UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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A. Principles of Consolidation

The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation.

The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income currently. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange for the period. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the unaudited consolidated condensed financial statements.

These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s fiscal 2018 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 2018 Annual Report on Form 10-K. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)" and in March 2017, the FASB issued AUSASU 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of the Net Periodic Pension Cost and Net Periodic PostretirementPost-retirement Benefit Cost," which were adopted by the Company on October 1, 2018. Significant changes to the Company's accounting policies as a result of adopting ASU 2014-09 (the "new revenue standard") and ASU 2017-07 are discussed below:

Revenue

A contract exists when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectibilitycollectability of consideration is probable.

Revenue is recognized when performance obligations under the terms of the contract with a customer of the Company are satisfied. A portion of the Company's revenue is from Purchase Orderspurchase orders ("PO's"), which continue to be recognized as of a point in time when products are shipped from the Company's manufacturing facilities or at a later time when control of the products transfers to the customer. Revenue was previously recognized for certain Long-term Agreementslong-term agreements ("LTA's"), Firm Fixed Pricing Agreements ("FFP"),firm fixed pricing agreements, and PO's at the point in time when the shipping terms were satisfied. Under the new revenue standard, the Company now recognizes certain revenue over time as it satisfies the performance obligations because the conditions of transfer of control to the applicable customer are as follows:

As a result of control transferring over time for these products, revenue is recognized based on progress toward completion of the 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 has elected to use the cost to cost input method of progress based on costs

Revenue is measured at the amount of consideration the Company expects to receive in exchange for transferring goods. An accounting policy election to exclude from transaction price was made for sales, value add, and other taxes the Company collects concurrent with revenue-producing activities when applicable. The Company has elected to recognize incremental costs incurred to obtain contracts, which primarily represent commissions paid to third party sales agents where the amortization period would be less than one year, as selling, general and administrative expenses in the consolidated condensed statements of operations as incurred.

The Company elected a practical expedient under Topic 606 to not adjust the promised amount of consideration for the effects of any significant financing component where the Company expects, at contract inception, that the period between when the Company transfers a promised good to a customer and when the customer pays for that good will be one year or less. Finally, the Company's policy is to exclude performance obligations resulting from contracts with a duration of one year or less from its disclosures related to remaining performance obligations.

The amount of consideration to which the Company expects to be entitled in exchange for the goods is not generally subject to significant variations.

The Company has elected to recognize the cost of freight and shipping when control of the products has transferred to the customer as an expense in cost of goods sold on the consolidated condensed statements of operations, because those are costs incurred to fulfill the promise recognized, not a separate performance obligation. To the extent certain freight and shipping fees are charged to customers, the Company recognizes the amounts charged to customers as revenues and the related costs as an expense in cost of goods sold when control of the related products has transferred to the customer.

Contracts are occasionally modified to account for changes in contract specifications, requirements, and pricing. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Substantially all of the Company's contract modifications are for goods that are distinct from the existing contract. Therefore, the effect of a contract modification on the transaction price and the Company's measure of progress for the performance obligation to which it relates is generally recognized on a prospective basis.

Contract Balances

Contract assets on the consolidated condensed balance sheets is recognized when a good is transferred to the a customer and the Company does not have the contractual right to bill for the related performance obligations. In these instances, revenue recognized exceeds the amount billed to the customer and the right to payment is not justsolely subject to the passage of time. Amounts do not exceed their net realizable value. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Payment from customers are received based on the terms established in the contract with the customer.

Pension Benefits

The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Due to the net loss for each reporting period, zero restricted shares are included in the calculation of basic or diluted earnings per share because the effect would be anti-dilutive. The dilutive effect of the Company’s restricted shares and performance shares were as follows:

On October 1, 2018, the Company adopted the new revenue standard and all related amendments using the modified retrospective method and applied those provisions to all open contracts. The Company recognized the cumulative effect ofby initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The cumulative effect of changes made to the balance sheet as of October 1, 2018 for the adoption of the new revenue standard was as follows:

The following tables reflect the changes to the financial statements line items as a result to the new revenue standard. The adoption of the new standard did not have an impact on "net cash provided by operating activities" on the consolidated condensed statement of cash flows for the threenine months ended December 31, 2018.June 30, 2019.

Since adopting the new revenue standard, interim results show a reduction of inventory resulting in liquidations of LIFO inventory quantities. The estimated liquidation of LIFO inventory quantities resultresults in a projected increase in cost of goods sold by approximately $184$210 for the quarter.nine months ended June 30, 2019. These inventories were carried in prior periods at the then prevailing costs, which were accurate at themthe time, but differ from the current manufacturing cost and/or material costs.

Credit Agreement and Security Agreement of 2018

On August 8, 2018, the Company entered into a new asset-based Credit Agreement ("Credit Agreement") and a Security Agreement (“Security Agreement”) with a newits current lender. The new Credit Agreement matures on August 6, 2021 and is comprised of a senior secured revolving credit facility ofwith a maximum borrowing of $30,000. The Credit Agreement also has an accordion feature, which allows the Company to increase maximum borrowings by up to $10,000 upon consent of the existing lender or upon additional lenders joining the Credit Agreement. The terms of the Credit Agreement contain both a lock box arrangement and subjective acceleration clause. As a result, the amount outstanding on the revolving credit facility is classified as a short-term liability and the availability at December 31, 2018June 30, 2019 and September 30, 2018 was $9,393$10,069 and $8,437, respectively. The proceeds from the Credit

The Credit Agreement contains affirmative and negative covenants and events of defaults. As set forth in the Credit Agreement, the Company is required to maintain a fixed charge coverage ratio ("FCCR") of 1.1:1.0 any time the availability is equal to or less than 12.5% of the revolving commitment. In the event of a default, the Company may not be able to access the revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities. See discussion below under the First Amendment (the "First Amendment") to the Credit Agreement and Security Agreement discussion which revises the provision related to the FCCR.

On November 5, 2018, the Company entered into the First Amendment (the "First Amendment") to the Credit Agreement and Security Agreement with its lender. The First Amendment retroactively amended certain definitions and provisions effective as of the original closing date to clarify the parties original understanding regarding, among other things: (i) the permitted liens securing certain indebtedness of the Company to the City of Cleveland (noted as other debt within the above debt table), (ii) the time frames for which certain post-closing requirements would be satisfied, and (iii) the conditions under which the Company will be required to meet the minimum fixed charge coverage ratio,FCCR, which is as follows: the borrowers will not permit the Fixed Charge Coverage RatioFCCR to be less than: (a) 1.1 to 1.0 as of August 31, 2018 or as of September 30, 2018; or (b) 1.1 to 1.0 at any month end on or after October 31, 2018; provided that the Fixed Charge Coverage RatioFCCR will not be tested under this clause (b) unless (i) a Default has occurred and is continuing or (ii) availability was less than or equal to 12.5% of the Revolving Commitment for three or more business days in any consecutive 30 day period (with the FCCR calculated as of the end of the month for which the lender has most recently received financial statements). SIFCO met the FCCR requirements at August 31, 2018, after obtaining a waiver, and the FCCR requirements at September 30, 2018. The availability was greater than the 12.5% of the Revolving Commitment as of December 31, 2018,June 30, 2019, and, as such, FCCR calculation was not required.

On December 17, 2018, the Company entered into an Export Credit Agreement (the “Export Credit Agreement”) with its Lender. Pursuant to the terms of the Export Credit Agreement, the Lender will lend amounts to the Company on foreign receivables that are guaranteed by the Export-Import Bank of the United States of America. The Export Credit Agreement provides for a revolving commitment of $5,000, therefore increasing the maximum borrowing of the revolver to $35,000. The borrowings under the Export Credit Agreement will bear interest at (depending on the type of borrowing) the CBFR or LIBOR Rate, plus the applicable margin as set forth in the Export Credit Agreement. The maturity date under the Export Credit Agreement is August 6, 2021 (or such earlier date as the revolving commitments under the Export Credit Agreement are reduced to zero or otherwise terminated). The Export Credit Agreement contains customary representations, warranties, covenants and events of default, including, without limitation, the affirmative covenants under the Company’s Credit Agreement dated August 8, 2018, as amended with the Lender. In connection with entering into the Export Credit Agreement, the Company also entered into the Second Amendment (the “Second Amendment”) to its Credit Agreement. The Second Amendment amends certain definitions and provisions to provide for the Company’s entrance into the Export Credit Agreement.

Amounts borrowed under the Credit Agreement are secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 66.67% of the stock of its first-tier non-U.S. subsidiaries. Borrowings will bear interest at the lender's established domestic rate or LIBOR, plus the applicable margin as set forth in the Credit Agreement. The revolver has a rate based on LIBOR plus 1.75% spread, which was 4.05%3.94% and 3.85% at December 31, 2018June 30, 2019 and September 30, 2018, respectively and the Export Credit Agreement has a rate based on LIBOR plus 1.25% spread, which was 3.59%3.69% at December 31, 2018.June 30, 2019. The Company also has a commitment fee of 0.25% under the Credit Agreement to be incurred on the unused balance of the revolver.

Foreign subsidiary borrowings

Foreign debt consists of:

Interest rates on foreign borrowings are based on Euribor rates which range from 1.0% to 4.0%. In December 2018, the Company entered into a six month short-term debt arrangement of $1,137 to be used for working capital purpose.purposes, which has been repaid as of June 30, 2019. The Company factors one of its customer's invoices. The factoring programs are uncommitted, whereby the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are not isolated from the Company, and effective control of the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables. The Company accounts for the pledge of receivables under this agreement as short-term debt and continues to carry the receivables on its consolidated condensed balance sheet.sheets.

The Company incurred debt issuance costs as it pertains to the Credit Agreement in the amount of $212, as of September 30, 2018, and during the first quarternine months of fiscal 2019, additional costs of $75 were incurred that related to the First and Second Amendment,Amendments, of which are included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $23$81 and $12 at December 31, 2018June 30, 2019 and September 30, 2018, respectively.

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 the first threenine months of fiscal 2019, the Company granted 134 shares under the 2016 Plan to certain key employees. The award was split into two tranches, 87 performance shares and 47 shares of time-based restricted shares, with a grant date fair value of $4.73 per share. The award vests over three years. During the first threenine months of the fiscal year, there waswere approximately 17 performance shares forfeited and time-based restricted shares that were forfeited.for the 2018 award year, the target payout estimate went from 100% to 0% at June 30, 2019, therefore there was a reversal of expense in the amount of $256.

The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 170118 shares that remain available for award at December 31, 2018.June 30, 2019. 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% of such target, then a fewer number of shares would be available for award.

¹ Prior period amounts have not been adjusted under the modified retrospective adoption method.

The following table represents revenue by the various components for the three and nine months ended December 31,June 30, 2019 and 2018, and 2017, respectively.

¹ Prior period amounts have not been adjusted under the modified retrospective adoption method.

The following table represents revenue by geographic region based on the Company's selling operation locations for the three and nine months ended December 31,June 30, 2019 and 2018, and 2017, respectively:

¹ Prior period amounts have not been adjusted under the modified retrospective adoption method.

In addition to the disaggregating revenue information provided above, approximately 61%56% of total net sales as of December 31, 2018June 30, 2019 is recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as a point in time. 

Generally, payment is due shortly after the shipment of goods. For performance obligations recognized at a point in time, a contract asset is not established as the billing and revenue recognition occur at the same time. For performance obligations recognized over time, a contract asset is established as revenue is recognized prior to billing and shipment. Upon shipment and billing, the value of the contract asset is reversed and accounts receivable is recorded. In circumstances where prepayments are required and payment is made prior to satisfaction of performance obligations, a contract liability is established. If the performance obligation occurs over time, the contract liability is reversed over the course of production. If the performance obligation is point in time, the contract liability reverses upon shipping.shipment.  

As of December 31, 2018,June 30, 2019, the Company has $86,364$104,369 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

On December 26, 2018, a subsidiary of the Company, Quality Aluminum Forge, LLC ("Orange") experienced a fire at its manufacturing facility, causing damage to one of three manufacturing buildings. The building that was damaged housed six of the eight presses on site. The Company is fully insured and actively working with its insurance carrier to returnrestore the site to full service as safely and quickly as possible. As of December 31, 2018,June 30, 2019, the Company recorded an estimated loss on assets relatedhas received insurance proceeds of $8,244. The fire also destroyed a leased building, which in accordance with its lease agreement, the Company is responsible to machineryrestore the property to full replacement value. With the Company being fully insured, the restoration of the property is covered and equipmentthe insurance carrier has separately funded a partial payment of $1,107, inventory loss of $78, other period costs/fire remediations costs of $176 and $50 for insurance deductible. An offsetting receivable for insurance is included within other receivables, net of deductible within the consolidated condensed balance sheetsproceeds as of December 31, 2018June 30, 2019 to the landlord for the restoration of the damaged building as these lossesprescribed under the lease arrangement in the amount of $378. The table below reflects the receipt of proceeds and how they were insurable.expended as of June 30, 2019. Any furtheradditional recoveries in excess of recognized losses are evaluatedtreated as gain contingencies and will be recognized when the gain is realized or realizable. The Company also hasmaintains business interruption coverage; however,insurance coverage and continues to work with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses. As noted within the table below, a payment of $619 was made towards this coverage as of December 31, 2018, it was premature to record an estimateJune 30, 2019 and is reflected within the cost of lossesgoods sold line within the consolidated condensed financial statements as the Company and insurance carrier are still working through this portion of the policy.June 30, 2019.

OrangeThe Company is currently a defendant and cross-complainant in a purported class action lawsuit filed by a previous landlord in the Superior Court of the State of California, for the County of Los Angeles that is relatedOrange, 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; failure to amaintain required wage records and furnish accurate wage statements; and unfair competition. As mentioned previously, leased property in Long Beach, California. The plantiff is alleging certain claims against the Company, which pursuant to Code of Civil Procedure Section 998, the Company is offering a judgment in favor of the plaintiff in the amount of $48. Although the Company records reserves for legal disputes and other matters in accordance with GAAP, the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, the Company has not recorded a loss as the amount of the offer as of December 31, 2018 within the selling, general and administrative expense line of the consolidated condensed statements.Company does not have a reasonable basis on which to establish an estimate.

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. 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 in the Aerospace and Energy ("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 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; (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 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.

The Company is engaged in the production of forgings and machined components primarily for the A&E 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 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.

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

The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and armored military vehicles; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) other commercial applications. The Company completed the sale of the building and land at its Alliance, Ohio ("Alliance") location in November 2018. As a result of the sale, the companyCompany generated cash proceeds of $0.3 million, net of cost to sell.

On December 26, 2018, a subsidiary of the Orange, CaliforniaCompany, Quality Aluminum Forge, LLC ("Orange") manufacturing facility experienced a fire which causedat its manufacturing facility, causing damage to one of the three manufacturing buildings. The building that was damaged housed six of the eight presses on site. The Company is fully insured and actively working with its insurance carrier to returnrestore the site to full service as safely and quickly as possible. As of December 31, 2018,June 30, 2019, the Company recorded an estimated loss on assets relatedhas received insurance proceeds of $8.2 million. The fire also destroyed a leased building, which in accordance with its lease agreement, the Company is responsible to machineryrestore the property to full replacement value. With the Company being fully insured, the restoration of the property is covered and equipmentthe insurance carrier has separately funded a partial payment of $1.1 million, an inventory loss of $0.1 million, other period costs/fire remediations costs of $0.2 million and $0.1 million in insurance deductibles. An offsetting receivable for insurance are included within other receivables, net of deductible within the consolidated condensed balance sheetsproceeds as of December 31, 2018 as these losses were insurable. As such, the impactJune 30, 2019 to the statementlandlord for the restoration of operations is zerothe damaged building as prescribed under the lease arrangement in the amount of $0.4 million. The table below reflects the

For the long-lived assets that were not damaged as a result of the fire, the Company performed a separate evaluation for these assets. In accordance to Accounting Standard Codification 360 ("Topic 360"), the fire resulted in a triggering event, requiring an interim assessment to determine if the carrying amount of long-lived assets are recoverable. As noted within Topic 360, an impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of long-lived assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The results of management's analysis indicated that the remaining long-lived assets as of December 31, 2018 are recoverable.recoverable and continue to be as of June 30, 2019.

Nine Months Ended December 31, 2018June 30, 2019 compared with ThreeNine Months Ended December 31, 2017June 30, 2018

Net Sales

Net sales for the first threenine months of fiscal 2019 increased 19.9%1.0% to $29.1$81.3 million, compared with $24.3$80.7 million in the comparable period of fiscal 2018. Net sales comparative information for the first threenine months of fiscal 2019 and 2018 is as follows:

Commercial products and other revenue increased $6.8$7.4 million primarily due to theincreased market share and timing of the Hellfire II missile program. Net sales in energy components for power generation units decreased by $2.3$3.0 million compared with the same period last year due to the continued softening of the energy market. The increasedecrease in fixed wing aircraft sales of $0.8$4.6 million is primarily attributed to delays in production/delivery at the Orange location due to increased sales for the C-130fire and F-35reduced production of the Boeing 737 and Airbus A320 and the C-130J programs.

Commercial net sales were 41.5%50.7% of total net sales and military net sales were 58.5%49.3% of total net sales in the first threenine months of fiscal 2019, compared with 56.2%54.6% and 43.8%45.4%, respectively, in the comparable period in fiscal 2018.  Military net sales increased by $6.4$3.5 million to $17.0$40.1 million in the first threenine months of fiscal 2019, compared with $10.6$36.6 million in the comparable period of fiscal 2018, primarily due to the timing of the Hellfire II missile program.  Commercial net sales decreased $1.6$2.9 million to $12.1$41.2 million in the first threenine months of fiscal 2019, compared with $13.6$44.1 million in the comparable period of fiscal 2018 primarily due to business interruption created by the softening offire at the Orange location and the soft energy market. 

Gross profit increased $0.7decreased $1.6 million to $2.7$6.2 million during the first threenine months of fiscal 2019, compared with $2.0$7.8 million in the comparable period of fiscal 2018. Gross margin percent of sales was 9.4%7.6% during the first threenine months of fiscal 2019, compared with 8.4%9.7% in the comparable period in fiscal 2018. The decrease in gross profit was primarily due to product mix.higher costs incurred at the Orange location due to the fire. As noted above, the Company has only recorded approximately $0.6 million of business interruption insurance recoveries with respect to the fire at the Orange location as it is working with its insurer to reach an agreement on the recoverable amount of business interruption related expenses.

Amortization of intangibles was $0.4$1.2 million for bothand $1.3 million in the first threenine months of fiscal 2019 and fiscal 2018, respectively.

The Company had a gainrecorded an operating loss of $0.3$9.9 million in the first threenine months of fiscal 2019, compared to $1.4 milliona $4.2 in the first threenine months of fiscal 2018. The current

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first threenine months of both fiscal 2019 and 2018:

Net loss was $1.3$9.9 million during the first threenine months of fiscal 2019, compared with a net loss of $0.9$4.5 million in the comparable period of fiscal 2018.  Net loss in the current period increased primarily due to non-cash charge of $8.3 million due to full write-down of goodwill at the Company's Maniago reporting unit.

Net loss was $7.4 million during the third quarter of fiscal 2019, compared with net loss of $1.5 million in the comparable period of fiscal 2018. Net loss increased primarily due to the prior year's results includingnon-cash goodwill impairment charge of $8.3 million and decrease gross profit of $1.9 million, partially offset with the gain on saleproperty recovered by insurance of $3.3 million as we continue to work through the rebuilding phase of the Irish building and grant income realized as a result of the sale, partially offset by higher sales and gross profit.Orange location.

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 management 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:

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:

B. Liquidity and Capital Resources

Operating Activities

The Company's operating activities provided $0.7 million of cash in the first nine months of fiscal 2018. The cash provided by operating activities in the first nine months of fiscal 2018 was primarily due to, depreciation and amortization of $6.5 million, a net usesource of working capital of $0.1 million, offset by the net gain on the sale of AllianceIrish building and other assets of $0.3$1.1 million and other non-cash items, such as equity based compensation, deferred income taxes and LIFO effect, partially offset by a net loss of $1.3$4.5 million. The cash usedprovided for working capital was primarily due to decreased receivables due to collections offset by timingincreased inventory and payables as a result of payments to suppliers.

Investing Activities

Financing Activities