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What changed in SIFCO INDUSTRIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SIFCO INDUSTRIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+226 added−255 removedSource: 10-K (2024-12-26) vs 10-K (2024-01-02)

Top changes in SIFCO INDUSTRIES INC's 2024 10-K

226 paragraphs added · 255 removed · 132 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

37 edited+15 added−3 removed13 unchanged
Biggest changeInformation relating to the Company's financial results is set forth in the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Cybersecurity Incident As reported on Forms 8-K filed January 6, 2023 and February 10, 2023, the Company became aware of unauthorized access to the Company's systems on December 30, 2022.
Biggest changeCybersecurity Incident As reported on Forms 8-K filed January 6, 2023 and February 10, 2023, the Company became aware of unauthorized access to the Company’s systems on December 30, 2022. The Company’s domestic operations were impacted by this cybersecurity incident (“Cyber Incident”), which resulted in production delays and delayed shipments due to information access limitations.
SIFCO believes that the loss of sales to such customers would result in a material adverse impact on the business. However, SIFCO has maintained a business relationship with these customers for many years and is currently conducting business with them under multi-year agreements.
SIFCO believes that the loss of sales to these customers would result in a material adverse impact on the business. However, SIFCO has maintained a business relationship with these customers for many years and is currently conducting business with them under multi-year agreements.
Orders may be subject to modification or cancellation by the customer with limited charges. The increase in total backlog as of September 30, 2023 compared with the previous year is primarily due to tim ing of annual awards, SIFCO's customers adjusting orders due to recovery within the commercial airline industry, new content awarded, and extended raw material lead times.
Orders may be subject to modification or cancellation by the customer with limited charges. The increase in total backlog as of September 30, 2024 compared with the previous year is primarily due to tim ing of annual awards, SIFCO’s customers adjusting orders due to recovery within the commercial airline industry, new content awarded, and extended raw material lead times.
For those contractual agreements, in which pass through pricing is not permissible, a material adverse effect upon the profitability of one or more of the affected contracts, future period financial reporting and performance may result. Products SIFCO’s products are made primarily of steel, high temperature alloys, nickel alloy, titanium and aluminum.
For those contractual agreements under which pass through pricing is not permissible, a material adverse effect upon the profitability of one or more of the affected contracts, future period financial reporting and performance may result. Products SIFCO’s products are made primarily of steel, high temperature alloys, nickel alloy, titanium and aluminum.
Backlog information may not be indic ative of future sales. C. Regulatory Matters The Company is subject to a number of domestic and foreign regulations relating to our operations worldwide and is required to comply with various environmental, health, and employee safety laws and regulations. The Company believes that it is in compliance with these laws and regulations.
Backlog information may not be indic ative of future sales. C. Regulatory Matters The Company is subject to a number of domestic regulations relating to our operations and is required to comply with various environmental, health, and employee safety laws and regulations. The Company believes that it is in compliance with these laws and regulations.
See further discussion of the risks relating to competition SIFCO faces in Item 1A. Risk Factors . Government Contracts Companies, such as SIFCO, that supply equipment and products to the U.S. military are subject to certain risks related to commercial relationships with the U.S. government and its agencies.
See further discussion of the risks relating to competition SIFCO faces in Item 1A. Risk Factors . 5 Table of Contents Government Contracts Companies, such as SIFCO, that supply equipment and products to the U.S. military are subject to certain risks related to commercial relationships with the U.S. government and its agencies.
SIFCO is engaged in the production of forgings, sub-assemblies, and machined components primarily for the Aerospace and Energy ("A&E") markets. The processes and services include forging, heat-treating, chemical processing and machining. The Company's operations are conducted in a single business segment.
SIFCO is engaged in the production of forgings, sub-assemblies, and machined components primarily for the Aerospace and Energy (“A&E”) markets. The Company’s processes and services include forging, heat-treating, chemical processing and machining. The Company’s operations are conducted in a single business segment.
An increasing number of companies are participating in the space launch and reentry programs, which brings continuous development, innovation in technologies, and new approaches in this market.
An increasing number of companies are participating in private space launch and reentry programs, which brings continuous development, innovation in technologies, and new approaches in this market.
SIFCO believes it can expand its market share by (i) continuing to increase capacity utilization; (ii) broadening its product lines through 5 Table of Contents investment in equipment that expands its manufacturing capabilities; and (iii) developing new customers in markets where the participants require similar technical competence and service as those in the A&E industries.
SIFCO believes it can expand its market share by (i) continuing to increase capacity utilization; (ii) broadening its product lines through investment in equipment that expands its manufacturing capabilities; and (iii) developing new customers in markets where the participants require similar technical competence and service as those in the A&E industries.
Historically, compliance with such laws and regulations have not had, and are not presently expected to have a material effect on capital expenditures, earnings or competitive position of the Company or its subsidiaries under existing regulations and interpretations.
Historically, compliance with such laws and regulations has not had, and is not presently expected to have a material effect on capital expenditures, earnings or competitive position of the Company or its subsidiaries under existing regulations and interpretations.
SIFCO relies on its ability to adapt its services and operations to changing requirements of the market in general and its customers in particular. No material part of SIFCO’s business is seasonal. For additional financial information about geographic areas, refer to Note 12, Business Information .
SIFCO relies on its ability to adapt its services and operations to changing requirements of the market in general and its customers in particular. No material part of SIFCO’s business is seasonal. For additional financial information about geographic areas, refer to Note 13 — Business Information of the Notes to Consolidated Financial Statements.
Item 1. Business A. The Company SIFCO Industries, Inc. ("SIFCO," "Company," "we" or "our"), an Ohio corporation, was incorporated in 1916. The executive offices of the Company are located at 970 East 64th Street, Cleveland, Ohio 44103, and its telephone number is (216) 881-8600.
Item 1. Business A. The Company SIFCO Industries, Inc. (“SIFCO,” “Company,” “we” or “our”), an Ohio corporation, was incorporated in 1916. The executive offices of the Company are located at 970 East 64th Street, Cleveland, Ohio 44103, and its telephone number is (216) 881-8600.
Although there is no assurance that these relationships will continue, as one or more major customers have reduced their purchases, SIFCO has generally been successful in gaining new business, thereby avoiding a material adverse impact on the Company.
Although there is no assurance that these relationships will continue, as one or more major customers have reduced their purchases in the past, historically SIFCO has generally been successful in gaining new business from these customers or from other customers to offset any potential reduction in purchases, thereby avoiding a material adverse impact on the Company.
The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. There are several ways in which we attract, develop, and retain highly qualified talent and measure the ongoing effectiveness of our human capital management practices, including by making the safety and health of our employees a top priority.
There are several ways in which we attract, develop, and retain highly qualified talent and measure the ongoing effectiveness of our human capital management practices, including by making the safety and health of our employees a top priority.
As a result of supply chain disruptions and inflationary pressures, the Company has experienced increases in pricing for raw materials which could effect our customer demand and cost. 4 Table of Contents However, SIFCO believes that its ability to pass through raw material costs on certain contractual agreements and discrete orders limits this exposure.
As a result of increased supply chain lead times and inflationary pressures, the Company has experienced increases in pricing for raw materials, which could affect our customer demand and cost. However, SIFCO believes that its ability to pass through raw material costs under certain contractual agreements and discrete orders limits this exposure.
The Company is a party to collective bargaining agreements ("CBA") with certain employees within the Cleveland location. The Company ratified its CBA with one such bargaining unit in December 2019 and ratified its CBA with the second bargaining unit in December 2021. The Maniago location is party to the National Collective Agreement in Metalworking, which renewed in February 2021.
The Company is a party to collective bargaining agreements (“CBA”) with certain employees within the Cleveland location. The Company ratified its CBA with one such bargaining unit in December 2019 and ratified its CBA with the second bargaining unit in December 2021.
Customers During fiscal 2023, SIFCO had one direct customer that accounted for 12% of consolidated net sales; and 32% of the Company's consolidated net sales were from three customers and their direct subcontractors, which individually accounted for 12%, 10% and 10% of net sales, respectively.
Customers and Seasonality During fiscal 2024, SIFCO had one direct customer that accounted for 15% of consolidated net sales; and 41% of the Company’s consolidated net sales were from three customers and their direct subcontractors, which individually accounted for 15%, 15% and 11% of net sales, respectively.
The Company's top programs include Blackhawk (H60), C-130, F-18 and F-35. The defense budget in the United States varies from year to year, driven by defense procurement policy and government budget constraints. Coming out of the pandemic, the defense aerospace market has been impacted by COVID overproduction and build rates.
The defense budget in the United States varies from year to year, driven by defense procurement policy and government budget constraints. Coming out of the pandemic, the defense aerospace market has been impacted by COVID overproduction and build rates.
The Company has experienced delays in the supply chain, which could effect our ability to timely obtain materials and components from our suppliers in the quantities we require or on favorable ter ms.
In recent 4 Table of Contents years, the Company occasionally experienced delays in the supply chain, which, if such delays reoccur, could affect our ability to timely obtain materials and components from our suppliers in the quantities we require or on favorable ter ms.
Suppliers of such materials are located principally in North America and Europe. SIFCO generally does not depend on a single source for the supply of its materials. Due to the limited supply of certain raw materials, some material is provided by a small number of suppliers; however, SIFCO believes that its sources are adequate for its busines s.
Due to the limited supply of certain raw materials, some material is provided by a small number of suppliers; however, SIFCO believes that its sources are adequate for its busines s.
SIFCO manufacturing facilities are located in Cleveland, Ohio ("Cleveland"); Orange, California ("Orange"); and Maniago, Italy ("Maniago"). SIFCO's operations are AS 9100D and/or ISO 9001:2015 certified and the Company also holds multiple National Aerospace and Defense Contractors Accreditation Program (“NADCAP”) certifications and site approvals from key OEM customers.
SIFCO’s operations in Cleveland and Orange are AS 9100D and/or ISO 9001:2015 certified and the Company also holds multiple National Aerospace and Defense Contractors Accreditation Program (“NADCAP”) certifications and site approvals from key OEM customers. The Company’s success is not dependent on patents, trademarks, licenses or franchises.
SIFCO has positioned itself to be less dependent on OEM production, but with flexibility to address the demand cycle in this segment as well as continuing to support the aftermarket. • SIFCO supplies components to the commercial space industry, which is rapidly evolving.
SIFCO has positioned itself to be less dependent on OEM production, but with flexibility to address the demand cycle in this segment as well as continuing to support the aftermarket. Competition SIFCO competes with numerous companies, both in and tangential to the A&E industry.
Backlog of Orders SIFCO’s total backlog as of September 30, 2023 increased to $120.1 million, co mpared with $81.9 million as of September 30, 2022. Orders for delivery scheduled in the upcoming fiscal year 2024 increased to $89.6 m illion compared with $65.5 million scheduled in fiscal 2023.
Backlog of Orders SIFCO’s total backlog as of September 30, 2024 increased to $114.4 million , co mpared with $97.4 million as of September 30, 2023. Orders for delivery scheduled in the upcoming fiscal year 2025 increased to $85.0 million compared with $70.9 million scheduled as of the end of the 2023 fiscal year.
Our technical expertise has allowed SIFCO to gain customer certifications for a variety of materials in the this application. We believe this market holds growth opportunity for SIFCO. Competition SIFCO competes with numerous companies, both in and tangential to the A&E industry, of which fifteen are known by SIFCO.
Our technical expertise has allowed SIFCO to gain customer certifications for a variety of materials in this application. We believe this market is a growth opportunity for SIFCO. • SIFCO supplies new and spare components to the energy industry.
In addition, the Company conducts annual employee development reviews, identifies growth opportunities, which include employee rotations, promotes value-based recognition programs and engages employees in continuous improvement activities. 6 Table of Contents E. Non-U.S. Operations The Company's products are distributed in the U.S. as well as non-U.S. markets.
In addition, the Company conducts annual employee development reviews, identifies growth opportunities, which include employee rotations, promotes value-based recognition programs and engages employees in continuous improvement activities. 6 Table of Contents Set forth below is certain information concerning the Company’s executive officers. The executive officers are appointed annually by the Board of Directors (current officers in bold).
The Company’s employees include full-time, part-time, and temporary employees. Approximately 68% of our employees were located within the U.S. and 32% of our employees were located in Italy. Approximately 61% of our workforce within the U.S. is composed of skilled and unskilled labor, and the remaining population includes management, corporate, administrative and support staff.
As of September 30, 2024, all employees were located within the U.S., excluding CBlade due its sale in October 2024. Approximately 65% of our workforce within the U.S. is composed of skilled and unskilled labor, and the remaining population includes management, corporate, administrative and support staff.
Financial information about the Company's U.S. and non-U.S. operations is set forth in Note 12, Business Information, of the consolidated financial statements. F. Available Information The Company files annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Securities Exchange Act of 1934, as amended.
F. Available Information The Company files annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Securities Exchange Act of 1934, as amended. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The public can obtain any documents that are filed by the Company at http://www.sec.gov.
The public can obtain any documents that are filed by the Company at http://www.sec.gov .
In fiscal 2023, commercial and military revenues accounted for 55.6% and 44.4% of revenues, respectively, compared with 47.4% in commercial revenues and 52.6% in military revenues in fiscal 2022. The Company's capabilities are focused on supplying critical components, consisting primarily of steel, high temperature alloys, nickel alloys, titanium and aluminum. SIFCO operates from multiple locations.
The Company’s capabilities are focused on supplying critical components, consisting primarily of steel, high temperature alloys, nickel alloys, titanium and aluminum. SIFCO operates primarily from two locations. SIFCO manufacturing facilities are located in Cleveland, Ohio (“Cleveland”) and Orange, California (“Orange”).
Build rates, particularly the Boeing 777-9 (formerly 777X), 787, 737 MAX and the Airbus A350, declined and partially rebounded in 2022, but not as quickly as previously anticipated. In fiscal year 2023, build rates on these platforms continued to rebound. • SIFCO supplies new and spare components to the energy industry, particularly the industrial gas and steam turbine markets.
Build rates, particularly the Boeing 777-9 (formerly 777X), 787, 737 MAX and the Airbus A350, continued to rebound in both fiscal 2023 and 2024. • SIFCO supplies components to the commercial space industry, which is rapidly evolving.
Nevertheless, the Company cannot guarantee that, in the future, it will not incur additional costs for compliance or that such costs will not be material. D. Human Capital Management SIFCO employed approximat ely 348 f ul l-time employees at the beginning of fiscal 2023, which increased to ap proximatel y 368 employees at the end of fiscal 2023.
Nevertheless, the Company cannot guarantee that, in the future, it will not incur additional costs for compliance or that such costs will not be material. D.
The Company’s domestic operations were impacted by this Cybersecurity Incident ("Cyber Incident") which resulted in production delays and delayed shipments due to information access limitations. The Company immediately initiated response protocols and an investigation, engaging cyber security experts to assist with the assessment of the incident and to help determine what data was impacted.
The Company immediately initiated response protocols and an investigation, engaging cyber security experts to assist with the assessment of the incident and to help determine what data was impacted. The Company has since completed data recovery and restoration from the cyber incident. See Note 12 — Commitments and Contingencies of the Notes to Consolidated Financial Statements . B.
We provide our customers with envelope and precision forgings, rough and finished machined components, as well as sub-assemblies. SIFCO services both original equipment manufacturers ("OEM"), Tier 1 and Tier 2 suppliers, and aftermarket service providers with products that range in size from approximately 2 to 1,200 pounds.
SIFCO services both original equipment manufacturers (“OEM”), Tier 1 and Tier 2 suppliers, and aftermarket service providers with products that range in size from approximately 2 to 1,200 pounds. The Company’s strategic vision is to build a leading A&E company positioned for long-term, stable growth and profitability.
The Company has since completed data recovery and restoration from the cyber incident. See Note 11 , Commitments and Contingencies. B. Principal Products and Services Operations SIFCO is a manufacturer of forgings and machined components for the Aerospace and Defense, Energy and Commercial Space markets.
Principal Products and Services Operations SIFCO is a manufacturer of forgings and machined components for the Aerospace and Defense, Energy and Commercial Space markets. We provide our customers with envelope and precision forgings, rough and finished machined components, as well as sub-assemblies.
The Company's success is not dependent on patents, trademarks, licenses or franchises. Raw Materials While the residual effects from the COVID-19 pandemic disrupted the global supply chain and availability of raw materials, SIFCO generally has multiple sources for its raw materials, which consist primarily of high-quality metals essential to its business.
Raw Materials SIFCO generally has multiple sources for its raw materials, which consist primarily of high-quality metals essential to its business. Suppliers of such materials are located principally in North America and Europe. SIFCO generally does not depend on a single source for the supply of its raw materials.
The Company's strategic vision is to build a leading A&E company positioned for long-term, stable growth and profitability. SIFCO's long-term plan is to have a balance comprised of military and commercial aerospace revenues, supplemented with energy, commercial space, and adjacent market components.
SIFCO’s long-term plan is to seek to maintain a balance of military and commercial aerospace revenues, supplemented with revenue from energy, commercial space, and other adjacent market components. In fiscal 2024, commercial and military revenues accounted for 52.4% and 47.6% of revenues, respectively, compared with 41.5% in commercial revenues and 58.5% in military revenues in fiscal 2023.
Industry The performance of the domestic and international air transport industry, the energy industry, as well as government defense spending, directly and significantly impact the performance of SIFCO. The residual impacts of COVID-19 continue to be assessed by the Company.
Industry The performance of the domestic and international air transport industry, the energy industry, as well as government defense spending, directly and significantly impact the performance of SIFCO. • SIFCO supplies new and spare components to the U.S. military for aircraft, helicopters, vehicles, and munitions. The Company’s top programs include Blackhawk (H60), C-130, F-18 and F-35.
Removed
During fiscal year 2022, the Company was subject to a NADCAP audit in Orange pursuant to which maintenance issues were identified that required remediation in order to meet the requisite qualifications for NADCAP Certification.
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Information relating to the Company’s financial results is set forth in the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. In October 2024, the Company sold its European operations in order to streamline operational synergies and refocus on its core aerospace forging business.
Removed
The Company temporarily lost NADCAP Certification at its Orange location in the third quarter of fiscal 2022 and was required to outsource the process that required such certification to a third party. The Company regained such NADCAP Certification in Orange in the first quarter of fiscal 2023 and was able to fully resume operations.
Added
SIFCO Irish Holdings, Ltd., a wholly owned subsidiary of the Company, entered into a Share Purchase Agreement (the “SPA”) pursuant to which it sold 100% of the share capital of C Blade S.p.A. Forging & Manufacturing, an Italian joint stock company located in Maniago, Italy, and wholly-owned subsidiary of the Company (“CBlade”), for cash consideration.
Removed
While demand for travel declined at a rapid pace beginning in the second half of our fiscal 2020, commercial air travel has progressively shown signs of recovery to pre-pandemic levels in fiscal 2023 with increasing air traffic, in both domestic and international markets. • SIFCO supplies new and spare components to the U.S. military for aircraft, helicopters, vehicles, and munitions.
Added
As a result of the planned sale transaction, the Company’s financial statements have been prepared with the net assets, results of operations, and cash flows of CBlade presented as assets held for sale and discontinued operations, respectively, as of and for the years ended September 30, 2024 and 2023.
Added
All historical statements, amounts and related disclosures have been retrospectively adjusted to conform to this presentation. Refer to Note 2 — Assets Held for Sale and Discontinued Operations of the Notes to Consolidated Financial Statements.
Added
Human Capital Management Excluding CBlade employees due to the sale of this business in October 2024, SIFCO employed approximat ely 252 f ul l-time employees at the beginning of fiscal 2024, which decreased slightly to approximately 244 employees at the end of fiscal 2024 . The Company’s employees include full-time, part-time, and temporary employees.
Added
The Maniago business was sold to a third party on October 15, 2024, and all employees and obligations transferred to the third party with the consummation of this sale. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance.
Added
Name Age Title and Business Experience George Scherff 81 Chief Executive Officer since July 2024. Prior to joining the Company, Mr. Scherff served as CEO for Thermal Systems Manufacturing, Paradigm Packaging, Lund International, ABC Truck Body, and Hartzell Manufacturing following its merger with Continental Metal Specialties.
Added
He has a bachelor’s degree from The Ohio State University and a master’s degree in mechanical engineering from the University of Toledo. Mr. Scherff has successfully led middle-market organizations through periods of growth and transition and most recently served as a consultant, providing services to various companies with a focus on operational improvement.
Added
Jennifer Wilson 45 Chief Financial Officer since November 13, 2024. Ms. Wilson served as the Company’s Director of External Reporting since 2022. She brings significant experience in strategic accounting and finance and a deep knowledge of the Company’s accounting and operating organization. Prior to her role as Director of External Reporting, Ms.
Added
Wilson served as the Controller of the Company’s Orange, California-facility and as the Director of Financial Planning and Analysis. Prior to joining the Company, Ms. Wilson served as an Accounting and Finance Consultant with Resources Global Professionals and as a Manager of Accounting and Treasury for Technical Consumer Products.
Added
She is a certified public accountant and holds a Masters of Business Administration and Bachelor of Science in accounting from David N. Meyers College. Peter W. Knapper 62 President and Chief Executive Officer from June 2016 to July 2024. Prior to joining SIFCO, Mr.
Added
Knapper worked for the TECT Corporation, holding positions including Vice President of Operations of TECT Power, Corporate Director of Strategy and Site Development, and President of TECT Aerospace. In addition, Mr. Knapper held progressive leadership roles for other companies including Rolls Royce Energy Systems, Inc., a subsidiary of Rolls-Royce Holdings plc, and GE Aircraft Engines. Mr.
Added
Knapper has 38 years of experience in Aerospace and related industries. Thomas R. Kubera 65 Chief Financial Officer from August 8, 2018 to November 13, 2024. Prior to his appointment, Mr. Kubera was Interim Chief Financial Officer from July 1, 2017 to August 7, 2018 and Chief Accounting Officer since January 31, 2018. Mr.
Added
Kubera was Corporate Controller from May 2014 and had served as Interim Chief Financial Officer from April 2015 to May 2015. Prior to joining SIFCO, Mr. Kubera was previously at Cleveland-Cliffs, Inc. (previously known as Cliffs Natural Resources, Inc.) from April 2005 through 2014, most recently as the Controller of Global Operations Services.
Added
He also held several assistant controller positions and was a Senior Manager of External Reporting while at Cleveland-Cliffs, Inc. E. Non-U.S. Operations The Company’s products are distributed in the U.S. as well as non-U.S. markets. Financial information about the Company’s U.S. and non-U.S. operations is set forth in Note 13 — Business Information of the Notes to Consolidated Financial Statements.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

51 edited+5 added−26 removed73 unchanged
Biggest changeCompetitive bidding presents a number of risks, including: a. the need to compete against companies or teams of companies with more financial and marketing resources and more experience in bidding on and performing major contracts than we have; b. the need to compete against companies or teams of companies that may be long-term, entrenched incumbents for a particular contract for which we are competing and that have, as a result, greater domain expertise and better customer relations; c. the need to compete to retain existing contracts that have in the past been awarded to us on a sole-source basis or that have been incumbent for a long time; d. the award of contracts to providers offering solutions at the “lowest price technically acceptable,” which may lower the profit we may generate under a contract awarded using this pricing method or prevent us from submitting a bid for such work due to us deeming such work to be unprofitable; e. the reduction of margins achievable under any contracts awarded to us; f. the need to bid on some programs in advance of the completion of their specifications, which may result in unforeseen technological difficulties or increased costs that lower our profitability; g. the substantial cost and managerial time and effort, including design, development and marketing activities, necessary to prepare bids and proposals for contracts that may not be awarded to us; h. the need to develop, introduce and implement new and enhanced solutions to our customers’ needs; i. the need to locate and contract with teaming partners and subcontractors; j. the need to accurately estimate the resources and cost structure that will be required to perform any contract that we are awarded; and k. long term agreements - changes in our cost profile over the life of a long-term agreement. 8 Table of Contents If SIFCO wins a contract, and upon expiration, the customer requires further services of the type provided by the contract, there is frequently a competitive rebidding process.
Biggest changeCompetitive bidding processes present a number of risks, including: a. the need to compete against companies or groups of companies with more financial and marketing resources and more experience in bidding on and performing major contracts than we have; 8 Table of Contents b. the need to compete against companies or groups of companies that may be long-term, entrenched incumbents for a particular contract for which we are bidding and/or that have, as a result, greater domain expertise and better customer relations; c. the need to compete to retain existing contracts that have in the past been awarded to SIFCO on a sole-source basis or that have been incumbent to SIFCO for a prolonged period of time; d. the award of contracts to providers offering solutions at the “lowest price technically acceptable,” which may lower the profit we may generate under a contract awarded using this pricing method or prevent us from submitting a bid for such contracts due to us deeming such work to be unprofitable; e. the reduction of margins achievable under any contracts awarded to us; f. the need to bid on some programs in advance of the completion of their specifications, which may result in unforeseen technological difficulties or increased costs that lower our profitability; g. the substantial cost and managerial time and effort, including design, development and marketing activities, necessary to prepare bids and proposals for contracts that may not be awarded to us; h. the need to develop, introduce and implement new and enhanced solutions to our customers’ needs; i. the need to locate and contract with teaming partners and subcontractors; j. the need to accurately estimate the resources and cost structure that will be required to perform any contract that we are awarded; and k. changes in our cost profile that may occur over the life of a long-term agreement.
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.
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 or unauthorized access to proprietary and confidential information.
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.
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 from our key vendors, there could be an adverse effect on its results of operations and on its customer relationships and our reputation.
If the Company is unable to remediate the material weakness, or is otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, the Company’s ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject the Company to litigation or investigations requiring management resources and payment of legal and other expenses, including civil penalties, negatively affect investor confidence in our financial statements and adversely impact our stock price.
If the Company is unable to maintain effective internal control over financial reporting or disclosure controls and procedures or if additional material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, the Company’s ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject the Company to litigation or investigations requiring management resources and payment of legal and other expenses, including civil penalties, negatively affect investor confidence in our financial statements and adversely impact our stock price.
The military aerospace cycle is highly dependent on U.S. and foreign government funding; as well as the effects of terrorism, a changing global political environment, U.S. foreign policy, the retirement of older aircraft and technological improvements to new engines. Accordingly, the timing, duration and severity of cyclical upturns and downturns cannot be forecast with certainty.
The military aerospace cycle is highly dependent on U.S. and foreign government funding; as well as the effects of terrorism, a changing global political environment, U.S. foreign policy, the retirement of older aircraft and technological improvements to new engines. Accordingly, the timing, duration and severity of cyclical upturns and downturns within the military aerospace market cannot be forecast with certainty.
These pension costs are dependent on significant judgment in the use of various estimates and assumptions, particularly with respect to the discount rate and expected long-term rates of return on plan assets. Changes to these estimates and assumptions could have a material adverse effect on our financial position, results of operations or cash flows.
The pension costs associated with the Plans are dependent on significant judgment in the use of various estimates and assumptions, particularly with respect to the discount rate and expected long-term rates of return on plan assets. Changes to these estimates and assumptions could have a material adverse effect on our financial position, results of operations or cash flows.
We cannot predict changes in worldwide or regional economic conditions and government policies, as such conditions are highly volatile and beyond our control. If these conditions deteriorate for extended periods, however, our business, results of operations and financial condition could be materially adversely affected.
We cannot predict changes in worldwide or regional economic conditions and government policies, as such conditions are highly volatile and beyond our control. If these conditions were to deteriorate for extended periods, however, our business, results of operations and financial condition could be materially adversely affected.
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 changes in political, economic, and social conditions, weather, laws and regulations.
We have experienced and, in the future, 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 changes in political, economic, and social conditions, weather, laws and regulations.
We maintain standard property casualty insurance coverage for our properties and may be able to recover costs associated with certain natural disasters through insurance; however, even if covered by insurance, any significant damage or destruction of our facilities due to such events could result in our inability to meet customer delivery schedules and may result in the loss of customers and 15 Table of Contents significant additional costs to SIFCO.
We maintain standard property casualty insurance coverage for our properties and may be able to recover costs associated with certain natural disasters through insurance; however, even if covered by insurance, any significant damage or destruction of our facilities due to such events could result in our inability to meet customer delivery schedules and may result in the loss of customers and significant additional costs to SIFCO.
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.
In the event that the 12 Table of Contents 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.
Certain of the Company's employees are covered by its noncontributory defined benefit pension plans (“Plans”).
Certain of the Company’s employees are covered by its noncontributory defined benefit pension plans (collectively, the “Plans”).
There can be no assurance that we will win any particular bid, that we will win the contract at the same profit margin, or that we will be able to replace business lost upon expiration or completion of a contract.
There can be no assurance that we will win any particular bid or rebid, that we will win the contract at the same or at a similar profit margin, or that we will be able to replace business lost upon expiration or completion of a contract.
The impact of these Plans on our earnings may be volatile in that the amount of expense we record and may materially change from year to year because those calculations are sensitive to changes in several key economic assumptions, including discount rates, inflation, expected return on plan assets, retirement rates and mortality rates.
The impact of these Plans on our financial performance may be volatile in that the amount of expense we record may materially change from year to year because those calculations are sensitive to changes in several key economic assumptions, including discount rates, inflation, expected return on plan assets, retirement rates and mortality rates.
Our testing has, as described below, and in the future may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.
Our testing in the past has revealed, as described below, and in the future may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.
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 the availability and pricing of fuel.
The ongoing conflict between Russia and Ukraine continues to impact 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 the availability and pricing of fuel.
Failure to retain existing contracts or win new contracts under competitive bidding processes may adversely affect our sales. SIFCO obtains most of its contracts through a competitive bidding process, and substantially all of the business that we expect to seek in the foreseeable future likely will be subject to a competitive bidding process.
Failure to retain existing contracts or win new contracts under competitive bidding processes may adversely affect our sales. SIFCO obtains most of its contracts through a competitive bidding process, and a material portion of the business that we expect to seek in the foreseeable future likely will be subject to a competitive bidding process.
It also is not possible for SIFCO to obtain insurance to protect against all operational risks and liabilities. Substantial claims resulting from an incident in excess of the indemnification we receive and 10 Table of Contents our insurance coverage would harm our financial condition, results of operations and cash flows.
It is not possible for SIFCO to obtain insurance to protect against all operational risks and liabilities. Substantial claims resulting from an incident in excess of the indemnification we receive and our insurance coverage would harm our financial condition, results of operations and cash flows.
The inability of our suppliers to obtain financing could also result in the need for us to transition to alternate suppliers, which could result in significant incremental costs and delays. A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth.
The inability of our suppliers to obtain financing could also result in the need for us to transition to alternate suppliers, which could result in significant incremental costs and delays. A write-off of all or part of our goodwill could adversely affect our operating results and net worth. Goodwill is a component of our assets.
Despite our use of reasonable and appropriate controls, material security breaches, theft, misplaced, lost or corrupted data, programming, or 9 Table of Contents employee errors and/or malfeasance could lead to the compromise or improper use of such sensitive, confidential, or personal data or information, resulting in possible negative consequences, such as fines, ransom demands, penalties, loss of reputation, competitiveness or customers, or other negative consequences resulting in adverse impacts to our results of operations or financial condition.
Despite our use of reasonable and appropriate controls, material security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors and/or malfeasance or factors outside of our control could lead to the compromise or improper use of such sensitive, confidential, or personal data or information, resulting in possible negative consequences, such as fines, ransom demands, penalties, loss of reputation, competitiveness or customers, or other negative consequences resulting in adverse impacts to our results of operations or financial condition.
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.
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 under contracts with our customers may be jeopardized. Economic downturns can adversely affect a vendor’s ability to manufacture or deliver products.
Any subcontractor performance deficiencies could result in the customer terminating our contract for default, which could expose us to liability for excess costs of re-procurement by the customer and have a material adverse effect on our ability to compete for other contracts.
Any subcontractor performance deficiencies could result in the customer terminating our contract for default, which could expose SIFCO to liability for excess costs of re-procurement by the customer and have a material adverse effect on our ability to compete for other contracts and on our results of operations generally.
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.
Unfavorable fluctuations in prices for raw materials, 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.
Failure to perform by our subcontractors could materially and adversely affect our contract performance and its ability to obtain future business. The performance of contracts often involves subcontractors, upon which we rely to complete delivery of products to our customers. SIFCO may have disputes with subcontractors.
Failure to perform by our subcontractors could materially and adversely affect our contract performance and its ability to obtain future business. The performance of contracts often involves subcontractors, upon which we rely to complete delivery of products to our customers.
If the inflation rate continues to increase, it will likely affect our expenses, including, but not limited to, employee compensation and labor expenses and increased costs for supplies, and we may not be successful in offsetting such cost increases.
If inflation rates continue to increase, it will likely affect our expenses, including, but not limited to, employee compensation and labor expenses and increased costs for supplies, and we may not be successful in offsetting such cost increases.
A substantial portion of SIFCO's business is conducted with a relatively small number of large direct and indirect customers. In fiscal 2023, one direct customer accounted for approximately 12% percent of our consolidated net sales and three direct customers and their direct subcontractors accounted for approximately 32% of the Company’s consolidated net sales.
A substantial portion of SIFCO’s business is conducted with a relatively small number of large direct and indirect customers. In fiscal 2024, one direct customer accounted for approximately 15% percent of our consolidated net sales and three direct customers and their direct subcontractors accounted for approximately 41% of the Company’s consolidated net sales.
Moreover, any accident or incident for which we are liable, even if fully insured, could negatively affect our standing with our customers and the public, thereby making it more difficult for us to compete effectively, and could significantly impact the cost and availability of adequate insurance in the future. The Company's business is subject to risks associated with international operations.
Moreover, any accident or incident for which we are liable, even if fully insured, could negatively affect our standing with our customers and the public, thereby making it more difficult for us to compete effectively, and could significantly impact the cost and availability of adequate insurance in the future.
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 or other factors.
Consequently, our supply of key products and components could be disrupted if our suppliers fail or are unable to perform because of shortages in raw materials, operational problems, strikes, natural disasters, health crises or other factors.
The Company may not receive the full amounts estimated under the contracts in our total backlog, which could reduce our sales in future periods below the levels anticipated, and which makes backlog an uncertain indicator of future operating results. As of September 30, 2023, our total backlog w as $120.1 millio n.
The Company may not receive the full amounts estimated under the contracts in our total backlog, which could reduce our sales in future periods below the levels anticipated, and which makes backlog an uncertain indicator of future operating results. As of September 30, 2024, our total backlog w as $114.4 million.
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.
Our ability to deliver products on schedule is dependent upon a variety of factors, certain of which are outside of our control, 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.
Government spending priorities and terms may change in a manner adverse to our business. At times, our supplying of products to the U.S. military has been adversely affected by significant changes in U.S. defense and national security budgets.
Downturns or reductions in demand could have a material adverse effect on our business. Government spending priorities and terms may change in a manner adverse to our business. At times, our supplying of products to the U.S. military has been adversely affected by significant changes in U.S. defense and national security budgets.
Our ability to make interest and scheduled principal payments and operate within restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, changes in interest rates or changes in our credit ratings or our outlook.
We have incurred indebtedness, and may incur additional debt in the future. Our ability to make interest and scheduled principal payments and operate within restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, changes in interest rates or changes in our credit ratings or our outlook.
To the extent that the COVID-19 pandemic or its aftermath further impacts demand for our products and services or impairs the viability of some of our customers and/or suppliers, our financial condition, results of operations, and cash flows could be adversely affected, and those impacts could be material.
To the extent that the market conditions within the commercial airline industry further impacts demand for our products and services or impairs the viability of some of our customers and/or suppliers, our financial condition, results of operations, and cash flows could be adversely affected, and those impacts could be material.
Labor disruptions by our employees or personnel turnover and/or shortage could adversely affect our business. As of September 30, 2023, we employed approximately 378 pe ople. We face competition for management and employees from other companies and organizations.
Labor disruptions by our employees or personnel turnover and/or shortage could adversely affect our business. As of September 30, 2024, we employed approximately 244 pe ople (excluding Maniago due its sale in October 2024). We face competition for management and employees from other companies and organizations.
In particular, the recent 12 Table of Contents conflict between Russia and Ukraine has caused shortages in the availability of fuel.
In particular, the ongoing conflict between Russia and Ukraine has caused shortages in the availability of fuel.
The residual impacts from the COVID-19 pandemic also has increased uncertainty with respect to global trade volumes, which could put negative pressure on cargo traffic levels. Any of these factors would have a significant impact on the demand within the commercial aerospace industry.
We continue to experience uncertainty with respect to global trade volumes, which could put negative pressure on cargo traffic levels. Any of these factors would have a significant impact on the demand within the commercial aerospace industry.
Additionally, two of our locations are parties to collective bargaining agreements. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future.
Additionally, we are party to a collective bargaining agreement with certain employees at our Cleveland, Ohio facility. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future.
Differences between actual investment returns and our assumed long-term returns 13 Table of Contents on assets will result in changes in future pension expense and the funded status of our Plans, and could increase future funding of the Plans. Changes in these factors affect our plan funding, cash flows, earnings, and shareholders’ equity.
Differences between actual investment returns and our assumed long-term returns on assets will result in changes in future pension expense and the funded status of our Plans, and could increase future funding of the Plans.
Market volatility and adverse capital or credit market conditions may affect our ability to access cost-effective sources of funding and may expose SIFCO to risks associated with the financial viability of suppliers.
Changes in these factors affect our plan funding, cash flows, earnings, and shareholders’ equity. 13 Table of Contents Market volatility and adverse capital or credit market conditions may affect our ability to access cost-effective sources of funding and may expose SIFCO to risks associated with the financial viability of suppliers.
An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock. Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares or at all.
Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares or at all.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. If litigation is instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain.
Significant judgment is required in determining our provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain.
Item 1A. Risk Factors Set forth below are material risks and uncertainties that could negatively affect our business and financial condition and could cause our actual results to differ materially from those expressed in forward-looking statements contained in this report.
Risk Factors Set forth below are material risks and uncertainties that could negatively affect our business and financial condition and could cause our actual results to differ materially from those expressed in forward-looking statements contained in this report. 7 Table of Contents Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and financial condition.
If we incur additional debt, the agreements governing that debt may contain significant financial and other covenants that may materially restrict our operations. The Company may not be able to obtain refinancing or additional financing on favorable terms or at all. The Company has identified certain risks related to the Company's ability to continue as a going concern.
If we incur additional debt, the agreements governing that debt may contain significant financial and other covenants that may materially restrict our operations. The Company may not be able to obtain refinancing or additional financing on favorable terms or at all. Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility.
The tightening of the credit market and standards, as well as capital market volatility, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement.
The financial markets can experience high levels of volatility and disruption in response to various macroeconomic factors, reducing the availability of credit for certain issuers. The tightening of the credit market and standards, as well as capital market volatility, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement.
A failure by a subcontractor to satisfactorily deliver products can adversely affect our ability to perform our obligations as a prime contractor.
SIFCO may have disputes with subcontractors, and the failure by a subcontractor to satisfactorily deliver products 10 Table of Contents can adversely affect our ability to perform our obligations as a prime contractor.
SIFCO faces cyber threats, as well as the potential for business disruptions associated with information technology failures and interruptions, new software implementation, and damaging weather or other acts of nature, and pandemics or other public health crises, which may adversely affect our business.
SIFCO faces cybersecurity threats, as well as the potential for business disruptions associated with information technology failures and interruptions, new software implementation, and damaging weather or other acts of nature, and pandemics or other public health crises, which may adversely affect our business. 9 Table of Contents Although we continue to regularly review and enhance our protection 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.
Management identified deficiencies in its oversight and backup and recovery controls that represent a material weakness in internal control over financial reporting. Until remediated, this material weakness could result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Until it was fully remediated, this material weakness could have resulted in a material misstatement to the annual or interim consolidated financial statements that would not have been prevented or detected on a timely basis.
Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability and cash flow. SIFCO is subject to income taxes in the United States, Italy and Ireland. Significant judgment is required in determining our provision for income taxes.
If litigation is instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources. 14 Table of Contents Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability and cash flow. SIFCO is subject to income taxes in the United States and Ireland.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and financial condition. Risks Related to Our Business and Operations We are subject to the cyclical nature of the A&E industries and the continuing or further downturn in these industries could adversely impact the demand for our products.
Risks Related to Our Business and Operations We are subject to the cyclical nature of the A&E industries and the continuing or further downturn in these industries could adversely impact the demand for our products. The commerc ial aerospace industry is historically driven by the demand from commercial airlines for new aircraft.
Goodwill and other intangible assets are a component of our assets. At Septem ber 30, 2023, goodwill was $3.5 million and other intangible assets were $0.3 million of our total assets of $96.5 million. We may have to write off all or part of our goodwill or other intangible assets if their value becomes impaired.
At September 30, 2024 , goodwill was $3.5 million of our total assets of $104.6 million . We may have to write off all or part of our goodwill if the value becomes impaired. Although this write-off would be a non-cash charge, it could reduce our earnings and our financial condition.
Residual negative impacts of the COVID-19 pandemic on the commercial aerospace industry may continue for a prolonged period of time. We continue to experience changes in demand from our customers in this market and a reduction in demand for commercial aircraft will adversely impact our net sales and operating results.
We continue to experience changes in demand from our customers in this market and a reduction in demand for commercial aircraft will adversely impact our net sales and operating results. There is risk that the industry reintroduces mitigation strategies in response to fluctuating demand for commercial air travel, which could include reduced capacity and shifting route patterns.
Removed
The commerc ial aerospace industry is historically driven by the demand from commercial airlines for new aircraft.
Added
If SIFCO wins a contract, and upon expiration, the customer requires further services of the type provided by the contract, there is frequently a competitive rebidding process.
Removed
There is risk that the industry reintroduces mitigation strategies in response to residual impacts from COVID-19, which could include reduced capacity and shifting route patterns. Furthermore, airlines may experience reduced demand due to reluctance by the flying public to travel due to travel restrictions and/or social distancing requirements.
Added
Management identified deficiencies in its oversight and backup and recovery controls that represent a material weakness in internal control over financial reporting. This material weakness was remediated during the first half of fiscal 2024.
Removed
Downturns or reductions in demand could have a material adverse effect on our business. 7 Table of Contents The energy industry is also cyclical in nature.
Added
The failure to streamline operational synergies and refocus on our core aerospace forging business could adversely affect our business and results of operations. As noted above, in October 2024, we completed the sale of our CBlade forging and manufacturing business located in Maniago, Italy.
Removed
Demand for our new and spare components in this industry is, in turn, driven by the global demand for energy, which is affected by, among other factors, the state of the world economies, the political environments of numerous countries and environmental constraints.
Added
We cannot be certain that initiatives to streamline operational synergies and refocus on our core aerospace forging business will be successfully implemented following the sale of our Italian operations, or that the disposition of these operations will positively impact our profitability. To the extent we are not successful in implementing these initiatives, our business may be adversely impacted.
Removed
The availability of alternative energy to oil and gas, and related prices, also have a large impact on demand. Reductions in demand for products in this market could have a material adverse effect on our business. Cyclical declines or sustained weakness in these markets could have a material adverse effect on our business.
Added
General Risks The price of our common stock may fluctuate significantly. An active, liquid and orderly market for our common stock may not be sustained, which could depress the trading price of our common stock.
Removed
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.
Removed
SIFCO has operations in Maniago, Italy and operates internationally.
Removed
A number of risks inherent in international operations could have a material adverse effect on our results of operations, including: a. fluctuations in U.S. dollar value arising from transactions denominated in foreign currencies and the translation of certain foreign currency subsidiary balances; b. difficulties in staffing and managing multi-national operations; c. general economic and political uncertainties and potential for social unrest in countries in which we or our customers operate; d. other deterioration of economic conditions, including the effect of inflation on our customers and suppliers; e. limitations on our ability to enforce legal rights and remedies; f. restrictions on the repatriation of funds; g. changes in trade policies, laws, regulations, political leadership and environment, and/or security risks; h. tariff regulations; i. difficulties in obtaining export and import licenses and compliance with export/import controls and regulations; j. the risk of government financed competition; k. compliance with a variety of international laws as well as U.S. regulations, rules and practices affecting the activities of companies abroad; and l. difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology.
Removed
As with any internal control deficiency, there can be no assurance that our remedial measures will be successful or otherwise sufficient to address the material weakness.
Removed
See Note 1, Going Concern for further information. Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility. We have incurred indebtedness, and may incur additional debt in the future.
Removed
Additionally, the Company contributed to a multi-employer retirement plan. While the Company withdrew from this plan to mitigate future costs, the Company may be subject to liability in connection with such withdrawal (see Note 8, Retirement Benefit Plans ).
Removed
The financial markets can experience high levels of volatility and disruption, reducing the availability of credit for certain issuers and the financial markets have undergone significant volatility in reaction to various macroeconomic factors.
Removed
Although this write-off would be a non-cash charge, it could reduce our earnings and our financial condition. General Risks Our business is subject to risks associated with widespread public health crises.
Removed
We have continued to see a prolonged residual impact of the COVID-19 pandemic on the economy, our industry, and our business, with increased challenges for customers, labor shortages, supply chain disruptions, and increasing inflation, among others. The pandemic has affected and is expected to continue to affect certain elements of our operations and business.
Removed
As a result, we have been operating in industries which continue to be impacted by the COVID-19 pandemic.
Removed
As a result of the residual impacts of the pandemic, we may in the future experience, production site shutdowns, and workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at the facilities operated by our customers and suppliers.
Removed
Further or a more prolonged suspension of operations or delayed recovery in our operations, and/or any similar suspension of operations or delayed recovery at one or more of our key suppliers, or the failure of any of our key suppliers, would result in further challenges to our business, leading to a further material adverse effect on our business, financial condition, results of operations, and cash flows.
Removed
We expect to continue to experience unpredictable changes in demand from the markets we serve. The A&E industries continue to be negatively impacted by the residual impacts of the COVID-19 pandemic and its effects as a result of various restrictions on air travel, supply chain disruptions and labor shortages.
Removed
These factors have caused reductions in demand for commercial aircraft, which have adversely impacted our net sales and operating results and may continue to do so for an extended period of time. Further, an overall reduction in business activity as a result of the disruption previously led to a softening of the energy market.
Removed
If the residual impact of the pandemic continues and/or conditions worsen, we may experience additional adverse impacts on our operations, costs, customer orders, and collections of accounts receivable, which may be material.
Removed
While we are unable to predict the magnitude of the impact of these factors at this time, the loss of, or significant reduction in, purchases by our large customers could have a material adverse effect on our business, financial condition, and results of operations.
Removed
Additionally, the residual impacts of the pandemic could lead to an extended disruption of economic activity whereby the impact on our consolidated results of operations, financial position and cash flows could be material.
Removed
While the potential economic impact brought by and the duration of the residual impacts of the coronavirus outbreak may be difficult to assess or predict, the resurgence of a widespread pandemic could result in significant or sustained disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
Removed
While the Company believes it 14 Table of Contents has adequate cash/liquidity available to finance its operations, our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, depends on our future performance, which is subject to general economic, financial, competitive and other factors (including the continued residual impact of COVID-19) beyond our control.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe square footage numbers set forth in the following paragraph are approximations: • SIFCO operates and manufactures in multiple facilities—(i) an owned 280,000 square foot facility located in Cleveland, Ohio, which is also the site of the Company’s corporate headquarters, (ii) leased facilities aggregating approximately 70,500 square feet located in Orange, California, and (iii) owned facilities aggregating approximately 91,000 square feet located in Maniago, Italy.
Biggest changeThe square footage numbers set forth in the following paragraph are approximations: • SIFCO operates and manufactures in multiple facilities—(i) an owned 280,000 square foot facility located in Cleveland, Ohio, which is also the site of the Company’s corporate headquarters, (ii) leased facilities aggregating approximately 70,500 square feet located in Orange, California, and (iii) owned facilities aggregating approximately 91,000 square feet located in Maniago, Italy (this facility was included in the sale of the Maniago business effective October 15, 2024).
In general, the Company’s property, plant and equipment are in good operating condition, are well maintained, and its facilities are in regular use. The Company considers its investment in property, plant and equipment as of September 30, 2023 suitable and adequate given the current product offerings for the respective operations in the current business environment.
In general, the Company’s property, plant and equipment are in good operating condition, are well maintained, and its facilities are in regular use. The Company considers its investment in property, plant and equipment as of September 30, 2024 suitable and adequate given the current product offerings for the respective operations in the current business environment.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+50 added−0 removed2 unchanged
Biggest changeSee Note 11, C ommitments and Contingencies , for more information regarding the legal proceedings in which the Company is involved.
Biggest changeSee Note 12 — Commitments and Contingencies of the Notes to Consolidated Financial Statements for more information regarding the legal proceedings in which the Company is involved. C.
Added
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.
Added
Estimates are revised as additional information becomes available. The Company believes that the accounting estimates employed and the resulting balances are 22 Table of Contents reasonable; however, actual results in these areas could differ from management’s estimates under different assumptions or conditions.
Added
Significant accounting policies used in the preparation of the consolidated financial statements are discussed in Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.
Added
The Company believes that the assumptions and estimates associated with allowance for credit losses, inventory valuation, goodwill, contract balances, and income taxes have the greatest potential impact on our financial statements because they are inherently uncertain, involve significant judgements, and include areas where different estimates reasonably could materially impact the financial statements.
Added
The Company believes that the critical accounting estimates employed and the resulting balances are reasonable; however, actual results in these areas could differ from management’s estimates under different assumptions or conditions. Allowances for Credit Losses The Company establishes allowances for credit losses on accounts receivable, customer financing receivables, and certain other financial assets.
Added
The adequacy of these allowances are assessed quarterly through consideration of factors including, but not limited to, customer credit ratings, bankruptcy filings, published or estimated credit default rates, age of the receivable, expected loss rates and collateral exposures. The Company determines the creditworthiness of each customer based upon publicly available information and information obtained directly from its customers.
Added
As these factors change, the Company’s allowances for credit losses may change in subsequent periods. Historically, losses have been within management’s expectations and have not been significant.
Added
Inventories Approximately 30% of the Company’s inventory is valued using the last-in, first-out (“LIFO”) method with the remaining valued using the first-in, first-out (“FIFO”) method stated 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.
Added
The Company evaluates obsolete and excess inventory on a quarterly basis. The Company maintains a formal policy, which requires at a minimum, that amounts are written down based on an analysis of the age of the inventory.
Added
In addition, if the Company learns of specific obsolescence, other than that identified by the aging criteria, an additional write down will be recognized. Specific obsolescence may arise due to a technological or market change or based on cancellation of an order. Management’s judgment is necessary in determining the proper write down for obsolete and excess inventory.
Added
For the portion of the Company’s inventory not valued at LIFO, inventory is valued at FIFO and stated at the lower of cost or net realizable value. The Company evaluates net realizable value on a quarterly basis. See Note 3 — Inventories of the Notes to Consolidated Financial Statements for further discussion.
Added
Revenue Recognition The Company recognizes revenue using the five-step revenue recognition model in which it depicts the transfer of goods to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services.
Added
The revenue standard also requires disclosure sufficient to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments and assets recognized from the cost to obtain or fulfill a contract.
Added
Contract Balances Contract assets on the consolidated balance sheets are recognized when a good is transferred to the customer and the Company does not have the contractual right to bill for the related performance obligations.
Added
In these instances, revenue recognized exceeds the amount billed to the customer and the right to payment is not solely 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.
Added
Payment from customers are received based on the terms established in the contract with the customer. Impairment of Long-Lived Assets The Company reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset (group) might not be recoverable.
Added
This review involves judgment and is performed using estimates of future undiscounted cash flows, which include proceeds from disposal of assets and which the Company considers a critical accounting estimate. The Company would assess the fair value of the asset group and compare it to its carrying value.
Added
Under the Accounting Standard Codification (“ASC”) 360 (“Topic 360”), if the carrying value of a long-lived asset or asset group is greater than the estimated undiscounted future cash flows, then the long-lived asset or asset group is considered impaired and an impairment charge is recorded for the amount by which the carrying value of the long-lived asset or asset group exceeds its fair value. 23 Table of Contents In projecting future undiscounted cash flows, the Company relies on internal budgets and forecasts, including revenue and cash flow projections,, and estimated residual value of the asset group upon disposal of long-lived assets.
Added
The Company’s budgets and forecasts are based on historical results and anticipated future market conditions, such as the general business climate and the effectiveness of competition.
Added
The Company believes that its estimates of future undiscounted cash flows and fair value are reasonable; however, changes in estimates of such undiscounted cash flows and fair value could change the Company’s estimates, which could result in future impairment charges. 2024 and 2023 Long-Lived Asset Recoverability Tests In the third quarter of fiscal 2024, certain qualitative factors, including operating results, at the Orange location, triggered a recoverability test.
Added
The results indicated that the long-lived assets were recoverable and did not require further review for impairment. The Company did not identify any indicators that the asset groups might be impaired in any of the other quarters assessed during fiscal 2024 and 2023. Impairment of Goodwill Goodwill is tested for impairment annually as of July 31.
Added
If circumstances change during interim periods between annual tests that would more likely than not reduce the fair value of a reporting unit below its carrying value, the Company will test goodwill for impairment.
Added
Factors that would necessitate an interim goodwill impairment assessment include a sustained decline in the Company’s stock price, prolonged negative industry or economic trends, or significant under-performance relative to expected, historical or projected future operating results. Management uses judgment to determine whether to use a qualitative analysis or a quantitative fair value measurement for its goodwill impairment testing.
Added
The Company’s fair value measurement approach combines the income and market valuation techniques for each of the Company’s reporting units that carry goodwill.
Added
These valuation techniques use estimates and assumptions including, but not limited to, the determination of appropriate market comparables, projected future cash flows (including timing and profitability), discount rate reflecting the risk inherent in future cash flows, perpetual growth rate, and projected future economic and market conditions.
Added
If a reporting unit fails the quantitative impairment test, impairment expense is immediately recorded as the difference between the reporting unit’s fair value and carrying value not to exceed the amount of goodwill recorded. 2024 Annual Goodwill Impairment Tests SIFCO performed its annual test as of July 31, 2024.
Added
Goodwill existed at one of the Company’s reporting units, Cleveland, Ohio as of July 31, 2024 and September 30, 2024. No impairment charge was identified in connection with the annual goodwill impairment test with respect to the Cleveland reporting unit.
Added
Refer to Note 4 — Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements. 2023 Annual Goodwill Impairment Tests SIFCO performed its annual test as of July 31, 2023. Goodwill existed at one of the Company’s reporting units, Cleveland, Ohio as of July 31, 2023 and September 30, 2023.
Added
No impairment charge was identified in connection with the annual goodwill impairment test with respect to the Cleveland reporting unit. Refer to Note 4 — Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements.
Added
Defined Benefit Pension Plan Expense The Company maintains three defined benefit pension plans in accordance with the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). The amounts recognized in the consolidated financial statements for pension benefits under these three defined benefit pension plans are determined on an actuarial basis utilizing various assumptions.
Added
The following table illustrates the sensitivity to change in the assumed discount rate and expected long-term rate of return on assets for the Company’s pension plans as of September 30, 2024.
Added
Impact on Fiscal 2024 Benefits Expense Impact on September 30, 2024 Projected Benefit Obligation for Pension Plans Change in Assumptions (In thousands) 25 basis point decrease in discount rate $ 6 $ 438 25 basis point increase in discount rate (6) (438) 100 basis point decrease in expected long-term rate of return on assets 170 — 100 basis point increase in expected long-term rate of return on assets (170) — The discussion that follows provides information on the significant assumptions/elements associated with these defined benefit pension plans. 24 Table of Contents The Company determines the expected return on plan assets principally based on (i) the expected return for the various asset classes in the respective plans’ investment portfolios and (ii) the targeted allocation of the respective plans’ assets.
Added
The expected return on plan assets is developed using historical asset return performance as well as current and anticipated market conditions such as inflation, interest rates and market performance.
Added
Should the actual rate of return differ materially from the assumed/expected rate, the Company could experience a material adverse effect on the funded status of its plans and, accordingly, on its related future net pension expense.
Added
The discount rate for each plan is determined, as of the fiscal year end measurement date, using prevailing market spot-rates (from an appropriate yield curve) with maturities corresponding to the expected timing/date of the future defined benefit payment amounts for each of the respective plans.
Added
Such corresponding spot-rates are used to discount future years’ projected defined benefit payment amounts back to the fiscal year end measurement date as a present value. A composite discount rate is then developed for each plan by determining the single rate of discount that will produce the same present value as that obtained by applying the annual spot-rates.
Added
The discount rate may be further revised if the market environment indicates that the above methodology generates a discount rate that does not accurately reflect the prevailing interest rates as of the fiscal year end measurement date.
Added
The Company computes a weighted-average discount rate taking into account anticipated plan payments and the associated interest rates from the USI Consulting Group Pension Discount Curve.
Added
As of September 30, 2024 and 2023, SIFCO used the following weighted-average assumptions: Years Ended September 30, 2024 2023 Discount rate for liabilities 4.8 % 5.6 % Discount rate for expenses 5.7 % 5.1 % Expected return on assets 6.2 % 6.2 % Deferred Tax Valuation Allowance The Company accounts for deferred taxes in accordance with the provisions of the Accounting Standards Codification guidance related to accounting for income taxes, whereby the Company recognizes an income tax benefit related to income tax credits, loss carryforwards and deductible temporary differences between financial reporting basis and tax reporting basis.
Added
A high degree of judgment is required to determine the extent a valuation allowance should be provided against deferred tax assets. On a quarterly basis, the Company assesses the likelihood of realization of its deferred tax assets considering all available evidence, both positive and negative.
Added
In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carry-back and carry-forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.
Added
The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified. It is generally difficult to outweigh objectively verifiable negative evidence of recent financial reporting losses.
Added
Based on the weight of available evidence, the Company determines if it is more likely than not that its deferred tax assets will be realized in the future.
Added
As a result of losses incurred in recent years, the Company entered into a three-year cumulative loss position in the U.S. jurisdiction during the fourth quarter of fiscal 2016 and remains in a cumulative loss position at the conclusion of fiscal 2024.
Added
Accordingly, the Company maintained its valuation allowance on its U.S. deferred tax assets as of the fourth quarter of fiscal 2024. As a result of income incurred in recent years, CBlade is in a three-year cumulative income position as of the end of fiscal 2024.
Added
In assessing all available positive and negative evidence available as of the fourth quarter of fiscal 2024, based on the weight of positive evidence, primarily related to the cumulative income position, the Company has concluded that it is more-likely-than-not that the deferred tax assets for CBlade will be realized.
Added
Accordingly, valuation allowance of $0.7 million was fully released during the fourth quarter of fiscal 2024. In October 2024, the Company sold 100% of the share capital of CBlade for cash consideration.
Added
As a result of the transaction, the Company’s financial statements have been prepared with CBlade presented as assets held for sale and discontinued operations as of and for the years ended September 30, 2024 and 2023. Uncertain Tax Positions The calculation of the Company’s tax liabilities also involves considering uncertainties in the application of complex tax regulations.
Added
SIFCO recognizes liabilities for uncertain income tax positions based on its estimate of whether it is more likely than not that additional taxes will be required, and it reports related interest and penalties as income taxes. Refer to Note 8 — Income Taxes of the Notes to Consolidated Financial Statements for further discussion. D.
Added
Impact of Newly Issued Accounting Standards Refer to Note 1 — Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements. 25 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed2 unchanged
Biggest changeAt November 30, 2023, there were approximately 298 shareholders of record of the Company’s Common Shares, as reported by Computershare, Inc., the Company’s Transfer Agent and Registrar, which maintains its U.S. corporate offices at 250 Royall Street, Canton, MA 02021. 17 Table of Contents Reference Part III, Item 12.
Biggest changeAt December 3, 2024 , there were approximately 280 shareholders of record of the Company’s Common Shares, as reported by Computershare, Inc., the Company’s Transfer Agent and Registrar, which maintains its U.S. corporate offices at 250 Royall Street, Canton, MA 02021. Reference Part III, Item 12.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s Common Shares are traded on the NYSE American exchange under the symbol “SIF.” Dividends and Shareholders The Company did not declare a cash dividend during fiscal 2023 or fiscal 2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s Common Shares are traded on the NYSE American exchange under the symbol “SIF.” Dividends and Shareholders The Company did not declare a cash dividend during fiscal 2024 or fiscal 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

39 edited+24 added−94 removed7 unchanged
Biggest changeThe Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies. 20 Table of Contents The following table sets forth a reconciliation of net loss to EBITDA and Adjusted EBITDA: (Dollars in thousands) Years Ended September 30, 2023 2022 Net loss $ (8,692) $ (9,640) Adjustments: Depreciation and amortization expense 6,404 6,348 Interest expense, net 1,348 646 Income tax expense (benefit) 159 (43) EBITDA (781) (2,689) Adjustments: Foreign currency exchange loss, net (1) 9 15 Other loss (income), net (2) 275 (149) Loss (gain) on disposal of assets (3) 1 (7) Gain on debt extinguishment (4) — (5,106) Equity compensation expense (5) 375 428 Pension settlement/curtailment benefit (6) 108 208 LIFO impact (7) (305) 729 IT incident costs, net (8) 1,275 — Strategic alternative expense (9) 86 — Adjusted EBITDA $ 1,043 $ (6,571) (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.
Biggest changeThe following table sets forth a reconciliation of net loss to EBITDA and Adjusted EBITDA: (Dollars in thousands) Years Ended September 30, 2024 2023 Net loss $ (5,383) $ (8,692) Less: Income from discontinued operations, net of tax 3,243 1,827 Loss from continuing operations (8,626) (10,519) Adjustments: Depreciation and amortization expense 4,784 5,071 Interest expense, net 3,080 997 Income tax expense 37 16 EBITDA (725) (4,435) Adjustments: Foreign currency exchange (gain) loss, net (1) (3) 3 Other expense, net (2) 302 361 Loss (gain) on disposal of assets (3) 4 (1) Non-recurring severance expense (4) 435 — Equity compensation expense (4) 250 375 Pension settlement/curtailment benefit (5) 60 78 LIFO impact (6) 862 (305) IT incident (benefit) expense, net (7) (594) 1,275 Strategic alternative expense (8) 237 85 Adjusted EBITDA $ 828 $ (2,564) (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.
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.
The Company presents EBITDA and Adjusted EBITDA because management believes that they are useful indicators for evaluating operating performance, including the Company’s ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions.
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 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.
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 amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA as measurements of financial performance; and • Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations.
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.
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 17 Table of Contents the fixed component of their respective cost structures.
The cash used by operating activities in fiscal 2023 was primarily due to net operating loss of $8.7 million, adjusted for non-cash items such as change in NRV reserve $1.1 million, and LIFO benefit of $0.3 million, partially offset by depreciation and amortization of $6.4 million, equity based compensation of $0.3 million and sources of working capital of $1.7 million.
The cash used by operating activities in fiscal 2023 was primarily due to net operating loss of $10.5 million, adjusted for non-cash items such as change in NRV reserve $1.1 million, and LIFO benefit of $0.3 million, partially offset by depreciation and amortization of $5.1 million, equity based compensation of $0.3 million and sources of working capital of $2.4 million.
The source of cash from working capital of $1.7 million was primarily due to increase in accounts payable due to timing of payments and lower inventories due to extended lead times, partially offset by higher accounts receivable due to increased sales at the end of the fiscal year.
The source of cash from working capital of $2.4 million was primarily due to increase in accounts payable due to timing of payments and lower inventories due to extended raw material lead times, partially offset by higher accounts receivable due to increased sales at the end of the fiscal year.
The Company initiated response protocols and an investigation, engaging cyber security experts to assist with the assessment of the incident and to help determine what data was impacted. The Company has since completed data recovery and restoration from the cyber incident. See Note 11 , Commitments and Contingencies.
The Company initiated response protocols and an investigation, engaging cyber security experts to assist with the assessment of the incident and to help determine what data was impacted. The Company has since completed data recovery and restoration from the cyber incident. See Note 12 — Commitments and Contingencies of the Notes to Consolidated Financial Statements .
The Company anticipates the total fiscal 2024 capital expenditures will be within the range of $3.5 million to $4.5 million and will relate principally to the further enhancement of production and product offering capabilities and operating cost reductions.
The Company anticipates the total fiscal 2025 capital expenditures will be within the range of $2.0 million to $3.0 million and will relate principally to the further enhancement of production and product offering capabilities and operating cost reductions.
When planning and evaluating its business operations, the Company takes 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 build rate for industrial steam and gas turbine engines; and (iii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft.
When planning and evaluating its business operations, the Company takes 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 demand for private space launch and reentry programs; and (iii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft.
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 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.
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 military vehicles; (ii) airframe applications for a variety of aircraft; (iii) private space launch and reentry programs; and (iv) other commercial applications.
(6) Represents expense incurred by its defined benefit pension plans related to settlement of pension obligations. (7) Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method. (8) Represents incremental information technology costs as it relates to the cybersecurity incident and loss on insurance recovery.
(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 (and credits) as it relates to the cybersecurity incident and loss on insurance recovery. (8) Represents expense related to evaluation of strategic alternatives.
The decrease in the effective tax rate in fiscal 2023 is primarily attributable to changes in jurisdictional mix of income in fiscal 2023 compared with the same period in fiscal 2022.
Income Taxes The Company’s effective tax rate in fiscal 2024 was (0.4)% compared with (0.2)% in fiscal 2023. The decrease in the effective tax rate in fiscal 2024 is primarily attributable to changes in jurisdictional mix of income in fiscal 2024 compared with the same period in fiscal 2023.
Fiscal Year 2023 Compared with Fiscal Year 2022 Net Sales Net sales comparative information for fiscal 2023 and 2022, respectively, is as follows: (Dollars in millions) Years Ended September 30, Year Over Year Increase (Decrease) Net Sales 2023 2022 Aerospace components for: Fixed wing aircraft $ 40.1 $ 39.5 $ 0.6 Rotorcraft 16.4 15.6 0.8 Energy components for power generation units 23.0 17.4 5.6 Commercial product and other revenue 7.5 11.4 (3.9) Total $ 87.0 $ 83.9 $ 3.1 Net sales in fiscal 2023 increased 3.7%, or $3.1 million to $87.0 million, compar ed with $83.9 million in fiscal 2022.
Fiscal Year 2024 Compared with Fiscal Year 2023 Net Sales Net sales comparative information for fiscal 2024 and 2023 is as follows: (Dollars in millions) Years Ended September 30, Year Over Year Increase (Decrease) 2024 2023 Aerospace components for: Fixed wing aircraft $ 41.8 $ 40.1 $ 1.8 Rotorcraft 17.3 16.4 0.9 Commercial space 13.2 4.6 8.6 Energy components for power generation units 1.8 2.1 (0.3) Commercial products and other revenue 5.5 2.9 2.5 Total $ 79.6 $ 66.1 $ 13.5 Net sales in fiscal 2024 increased 20.4%, or $13.5 million, to $79.6 million, compared with $66.1 million in fiscal 2023.
The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreements in fiscal 2023 and 2022: Weighted Average Interest Rate Years Ended September 30, Weighted Average Outstanding Balance Years Ended September 30, 2023 2022 2023 2022 Revolving credit agreement 6.9% 2.6% $ 13.1 million $ 10.4 million Foreign term debt 4.6% 2.8% $ 7.1 million $ 6.2 million Other debt 1.5% 0.7% $ 0.5 million $ 1.9 million The Company believes that inflation did not materially impact its results of operations in either fiscal 2023 or 2022. 19 Table of Contents Income Taxes The Company’s effective tax rate in fiscal 2023 was (1.9%) compared with 0.4% in fiscal 2022.
Other/General The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreements in fiscal 2024 and 2023: Weighted Average Interest Rate Years Ended September 30, Weighted Average Outstanding Balance Years Ended September 30, 2024 2023 2024 2023 Revolving credit agreement 8.0% 6.9% $17.1 million $ 13.1 million Other debt 12.6% 1.5% $0.3 million $ 0.5 million The Company believes that inflation did not materially impact its results of operations in either fiscal 2024 or 2023.
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.
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.
Tightening of the credit market and standards, as well as capital market volatility, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement. 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.
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.
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 Net loss wa s $8.7 million during fiscal 2023, compared with $9.6 million in fisca l 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.
Selling, General and Administrative Expenses Selling, general and administrative expenses were $14.0 million, or 16.1% of net sales, during fiscal 2023, compared with $11.9 million, or 14.2% of net sales, in fiscal 2022.
Selling, General and Administrative Expenses Selling, general and administrative (“SG&A”) expenses were $11.1 million, or 14.0% of net sales, during fiscal 2024, compared with $12.3 million, or 18.6% of net sales, in fiscal 2023.
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.
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. 19 Table of Contents Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in the United States of America (“GAAP”).
At September 30, 2023 and 2022, cash included financing proceeds for capital investment and a nominal amount of the Company’s cash and cash equivalents 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.
As of September 30, 2024 and 2023, cash included financing proceeds for capital investment and a nominal amount of the Company’s cash and cash equivalents were in the possession of its non-U.S. holding company subsidiary.
Fiscal 2023 and fiscal 2022 expenditures were used primarily for manufacturing enhancement and maintenance capital. Capital commitments at September 30, 2023 were $1.1 million.
Investing Activities Cash used for investing activities was $2.0 million in fiscal 2024, compared with $1.1 million in fiscal 2023. Fiscal 2024 and fiscal 2023 expenditures were used primarily for manufacturing enhancement and maintenance. Capital commitments at September 30, 2024 were $0.3 million.
Amortization of Intangibles Amortization of in tangibles decreased $0.1 million to $0.2 million during fiscal 2023, compared with $0.3 million in the comparable period of fiscal 2022. The decrease was primarily due to certain intangible assets that were fully amortized during fiscal 2023.
Amortization of Intangibles In fiscal 2024, amortization of intangibles decreased slightly by $0.1 million compared to the prior year due to certain intangible assets that were fully amortized during fiscal 2023.
The cash provided by operating activities in fiscal 2022 was primarily due to non-cash items, such as depreciation and amortization of $6.3 million, inventory write down to NRV of $1.5 million, LIFO effect of $0.7 million, equity based compensation of $0.3 million and source of working capital of $6.0 million, partially offset by the forgiveness of the PPP loan of $5.1 million and net loss of $9.6 million.
The cash used by operating activities in fiscal 2024 was primarily due to net operating loss of $8.6 million, adjusted for non-cash items such as depreciation and amortization of $4.8 million, amortization of debt issuance costs of $1.2 million, LIFO expense of $0.9 million, change in NRV reserve $0.6 million, equity based compensation of $0.2 million, partially offset by sources of working capital of $2.3 million.
Rotorcraft sales increased $0.8 million in fiscal 2023 compared to the same period in fiscal 2022 primarily due to commercial and Blackhawk programs. The energy components for power generation un its increased $5.6 million compared with the same period last year due to growth in the steam turbine markets.
Energy components for power generation units decreased $0.3 million compared with the same period last year due to lower demand in the steam turbine markets. Commercial products and other revenue increased by $2.5 million in fiscal 2024 compared to fiscal 2023, primarily due to timing of orders related to munitions programs.
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 Agreement for its domestic locations. 23 Table of Contents Additionally, the credit and capital markets saw significant volatility during the course of the pandemic.
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 its loan and security agreement as described in Note 6 — Debt of the Notes to Consolidated Financial Statements for its domestic locations.
The timing of shipments, coupled with increased demand in the steam turbine power generation market, have contributed to the increase in deliveries in fiscal 2023 than in fiscal 2022. Fixed wing aircraft sales increased $0.6 million compared with the same period last year primarily due to F35, 737 and 787 programs.
Higher demand in the commercial space market and the timing of shipments and contract approvals across most markets contributed to the increase in deliveries in fiscal 2024 from fiscal 2023. Fixed wing aircraft sales increased $1.8 million compared with the same period last year primarily due to the 787 program.
The Company does not have obligations that meet the definition of an off-balance sheet arrangement that have had, or are reasonably likely to have, a material effect on the Company’s financial condition or results of operations. D.
As of September 30, 2024, the Company was not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
(9) Represents expense related to evaluation of strategic alternatives. Reference to the above activities can be found in the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. B.
Reference to the above activities can be found in the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. B. Liquidity and Capital Resources Cash and cash equivalents increased to $1.7 million at September 30, 2024 compared with $21 thousand at September 30, 2023.
The decrease was primarily due to increased volume, ERC benefit of $1.5 million and reduction of net realizable value ("NRV") reserve of $0.9 million and lower idle expense of $0.9 million . Current year results include $2.1 million of idle expense and $0.9 million benefit associated with NRV compared with prior year costs of $3.1 million and $1.5 million, respectively.
Current year results include $1.4 million of idle expense and less than $0.1 million of expense associated with net realizable value (“NRV”) compared with prior year costs of $2.1 million and $0.9 million, respectively, which partially offset the increases in COGS in fiscal 2024.
The Company's liquidity could be negatively affected if the Company is unable to restructure existing debt obligations, obtain capital or enter 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, by customers extending payment terms to the Company and/or the decrease in demand for our products.
The Company’s liquidity could be negatively affected if the Company is unable to obtain capital, 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.
(4) Represents the gain on extinguishment of debt and interest for the amount forgiven by the SBA as it relates to the PPP loan in fiscal 2022. (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.
(4) 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 and executive severance. 20 Table of Contents (5) Represents expense incurred by its defined benefit pension plans related to settlement of pension obligations.
Liquidity and Capital Resources Historically, the main sources of liquidity of the Company have been cash flows from operations and borrowings under our Credit Agreement (as defined below under "Financing Activities").
Our primary requirements for liquidity and capital resources besides our growth initiatives, are working capital, capital expenditures, principal and interest payments on our outstanding debt, and other general corporate needs. Historically, the main sources of liquidity of the Company have been cash flows from operations and borrowings under our debt agreements.
Operating Activities The Company’s operating activi ties used $1.4 million of cash in f iscal 2023, compared with $0.3 million provided in fiscal 2022.
The Company’s operating activities from discontinued operations provided $1.4 million of cash in fiscal 2024, compared with $2.4 million of cash provided by fiscal 2023 primarily driven by net income from discontinued operations and changes in working capital.
Military net sales decreased $5.4 million to $38.7 million in fiscal 2023, compared to $44.1 million in fiscal 2022 primarily due to V22 demand reduction and timing of orders related to a munition progra m.
Military net sales decreased $0.8 million to $37.9 million in fiscal 2024, compared to $38.7 million in fiscal 2023 primarily due to V22 and C130 demand reductions, partially offset by higher demand in certain rotorcraft and munition programs.
Gross Profit (Loss) Gross profit increased by $9.4 million, to $7.5 million during fiscal 2023, compared with a loss of $1.9 million in fiscal 2022.
Cost of Goods Sold Cost of goods sold (“COGS”) increased by $10.9 million, or 17.4%, to $73.7 million, or 92.5% of net sales, during fiscal 2024, compared with $62.7 million, or 94.9%, of net sales during fiscal 2023.
Gross margin percent of sales was 8.7% during fiscal 2023, compared with (2.2%) in fiscal 2022, primarily due to increased volume, ERC benefit of $1.5 million, reduction of NRV reserve and idle expense, and lower outside processing costs compared with the prior year.
Gross margin percent of sales was 7.5% during fiscal 2024, compared with 5.1% in fiscal 2023, primarily due to the increases in sales volume and COGS discussed above and the impact of favorable mix of products sold, particularly due to growth in the commercial space market.
Future cash flows from the Company’s operations may be used to pay down amounts outstanding under the Credit Agreement and its foreign related debts.
Refer to Note 6 — Debt of the Notes to Consolidated Financial Statements for details regarding our financing activities during fiscal 2024 and 2023. Future cash flows from the Company’s operations may be used to pay down outstanding debt amounts.
Commercial net sales increased $8.6 million to $48.4 million in fiscal 2023, compared to $39.8 million in fiscal 2022 primarily due to growth in the energy components for power generation units (steam turbine markets) and the increase in build rates in the commercial aerospace industry.
Commercial net sales increased $14.4 million to $41.8 million in fiscal 18 Table of Contents 2024, compared to $27.4 million in fiscal 2023 primarily due to higher demand in the commercial space market, as well as increases in build rates in the commercial aerospace industry.
The source of cash from working capital of $6.0 million was primarily due to reductions in receivables due to lower sales and improved collections as well as decreases in inventories, partially offset by payments to suppliers. Investing Activities Cash used for investing activities was $2.4 million in fiscal 2023, compared with $3.2 million in fiscal 2022.
Cash used for investing activities from discontinued operations was $1.4 million and $1.3 million in fiscal 2024 and 2023, respectively, related to outlays for capital expenditures. Cash provided by financing activities from discontinued operations was $1.1 million in fiscal 2024 compared to $2.0 million of cash used in fiscal 2023, attributable to proceeds from new borrowings and loan payments, respectively.
Removed
Commercial products and other revenue decreased $3.9 million in fiscal 2023 compared to the same period in fiscal 2022, primarily due to timing of orders related to a munitions program partially offset by an increase in commercial space. 18 Table of Contents Commercial net sales wer e 55.6% of total net sales and military net sales wer e 44.4% of to tal net sales in fiscal 2023, compared with 47.4% and 52.6%, respectively, in the comparable period in fiscal 2022.
Added
CBlade Sale In October 2024, the Company sold its European operations in order to streamline operational synergies and refocus on its core aerospace forging business. SIFCO Irish Holdings, Ltd., a wholly owned subsidiary of the Company, entered into a Share Purchase Agreement (the “SPA”) pursuant to which it sold 100% of the share capital of C Blade S.p.A.
Removed
Cost of Goods Sold Cost of goods sol d ("COGS") decreased by $6.3 million, or 7.3%, to $79.5 million, or 91.3% of net sales, during fiscal 2023, compared with $85.8 million or 102.2% of net sales in the comparable period of fisc al 2022.
Added
Forging & Manufacturing, an Italian joint stock company and wholly-owned subsidiary of the Company (“CBlade”), for cash consideration.
Removed
The increase in selling, general and administrative expenses is primarily due to incremental IT costs related to the cybersecurity incident of $1.3 million and professional fees primarily related to the ERC credit of $0.4 million partially offset by ERC benefit of $0.2 million. See Note 11 , Commitments and Contingencies for further discussion on cyber incident.
Added
As a result of the planned sale transaction, the Company’s financial statements have been prepared with the net assets, results of operations, and cash flows of CBlade presented as assets held for sale and discontinued operations, respectively, as of and for the years ended September 30, 2024 and 2023.
Removed
Other/General The Company recorded an operat ing loss of $6.7 million during fiscal 2023, compared with an operating loss of $14.1 million in fiscal 2022. Prior year results included a gain on extinguishment of debt related to the PPP loan, that was forgiven by the SBA, for $5.1 million. See Note 5, Debt and Subsequent Event for further discussion.
Added
All historical statements, amounts and related disclosures have been retrospectively adjusted to conform to this presentation. Refer to Note 2 — Assets Held for Sale and Discontinued Operations of the Notes to Consolidated Financial Statements.
Removed
Net interest expe nse was $1.3 million in fisca l 2023 compared with $0.6 million in fisca l 2022. The increase was due to higher interest rates and higher average borrowings compared with the prior year. See Note 5, Debt and Subsequent Event for further discussion.
Added
Rotorcraft sales increased $0.9 million in fiscal 2024 compared to the same period in fiscal 2023 primarily due to the Sikorsky H60 and Blackhawk programs, partially offset by declines in sales in the Bell/Boeing Osprey V22 components. Commercial space products increased by $8.6 million year-over-year due to higher demand for staged-combustion engine components.
Removed
The decrease in net loss in the current period was primarily due to increased volume, ERC refund benefit, reduction of NRV reserve and idle expense, lower outside processing costs and stabilized raw material pricing partially offset by cybersecurity incident costs. Prior year results included a $5.1 million gain on debt extinguishment previously noted.
Added
Commercial net sales were 52.4% of total net sales and military net sales were 47.6% of total net sales in fiscal 2024, compared with 41.5% and 58.5%, respectively, in fiscal 2023.
Removed
Non-GAAP Financial Measures Presented below is certain financial information based on the Company's EBITDA and Adjusted EBITDA.
Added
The increase was primarily due to increased volume, coupled with higher labor costs of $1.3 million and other manufacturing and overhead costs of $1.4 million, primarily consisting of supplies, outside processing fees and insurance.
Removed
Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in the United States of America (“GAAP”).
Added
Additionally, fiscal 2023 results included $1.5 million of Employee Retention Credit (“ERC”) benefit that did not reoccur in fiscal 2024. Gross Profit Gross profit increased by $2.6 million, to $6.0 million during fiscal 2024, compared with $3.3 million in fiscal 2023.
Removed
The Company and management will continue to assess and actively manage liquidity needs. See Note 5 , Debt and Subsequent Event . 21 Table of Contents Cash and cash equivale nts decreased to $0.4 million at Septemb er 30, 2023 compared with $1.2 million at September 30, 2022.
Added
The decrease in SG&A expenses is primarily due to lower costs related to the prior year's cybersecurity incident, partially offset by higher legal and other costs related to the evaluation of strategic alternatives.
Removed
The Company’s operating activi ties provided $0.3 million of cash in f iscal 2022.
Added
Loss from Continuing Operations Net loss was $8.6 million during fiscal 2024 compared with $10.5 million in fiscal 2023 due to higher sales volumes and gross margins improvements coupled with lower SG&A expenses, partially offset by higher interest expense. Non-GAAP Financial Measures Presented below is certain financial information based on the Company’s EBITDA and Adjusted EBITDA.
Removed
Financing Activities Cash provided by financing activities was $2.9 million in fiscal 2023 compared to cash provided by financing activities of $3.7 million in fiscal 2022. As discussed in Note 5, Debt and Subsequent Event , the Company amended the Credit Agreement and the Export Agreement on August 9, 2023.
Added
As of September 30, 2024 and 2023, the Company also had cash and cash equivalents related to its business held for sale (i.e., CBlade) of $1.0 million and $0.3 million, respectively, which are included in Current assets of business held for sale in the audited consolidated balance sheets.
Removed
The combined maximum borrowings decreased to $30.0 million from $35.0 million. The Seventh Amendment (the "Seventh Amendment") to the Credit Agreement (as amended, the "Credit Agreement") consists of a senior secured revolving credit facility with a maximum borrowing of $23.0 million, previously $28.0 million.
Added
The cash requirements for the upcoming fiscal year relate to payments on our outstanding debt and leases, operating and capital purchase commitments, and expected contributions to our defined benefit and contribution plans.
Removed
The revolving commitment through the Third Amendment (the "Third Amendment") of the Export Credit Agreement, which lends amounts to the Company on foreign receivables remained unchanged at $7.0 million.
Added
For information regarding the Company’s expected cash requirements and timing of payments related to leases and noncancellable purchase commitments, see Note 11 — Leases and Note 12 — Commitments and Contingencies of the Notes to Consolidated Financial Statements.
Removed
The Seventh Amendment, among other things, (i) advanced the loan maturity date to December 31, 2023; (ii) provided a waiver of Existing Defaults and concludes the forbearance period as described under the Forbearance Agreement dated April 28, 2023; (iv) the aggregate outstanding principal balance of the Revolving Exposure under the ABL Credit Agreement and 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 $18.0 million through September 30, 2023 and $19.0 million thereafter; (v) the Reserves under the Borrowing Base in the ABL Credit Agreement were reduced to $1.5 million through September 30, 2023 and $2.0 million thereafter.
Added
Additionally, refer to Note 19 — Retirement Benefit Plans of the Notes to Consolidated Financial Statements for more information related to the Company’s pension and defined contribution plans.
Removed
The Third Amendment amends the Export Credit Agreement to (i) modified the loan maturity date to December 31, 2023 and (ii) provided waiver of Existing Defaults and concludes the forbearance period as described under the Forbearance Agreement dated April 28, 2023.
Added
With the sale of the CBlade manufacturing operations located in Maniago, Italy, the Company expects to increase its cash on hand from the proceeds, which will be used to repay a portion of its outstanding debt balances and for general operational needs.
Removed
The Seventh Amendment was subject to satisfaction of certain post closing deliverables, including: (i) one or more proposed term sheets which provide for the refinancing of all of the Obligations under the current Credit Agreement, 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 ("CIM"), by no later than September 20, 2023; and (iii) a duly executed term sheet providing for the refinancing of all of the Obligations in an amount sufficient to repay the Obligations in full, by no later than October 8, 2023.
Added
Historically, the cash flows from the Company’s CBlade business represented a material portion of the consolidated results of operations, financial condition and cash flows. Although future contributions from the CBlade business will cease with the execution of the sale transaction, the Company believes that its streamlined operations and lower overall costs will allow management to focus on domestic growth opportunities.
Removed
All post closing deliverables were satisfied as required under the Seventh Amendment. As discussed in Note 5, Debt and Subsequent Event , on November 8, 2023, the Company entered into the Eighth Amendment to the Credit Agreement (the "Eighth Amendment") with its Lender.
Added
However, there is no guarantee that the Company’s continuing operations will sufficiently replace the liquidity and cash flows previously provided by CBlade’s operations. For details regarding the sale of CBlade, refer to Note 2 — Assets Held for Sale and Discontinued Operations of the Notes to Consolidated Financial Statements.
Removed
The Eighth Amendment, among other things, reduced the Reserves under the Borrowing Base in the Credit Agreement to $1.5 million, or such lesser amount, if any, as may be agreed upon in writing by the Lender in its sole discretion. 22 Table of Contents As discussed in Note 5, Debt and Subsequent Event , on December 21, 2023 the Company entered into the Ninth Amendment (the "Ninth Amendment") to the Credit Agreement and the Fourth Amendment (the "Fourth Amendment") to the Export Credit Agreement with its lender JPMorgan Chase Bank, N.A.
Added
We believe that our existing cash will be sufficient to finance our continued operations, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months. In order to support and achieve our future growth plans, we may need or advantageously seek to obtain additional funding through equity or debt financing.
Removed
(the "Lender") The Ninth Amendment amends the Credit Agreement to, among other things, to: (i) reflect the incurrence by borrowers of the Subordinated Loan and the execution and delivery by borrowers, the Lender and GHI of the Subordinated Loan Documents, and the receipt by borrowers of $3.0 million immediately available funds on the Ninth Amendment Effective Date; (ii) delay the maturity date from December 31, 2023 to October 4, 2024, or any earlier date on which the Revolving Commitment is reduced to zero or otherwise terminated pursuant to the terms of the Credit Agreement; (iii) reduce the Revolving Commitment from $23.0 million to $19.0 million; (iv) modify the Reserves of $1.5 million, increasing on the first day of each month by $0.3 million, commencing on May 1, 2024 and continuing until (and including) August 1, 2024, or such lesser amount, if any, as may be agreed upon in writing by the Lender in its sole discretion (which may be by email from the Lender), plus (d) the PP&E Component; (v) modify the Applicable Margin schedule to reflect the following applicable rates 2.75% (SOFR Spread), and 0.50% (Commitment Fee Rate).
Added
We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next 12 months. If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to borrow under our loan agreement or seek additional financing.
Removed
The Fourth Amendment of the Export Credit Agreement, to, among other things, to: (i) reflect the incurrence by borrowers of the Subordinated Loan and the execution and delivery by borrowers, the Lender and GHI of the Subordinated Loan Documents, and the receipt by borrowers of $3.0 million in immediately available funds on the Ninth Amendment Effective Date; and (ii) delay the maturity date to October 4, 2024, or any earlier date on which the Revolving Commitment is reduced to zero or otherwise terminated pursuant to the terms thereof.
Added
For details regarding our debt agreements, see Note 6 — Debt of the Notes to Consolidated Financial Statements. Operating Activities The Company’s operating activities used $2.6 million of cash in fiscal 2024, compared with $3.8 million of cash used in fiscal 2023.
Removed
The Company incurred a secured subordinated loan from Garnet Holdings, Inc., a California corporation owned and controlled by Mark J. Silk (“GHI”) (Mr.

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Other SIF 10-K year-over-year comparisons