries, Inc., the Lenders named therein and KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender and Issuing Lender, filed as Exhibit 10.1 to the Company's Form 8-K dated November 15, 2016, and incorporated herein by reference
~~10.9~~	First Amendment to the Amended and Restated Credit and Security Agreement, dated February 16, 2017, by and among SIFCO Industries, Inc., the Lenders named therein; KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender and Issuing Lender; and Presidential Financial Corporation, as Assignee, and incorporated herein by reference
~~10.10~~	~~Second Amendment to the Amended and Restated Credit and Security Agreement, dated~~ August 4, 2017, by and among SIFCO Industries, Inc., the Lenders named therein; KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender and Issuing Lender; and Presidential Financial Corporation, as Assignee, and incorporated herein by reference
*10.11	~~Third Amendment to the Amended and Restated Credit and Security Agreement, dated February~~ 8, 2018, by and among SIFCO Industries, Inc. and Lender named therein and J.P. Morgan Chase Bank, N.A., filed as Exhibit 10.12 to the ~~Lenders named therein; KeyBank National Association, as Lead Arranger, Sole Book Runner, Administrative Agent, Swing Line Lender~~Company's Form 10-Q dated August 9, 2018, and ~~Issuing Lender; and Presidential Financial Corporation, as Assignee~~incorporated herein by reference
~~10.12~~10.8		Amendment and Restatement to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2017 Annual Meeting to Shareholders dated December 6, 2016, and incorporated herein by reference
~~10.13~~10.9		Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.14 to the Company's Form 10-Q dated January 31, 2017, and incorporated herein by reference
~~10.14~~10.10		Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.15 to the Company's Form 10-Q dated January 31, 2017, and incorporated herein by reference
~~10.15~~10.11		Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.16 to the Company's Form 10-Q dated January 31, 2017, and incorporated herein by reference


10.12						Change in Control Agreement and Separation Agreement between the Company and Thomas R. Kubera, effective June 29, 2019, filed as Exhibit 10.2 to the Company's Form 8-K dated July 1, 2019 and incorporated herein by reference
~~14.1~~10.13						First Amendment to Credit Agreement, dated November 5, 2018, by and among SIFCO Industries, Inc., T&W Forge, LLC., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to the Company's Form 8-K dated November 8, 2018, and incorporated herein by reference
10.14						Economic Development Administration Title IX Loan Agreement, dated November 8, 2018, by and between the City of Cleveland and SIFCO Industries, Inc., filed as exhibit 10.2 to the Company's Form 8-K dated November 8, 2018, and incorporated herein by reference
10.15						Second Amendment to Credit Agreement, dated December 17, 2018, by and among SIFCO Industries, Inc., T&W Forge, LLC., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.2 to the Company's Form 8-K dated December 19, 2018, and incorporated herein by reference
10.16						Export Credit Agreement, dated December 17, 2018, by and among SIFCO Industries, Inc., T & W Forge, LLC, Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit 10.1 to the Company's Form 8-K dated December 19, 2018 and incorporated herein by reference
10.17						Third Amendment to Credit Agreement, dated March 29, 2019, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.19 to the Company's Form 10-Q dated May 10, 2019
10.18						Fourth Amendment to Credit Agreement, dated September 20, 2019, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to the Company's Form 8-K dated September 24, 2019, and incorporated herein by reference.
10.19						First Amendment to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) filed as Exhibit A of the Company’s Definitive Proxy Statement dated December 16, 2019, and incorporated herein by reference.
10.20						Promissory Note, dated April 10, 2020, by and between SIFCO Industries, Inc. and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to the Company's Form 8-K dated April 13, 2020, and incorporated herein by reference.
10.21						Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.21 to the Company's Form 10-K dated December 23, 2020, and incorporated herein by reference
10.22						Fifth Amendment to Credit Agreement, dated February 19, 2021, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to the Company's Form 8-K dated February 22, 2021, and incorporated herein by reference.
10.23						First Amendment to Export Credit Agreement, dated February 19, 2021, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit 10.2 to the Company's Form 8-K dated February 22, 2021, and incorporated herein by reference
10.24						Sixth Amendment to the Credit Agreement, dated March 23, 2022, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit 10.1 to the Company's Form 8-K dated March 24, 2022, and incorporated herein by reference
10.25						Second Amendment to the Export Credit Agreement, dated March 23, 2022, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit 10.2 to the Company's Form 8-K dated March 24, 2022, and incorporated herein by reference
10.26						Forbearance Agreement, dated April 28, 2023, by and among JPMorgan Chase Bank, N.A., SIFCO Industries, Inc., T&W Forge LLC, and Quality Aluminum Forge, LLC.
10.27						Seventh Amendment to Credit Agreement, dated August 9, 2023, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to the Company's Form 8-K dated August 10, 2023, and incorporated herein by reference.
10.28						Third Amendment to Export Credit Agreement, dated August 9, 2023, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.2 to the Company's Form 8-K dated August 10, 2023, and incorporated herein by reference.
14.1						Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 8-K dated February 6, 2018, and incorporated herein by reference
*31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350


*101						The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended ~~December~~March 31, ~~2017~~2023 filed with the SEC on ~~February 8, 2018,~~August 14, 2023, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, (ii) Consolidated Condensed Statements of Comprehensive Income for the fiscal periods ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, (iii) Consolidated Condensed Balance Sheets at ~~December~~March 31, ~~2017~~2023 and September 30, ~~2017,~~2022, (iv) Consolidated Condensed Statements of Cash Flow for the fiscal periods ended ~~December~~March 31, ~~2017~~2023 and ~~2016,~~2022, (iv) Consolidated Condensed Statements of Shareholders' Equity for the periods March 31, 2023 and ~~(iv)~~2022, and (v) the Notes to the Consolidated Condensed Financial Statements.
*104						Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained with Exhibit 101

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		SIFCO Industries, Inc.
		(Registrant)

Date: August 14, 2023		~~SIFCO Industries, Inc.~~
	~~(Registrant)~~

~~Date: February 8, 2018~~	/s/ Peter W. Knapper
		Peter W. Knapper
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: ~~February 8, 2018~~August 14, 2023		/s/ Thomas R. Kubera
		Thomas R. Kubera
		~~Interim~~ Chief Financial Officer ~~& Chief Accounting Officer~~
		(Principal Financial Officer)



(Dollars in millions)	Three Months Ended December 31,				Increase/(Decrease)
Net Sales	2017		2016		Increase/(Decrease)
Aerospace components for:
Fixed wing aircraft	$	12.5	$	14.6	$	(2.1	)
Rotorcraft	5.6		4.9		0.7
Energy components for power generation units	6.1		7.8		(1.7		)
Commercial product and other revenue	0.1		4.2		(4.1		)
Total	$	24.3	$	31.5	$	(7.2	)



Dollars in thousands	Three Months Ended
	December 31,
	2017			2016
Net loss	$	(911	)	$	(2,609	)
Adjustments:
Depreciation and amortization expense	2,191			2,515
Interest expense, net	435			664
Income tax expense (benefit)	(240		)	327
EBITDA	1,475			897
Adjustments:
Foreign currency exchange (gain) loss, net (1)	(36		)	4
Other income, net (2)	(316		)	(107		)
Gain on disposal of operating assets (3)	(1,400		)	(6		)
Equity compensation (4)	194			158
LIFO impact (5)	52			107
Orange expansion (6)	—			953
Adjusted EBITDA	$	(31	)	$	2,006