2024
SIFCO Industries, Inc.
2024 Annual Report
To our Shareholders:
The Board of Directors (the “Board”) would like to thank you for your continued investment and confidence in
SIFCO Industries, Inc. During fiscal 2024, our Board—in its guidance and oversight of our management team—
continuously monitored our business performance, liquidity and risks. We reviewed business and capital deployment
strategies and opportunities that we believe have the potential to create long-term shareholder value.
As we reflect on the past year, we are pleased to share the progress we have made and the strategies that will drive
us forward. 2024 has been a year of rebuilding for SIFCO. We are incredibly proud of our team’s hard work,
dedication, and resilience.
This year, we endeavored to streamline operational synergies and refocus on our core businesses, all while
refinancing our maturing debt. We were successful in both efforts with the sale of our European operations and the
execution of our new loan agreement in mid-October 2024.
During 2024, SIFCO continued to experience growth in backlog across all served market segments, driven in part by
a strengthening global economy. Our positioning to better serve increasing demand in the Commercial Space market
resulted in triple-digit revenue growth and improved margins. Additionally, the Commercial Aerospace market
continued to stabilize from supply chain disruptions of the prior three years. Continuous development of new alloys
and applications resulted in SIFCO being awarded forty-five new products during the year. We remain committed to
exploring new ways to enhance our offerings and expand our reach.
Despite our many achievements, this year was not without its challenges. Like many companies, we faced supply
chain disruptions, inflationary pressures, persistent tightening in the credit markets, and shifting market conditions.
By adapting quickly to the changing environment, we were able to maintain operational efficiency while continuing
to deliver value to our customers. Looking forward, we remain vigilant and proactive in managing risks. Our diverse
portfolio and global presence provide us with the flexibility to respond to challenges as they arise.
The SIFCO team remains focused on safely providing class leading quality and service to our customers. As always,
our commitment to delivering value remains our top priority.
Our vision and mission have not changed. We strive to be the forged products supplier of choice to the markets we
serve. We look forward to updating you on our progress in the year ahead and continuing this journey together.
Thank you for your support of SIFCO.
George Scherff
Chief Executive Officer
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2024
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from _________________ to _____________________
Commission file number 1-5978
SIFCO Industries, Inc.
(Exact name of registrant as specified in its charter)
Ohio
34-0553950
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
970 East 64th Street, Cleveland Ohio
44103
(Address of principal executive offices)
(Zip Code)
(216) 881-8600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares
SIF
NYSE American
Securities registered pursuant to Section 12(g) of the Securities Exchange Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company (as defined in Rule 12b-2 of the Exchange Act).
large accelerated filer ☐ accelerated filer ☐ non-accelerated filer ☒ smaller reporting company ☒ emerging
growth company ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
1
Indicate by check mark whether the registrant has filed a report on an attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal
quarter is $19,683,297.
The number of the Registrant’s Common Shares outstanding at December 3, 2024 was 6,170,051.
Documents Incorporated By Reference
Certain information contained in the definitive Proxy Statement for the Company’s Annual Meeting of Shareholders to be held on
January 29, 2025 is incorporated by reference into Part III hereof.
2
Annual Report on Form 10-K
For the Year Ended September 30, 2024
Table of Contents
PART I
1
Business
4
1A.
Risk Factors
7
1B.
Unresolved Staff Comments
15
1C.
Cybersecurity
15
2
Properties
16
3
Legal Proceedings
22
4A.
Mine Safety Disclosures
16
PART II
5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
17
7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
8
Financial Statements and Supplemental Data
26
9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
65
9A
Controls and Procedures
65
9B
Other Information
66
9C
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
66
PART III
10
Directors Executive Officers and Corporate Governance
66
11
Executive Compensation
66
12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
66
13
Certain Relationships and Related Transactions, and Director Independence
67
14
Principal Accountant Fees and Services
67
PART IV
15
Exhibits and Financial Statement Schedules
67
Signatures
71
Item
Number
3
PART I
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.
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. 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. 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.
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. 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.
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. 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 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.
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. 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.
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. 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”). 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.
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. 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 business. In recent
4
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 terms. 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. 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. SIFCO’s product
offerings include: OEM and aftermarket components for aircraft and industrial gas turbine engines; steam turbine blades;
structural airframe components; aircraft landing gear components; aircraft wheels and brakes; critical rotating components for
helicopters; and commercial/industrial products. SIFCO also provides heat-treatment, surface-treatment, non-destructive testing
and select machining and sub-assembly of forged components.
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. 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. Uncertainty
may arise if the government reprioritizes funding as a result of, among other factors, potential changes in the threat
environment, defense spending levels, government priorities, political leadership, procurement strategy, military
strategy and planning, and broader changes in social, economic or political demands or priorities. Certain programs in
which the Company participates have seen favorable trends, which are expected to continue.
•
SIFCO supplies components for commercial aircraft, principally for large aircraft produced by Boeing and Airbus, and
for general aviation. Domestic and international travel are now at pre-pandemic levels. 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. 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. We believe there is an opportunity for SIFCO to gain
an increased market share as this industry continues to evolve and grow.
•
SIFCO supplies components to the semiconductor industry, for use in the manufacture of microchips. These
components require very challenging material properties and purity. 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. While alternative energy markets continue to
strengthen, oil and gas prices are expected to rebound given rising gas prices from historic lows. As such, it’s currently
anticipated that purchases of parts and supplies within the industry will increase. 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. SIFCO competes with both U.S. and
non-U.S. suppliers of forgings, some of which are significantly larger than SIFCO; however, our competitors range from
companies focused on the A&E markets to large diversified corporations that may also have business interests outside of the
A&E markets to smaller companies that offer a limited portfolio of products in this market. SIFCO believes that it has an
advantage and distinguishes itself in the primary markets it serves due to its: (i) demonstrated A&E expertise; (ii) focus on
quality and customer service; (iii) operating initiatives such as SMART (Streamlined Manufacturing Activities to Reduce Time/
Cost) and Six Sigma; and (iv) broad range of capabilities and offerings. As customers establish and utilize new facilities
throughout the world, SIFCO will continue to encounter non-U.S. competition. 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. See further discussion of the risks relating to competition SIFCO faces
in Item 1A. Risk Factors.
5
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. Under the terms of these agreements, it is possible for
demand and build rates to fluctuate or for the U.S. government to terminate existing contracts.
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. 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. 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. 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.
Backlog of Orders
SIFCO’s total backlog as of September 30, 2024 increased to $114.4 million, compared 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. 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
timing 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. Backlog information may not be indicative 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. 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. 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
Excluding CBlade employees due to the sale of this business in October 2024, SIFCO employed approximately 252 full-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. 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.
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 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. 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. The Company
is focused on ensuring the health of our employees through the implementation of standards, controls, and inspections to help
ensure that our operations and premises comply with national and local regulations. 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
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).
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. 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.
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. 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. 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.
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. 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. 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. 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.
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 public can obtain any
documents that are filed by the Company at http://www.sec.gov.
In addition, our annual reports on Form 10-K, as well as our quarterly reports on Form 10-Q, current reports on Form 8-K and
any amendments to all of the foregoing reports, are made available free of charge on or through the “Investor Relations” section
of our website at www.sifco.com as soon as reasonably practicable after such reports are electronically filed with or furnished
to the SEC.
Information relating to our corporate governance at SIFCO, including the Audit Committee, Corporate Governance and
Nominating Committee and Compensation Committee Charters, as well as the Corporate Governance Guidelines and Policies
and the Code of Conduct & Ethics adopted by our Board of Directors, is available free of charge on or through the “Investor
Relations” section of our website at www.sifco.com. References to our website or the SEC’s website do not constitute
incorporation by reference of the information contained on such websites, and such information is not part of this Form 10-K.
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.
7
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.
The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft. Demand for
commercial aircraft is influenced by airline industry profitability, trends in airline passenger traffic, the state of U.S. and world
economies, the ability of aircraft purchasers to obtain required financing and numerous other factors including the effects of
terrorism, health and safety concerns and environmental constraints imposed upon aircraft operators. 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. 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. In addition, a lengthy period of reduced industry-wide demand for
commercial aircraft could put additional pressure on our suppliers, resulting in increased procurement costs and/or additional
supply chain disruption. 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.
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. 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. Budget changes that result in a decline in overall spending, program delays, program cancellations or
a slowing of new program starts on programs in which we participate could materially adversely affect our business, prospects,
financial condition or results of operations. Future levels of expenditures and authorizations for defense-related programs by the
U.S. government may decrease, remain constant or shift to programs in areas where we do not currently provide products,
thereby reducing the chances that we will be awarded new contracts.
SIFCO has contracts for programs where the period of performance may exceed one year. Congress and certain foreign
governments must usually approve funds for a given program each fiscal year and may significantly reduce funding of a
program in a particular year. Significant reductions in these appropriations or the amount of new defense contracts awarded
may affect our ability to complete contracts, obtain new work and grow our business. At times when there are perceived threats
to national security, U.S. defense spending can increase; at other times, defense spending can decrease. Future levels of defense
spending are uncertain and subject to congressional debate. Any reduction in future U.S. defense spending levels could
adversely impact our sales, operating profit and cash flow.
Furthermore, business conducted pursuant to U.S. government contracts is subject to extensive procurement regulations and
other unique risks. New procurement regulations, or changes to existing requirements, could increase compliance costs or
otherwise have a material impact on the operating margins of the portion of our business derived from contracts with the U.S.
government. The U.S. government contracting party may modify, curtail, or terminate its contracts and subcontracts with the
Company without prior notice either at its convenience or for default based on performance, and funding pursuant to our U.S.
government contracts may be reduced or withheld as a part of the appropriations process due to fiscal constraints or due to
changes in foreign or domestic policy strategy.
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. Competitive 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
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.
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. 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.
If SIFCO is unable to consistently retain existing contracts or win new contract awards, our business, prospects, financial
condition and results of operations may be adversely affected.
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 was $114.4 million. Orders may be canceled and scope adjustments may occur,
and we may not realize the full amounts of sales that we anticipate in our backlog numbers. Further, there is no assurance that
our customers will purchase all the orders represented in our backlog, due in part to the U.S. government’s ability to modify,
curtail or terminate major programs. Additionally, the timing of receipt of orders, if any, on contracts included in our backlog
could change. The failure to realize amounts reflected in our backlog could materially adversely affect our business, financial
condition and results of operations in future periods.
SIFCO business is dependent on a few number of direct and indirect customers.
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. A
financial hardship experienced by any one of these key customers, the loss of any of them or a reduction in or substantial delay
of orders from any of them could have a material adverse effect on our business.
The Company’s failure to identify, attract and retain qualified personnel could adversely affect our existing business,
financial condition and results of operations.
SIFCO may not be able to identify, attract or retain qualified technical personnel, sales and customer service personnel,
employees with expertise in forging, or management personnel to supervise such activities. We may also not attract and retain
employees who share the Company’s core values, who can maintain and grow our existing business, and who are suited to work
in a public company environment, which could adversely affect our financial condition and results of operations.
The Company’s business could be negatively affected by cybersecurity threats, information systems interruptions, intrusions
or new software implementations and other disruptions.
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
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. 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, while SIFCO works cooperatively with its customers, suppliers and
subcontractors to seek to minimize the impacts of cyber threats, other security threats or business disruptions, in addition to our
internal processes, procedures and systems, it must also rely on the safeguards put in place by those entities.
Any intrusion, disruption, breach or similar event may cause operational stoppages, fines, penalties, diminished competitive
advantages through reputational damages and increased operational costs. The costs related to cyber or other security threats or
disruptions may not be fully mitigated by insurance or other means.
We continue to provide for remote work for certain of our employees, which may increase our vulnerability to cyber and other
information technology risks. In addition to existing risks, any adoption or deployment of new technologies via acquisitions or
internal initiatives may increase our exposure to risks, breaches, or failures, which could materially adversely affect our results
of operations or financial condition. Furthermore, the Company may have access to sensitive, confidential, or personal data or
information that may be subject to privacy and security laws, regulations, or other contractually-imposed controls. 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.
SIFCO relies on our suppliers to meet the quality and delivery expectations of our customers.
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. We rely on
numerous third-party suppliers for raw materials and a large proportion of the components used in our production process.
Certain of these raw materials and components are available only from single sources or a limited number of suppliers, or
similarly, customers’ specifications may require SIFCO to obtain raw materials and/or components from a single source or
certain suppliers. Many of our suppliers are small companies with limited financial resources and manufacturing capabilities.
We do not currently have the ability to manufacture these components ourselves. Consequently, 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. 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. 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. If we were unsuccessful in obtaining those
products from other sources or at comparable cost, a disruption in our supply chain could adversely affect our sales, earnings,
financial condition, and liquidity.
We may have disputes with our vendors arising from, among other things, the quality of products and services or customer
concerns about the vendor. If any of our vendors fail to timely meet their contractual obligations or have regulatory compliance
or other problems, our ability to fulfill our obligations under contracts with our customers may be jeopardized. Economic
downturns can adversely affect a vendor’s ability to manufacture or deliver products. Further, vendors may also be enjoined
from manufacturing and distributing products to us as a result of litigation filed by third parties, including intellectual property
litigation. If SIFCO were to experience difficulty in obtaining certain products from our key vendors, there could be an adverse
effect on its results of operations and on its customer relationships and our reputation. Additionally, our key vendors could also
increase pricing of their products, which could negatively affect our ability to win contracts by offering competitive prices.
Any material supply disruptions could adversely affect our ability to perform our obligations under our contracts and could
result in cancellation of contracts or purchase orders, penalties, delays in realizing revenues, and payment delays, as well as
adversely affect our ongoing product cost structure.
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, and the failure by a subcontractor to satisfactorily deliver products
10
can adversely affect our ability to perform our obligations as a prime contractor. 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.
The Company’s future success depends on the ability to meet the needs of its customer requirements in a timely manner.
The Company believes that the commercial A&E markets in which we operate require sophisticated manufacturing and system-
integration techniques and capabilities using composite and metallic materials. The Company’s success depends to a significant
extent on our ability to acquire, develop, execute and maintain such sophisticated techniques and capabilities to meet the needs
of our customers, and to bring those products to market quickly and at cost-effective prices. If we are unable to acquire and/or
develop, execute and maintain such techniques and capabilities, we may experience an adverse effect to our business, financial
condition or results of operation.
The Company faces certain significant risk exposures and potential liabilities that may not be covered adequately by
insurance or indemnity.
We are exposed to liabilities that are unique to the products we provide. While we maintain insurance for certain risks, the
amount of insurance or indemnity may not be adequate to cover all claims or liabilities, and we may be forced to bear
substantial costs from an accident or incident. 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. 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.
We operate in a highly competitive and price sensitive industry, and customer pricing pressures could reduce the demand
and/or price for our products and services.
The end-user markets SIFCO serves are highly competitive and price sensitive. We compete globally with a number of
domestic and international companies that have substantially greater manufacturing, purchasing, marketing and financial
resources than we do. Many of SIFCO’s customers have the in-house capability to fulfill their manufacturing requirements.
SIFCO’s larger competitors may be able to vie more effectively for very large-scale contracts than we can by providing
different or greater capabilities or benefits such as technical qualifications, past performance on large-scale contracts,
geographic presence, price and availability of key professional personnel. If SIFCO is unable to successfully compete for new
business, our net sales growth and operating margins may decline. Competitive pricing pressures may have an adverse effect on
our financial condition and operating results. Further, there can be no assurance that competition from existing or potential
competitors will not have a material adverse effect on our financial results. If SIFCO does not continue to compete effectively
and win contracts, our future business, financial condition, results of operations and our ability to meet its financial obligations
may be materially compromised.
The Company uses estimates when pricing contracts and any changes in such estimates could have an adverse effect on our
profitability and our overall financial performance.
When agreeing to contractual terms, some of which extend for multiple years, SIFCO makes assumptions and projections about
future conditions and events. These projections assess the productivity and availability of labor, complexity of the work to be
performed, cost and availability of materials, impact of delayed performance and timing of product deliveries. Contract pricing
requires judgment relative to assessing risks, estimating contract revenues and costs, and making assumptions for schedule and
technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and costs at completion is
complicated and subject to many variables. For example, assumptions are made regarding the length of time to complete a
contract since costs also include expected increases in wages, prices for materials and allocated fixed costs. Similarly,
assumptions are made regarding the future impact of our efficiency initiatives and cost reduction efforts. Incentives, awards or
penalties related to performance on contracts are considered in estimating revenue and profit rates and are recorded when there
is sufficient information to assess anticipated performance. Suppliers’ assertions are also assessed and considered in estimating
costs and profit rates.
Because of the significance of the judgment and estimation processes described above, it is possible that materially different
amounts could be obtained if different assumptions were used or if the underlying circumstances were to change. Changes in
underlying assumptions, circumstances or estimates may have a material adverse effect upon the profitability of one or more of
the affected contracts, future period financial reporting and performance, as pass through pricing is not always permissible.
11
Our technologies could become obsolete, reducing our revenues and profitability.
Technologies related to our products have undergone, and in the future may undergo, significant changes and the future of our
business will depend in large part upon the continuing relevance of our forging capabilities. SIFCO could encounter
competition from new or revised technologies that render its technologies and equipment less profitable or obsolete in our
chosen markets and our operating results may suffer.
If the Company fails to maintain an effective system of internal control over financial reporting, it may not be able to
accurately or timely report its financial results. As a result, current and potential shareholders could lose confidence in the
Company’s financial reporting, which would harm the business and the trading price of its common stock.
The Sarbanes-Oxley Act, among other things, requires that we maintain effective internal controls for financial reporting and
disclosure controls and procedures. In particular, we must perform system and process evaluations and testing of our internal
controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial
reporting, as required by Section 404 of the Sarbanes-Oxley Act. Compliance with Section 404 may require that we incur
substantial accounting expenses and expend significant management efforts. 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. In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot
remediate in a timely manner, the market price of our stock could decline if investors and others lose confidence in the
reliability of our financial statements and we could be subject to sanctions or investigations by the SEC or other applicable
regulatory authorities.
As further described in Item 9A in our Annual Report on Form 10-K, for the fiscal year ended September 30, 2023,
management determined that SIFCO’s internal control over financial reporting and its disclosure controls and procedures were
not effective. 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.
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. 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.
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 people (excluding Maniago due its sale in October 2024). We face
competition for management and employees from other companies and organizations. If we continue to experience turnover
and/or are unable to quickly hire employees and subsequently retain our workforce, or we experience a significant or prolonged
work stoppage in such an environment, we may experience increased costs, such as increased overtime to meet demand and
increased wage rates to attract and retain employees, and our ability to secure new work and our results of operations and
financial condition could be adversely affected. 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. If the unionized workers were to
engage in a strike or other work stoppage, or if SIFCO is unable to negotiate acceptable collective bargaining agreements with
the unions, or if other employees were to become unionized, we could experience a significant disruption of our operations,
higher ongoing labor costs and possible loss of customer contracts, which could have an adverse effect on our business and
results of operations.
The price and availability of oil and other energy sources worldwide could adversely impact our results of operations.
Unexpected pricing of fuel or a shortage of, or disruption in, the supply of fuel or other energy sources could have a
material adverse effect on our and our customers’ business, results of operations and financial condition.
Our results of operations can be directly affected, positively and negatively, by volatility in the cost and availability of energy,
which is subject to global supply and demand and other factors beyond our control. 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. Weather-related events, natural disasters, terrorism, wars, political disruption or instability involving oil-
producing countries, changes in governmental or cartel policy concerning crude oil or aircraft fuel production, labor strikes,
cyberattacks or other events affecting refinery production, transportation, taxes, marketing, environmental concerns, market
manipulation, price speculation and other unpredictable events may drive actual or perceived fuel supply shortages. In
particular, the ongoing conflict between Russia and Ukraine has caused shortages in the availability of fuel. In the event that the
12
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.
Risks Related to Financial Matters
A decline in operating results or access to financing may have an adverse impact on our liquidity position.
Our ability to make required payments of principal and interest on our debt will depend in part on our future performance,
which, to a certain extent, is subject to general economic, financial, competitive, political and other factors, some of which are
beyond our control. Accordingly, conditions could arise that could limit our ability to generate sufficient cash flows or to access
borrowings to enable us to fund our liquidity needs, which could further limit our financial flexibility or impair our ability to
obtain alternative financing sufficient to repay our debt at maturity. We believe that our cash on hand, together with funds
generated by our operations and borrowings under our existing credit facilities, will provide us with sufficient liquidity and
capital resources to meet our operating needs for the foreseeable future. Significant assumptions underlie this belief however,
including, among other things, assumptions relating to future sales volumes, the successful implementation of our business
strategies and that there will be no material adverse developments in our competitive market position, business, liquidity or
capital requirements. In the event that we do not have sufficient liquidity, we may be required to seek additional capital, reduce
or cut back our operating activities, capital expenditures or otherwise alter our business strategy. If we obtain additional capital
by issuing equity, the interests of our existing stockholders will be diluted. 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.
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. These changes could increase our cost of
business, limiting our ability to pursue acquisition opportunities, react to market conditions and meet operational and capital
needs, thereby placing us at a competitive disadvantage.
Global economic conditions may adversely impact our business, operating results or financial condition.
Disruption and volatility in global financial markets may lead to increased rates of default and bankruptcy and may negatively
impact consumer and business spending levels. Current or potential customers may delay or decrease spending on our products
and services as their business and/or budgets are impacted by economic conditions. The inability of current and potential
customers to pay SIFCO for its products and services may adversely affect its earnings and cash flows.
Further, we are exposed to fluctuations in inflation, which could negatively affect our business, financial condition and results
of operation. The United States and other jurisdictions have recently experienced high levels of inflation. 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.
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.
The funding and costs associated with our pension plans and significant changes in key estimates and assumptions, such as
discount rates and assumed long-term returns on assets, actual investment returns on our pension plan assets, and
legislative and regulatory actions could affect our earnings, equity and contributions to our pension plans in future periods.
Certain of the Company’s employees are covered by its noncontributory defined benefit pension plans (collectively, the
“Plans”). 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. 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. 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. Changes in these factors affect our plan
funding, cash flows, earnings, and shareholders’ equity.
13
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.
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. 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 capital market financing or bank financing on favorable terms, or at all, which could have a material adverse
effect on our financial position, results of operations or cash flows.
Tightening credit markets could also adversely affect our suppliers’ ability to obtain financing. Delays in suppliers’ ability to
obtain financing, or the unavailability of financing, could negatively affect their ability to perform their contracts with SIFCO
and cause our inability to meet our contract obligations. 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. 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.
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. 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.
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.
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. The market price of our common stock could fluctuate significantly for various reasons,
which include:
a.
our quarterly or annual earnings or those of our competitors or our significant customers;
b.
the public’s reaction to our press releases, our other public announcements and our filings with the Securities and
Exchange Commission;
c.
changes in earnings estimates or recommendations by research analysts who track the stocks of our competitors;
d.
new laws or regulations or new interpretations of laws or regulations applicable to our business;
e.
changes in accounting standards, policies, guidance, interpretations or principles;
f.
changes in general conditions in the domestic and global economies or financial markets, including those resulting
from war, incidents of terrorism, health crises or responses to such events;
g.
litigation involving our company or investigations or audits by regulators into the operations of our company or our
competitors;
h.
strategic action by our competitors;
i.
sales of common stock by our directors, executive officers and significant shareholders; and
j.
our stock being closely held by insider holdings and is thinly traded which impacts price volatility.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly
affect the market price of our common stock, regardless of actual operating performance. 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.
14
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. 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. Changes in applicable income tax laws and regulations, or their interpretation, could result in
higher or lower income tax rates or changes in the taxability of certain sales or the deductibility of certain expenses, thereby
affecting our income tax expense and profitability. In addition, the final results of any tax audits or related litigation could be
materially different from our related historical income tax provisions and accruals. Additionally, changes in our tax rate as a
result of changes in our overall profitability, changes in tax legislation, changes in the valuation of deferred tax assets and
liabilities, changes in differences between financial reporting income and taxable income, the examination of previously filed
tax returns by taxing authorities and continuing assessments of our tax exposures can also impact our tax liabilities and affect
our income tax expense, profitability and cash flow.
Damage or destruction of our facilities caused by storms, earthquakes or other causes could adversely affect our financial
results and financial condition.
We have operations located in regions of the world that may be exposed to damaging storms, earthquakes and other natural
disasters as well as other events outside of our control, such as fires, floods and other catastrophic events. 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. Thus, any significant damage or destruction of our properties could have a material
adverse effect on our business, financial condition or results of operations.
The occurrence of litigation where we could be named as a defendant is unpredictable.
From time to time, we are involved in various legal and other proceedings that are incidental to the conduct of our business.
While we believe no current proceedings, if adversely determined, could have a material adverse effect on our financial results,
no assurances can be given. Any such claims may divert financial and management resources that would otherwise be used to
benefit our operations and could have a material adverse effect on our financial results.
Our operations are subject to environmental laws, and complying with those laws may cause us to incur significant costs.
Our operations and facilities are subject to numerous stringent environmental laws and regulations. Although we believe that
we are in compliance with these laws and regulations, future changes in these laws, regulations or interpretations of them, or
changes in the nature of our operations may require us to make significant capital expenditures to ensure compliance.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
We have processes in place aimed at assessing, identifying, and managing material risks from cybersecurity threats. Our
cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common
methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other
legal, compliance, strategic, operational, and financial risk areas.
Key elements of our cybersecurity risk management program include:
•
periodic risk assessments designed to help identify material cybersecurity risks to our critical systems and information;
•
a formal register documenting and mitigating identified risks, reviewed by management on a quarterly basis;
•
a data protection team principally responsible for managing our cybersecurity risk assessment processes, our security
controls, and our response to cybersecurity incidents;
•
the regular use of external service providers to independently assess and test security posture, as well as to otherwise
assist with aspects of our security processes;
•
cybersecurity awareness training of our employees, including incident response personnel and senior management;
•
a written cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents,
including data storage and restoration and disaster recovery plans; and
15
•
a third-party risk management process for key service providers based on our assessment of their criticality to our
operations and respective risk profile.
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 the 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 has since completed data recovery and restoration from the cyber
incident. See Note 12 — Commitments and Contingencies of the Notes to Consolidated Financial Statements.
Except for the above incident, we have not identified risks from known cybersecurity threats, including as a result of any prior
cybersecurity incidents, which have materially affected us, including our operations, business strategy, results of operations, or
financial condition. We face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us,
including our operations, business strategy, results of operations, or financial condition. See “Risk Factors—Risks Related to
Our Business and Operations.”
Governance
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and maintains oversight of risk
assessment and risk management, including cybersecurity and other information technology risks. In addition, our Board of
Directors oversees management’s implementation of our cybersecurity risk management program.
The Board of Directors receives periodic reports from management on our cybersecurity risks. In addition, management updates
the Board of Directors, where it deems appropriate, regarding cybersecurity incidents it considers to be significant or potentially
significant. These presentations may cover a range of topics, including:
•
the current cybersecurity landscape and best practices for mitigating emerging threats;
•
progress on cybersecurity projects;
•
incident reports;
•
updates from past event(s); and
•
adherence to regulatory requirements and/or industry standards, as appropriate.
Our management team, including our Data Protection Officer and external counsel, are responsible along with the Company’s
Board of Directors for assessing and managing our material risks from cybersecurity threats. Our Data Protection Officer has
primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity
personnel and our retained external cybersecurity consultants. Our Data Protection Officer has extensive experience in
information technology, including prior experience in cybersecurity architecture. We have a diverse information security team,
including external consultants, with varying backgrounds and experience and levels of information security certification.
Our management team takes steps to remain informed about and monitor efforts to prevent, detect, mitigate, and remediate
cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat
intelligence and other information obtained from governmental, public or private sources, including external consultants
engaged by us; and alerts and reports produced by security tools deployed in our IT environment.
Item 2. Properties
The Company’s property, plant and equipment include the facilities described below and a substantial quantity of machinery
and equipment, most of which consists of industry specific machinery and equipment using special dies, jigs, tools and fixtures
and in many instances having automatic control features and special adaptations. 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. The 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).
Item 4. Mine Safety Disclosures.
Not applicable.
16
PART II
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K may contain various forward-looking statements and includes assumptions concerning the
Company’s operations, future results and prospects. The words "will," "may," "designed to," "outlook," "believes," "should,"
"anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-
looking statements. These forward-looking statements are based on current expectations and are subject to risk and
uncertainties. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the
Company provides this cautionary statement identifying important economic, political and technological factors, among others,
the absence or effect of which could cause the actual results or events to differ materially from those set forth in or implied by
the forward-looking statements and related assumptions. Such factors include the following: (1) the impact on business
conditions in general, and on the demand for product in the aerospace and energy (or "A&E”) industries in particular, of the
global economic outlook, including the continuation of military spending at or near current levels and the availability of capital
and liquidity from banks, the financial markets and other providers of credit; (2) the future business environment, including
capital and consumer spending; (3) competitive factors, including the ability to replace business that may be lost at comparable
margins; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful
development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional
and business aircraft powered by more fuel efficient turboprop engines; (7) continued reliance on military spending, in general,
and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined
benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9)
stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; (10) the ability
to successfully integrate businesses that may be acquired into the Company’s operations; (11) cyber and other security threats
or disruptions faced by us, our customers or our suppliers and other partners; (12) our exposure to additional risks as a result of
our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations; (13) the
ability to maintain a qualified workforce; (14) the adequacy and availability of our insurance coverage; (15) our ability to
develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet
the needs of our customers; (16) our ability to realize amounts in our backlog; (17) investigations, claims, disputes, enforcement
actions, litigation and/or other legal proceedings; and (18) extraordinary or force majeure events affecting the business or
operations of our business.
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. The Company will continue to evaluate the
payment of dividends annually based on its relative profitability, available resources, and investment strategies. The Company
currently intends to retain a significant majority of its earnings for operations, focusing on its long-term plan and growth.
Additionally, the Company’s ability to declare or pay cash dividends is limited by its credit agreement. At 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. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters” for information related to the Company’s equity compensation plans.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
SIFCO is engaged in the production of forgings and machined and sub-assembled components primarily for the Aerospace and
Defense, Energy and Commercial Space markets. The processes and services include forging, heat-treating, chemical
processing and machining. The Company operates under one business segment.
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.
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
the fixed component of their respective cost structures. Conversely, the opposite effect is expected to occur at lower net sales
and related production volumes.
A.
Results of Operations
Overview
The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well
as military aircraft and armored military vehicles; (ii) airframe applications for a variety of aircraft; (iii) private space launch
and reentry programs; and (iv) other commercial applications.
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. Forging &
Manufacturing, an Italian joint stock company and wholly-owned subsidiary of the Company (“CBlade”), for cash
consideration.
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. 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.
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. The Company’s domestic operations were impacted by this cybersecurity
incident which resulted in production delays and delayed shipments due to information access limitations. 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.
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. 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. 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. 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.
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. Commercial net sales increased $14.4 million to $41.8 million in fiscal
18
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. 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.
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. 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. 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. 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. 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.
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. 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.
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.
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.
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. 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.
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. 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
Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting
principles in the United States of America (“GAAP”). The Company presents EBITDA and Adjusted EBITDA
because management believes that they are useful indicators for evaluating operating performance, including the Company’s
ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions. Although the Company uses EBITDA
and Adjusted EBITDA for the reasons noted above, the use of these non-GAAP financial measures as analytical tools has
limitations. Therefore, reviewers of the Company’s financial information should not consider them in isolation, or as a
substitute for analysis of the Company’s results of operations as reported in accordance with GAAP. Some of these limitations
include:
•
Neither EBITDA nor Adjusted EBITDA reflects the interest expense or the cash requirements necessary to service interest
payments on indebtedness;
•
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to
be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such
replacements;
•
The omission of the 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.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash
available to the Company to invest in the growth of its businesses. Management compensates for these limitations by not
viewing EBITDA or Adjusted EBITDA in isolation and specifically by using other GAAP measures, such as net income (loss),
net sales, and operating income (loss), to measure operating performance. Neither EBITDA nor Adjusted EBITDA is a
measurement of financial performance under GAAP, and neither should be considered as an alternative to net loss or cash flow
from operations determined in accordance with GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may
not be comparable to the calculation of similarly titled measures reported by other companies.
The following table sets forth a reconciliation of net 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.
(2)
Represents miscellaneous non-operating income or expense, such as pension costs or grant income.
(3)
Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company’s books.
(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
(5)
Represents expense incurred by its defined benefit pension plans related to settlement of pension obligations.
(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.
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.
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. 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.
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. 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. 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. 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. 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.
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. 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. 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.
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. 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. 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. 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. 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. The use of cash from working capital of $2.3 million was primarily due to higher
inventories due to timing of raw material receipts, the increase in accounts receivable due to higher sales and timing of
payments at the end of the fiscal year, and higher prepaid expenses attributable to deferred financing costs related to the debt
refinancing, partially offset by an increase in contract liabilities due to advance payments for raw materials and higher sales
recognized over-time and higher accounts payable due to timing of payments.
21
The Company’s operating activities used $3.8 million of cash in fiscal 2023. 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 $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.
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. 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.
Financing Activities
Cash provided by financing activities was $6.3 million in fiscal 2024 compared to cash provided by financing activities of $4.9
million in fiscal 2023. The year-over-year increase was primarily related to the higher proceeds received from the related party
promissory note and funds drawn from the revolving credit facility, net of payments made, during fiscal 2024.
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. 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.
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 debt agreements when needed in the future. 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.
Net Cash Provided By (Used For) Discontinued Operations
Net cash from discontinued operations are presented in the consolidated statements of cash flows as summarized operating,
investing and financing cash flows, as well as the impact of exchange rate changes on cash. 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. 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.
Item 3. Legal Proceedings
In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot
reasonably estimate future costs, if any, related to these matters and does not believe any such matters are material to its
financial condition or results of operations. The Company maintains various liability insurance coverages to protect its assets
from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is
possible that the Company’s future operating results could be affected by future costs of litigation. See 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.
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. Estimates are revised as additional
information becomes available. The Company believes that the accounting estimates employed and the resulting balances are
22
reasonable; however, actual results in these areas could differ from management’s estimates under different assumptions or
conditions.
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. 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.
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. 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. 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.
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.
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. 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. 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.
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. 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.
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. 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. 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. 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. 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
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. 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. 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. 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. 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. 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. 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.
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.
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. 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. 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. 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.
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. 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.
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
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. 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. 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.
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. 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. 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. 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.
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.
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. 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. 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. 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.
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.
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. 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. 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. 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. 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.
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
Item 8. Financial Statements and Supplementary Data
Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 49)
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of SIFCO Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SIFCO Industries, Inc. and its subsidiaries (the Company) as
of September 30, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, shareholders’ equity
and cash flows for the years then ended, and the related notes to the consolidated financial statements and schedule
(collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on
the accounts or disclosures to which they relate.
Goodwill Impairment Assessment
As discussed in Notes 1 and 4 to the consolidated financial statements, the Company’s goodwill balance was $3.5 million at
September 30, 2024 and is recorded at the Cleveland, Ohio (“Cleveland”) reporting unit. At July 31, 2024, the Company
performed its annual goodwill impairment test by performing a quantitative analysis in lieu of a qualitative analysis and
concluded there was no impairment of goodwill. The fair value of the Cleveland reporting unit for the goodwill impairment
assessment is estimated utilizing a combination of income (discounted cash flow method) and market valuation (market
comparable method) approaches. The income approach involves using cash flow projections developed by management to
calculate discounted cash flows, the sum of which is subject to certain adjustments to estimate the business enterprise value.
The market approach involves performing research on guideline public companies that are similar in nature to the Company to
develop an appropriate valuation multiple to estimate the business enterprise value. The estimated fair values determined by the
income approach and market approach are then weighted to estimate the fair value of the Cleveland reporting unit. Significant
judgment is required to forecast future cash flows, determine the discount rate applicable to the Cleveland reporting unit, select
the appropriate guideline public companies and determine the appropriate market multiples from those guideline public
companies.
We identified the Company’s annual goodwill impairment test for the Cleveland reporting unit as a critical audit matter because
of the significant assumptions management used in its annual impairment test, including the revenue growth rates and margin
percentages used in the projected cash flows, the determination of the discount rate applicable to the reporting unit, the
identification of comparable guideline public companies and the determination of the appropriate market multiples. Auditing
management’s assumptions involved a high degree of auditor judgment and an increase in audit effort, including the use of our
valuation specialists, due to the impact these assumptions could have on the accounting estimate.
27
Our audit procedures related to the Company’s annual goodwill impairment test included the following, among others:
•
We tested the underlying data used by management in its model for completeness and accuracy.
•
We developed an independent estimate of the Cleveland reporting unit’s fair value under both the income and market
valuation approaches using publicly available market data for the Cleveland reporting unit’s industry and compared
our independent estimate to management’s estimate of fair value.
•
We utilized our valuation specialists to assist in the following procedures, among others:
◦
Testing the reasonableness of the discount rate by comparing the inputs used by management to publicly
available market data.
◦
Evaluating the comparability of the guideline public companies identified by management based upon
publicly available market data.
◦
Corroborating the market multiples selected by the Company by comparing them publicly available market
data.
◦
Evaluating the appropriateness of the valuation models used by management and testing their mathematical
accuracy.
Recoverability of Long-Lived Assets at Orange, California
As described in Note 1 to the consolidated financial statements, the Company assesses long-lived assets for impairment at the
asset group level when events or changes in circumstances indicate that the carrying value of the asset group may not be
recoverable (Step 1). When indicators of impairment are identified, the Company tests the recoverability of the asset group by
comparing estimates of future undiscounted cash flows expected to be generated by the asset group to the carrying value of the
asset group (Step 2). If the carrying value of the asset group is greater than the estimated undiscounted future cash flows, the
asset group is considered impaired, and an impairment charge is recorded for the amount by which the carrying value of the
asset group exceeds its fair value (Step 3). During the year ended September 30, 2024, the Company concluded that the Orange,
California asset group exhibited indicators of impairment, which required management to perform a Step 2 test of
recoverability.
We identified the Step 2 test of recoverability of the Orange, California asset group to be a critical audit matter due to the
significant assumptions used by management in determining the estimated future undiscounted cash flows of the asset group,
including revenue and cash flow projections as well as the estimated residual value of the asset group. Auditing management’s
assumptions involved a high degree of auditor judgment and increased audit effort, including the use of our valuation
specialists, due to the impact these assumptions could have on the accounting conclusion.
Our audit procedures related to the Company’s Step 2 test of recoverability of the Orange, California asset group included the
following, among others:
•
We evaluated the reasonableness of management’s revenue and cash flow projections by comparing the assumptions
used by management to the asset group’s historical results, underlying source documents, and publicly available
industry information.
•
We tested the clerical accuracy of the Company’s calculation of the undiscounted cash flows.
•
We tested the completeness and accuracy of the historical source data by agreeing it to the underlying support.
•
We utilized our valuation specialists to assist in the following procedures, among others:
◦
Evaluating the appropriateness of the model used by management to estimate the future undiscounted cash
flows.
◦
Corroborating the market multiple used by management to estimate the residual value of the Orange,
California asset group by comparing it to publicly available market data.
/s/ RSM US LLP
We have served as the Company’s auditor since 2023.
Cleveland, Ohio
December 23, 2024
28
SIFCO Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
Years Ended September 30,
2024
2023
Net sales
$
79,633 $
66,067
Cost of goods sold
73,651
62,722
Gross profit
5,982
3,345
Selling, general and administrative expenses
11,128
12,276
Amortization of intangible assets
—
73
Loss (gain) on disposal of operating assets
4
(1)
Operating loss
(5,150)
(9,003)
Interest expense, net
3,080
997
Foreign currency exchange (gain) loss, net
(3)
3
Other expense, net
362
500
Loss from continuing operations before income tax expense
(8,589)
(10,503)
Income tax expense
37
16
Loss from continuing operations
(8,626)
(10,519)
Income from discontinued operations, net of tax
3,243
1,827
Net loss
$
(5,383) $
(8,692)
Basic earnings (loss) per share:
Basic loss per share from continuing operations
$
(1.44) $
(1.77)
Basic earnings per share from discontinued operations
0.54
0.30
Basic loss per share
$
(0.90) $
(1.47)
Diluted earnings (loss) per share:
Diluted loss per share from continuing operations
$
(1.44) $
(1.77)
Diluted earnings per share from discontinued operations
0.54
0.30
Diluted loss per share
$
(0.90) $
(1.47)
Weighted-average number of common shares (basic)
5,996
5,929
Weighted-average number of common shares (diluted)
5,996
5,929
See notes to consolidated financial statements.
29
SIFCO Industries, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(Amounts in thousands)
Years Ended September 30,
2024
2023
Net loss
$
(5,383) $
(8,692)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax
374
268
Retirement plan liability adjustment, net of tax
904
1,768
Interest rate swap agreement adjustment, net of tax
(7)
(3)
Comprehensive loss
$
(4,112) $
(6,659)
See notes to consolidated financial statements.
30
SIFCO Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except per share data)
September 30,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
1,714 $
21
Receivables, net of allowance for credit losses of $117 and $237, respectively
17,272
15,638
Contract asset
10,745
10,091
Inventories, net
6,230
4,547
Refundable income taxes
13
84
Prepaid expenses and other current assets
2,382
1,545
Current assets held for sale
15,967
9,548
Total current assets
54,323
41,474
Property, plant and equipment, net
26,261
29,467
Operating lease right-of-use assets, net
13,326
14,221
Goodwill
3,493
3,493
Other assets
357
368
Noncurrent assets held for sale
6,864
7,258
Total assets
$
104,624 $
96,281
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt
$
353 $
374
Promissory note — related party
3,510
—
Revolver
20,142
16,289
Short-term operating lease liabilities
879
818
Accounts payable
11,574
11,024
Contract liabilities
2,879
731
Accrued liabilities (related party — $880 and nil, respectively)
4,615
3,342
Current liabilities held for sale
10,058
8,661
Total current liabilities
54,010
41,239
Long-term operating lease liabilities, net of short-term
13,035
13,915
Deferred income taxes, net
154
142
Pension liability
2,465
3,105
Other long-term liabilities
645
661
Noncurrent liabilities held for sale
3,890
2,884
Shareholders’ equity:
Serial preferred shares, no par value, authorized 1,000 shares; 0 shares issued and
outstanding at September 30, 2024 and 2023
—
—
Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding
shares 6,158 at September 30, 2024 and 6,105 at September 30, 2023
6,158
6,105
Additional paid-in capital
11,775
11,626
Retained earnings
17,881
23,264
Accumulated other comprehensive loss
(5,389)
(6,660)
Total shareholders’ equity
30,425
34,335
Total liabilities and shareholders’ equity
$
104,624 $
96,281
See notes to consolidated financial statements.
31
SIFCO Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Amounts in thousands)
Years Ended September 30,
2024
2023
Cash flows from operating activities:
Net loss
$
(5,383) $
(8,692)
Income from discontinued operations, net of tax
3,243
1,827
Loss from continuing operations
(8,626)
(10,519)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization
4,784
5,070
Amortization of debt issuance costs
1,187
44
Loss (gain) on disposal of operating assets
4
(1)
Loss on insurance proceeds received for damaged property
—
60
Inventory valuation accounts
570
(1,149)
LIFO effect
862
(305)
Share transactions under employee stock plan
202
304
Deferred income taxes
12
13
Interest added to promissory note - related party (paid-in-kind)
360
—
Other short-term liabilities
40
—
Other long-term liabilities
240
338
Changes in operating assets and liabilities:
Receivables
(1,634)
(3,850)
Contract assets
(655)
81
Inventories
(2,971)
2,615
Refundable income taxes
71
13
Prepaid expenses and other current assets
(1,181)
(330)
Other assets
11
(6)
Accounts payable
1,457
3,295
Accrued liabilities
516
(11)
Contract liabilities
2,147
577
Accrued income tax and other
(44)
1
Net cash used in operating activities
(2,648)
(3,760)
Cash flows from investing activities:
Proceeds from disposal of property, plant and equipment
—
1
Capital expenditures
(1,989)
(1,118)
Net cash used for investing activities
(1,989)
(1,117)
Cash flows from financing activities:
Proceeds from promissory note - related party
3,000
—
Repayments of term note
(61)
(240)
Proceeds from revolving credit agreement
95,945
80,041
Repayments of revolving credit agreement
(92,093)
(74,915)
Payments for debt issuance costs
(461)
—
Principal payments on finance leases
—
(5)
Net cash provided by financing activities
6,330
4,881
Cash flows from discontinued operations:
Net cash provided by operating activities
1,373
2,397
Net cash used for investing activities
(1,411)
(1,317)
Net cash provided by (used for) financing activities
1,081
(2,000)
Effects of exchange rate changes on cash and cash equivalents
(381)
110
Net cash provided by (used for) discontinued operations
662
(810)
Increase in cash and cash equivalents
2,355
(806)
Cash and cash equivalents at beginning of year
368
1,174
32
Less cash and cash equivalents of discontinued operations at the end of the year
(1,009)
(347)
Cash and cash equivalents from continuing operations at end of year
$
1,714 $
21
See notes to consolidated financial statements.
33
SIFCO Industries, Inc. and Subsidiaries
Supplemental Disclosure of Cash Flow Information
(Amounts in thousands)
Years Ended September 30,
2024
2023
Cash paid during the year:
Cash paid for interest
$
(1,468) $
(986)
Cash paid for income tax, net
(19)
(9)
Non-cash investing and financing activities:
Additions to property, plant & equipment - incurred but not yet paid
—
189
Accrued guaranty fees - related party
880
—
Origination fees capitalized to promissory note principal - related party
150
—
Interest added to promissory note - related party (paid-in-kind)
360
—
See notes to consolidated financial statements.
34
SIFCO Industries, Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(Amounts in thousands)
Common
Shares
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Balance - September 30, 2022
6,040
$
11,387 $
31,956 $
(8,693) $
40,690
Comprehensive (loss) income
—
—
(8,692)
2,033
(6,659)
Performance and restricted share expense
—
375
—
—
375
Share transactions under employee stock plans
65
(136)
—
—
(71)
Balance - September 30, 2023
6,105 $
11,626 $
23,264 $
(6,660) $
34,335
Comprehensive (loss) income
—
—
(5,383)
1,271
(4,112)
Performance and restricted share expense
—
250
—
—
250
Share transactions under employee stock plans
53
(101)
—
—
(48)
Balance - September 30, 2024
6,158
$
11,775 $
17,881 $
(5,389) $
30,425
See notes to consolidated financial statements.
35
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Amounts in thousands, except per share data)
1.
Summary of Significant Accounting Policies
A.
DESCRIPTION OF BUSINESS
SIFCO Industries, Inc. and its subsidiaries are engaged in the production of forgings and machined components primarily in the
Aerospace and Energy (“A&E”), Defense and Commercial Space markets. The Company’s operations are conducted in a single
business segment, "SIFCO" or the "Company." SIFCO operates from multiple locations. SIFCO manufacturing facilities are
located in Cleveland, Ohio (“Cleveland”); Orange, California (“Orange”); and Maniago, Italy (“Maniago”).
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. Forging &
Manufacturing, an Italian joint stock company and wholly-owned subsidiary of the Company (“CBlade”), for cash
consideration.
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. 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.
Cybersecurity Incident
During fiscal 2023, the Company’s domestic operations were impacted by the Cybersecurity Incident (“Cyber Incident”) which
resulted in production delays and delayed shipments due to information access limitations. The Company has since completed
data recovery and restoration from the cyber incident. See Note 12 — Commitments and Contingencies.
B.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation. The U.S. dollar is the functional
currency for all the Company’s U.S. operations and its non-operating non-U.S. subsidiaries. For these operations, all gains and
losses from completed currency transactions are included in income. The functional currency for the Company’s other non-U.S.
subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period,
and revenues and expenses are translated using average rates of exchange which approximate the rates in effect at the date of
the transaction. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss
in the consolidated statements of shareholders’ equity.
C.
CASH EQUIVALENTS
The Company considers all highly liquid short-term investments with original maturities of three months or less to be cash
equivalents. A substantial majority of the Company’s cash and cash equivalent bank balances exceed federally insured limits as
of September 30, 2024 and 2023.
D.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES
Accounts receivable represent the Company’s unconditional rights to consideration, subject to the payment terms of the
contract, for which only the passage of time is required before payment. Unbilled receivables are reflected under contract assets
on the consolidated condensed balance sheets.
The Company establishes allowances for credit losses on accounts receivable, customer financing receivables, and certain other
financial assets. 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.
Receivables are presented net of allowance for credit losses of $117 and $237 at September 30, 2024 and 2023, respectively.
Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company writes off
accounts receivable when they become uncollectible. In fiscal 2024, $30 of accounts receivable were written off against the
36
allowance for credit losses, while $16 were written off in fiscal 2023. Bad debt expense totaled expense of $90 and a benefit of
$194 benefit in fiscal 2024 and 2023, respectively.
E.
CONCENTRATIONS OF CREDIT RISK
Most of the Company’s receivables represent trade receivables due from manufacturers of turbine engines and aircraft
components as well as turbine engine overhaul companies located throughout the world, including a significant concentration of
U.S. based companies. In fiscal 2024, 15% of the Company’s consolidated net sales were from one of its largest customers; and
41% of the Company’s consolidated net sales were from the three largest customers and their direct subcontractors, which
individually accounted for 15%, 15% and 11%, of consolidated net sales, respectively. In fiscal 2023, the Company had two
customers who accounted for 12% and 11%, respectively, of the Company’s consolidated net sales; and 39% of the Company’s
consolidated net sales were from three of the largest customers and their direct subcontractors, which each individually
accounted for 13%, of consolidated net sales. Other than what has been disclosed, no other single customer or group
represented greater than 10% of total net sales in fiscal 2024 and 2023.
At September 30, 2024, there was no customer of the Company with net accounts receivable balances representing greater than
10% of the total net accounts receivable; and two of the largest customers and their direct subcontractors collectively had an
outstanding net accounts receivable which accounted for 22% of total net accounts receivable. At September 30, 2023, one of
the Company’s largest customers had an outstanding net accounts receivable balance of 11% of the total net accounts
receivable; and one of the largest customers and their direct subcontractors collectively had an outstanding net accounts
receivable which accounted for 13% of total net accounts receivable.
F.
INVENTORY VALUATION
For a portion of the Company’s inventory, cost is determined using the last-in, first-out (“LIFO”) method. For approximately
30% and 36% of the Company’s inventories at September 30, 2024 and 2023, respectively, the LIFO method is used to value
the Company’s inventories. The first-in, first-out (“FIFO”) method is used to value the remainder of the Company’s inventories,
which are 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. To reflect inventory at net realizable value, the Company
recorded reserves of $705 and $669 as of September 30, 2024 and 2023, respectively.
The Company writes down inventory for obsolete and excess inventory each quarter and requires at a minimum that the write
down be established based on an analysis of the age of the inventory. In addition, if the Company identifies specific
obsolescence, other than that identified by the aging criteria, an additional write down will be recognized. Specific obsolescence
and excess write down requirements may arise due to technological or market changes or based on cancellation of an order. In
order to accurately reflect the value of inventory, the Company wrote down inventory for obsolete and excess inventory, and
accrued reserves of $2,028 and $1,495 as of September 30, 2024 and 2023.
G. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost net of accumulated depreciation. Depreciation is generally computed using the
straight-line method. Depreciation is provided in amounts sufficient to amortize the cost of the assets over their estimated useful
lives. Depreciation provisions are based on estimated useful lives: (i) buildings, including building improvements - 5 to 40
years; (ii) machinery and equipment, including office and computer equipment - 3 to 20 years; (iii) software - 3 to 7 years
(included in machinery and equipment); and (iv) leasehold improvements - 6 to 15 years range represent the remaining life or
length of the lease, whichever is less (included in buildings).
The Company’s property, plant and equipment assets by major asset class at September 30 consist of:
2024
2023
Property, plant and equipment:
Land
$
469 $
469
Buildings
13,514
13,514
Machinery and equipment
74,497
79,853
Total property, plant and equipment
88,480
93,836
Less: Accumulated depreciation
62,219
64,369
Property, plant and equipment, net
$
26,261 $
29,467
Depreciation expense was $4,784 and $4,998 in fiscal 2024 and 2023, respectively.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
37
H. LONG-LIVED ASSET IMPAIRMENT
The Company reviews the carrying value of its long-lived assets (“asset groups”), when events and circumstances indicate a
triggering event has occurred. A triggering event is a change in circumstances that indicates the carrying value of the asset
group may not be recoverable. This review is performed using estimates of future undiscounted cash flows, which include
proceeds from disposal of assets. Under the Accounting Standard Codification (“ASC”) 360 (“Topic 360”), if the carrying
value of a long-lived asset is greater than the estimated undiscounted future cash flows, then the long-lived asset is considered
impaired and an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its
fair value.
Fiscal 2024 and 2023
The Company continuously monitors potential triggering events to determine if further testing is necessary. In the first, second,
third and fourth quarters of both fiscal 2024 and 2023, the Company evaluated triggering events. In the third quarter of fiscal
2024, certain qualitative factors, including operating results, at the Orange location, triggered a recoverability test. 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.
I.
GOODWILL AND INTANGIBLE ASSETS
Goodwill represents the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill
is subject to impairment testing if triggered in the interim, and if not, on an annual basis. The Company has selected July 31 as
the annual impairment testing date. The first step of the goodwill impairment test compares the fair value of a reporting unit (as
defined) with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount,
goodwill is not considered impaired. However, if the carrying amount exceeds the fair value, the Company should recognize an
impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of
goodwill allocated to that reporting unit. See Note 4 — Goodwill and Intangibles Assets, for further discussion of the July 31,
2024 and 2023 annual impairment test results. The Company monitors for triggering events outside of the annual impairment
assessment date, and no potential triggers were identified through September 30, 2024.
Intangible assets consist of identifiable intangibles acquired or recognized in the accounting for the acquisition of a business
and include such items as a trade name, a non-compete agreement, below market lease, customer relationships and order
backlog. Intangible assets are amortized over their useful lives ranging from one year to ten years. Identifiable intangible assets
assessment for impairment is evaluated when events and circumstances warrant such a review.
J.
NET LOSS PER SHARE
The Company’s net loss per basic share has been computed based on the weighted-average number of common shares
outstanding. Due to the net loss in the reporting period, no restricted shares and performance shares are included in the
calculation of diluted earnings per share because the effect would be anti-dilutive. In the prior period, net loss per diluted share
reflects the effect of the Company’s outstanding restricted shares and performance shares under the treasury stock method. The
dilutive effect is as follows:
September 30,
2024
2023
Loss from continuing operations
$
(8,626)
(10,519)
Income from discontinued operations, net of tax
3,243
1,827
Net loss
$
(5,383) $
(8,692)
Weighted-average common shares outstanding (basic and diluted)
5,996
5,929
Net earnings (loss) per share – basic and diluted:
Continuing operations
$
(1.44) $
(1.77)
Discontinued operations
0.54
0.30
Net loss per share
$
(0.90) $
(1.47)
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share
238
202
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
38
K. 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. 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.
The Company recognizes revenue in the following manner using the five-step revenue recognition model. A contract exists
when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified,
the contract has commercial substance and collectability of consideration is probable.
Revenue is recognized when performance obligations under the terms of the contract with a customer of the Company are
satisfied. A portion of the Company’s contracts are from purchase orders (“PO’s”), which continue to be recognized as of a
point in time when products are shipped from the Company’s manufacturing facilities or at a later time when control of the
products transfers to the customer. Under the revenue standard, the Company recognizes certain revenue over time as it satisfies
the performance obligations because the conditions of transfer of control to the applicable customer are as follows:
•
Certain military contracts, which relate to the provisions of specialized or unique goods to the U.S. government with
no alternative use, include provisions within the contract that are subject to the Federal Acquisition Regulation
(“FAR”). The FAR provision allows the customer to unilaterally terminate the contract for convenience and requires
the customer to pay the Company for costs incurred plus reasonable profit margin and take control of any work in
process.
•
For certain commercial contracts involving customer-specific products with no alternative use, the contract may fall
under the FAR clause provisions noted above for military contracts or may include certain provisions within their
contract that the customer controls the work in process based on contractual termination clauses or restrictions of the
Company’s use of the product and the Company possesses a right to payment for work performed to date plus
reasonable profit margin.
As a result of control transferring over time for these products, revenue is recognized based on progress toward completion of
the performance obligation. The determination of the method to measure progress towards completion requires judgment and is
based on the nature of the products to be provided. The Company elected to use the cost to cost input method of progress based
on costs incurred for these contracts because it best depicts the transfer of goods to the customer based on incurring costs on the
contracts. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date
to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are
incurred. When the criteria to recognize revenue over time are not met, revenue is recognized at point in time. Under this
method, transferring control of the good or service to the customer satisfies the performance obligation to recognize revenue at
a point in time. Transfer of control is satisfied when the Company has the right to present for payment and/or the customer has
legal title, physical possession, significant risks and rewards of ownership and/or accepted the asset.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. An
accounting policy election to exclude from transaction price was made for sales, value add, and other taxes the Company
collects concurrent with revenue-producing activities when applicable. The Company has elected to recognize incremental costs
incurred to obtain contracts, which primarily represent commissions paid to third party sales agents where the amortization
period would be less than one year, as selling, general and administrative expenses in the consolidated statements of operations
as incurred.
The Company elected a practical expedient under Topic 606 to not adjust the promised amount of consideration for the effects
of any significant financing component where the Company expects, at contract inception, that the period between when the
Company transfers a promised good to a customer and when the customer pays for that good will be one year or less. Finally,
the Company’s policy is to exclude performance obligations resulting from contracts with a duration of one year or less from its
disclosures related to remaining performance obligations.
The amount of consideration to which the Company expects to be entitled in exchange for the goods is not generally subject to
significant variations.
The Company elected to recognize the cost of freight and shipping after control of the products has transferred to the customer
as an expense in cost of goods sold on the consolidated statements of operations, because those are costs incurred to fulfill the
promise recognized, not a separate performance obligation. To the extent certain freight and shipping fees are charged to
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
39
customers, the Company recognizes the amounts charged to customers as revenues and the related costs as an expense in cost of
goods sold when control of the related products has transferred to the customer.
Contracts are occasionally modified to account for changes in contract specifications, requirements, and pricing. The Company
considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights
and obligations. Substantially all of the Company’s contract modifications are for goods that are distinct from the existing
contract. Therefore, the effect of a contract modification on the transaction price and the Company’s measure of progress for the
performance obligation to which it relates is generally recognized on a prospective basis.
Contract Balances
Contract assets on the consolidated balance sheets are recognized when control is transferred to the customer over-time and the
Company does not have the contractual right to bill for the related performance obligations. In these instances, revenue
recognized exceeds the amount billed to the customer and the right to payment is not 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. Payments from customers are received based on the terms established in the contract with
the customer.
L.
LEASES
The leasing standard requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on the consolidated balance
sheet, with the exception of short-term leases. The Company primarily leases its manufacturing buildings, specifically at its
Orange location, as well as certain machinery and office equipment. The Company determines if a contract contains a lease
based on whether the contract conveys the right to control the use of identified assets for a period in exchange for consideration.
Upon identification and commencement of a lease, the Company establishes a ROU asset and a lease liability. Operating leases
are included in ROU assets, short-term operating lease liabilities, and long-term operating lease liabilities on the consolidated
balance sheets. Finance leases are included in property, plant, and equipment, current maturities of long-term debt and long-
term debt on the consolidated balance sheets.
ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term
at commencement date. As most of the leases do not provide an implicit rate, the Company uses the incremental borrowing rate
based on the information available at commencement date and duration of the lease term in determining the present value of the
future payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while the expense
for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of
recognition.
M. EMPLOYEE RETENTION CREDIT
Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Employee Retention Credit (“ERC”) is
a refundable payroll tax credit for businesses and tax-exempt organizations that were affected during the COVID-19 pandemic.
Eligible businesses, both for-profit and not-for-profit, that experienced a full or partial government-ordered suspension of
operations or a "significant" decline in gross receipts in any quarter (more than 50% decrease in 2020 from 2019, and more than
20% in 2021) could receive a quarterly refundable payroll tax credit. The Company, with reasonably assured qualification,
submitted and received approval for refunds under the ERC program.
As no authoritative guidance exists under U.S. GAAP for reporting ERCs, the Company adopted International Accounting
Standards (“IAS”) 20 – Accounting for Government Grants and Disclosure of Government Assistance which permits the
recording and presentation of either the gross amount as other income or netting the credit against related expense. For the year
ended September 30, 2024, there was no income or expense recorded. In the same periods of the prior year, the Company
recorded a gross benefit of $1,772, which represented $1,688 claimed as refund and $84 in interest income. The ERC was
recognized as a reduction in other manufacturing and selling, general and administrative expenses and allocated to the financial
statement categories from which the payroll taxes were originally incurred. The Company recorded benefits to cost of goods
sold of $1,452, selling, general and administrative expense of $236 and interest income $84, respectively, and recorded selling,
general and administrative expense of $354 for professional fees related to the tax credit in the consolidated statements of
operations during the year ended September 30, 2023.
N.
IMPACT OF RECENTLY ADOPTED ACCOUNTING STANDARDS
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments” and subsequent updates. ASU 2016-13 changes how entities will measure credit losses for
most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
40
replaces the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will
apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables,
loans, held-to-maturity debt instruments, net investments in leases, loan commitments and standby letters of credit. Upon initial
recognition of the exposure, the expected credit loss model requires entities to estimate the credit losses expected over the life
of an exposure (or pool of exposures). The estimate of expected credit losses should consider historical information, current
information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar
risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a
specific method to make the estimate, so its application will require significant judgment. ASU 2016-13 is effective for public
companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. However, in
November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging
(Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that qualify as a smaller reporting
company (“SRC”), as defined by the Securities and Exchange Commission, to fiscal years after December 15, 2022, including
interim periods within those fiscal years. Because SIFCO is considered a SRC, this ASU is effective for the Company
beginning October 1, 2023. The effect of adopting this ASU did not have an impact to the Company's results within the
consolidated statements of operations and financial condition.
O. IMPACT OF NEWLY ISSUED ACCOUNTING STANDARDS
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures”, that would enhance disclosures for significant segment expenses for all public entities required to report segment
information in accordance with ASC 280. ASC 280 requires a public entity to report for each reportable segment a measure of
segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make
decisions about resource allocations. The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of
incremental segment information on an annual and interim basis for all public entities to enable investors to develop more
useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable
segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess
segment performance and make decisions about allocating resources. ASC 280 also requires other specified segment items and
amounts such as depreciation, amortization and depletion expense to be disclosed under certain circumstances. The
amendments in ASU 2023-07 do not change or remove those disclosure requirements. The amendments in ASU 2023-07 also
do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the
quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years
beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption
is permitted. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the
financial statements. The Company does not anticipate the adoption of ASU 2023-07 to have a significant impact on the
consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”.
ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in
ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate
reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply the amendments in
ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the
impact of this standard on our consolidated financial statements and related disclosures.
In March 2024, the FASB issued ASU 2024-01 “Compensation - Stock Compensation (Topic 718) - Scope Application of
Profits Interest and Similar Awards” (“ASU 2024-01”), which clarifies how an entity determines whether a profits interest or
similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of
other guidance. ASU 2024-01 provides an illustrative example with multiple fact patterns and also amends certain language in
the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the
guidance. Entities can apply the amendments either retrospectively to all prior periods presented in the financial statements or
prospectively to profits interest and similar awards granted or modified on or after the date of adoption. If prospective
application is elected, an entity must disclose the nature of and reason for the change in accounting principle. The amendments
in ASU 2024-01 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024.
The Company is currently assessing the impact of this standard on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU
2024-03 requires both interim and annual disclosures pertaining to expense captions on the face of the income statement within
continuing operations containing the following amounts: (i) purchases of inventory, (ii) employee compensation, (iii)
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
41
depreciation, (iv) intangible asset amortization, and (v) depreciation, depletion, and amortization recognized as part of oil and
gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. This disaggregated
information will be required to be disclosed with other disaggregated amounts under other U.S. GAAP guidance, such as
revenue and income taxes. Additionally, a qualitative description of the amounts remaining in relevant expense captions that are
not separately disaggregated quantitatively and total selling expenses and a definition of such costs (in annual reporting periods
only) should be disclosed. More granular information about cost of sales and selling, general, and administrative expenses
(SG&A) would assist a reader of the Company's consolidated financial statements in better understanding an entity’s cost
structure and forecasting future cash flows. While early adoption is permitted, the amendments in ASU 2024-03 are effective
for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15,
2027. The amendments in ASU 2024-03 should be applied either (1) prospectively to financial statements issued for reporting
periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements.
The Company is currently assessing the impact of this standard on our consolidated financial statements and related disclosures.
P.
USE OF ESTIMATES
Accounting principles generally accepted in the U.S. require management to make a number of estimates and assumptions
relating to the reported amounts of assets and liabilities and the disclosure of contingent liabilities, at the date of the
consolidated financial statements, and the reported amounts of revenues and expenses during the period in preparing these
financial statements. Actual results could differ from those estimates.
Q. RESEARCH AND DEVELOPMENT
Research and development costs are expensed as they are incurred. Research and development expenses were nominal in fiscal
2024 and 2023.
R.
DEBT ISSUANCE COSTS
Debt issuance costs are capitalized and amortized over the life of the related debt. Amortization of debt issuance costs is
included in interest expense in the consolidated statements of operations.
S.
ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss as shown on the consolidated balance sheets at September 30 are as
follows:
2024
2023
Foreign currency translation adjustment, net of income tax
$
(5,554) $
(5,928)
Net retirement plan liability adjustment, net of income tax
163
(741)
Interest rate swap agreement, net of income tax
2
9
Total accumulated other comprehensive loss
$
(5,389) $
(6,660)
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
42
The following table provides additional details of the amounts recognized into net earnings from accumulated other
comprehensive loss, net of tax:
Foreign
Currency
Translation
Adjustment
Retirement Plan
Liability
Adjustment
Interest Rates
Swap
Adjustment
Accumulated
Other
Comprehensive
Loss
Balance at September 30, 2022
(6,196)
(2,509)
12
(8,693)
Other comprehensive (loss) income before
reclassifications
268
1,341
(3)
1,606
Amounts reclassified from accumulated other
comprehensive loss
—
427
—
427
Net current-period other comprehensive (loss) income
268
1,768
(3)
2,033
Balance at September 30, 2023
(5,928)
(741)
9
(6,660)
Other comprehensive income (loss) before
reclassifications
374
701
(7)
1,068
Amounts reclassified from accumulated other
comprehensive loss
—
203
—
203
Net current-period other comprehensive income (loss)
374
904
(7)
1,271
Balance at September 30, 2024
$
(5,554) $
163 $
2 $
(5,389)
The following table reflects the changes in accumulated other comprehensive loss related to the Company for September 30,
2024 and 2023:
Amount reclassified from accumulated other
comprehensive loss
Details about accumulated other comprehensive
loss components
2024
2023
Affected line item in the Consolidated
Statement of Operations
Amortization of Retirement plan liability:
Net actuarial gain
$
844 $
1,660
(1)
Settlements/curtailments
60
108
(1)
904
1,768
Total before taxes
—
—
Income tax expense
$
904 $
1,768
Net of taxes
(1)
These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. See Note 9 — Retirement Benefit
Plans for further discussion.
T.
INCOME TAXES
The Company files a consolidated U.S. federal income tax return and tax returns in various state and local jurisdictions. The
Company’s Irish and Italian subsidiaries also file tax returns in their respective jurisdictions.
The Company provides deferred income taxes for the temporary difference between the financial reporting basis and tax basis
of the Company’s assets and liabilities. Such taxes are measured using the enacted tax rates that are assumed to be in effect
when the differences reverse. Deductible temporary differences result principally from recording certain expenses in the
financial statements in excess of amounts currently deductible for tax purposes. Taxable temporary differences result
principally from tax depreciation in excess of book depreciation.
The Company evaluates for uncertain tax positions taken at each balance sheet date. The Company recognizes the financial
statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the
position. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the
largest cumulative benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax
authority. The Company’s policy for interest and/or penalties related to underpayments of income taxes is to include interest
and penalties in tax expenses.
The Company maintains a valuation allowance against its deferred tax assets when management believes it is more likely than
not that all or a portion of a deferred tax asset may not be realized. Changes in valuation allowances are recorded in the period
of change. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
43
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. 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. Accordingly,
valuation allowance of approximately $700 was fully released during the fourth quarter of fiscal 2024 and is reflected as a
component of income from discontinued operations.
The Tax Cut and Jobs Act (the “Act”) includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein
minimum taxes are imposed on foreign income in excess of a deemed return on the tangible assets of foreign corporations. This
income will effectively be taxed at a 10.5% tax rate. GILTI was effective for the Company starting in fiscal 2019. The
Company has elected to account for GILTI as a component of tax expense in the period in which the Company is subject to the
rules.
U.
FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company utilizes certain assumptions that
market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the
inputs to the valuation technique. Based on the examination of the inputs used in the valuation techniques, the Company is
required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality
and reliability of the information used to determine fair values.
Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
Level 1 - Quoted market prices in active markets for identical assets or liabilities
Level 2 - Observable market based inputs or unobservable inputs that are corroborated by market data
Level 3 - Unobservable inputs that are not corroborated by market data
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant
to the fair value measurement. The book value of cash equivalents, accounts receivable, and accounts payable are considered to
be representative of their fair values because of their short maturities. The carrying value of debt is considered to approximate
the fair value based on the borrowing rates currently available to us for loans with similar terms and maturities. Fair value
measurements of non-financial assets and non-financial liabilities are primarily used in goodwill, other intangible assets and
long-lived assets impairment analysis, the valuation of acquired intangibles and in the valuation of assets held for sale.
Goodwill and intangible assets are valued using Level 3 inputs. Defined benefit plans can be valued using Level 1, Level 2,
Level 3 or a combination of Level 1, 2 and 3 inputs. See Note 9 — Retirement Benefit Plans for further discussion.
V.
SHARE-BASED COMPENSATION
Share-based compensation is measured at the grant date, based on the calculated fair value of the award and the probability of
meeting its performance condition, and is recognized as expense when it is probable that the performance conditions will be
met over the requisite service period (generally the vesting period). Share-based compensation includes expense related to
restricted shares and performance shares issued under the Company’s 2007 Long-Term Incentive Plan (Amended and Restated
as of November 16, 2016) (as further amended, the "2016 Plan”). The Company recognizes share-based compensation within
selling, general, and administrative expense and adjusts for any forfeitures as they occur.
W. GOING CONCERN
In accordance with ASU 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC
205-40”)”, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its
ability to meet its future financial obligations as they become due within one year after the date that the financial statements are
issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are
conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if
management concludes that substantial doubt is raised, management is required to consider whether its plans that are not yet
fully implemented are probable of both being implemented and effective in alleviating that doubt. In the event substantial doubt
is raised, disclosures in the notes to the consolidated financial statements of management’s plans and management’s conclusion
as to whether the substantial doubt exists or has been alleviated are required. The consolidated financial statements have been
prepared assuming that the Company will continue as a going concern and do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result
from the outcome.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
44
The Company had debt maturing in October 2024. As a result of this condition, there was substantial doubt about the
Company’s ability to continue as a going concern during fiscal 2024. During much of fiscal 2024, the Company evaluated
available financial alternatives, including obtaining acceptable alternative financing.
In the fourth quarter of 2024, the Company received approval from the Board of Directors to: (i) sell its equity interests in
CBlade for cash consideration (net of outstanding debt) and (ii) execute an alternative financing arrangement with an identified
lender. In October 2024, the Company obtained the additional financing and repaid the outstanding balances due under its
Credit Agreements. Additionally, the Company completed the sale of CBlade for cash consideration. As a result of these efforts
and due to expected cash flows from operations based on order backlog over the next twelve months, the substantial doubt
about the Company’s ability to continue as a going concern was resolved as of the date of issuance of these consolidated
financial statements. See Note 2 — Assets Held for Sale and Discontinued Operations, Note 6 — Debt, and Note 15 —
Subsequent Events.
X.
RECLASSIFICATIONS
Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications. In fiscal
2024, the Company revised its classification within the consolidated balance sheets by moving a prior year amount for contract
liabilities from accrued liabilities to contract liabilities to conform to current period presentation. Additionally, the Company
revised its classification within the consolidated statements of cash flows by moving the prior year amount related to contract
liabilities from other accrued liabilities to conform to current period presentation.
2.
Assets Held for Sale and Discontinued Operations
The Company committed to the plan to sell CBlade in August 2024 in order to streamline operational synergies and refocus on
its core aerospace forging entities. On August 1, 2024, the Company’s Board of Directors approved, and management executed
a share purchase agreement (the “SPA”), under which SIFCO Irish Holdings, Ltd., a wholly owned subsidiary of the Company,
entered into an agreement to sell 100% of the share capital of CBlade, to TB2 S.r.l. (the “Buyer”) totaling an enterprise value of
€20,000, less debt, for cash consideration of €13,800 in net equity value at closing, subject to adjustments for changes in
working capital and certain other items.(the “CBlade Sale”). The Company determined that CBlade met the criteria for
classification as assets held for sale upon the aforementioned events. Based on the asset held for sale classification and the
significance of the disposed operations (i.e., strategic shift), CBlade represented discontinued operations as of September 30,
2024.
In October 2024, upon regulatory approval, the Company completed the sale of CBlade and received cash consideration of
approximately $14,938. The Company does not expect to have any significant continuing involvement with CBlade after the
sale.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
45
The principal components of the assets and liabilities held for sale for the periods presented were as follows:
September 30,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
1,009 $
347
Short-term investments
1,114
—
Receivables, net
6,259
4,558
Inventories, net
6,185
4,305
Prepaid expenses and other current assets
1,400
338
Total current assets
15,967
9,548
Property, plant and equipment, net
6,625
6,820
Operating lease right-of-use assets, net
113
159
Intangible assets, net
126
278
Other assets
—
1
Total assets held for sale
$
22,831 $
16,806
LIABILITIES
Current liabilities:
Current maturities of long-term debt
$
3,843 $
3,446
Short-term operating lease liabilities
40
51
Accounts payable
2,770
2,473
Accrued liabilities
3,405
2,691
Total current liabilities
10,058
8,661
Long-term debt, net
3,536
2,466
Long-term operating lease liabilities
71
105
Deferred income taxes, net
1
—
Pension liability
282
313
Total liabilities held for sale
$
13,948 $
11,545
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
46
A summary of the operating results for the discontinued operations is as follows:
Years Ended September 30,
2024
2023
Net sales
$
24,705 $
20,955
Cost of sales
18,868
16,770
Depreciation and amortization
1,227
1,333
Interest expense net
507
351
Income from discontinued operations before income tax provision
3,132
1,971
Income tax (benefit) expense
(111)
144
Income from discontinued operations, net of tax
$
3,243 $
1,827
A summary of the cash flows for the discontinued operations is as follows:
Years Ended September 30,
2024
2023
Net cash provided by operating activities from discontinued operations
$
1,373 $
2,397
Net cash used in investing activities from discontinued operations
(1,411)
(1,317)
Net cash provided by (used for) financing activities of discontinued operations
1,081
(2,000)
Effects of exchange rate changes on cash and cash equivalents
(381)
110
3.
Inventories, net
Inventories at September 30 consist of:
2024
2023
Raw materials and supplies
$
1,044 $
944
Work-in-process
3,419
1,977
Finished goods
1,767
1,626
Total inventories
$
6,230 $
4,547
If the FIFO method had been used for the entire Company, inventories would have been $10,496 and $9,634 higher than
reported at September 30, 2024 and 2023, respectively. LIFO expense was $862 in fiscal 2024 and benefit of $305 in fiscal
2023.
Results showed a reduction of inventory resulting in liquidations of LIFO inventory quantities. The estimated liquidation of
LIFO inventory quantities results in a projected increase in cost of goods sold of $610 and $1,476 during fiscal 2024 and 2023,
respectively. These inventories were carried in prior periods at the then prevailing costs, which were accurate at the time, but
differ from the current manufacturing cost and/or material costs.
The allocation of production costs to inventory are based on a normal range of capacity in production. The amount of cost
allocated to each unit of production is not increased as a consequence of low production or idle capacity. As a result, the
Company recorded idle cost of $1,412 and $2,149 for the years ended September 30, 2024 and 2023, respectively.
4.
Goodwill and Intangible Assets
With the sale of CBlade and its presentation as assets held for sale, the Company had no unamortized intangible assets at
September 30, 2024 and 2023.
The amortization expense on identifiable intangible assets for fiscal 2024 and 2023 was nil and $73, respectively.
Goodwill is not amortized, but is subject to an annual impairment test. The Company tests its goodwill for impairment in the
fourth fiscal quarter, and in interim periods if certain events occur indicating that the carrying amount of goodwill may be
impaired. 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.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
47
The Company uses a fair value measurement approach which combines the income (discounted cash flow method) and market
valuation (market comparable method) techniques for each of the Company’s reporting units that carry goodwill. These
valuation techniques use estimates and assumptions including, but not limited to, the determination of appropriate market
comparable, 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 (Level 3 inputs).
Although the Company believes its assumptions are reasonable, actual results may vary significantly and may expose the
Company to material impairment charges in the future. The methodology for determining fair values was consistent for the
periods presented.
2024 and 2023 Annual Goodwill Impairment Tests
SIFCO performed its annual impairment test as of July 31, 2024 and 2023, respectively, for the Cleveland, Ohio (“Cleveland”)
reporting unit, which is the only reporting unit that carries goodwill. Results determined that the fair value of the reporting unit
exceeded the carrying value at each assessment date. As a result, no impairment was required as of September 30, 2024 and
2023, respectively.
Goodwill is deductible for tax purposes. As of September 30, 2024 and 2023, the Company had goodwill of $3,493, and no
changes in the balance occurred during the respective fiscal years.
5.
Accrued Liabilities
Accrued liabilities at September 30 consist of:
2024
2023
Accrued employee compensation and benefits
$
1,407 $
985
Accrued workers’ compensation
303
648
Other accrued liabilities (related party — $880 and nil, respectively)
2,905
1,709
Total accrued liabilities
$
4,615 $
3,342
6.
Debt
Debt at September 30 consists of:
2024
2023
Revolving credit agreement
$
20,142 $
16,289
Promissory note — related party
3,510
—
Other, net of unamortized debt issuance cost $0 and $9
353
374
Total debt
24,005
16,663
Less – current maturities
(24,005)
(16,663)
Total long-term debt
$
— $
—
As of September 30, 2024, all outstanding debt is due within the next year.
Credit Agreement and Security Agreement
The Company’s asset-based Credit Agreement (as amended, the “Credit Agreement”), Security Agreement (“Security
Agreement”) and Export Credit Agreement (as amended, the “Export Credit Agreement”) are secured by substantially all the
assets of the Company and its U.S. subsidiaries and a pledge of 66.67% of the stock of its first-tier non-U.S. subsidiaries.
The Credit Agreement (as amended by Seventh Amendment (the “Seventh Amendment”) described below), consists of a senior
secured revolving credit facility with a maximum borrowing of $23,000. The revolving commitment through the Export Credit
which lends amounts to the Company on foreign receivables is $7,000. The Credit Agreement and the Export Agreement were
amended on August 9, 2023, when the Company and certain of its subsidiaries (collectively, the “borrowers”) entered into the
Seventh Amendment to the Credit Agreement and the Third Amendment (the “Third Amendment”) to the Export Credit
Agreement, in each case, with JPMorgan Chase Bank, N.A., a national banking association, (the “Lender”). The combined
maximum borrowings was reduced to $30,000 (from $35,000); and the maximum borrowing under the Credit Agreement was
decreased to $23,000 (from $28,000) and the revolving commitment through the Export Agreement remained unchanged at
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
48
$7,000. The Seventh Amendment amends the Credit Agreement to, 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 $18,000 through September 30, 2023 and $19,000 thereafter; (v) the Reserves under the Borrowing Base
in the ABL Credit Agreement were reduced to $1,500 through September 30, 2023 and $2,000 thereafter. 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. Lender’s agreement 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, 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.
The Credit Agreement contains affirmative and negative covenants and events of defaults. Prior to the Seventh Amendment, the
Credit Agreement required the Company to maintain a fixed charge coverage ratio (“FCCR”) to be less than 1.1 to 1.0 as of the
last day of any calendar month; provided that the fixed charge coverage ratio will not be tested unless (i) a default has occurred
and is continuing, (ii) when the combined availability was less than or equal to the greater of (x) 10% of the lesser of the
combined commitments or (y) 10% of the combined borrowing base, and $2,000, for three or more business days in any
consecutive 30 day period. However, the Seventh Amendment provides that the Company will not permit the fixed charge
coverage ratio to be less than 1.1 to 1.0 as of the last day of any calendar month; provided that the fixed charge coverage ratio
will not be tested unless availability falls below the Reserves under the Borrowing Base in the ABL Credit Agreement of
$1,500.
On November 8, 2023, the Company entered into the Eighth Amendment to the Credit Agreement (the “Eighth Amendment”)
with its Lender. The Eighth Amendment, among other things, reduced the Reserves under the Borrowing Base in the Credit
Agreement to $1,500, or such lesser amount, if any, as may be agreed upon in writing by the Lender in its sole discretion.
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. 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 Silk (Mr. Silk is a member of the Board of Directors of the Company
and considered a related party) of the Subordinated Loan Documents, and the receipt by borrowers of $3,000 in 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 to $19,000 from $23,000; (iv) modify the definition of
Borrowing Base to mean, at any time, the sum of (a) 85% of Eligible Accounts at such time, plus (b) the lesser of (1) 70% of
Eligible Inventory, valued at the lower of cost or market value, determined on a first-in-first-out basis, at such time and (2) the
product of 85% multiplied by the NOLV Percentage identified in the most recent inventory appraisal ordered by the Lender
multiplied by Eligible Inventory, valued at the lower of cost or market value, determined on a first-in-first-out basis, at such
time, minus (c) Reserves of $1,500, increasing on the first day of each month by $250, 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% (CBFR REVSOFR30), 0.25% (CBFR Spread (CB Floating
Rate)), 2.75% (SOFR Spread), and 0.50% (Commitment Fee Rate); and (vi) amend and restate subsection (l) of the Reporting
Schedule to require, by the 17th day of every month, the delivery of a rolling 13 week cash flow forecast in form acceptable to
Lender, which must include a projected to actual results comparison for the week then ended and on a cumulative basis from
the beginning of the cash flow forecast. 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 Silk
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.
The Company entered into the Tenth Amendment (the “Tenth Amendment”) to the Credit Agreement and the Fifth Amendment
(the “Fifth Amendment") to the Export Credit Agreement with its lender on May 21, 2024. The Tenth and Fifth Amendments
amend the Credit Agreement and the Export Credit Agreement to, among other things, to: (i) increase the Revolving
Commitment, less the Availability Block, if applicable, (y) the Borrowing Base, and (z) in combination with the Export
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
49
Revolving Loans under the Export Credit Agreement, (i) $18,000 through September 30, 2023, (ii) $19,000 from and including
October 1, 2023 through May 14, 2024, and (iii) $22,000 thereafter until, and reducing to zero and terminating on, the maturity
date; (ii) modify the definition of Borrowing Base Reserves to $1,500 or such other amount, if any, as may be determined in
writing by the Lender in its Permitted Discretion (which may be by email from the Lender); and (iii) required the execution and
delivery of the First Amendment of the Silk Guaranty discussed below.
On September 30, 2024, the Company entered into the Eleventh Amendment (the “Eleventh Amendment”) to the Credit
Agreement and the Sixth Amendment (the “Sixth Amendment”) to the Export Credit Agreement, in each case, with the Lender.
The Eleventh Amendment and the Sixth Amendment amend the Credit Agreement and the Export Credit Agreement,
respectively, to delay the maturity date from 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) to November 6, 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
or under the Ex-Im Bank Documents. In consideration for the amendments, the Company paid: (a) an amendment fee to the
Lender in an amount equal to $6 and (b) a fee to the Export-Import Bank of the United States of America in an amount equal to
$5.
The total collateral as of September 30, 2024 and 2023 was $24,293 and $21,089, respectively, and the revolving commitment
was $26,000 and $30,000, respectively. Total availability at September 30, 2024 and 2023 was $2,055 and $2,830, respectively,
which exceeds both the collateral and total commitment threshold. The Credit Agreement contains affirmative and negative
covenants and events of default. Since the availability exceeded the $1,500 reserve minimum as of September 30, 2024 and
2023, no covenant calculations were required. The Company had a letter of credit balance of $1,970 as of September 30, 2024
and 2023, respectively.
The revolving credit agreement (or “revolver”), as amended, has a rate based on SOFR plus a 2.75% spread, which was 8.1% at
September 30, 2024 and a rate based on SOFR plus a 2.25% spread, which was 7.7% at September 30, 2023. The Export Credit
Agreement as amended has a rate based on SOFR plus a 2.25% spread, which was 7.6% at September 30, 2024 and a rate based
on SOFR plus a 1.75% spread, which was 7.2% at September 30, 2023. The Company also has a commitment fee of 0.50%
under the Credit Agreement as amended to be incurred on the unused balance of the revolver.
Subordinated Promissory Note and Guarantee
The Company, in connection with and as a condition to the agreement by JPMorgan Chase Bank, N.A. to consummate the
transactions contemplated by the Ninth Amendment and the Fourth Amendment, incurred a secured subordinated loan from
Garnet Holdings, Inc., a California corporation owned and controlled by Mark J. Silk (“GHI”) (Mr. Silk is a member of the
Board of Directors of the Company and considered a related party), in the original principal amount of $3,000 (the
“Subordinated Loan”) on the terms and subject to the conditions of a Subordinated Secured Promissory Note (the
“Subordinated Promissory Note”). The obligations of borrowers under the Subordinated Loan mature on October 4, 2024.
Interest accrues on the then-outstanding principal amount at a rate of 14% per annum and shall be paid in kind (and not in cash)
by capitalization as additional principal (“PIK Interest”) each six-month period after the date hereof in arrears. As of
September 30, 2024, the Company accrued PIK Interest in the amount of $360, which was included in the principal balance of
the Subordinated Promissory Note. The Company agreed to pay to Mr. Silk a fully earned and non-refundable fee in an amount
equal to $150, which fee shall be due and payable in full on, and subject to the occurrence of the maturity date or such earlier
date on which the Company’s obligations under the Subordinated Promissory Note are accelerated pursuant to the terms
thereof. Borrower’s obligations under the Subordinated Promissory Note are secured by a first priority lien, subject to any liens
granted to Lender as described in the Subordination Agreement, on all of borrowers’ accounts, deposit accounts, contract rights,
documents, equipment, general intangibles, instruments, inventory, investment property, commercial tort claims, all other goods
and personal property whether tangible or intangible and wherever located, and all proceeds of the foregoing.
The Ninth Amendment, was also subject to including, but not limited to, the execution and delivery by Mark. J. Silk, a member
of the Board of Directors of the Company (“Silk”), of a Guaranty Agreement (the “Guaranty”) in favor of Lender pursuant to
which Silk guarantees the obligations of borrowers under the Credit Agreement and Export Credit Agreement. The Fee Letter
requires the borrowers to pay Silk a fee in an amount equal to $760 (the “Guaranty Fee”) in consideration for his agreement to
execute and deliver the Guaranty. The Guaranty Fee becomes due and payable on the maturity date.
The Tenth Amendment was subject to the execution and delivery of the First Amendment of the Guaranty and an amendment to
the Fee Letter, which required the borrowers to pay Silk an incremental fee of $120 in consideration for his agreement to
execute and deliver the First Amendment to the Guaranty. Guaranty fees were included in the consolidated balance sheets as a
deferred charge in accrued liabilities and become due and payable on the maturity date.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
50
In connection with and as a condition to the effectiveness of the Eleventh Amendment and the Sixth Amendment, the Company
on September 30, 2024 entered into the First Amendment to the Subordinated Loan (the “First Amendment to Subordination
Agreement”) and the First Amendment to the Subordinated Promissory Note (the “First Amendment to Subordinated
Promissory Note”) to delay the maturity date of the obligations of the borrowers thereunder to the earlier of (a) November 6,
2024 and (b) the date on which the Revolving Commitment is reduced to zero or otherwise terminated pursuant to the terms of
the Credit Agreement, unless accelerated upon the occurrence of an event of default specified therein. Refer to See Note 14 —
Related Party Transactions.
See Note 15 — Subsequent Event for information related to the refinancing arrangement, including the repayment and
termination of the Credit Agreement, Security Agreement and Export Credit Agreement in October 2024.
Debt issuance costs
The Company incurred new debt issuance costs of $117 in the first quarter of fiscal 2024 as it pertains to the new amendments
entered into, which are included in the consolidated condensed balance sheet as a deferred charge in other current assets, net of
amortization of $117 and fully amortized as of September 30, 2024. The Company previously had debt issuance costs of $87,
which are included in the consolidated balance sheets as a deferred charge in other current assets, net of amortization of $78 at
September 30, 2023. These debt issuance costs were fully amortized, and the Company recognized new debt issuance costs of
$461 as of September 30, 2024.
Other
First Energy
In April 2019, the Company entered into an economic development loan in the amount of $864 with FirstEnergy Corporation
(“FirstEnergy”) through its Ohio Electric Security Plan (“ESP”) in effect at that time (the “ED Loan”). The ED Loan matures in
five years and requires quarterly payments at an interest rate of zero percent per annum for the first twenty-four months and 2%
per annum for the remainder of the term. Any unpaid balance after the initial term will convert to the U.S. Prime Rate plus 1%.
As of September 30, 2024 and 2023, the Company had outstanding balances under the ED Loan of $133 and $194, respectively.
Beginning on October 1, 2019, FirstEnergy invoiced the Company on a quarterly basis and payments were made accordingly.
However, in light of recent difficulties experienced by FirstEnergy, the Company has not received invoices (or other requests
for payment) since its October 2023 payment, and all attempts at correspondence with FirstEnergy have gone unanswered. Due
to the lack of communication with the lender, the Company has been unable to make the remaining three installment payments
and consider the outstanding balance a potential contingent cash payment under the ED Loan until a formal letter of forgiveness
or other determination is received. The Company will continue efforts to resolve this obligation in the near future. While we
expect to meet the standards for full forgiveness of the ED Loan, there is no assurance that we will be granted such forgiveness.
City of Cleveland
In May 2019, the Company entered into a vacant property initiative loan agreement with the City of Cleveland in the amount of
$180 at an annual interest rate of 3.56% to construct a die storage building near our Cleveland, OH facility (the “VPI Loan”).
The VPI Loan matures in five years with a final balloon payment of all outstanding principal and interest and is forgivable in
full contingent upon the Company creating a minimum number of new jobs and maintaining minimum employment levels
during the term of the loan. As of September 30, 2024 and 2023, the Company had amounts outstanding under the VPI Loan of
$220 and $180, respectively.
Due to the effects of the worldwide pandemic, the Company experienced declines in demand for its products and sales, which
hindered the Company's ability to grow its workforce and maintain it at or above the required levels. The Company is currently
in discussions with the City of Cleveland for forgiveness of the VPI Loan under extenuating circumstances beyond the
Company's control. Until a final determination is made by the City of Cleveland, the Company has not made payments on the
VPI Loan, which may become payable in full if forgiveness is not approved. The Company will continue efforts to resolve this
obligation in the near future. While we expect to meet the standards for full forgiveness of the VPI Loan, there is no assurance
that we will be granted such forgiveness.
7.
Revenue
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.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
51
The following table represents a breakout of total revenue by customer type:
Years Ended
September 30,
2024
2023
Commercial revenue
$
41,759 $
27,403
Military revenue
37,874
38,664
Total
$
79,633 $
66,067
The following table represents revenue by the various components:
Years Ended
September 30,
2024
2023
Aerospace components for:
Fixed wing aircraft
$
41,847 $
40,094
Rotorcraft
17,255
16,369
Commercial space
13,200
4,557
Energy components for power generation units
1,821
2,078
Commercial products and other revenue
5,510
2,969
Total
$
79,633 $
66,067
All revenue based on selling locations originated from the Company’s U.S. operations.
In addition to the disaggregating revenue information provided above, approximately 54% and 61% of total net sales as of
September 30, 2024 and 2023, respectively, was recognized on an over-time basis because of the continuous transfer of control
to the customer, with the remainder recognized at a point in time.
Contract Balances
Generally, payment is due upon the shipment of goods. For performance obligations recognized at a point in time, a contract
asset is not established as the billing and revenue recognition occur at the same time. For performance obligations recognized
over time, a contract asset is established for revenue that is recognized prior to billing and shipment. Upon shipment and billing,
the value of the contract asset is reversed and accounts receivable is recorded. In circumstances where prepayments are required
and payment is made prior to satisfaction of performance obligations, a contract liability is established. If the satisfaction of the
performance obligation occurs over time, the contract liability is reversed over the course of production. If the satisfaction of
the performance obligation is point in time, the contract liability reverses upon shipment.
The following table contains a roll forward of contract assets and contract liabilities for the years ended September 30, 2024 and
2023:
Contract assets - Ending balance, September 30, 2022
$
10,172
Additional revenue recognized over-time
40,265
Less amounts billed to the customers
(40,346)
Contract assets - Ending balance, September 30, 2023
$
10,091
Additional revenue recognized over-time
42,697
Less amounts billed to the customers
(42,043)
Contract assets - Ending balance, September 30, 2024
$
10,745
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
52
Contract liabilities (included within Accrued liabilities) - Ending balance, September 30, 2022
$
(154)
Payments received in advance of performance obligations
(1,545)
Performance obligations satisfied
968
Contract liabilities (included within Accrued liabilities) - Ending balance, September 30, 2023
$
(731)
Payments received in advance of performance obligations
(5,737)
Performance obligations satisfied
3,589
Contract liabilities (included within Accrued liabilities) - Ending balance, September 30, 2024
$
(2,879)
Accounts receivable, net were $17,272, $15,638, $11,788 as of September 30, 2024, 2023, and 2022, respectively. There were
no impairment losses recorded on contract assets during the years ended September 30, 2024 and 2023.
Remaining performance obligations
As of September 30, 2024 and 2023, the Company has $85,019 and $70,911, respectively, of remaining performance
obligations, the majority of which are anticipated to be completed within the next twelve months.
8.
Income Taxes
The components of loss before income tax provision are as follows:
Years Ended
September 30,
2024
2023
U.S.
$
(8,309) $
(10,259)
Non-U.S.
(280)
(244)
Loss before income tax provision
$
(8,589) $
(10,503)
Income tax provision consists of the following:
Years Ended
September 30,
2024
2023
Current income tax provision (benefit):
U.S. federal
$
70 $
—
U.S. state and local
1
1
Non-U.S.
(46)
1
Total current tax provision
25
2
Deferred income tax provision:
U.S. federal
10
11
U.S. state and local
2
3
Non-U.S.
—
—
Total deferred tax provision
12
14
Income tax provision
$
37 $
16
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
53
The income tax provision in the accompanying consolidated statements of operations differs from amounts determined by using
the statutory rate as follows:
Years Ended
September 30,
2024
2023
Loss before income tax provision
$
(8,589) $
(10,503)
Income tax benefit at U.S. federal statutory rates
(1,804)
(2,206)
Tax effect of:
Foreign rate differential
(4)
46
Permanent items
59
36
State and local income taxes
4
5
Federal tax credits
(241)
(179)
Valuation allowance
1,943
2,303
Other
80
11
Income tax provision
$
37 $
16
Deferred tax assets and liabilities at September 30 consist of the following:
2024
2023
Deferred tax assets:
Net U.S. operating loss carryforwards
$
9,407
$
8,175
Net non-U.S. operating loss carryforwards
629
613
Employee benefits
849
1,088
Inventory reserves
—
11
Allowance for credit losses
28
57
Intangibles
296
837
Foreign tax credits
1,724
1,724
Other tax credits
2,175
1,882
Other
1,908
1,079
Total deferred tax assets
$
17,016
$
15,466
Deferred tax liabilities:
Depreciation
(5,308)
(6,066)
Inventory reserves
(573)
—
Prepaid expenses
(338)
(355)
Other
(51)
(75)
Total deferred tax liabilities
$
(6,270) $
(6,496)
Net deferred tax assets
10,746
8,970
Valuation allowance
(10,900)
(9,112)
Net deferred tax liabilities
$
(154) $
(142)
At September 30, 2024, the Company has a non-U.S. tax loss carryforward of approximately $5,458 related to the Company’s
non-operating subsidiary. The Company’s non-operating subsidiary ceased operations in 2007 and therefore, a valuation
allowance has been recorded against the deferred tax asset related to the Irish tax loss carryforward because it is unlikely that
such operating loss can be utilized unless the Irish subsidiary resumes operations. The non-operating and Italian tax loss
carryforwards do not expire.
The Company has $1,724 of foreign tax credit carryforwards that are subject to expiration in fiscal 2025-2028, $1,998 of U.S.
general business tax credits that are subject to expiration in 2035-2043, $2,684 of interest expense carryforward that do not
expire, and $36,932 of U.S. Federal tax loss carryforwards with $9,107 subject to expiration in fiscal 2037 and $27,825 that do
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
54
not expire. A valuation allowance has been recorded against the deferred tax assets related to the foreign tax credit
carryforwards, U.S. general business credits, interest expense carryforward, and U.S. Federal tax loss carryforwards. The
valuation allowance increased during fiscal 2024 related to $2,000 in amounts charged to expense less $212 of reductions
charged to other accounts. The valuation allowance increased during fiscal 2023 related to $2,534 in amounts charged to
expense less $399 of reductions charged to other accounts.
In addition, the Company has $178 of U.S. state tax credit carryforwards subject to expiration in fiscal 2025 and $33,418 of
U.S. state and local tax loss carryforwards subject to expiration in fiscal 2026-2044. The U.S. state tax credit carryforwards and
U.S. state and local tax loss carryforwards have been fully offset by a valuation allowance.
The Company reported liabilities for uncertain tax positions, excluding any related interest and penalties, of $22 for both fiscal
2024 and 2023. If recognized, $22 of the fiscal 2024 uncertain tax positions would impact the effective tax rate. As of
September 30, 2024, the Company had accrued interest of $18 and recognized $1 for interest and penalties in operations. The
Company classifies interest and penalties on uncertain tax positions as income tax expense. A summary of activity related to the
Company’s uncertain tax position is as follows:
2024
2023
Balance at beginning of year
$
22 $
22
Decrease due to lapse of statute of limitations
—
—
Balance at end of year
$
22 $
22
The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy and various states and local jurisdictions.
The Company believes it has appropriate support for its federal income tax returns. The Company is no longer subject to U.S.
federal income tax examinations by tax authorities for fiscal years prior to 2021, state and local income tax examinations for
fiscal years prior to 2018, or non-U.S. income tax examinations by tax authorities for fiscal years prior to 2008.
The Company does not record deferred taxes on the undistributed earnings of its non-U.S. subsidiaries as it does not expect the
temporary differences related to those unremitted earnings to reverse in the foreseeable future. As of September 30, 2024, the
Company’s non-U.S. subsidiaries had accumulated deficits of approximately $4,824. In October 2024, the Company sold 100%
of the share capital of CBlade for cash consideration. No material tax impact is anticipated from the sale.
9.
Retirement Benefit Plans
Defined Benefit Plans
The Company and certain of its subsidiaries sponsor three defined benefit pension plans covering some of its employees. The
Company’s funding policy for its defined benefit pension plans is based on an actuarially determined cost method allowable
under Internal Revenue Service regulations. One of the defined benefit pension plans covers non-union employees of the
Company’s U.S. operations who were hired prior to March 1, 2003. Benefit accruals ceased in March 2003. A second defined
benefit plan covered employees at a business location that closed in December 2013, at which time benefits accruals ceased.
The third defined pension plan covers one of the Company’s union groups at the Cleveland location. Benefits accruals under
this plan ceased in March 2020, when the then-current union disclaimed all interest in the bargaining unit. Curtailment
occurred; however, there was no impact to consolidated financial statements. A new union was certified and the collective
bargaining agreement was finalized in December 2021, at which time it was agreed that the defined benefit plan would be
frozen and retirement benefits are to be provided through a defined contribution plan.
The Company uses a September 30 measurement date for its U.S. defined benefit pension plans. Net pension expense, benefit
obligations and plan assets for the Company-sponsored defined benefit pension plans consist of the following:
Years Ended
September 30,
2024
2023
Service cost
$
181
$
24
Interest cost
1,072
1,090
Expected return on plan assets
(1,046)
(1,101)
Amortization of net loss
143
319
Settlement cost
60
108
Net pension expense for defined benefit plans (non-operating expense)
$
410
$
440
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
55
The status of all defined benefit pension plans at September 30 is as follows:
2024
2023
Benefit obligations:
Benefit obligations at beginning of year
$
20,345
$
22,492
Service cost
181
24
Interest cost
1,072
1,090
Actuarial loss (gain)
1,313
(1,463)
Benefits paid
(2,023)
(1,798)
Benefit obligations at end of year
$
20,888
$
20,345
Plan assets:
Plan assets at beginning of year
$
17,194
$
17,937
Actual return on plan assets
3,076
979
Employer contributions
129
77
Benefits paid
(2,023)
(1,799)
Plan assets at end of year
$
18,376
$
17,194
Underfunded status at end of year
$
(2,512) $
(3,151)
As shown within the above table, there was an increase in the benefit obligation of $542 to $20,888 at September 30, 2024
compared with $20,345 at September 30, 2023. The primary drivers that attributed to the change pertained to decrease in the
discount rate used partially offset by asset returns.
Plans in which
Benefit Obligations
Exceed Assets at
September 30,
2024
2023
Reconciliation of funded status:
Plan assets less than projected benefit obligations
$
(2,512) $
(3,151)
Amounts recognized in accumulated other comprehensive loss:
Net loss
3,599
4,504
Net amount recognized in the consolidated balance sheets
$
1,087
$
1,353
Amounts recognized in the consolidated balance sheets are:
Accrued liabilities
(47)
(46)
Pension liability
(2,465)
(3,105)
Accumulated other comprehensive loss – pretax
3,599
4,504
Net amount recognized in the consolidated balance sheets
$
1,087
$
1,353
Where applicable, the following weighted-average assumptions were used in developing the benefit obligation and the net
pension expense for defined benefit pension plans:
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 %
During fiscal 2023, the Company transferred its investments to a new custodian. The Company held investments in mutual
funds and money market funds, in which the fair value of assets of the underlying funds are determined in the following ways:
•
Mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held are open-ended mutual
funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
56
net asset value (“NAV”) and to transact at that price. The mutual funds held by the Plan are deemed to be actively
traded.
•
Money market funds are valued at NAV, which approximates fair value.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or
reflective of future fair values. However, while the Company believes its valuation methods are appropriate and consistent with
other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement result.
The following tables set forth the asset allocation of the Company’s defined benefit pension plan assets and summarize the fair
values and levels within the fair value hierarchy for such plan assets as of September 30, 2024 and 2023:
September 30, 2024
Asset
Amount
Level 1
U.S. equity securities:
Large blend
$
3,796 $
3,796
Large growth
1,458
1,458
Mid blend
775
775
Small growth
633
633
Non-U.S. equity securities:
Foreign large blend
770
770
Diversified emerging markets
338
338
Global equity securities
702
702
U.S. debt securities:
Intermediate term bond
5,764
5,764
Multi-sector bond
3,697
3,697
Stable value:
Cash or money market
443
443
Total plan assets at fair value
$
18,376 $
18,376
September 30, 2023
Asset
Amount
Level 1
U.S. equity securities:
Large value
$
879
$
879
Large blend
3,124
3,124
Large growth
1,060
1,060
Mid blend
599
599
Small blend
499
499
Non-U.S. equity securities:
Foreign large blend
615
615
Diversified emerging markets
272
272
Global equity securities
577
577
U.S. debt securities:
Intermediate term bond
5,676
5,676
High inflation bond
2,044
2,044
Stable value:
Short-term bonds
1,849
1,849
Total plan assets at fair value
$
17,194
$
17,194
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
57
Changes in the fair value of the Company’s Level 3 investments during the years ending September 30, 2024 and 2023 were as
follows:
2024
2023
Balance at beginning of year
$
— $
1,829
Actual return on plan assets
—
94
Purchases and sales of plan assets, net
—
(1,923)
Balance at end of year
$
— $
—
Investment objectives relative to the assets of the Company’s defined benefit pension plans are to (i) optimize the long-term
return on the plans’ assets while assuming an acceptable level of investment risk; (ii) maintain an appropriate diversification
across asset categories and among investment managers; and (iii) maintain a careful monitoring of the risk level within each
asset category. Asset allocation objectives are established to promote optimal expected returns and volatility characteristics
given the long-term time horizon for fulfilling the obligations of the Company’s defined benefit pension plans. Selection of the
appropriate asset allocation for the plans’ assets was based upon a review of the expected return and risk characteristics of each
asset category in relation to the anticipated timing of future plan benefit payment obligations. The Company has a long-term
objective for the allocation of plan assets. However, the Company realizes that actual allocations at any point in time will likely
vary from this objective due principally to (i) the impact of market conditions on plan asset values and (ii) required cash
contributions to and distribution from the plans. The “Asset Allocation Range” listed below anticipates these potential scenarios
and provides flexibility for the plans’ investments to vary around the objective without triggering a reallocation of the assets, as
noted by the following:
Percent of Plan Assets at
September 30,
Asset
Allocation
Range
2024
2023
U.S. equities
36 %
36 %
30% to 70%
Non-U.S. equities
10 %
8 %
0% to 20%
U.S. debt securities
52 %
45 %
20% to 70%
Non-U.S. debt securities
— %
— %
0% to10%
Other securities
2 %
11 %
0% to 60%
Total
100 %
100 %
External consultants assist the Company with monitoring the appropriateness of the above investment strategy and the related
asset mix and performance. To develop the expected long-term rate of return assumptions on plan assets, generally the
Company uses long-term historical information for the target asset mix selected. Adjustments are made to the expected long-
term rate of return assumptions when deemed necessary based upon revised expectations of future investment performance of
the overall investments markets.
The Company anticipates making approximately $275 in contributions to its defined benefit pension plans during fiscal 2025.
The Company has carryover balances from previous periods that may be available for use as a credit to reduce the amount of
contributions that the Company is required to make to certain of its defined benefit pension plans in fiscal 2025. The
Company’s ability to elect to use such carryover balances will be determined based on the actual funded status of each defined
benefit pension plan relative to the plan’s minimum regulatory funding requirements.
The following defined benefit payment amounts are expected to be made in the future:
Years Ending
September 30,
Projected
Benefit Payments
2025
$
2,411
2026
1,725
2027
1,611
2028
1,574
2029
1,501
2030-2033
7,316
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
58
Multi-Employer Plan
One of the bargaining units previously participated in a multi-employer plan; however, as part of the ratification of a new
collective bargaining agreement in December 2019, there was a provision to withdraw from the existing multi-employer plan
effective December 31, 2019. The withdrawal resulted in a liability of $739, which was recorded within the costs of goods sold
line in fiscal 2020 of the consolidated statements of operations and is included in other long-term liabilities. The liability is
payable in quarterly installments over the next 20 years. The next four quarterly installments are recorded in accrued liabilities
of the consolidated balance sheet.
Defined Contribution Plans
Substantially all non-union U.S. employees of the Company and its U.S. subsidiaries are eligible to participate in the
Company’s U.S. defined contribution plan. The Company makes non-discretionary, regular matching contributions to this plan
equal to an amount that represents one hundred percent (100%) of a participant’s deferral contribution up to one percent
(1%) of eligible compensation plus eighty percent (80%) of a participant’s deferral contribution between one percent (1%) and
six percent (6%) of eligible compensation. The Company’s regular matching contribution expense for its U.S. defined
contribution plan in fiscal 2024 and 2023 was $550 and $516, respectively. This defined contribution plan provides that the
Company may also make an additional discretionary matching contribution during those periods in which the Company
achieves certain performance levels. The Company did not provide additional discretionary matching contributions in either
fiscal 2024 and 2023.
The Company sponsors two defined contribution plans for the Cleveland bargaining units that either withdrew from the multi-
employer plan (union) pension plan or bargained to freeze the company-sponsored pension plan. Impacted employees were
enrolled into one of two newly formed defined contribution plans. The Company makes a non-elective contribution equal to
$1.50 or $1.25 per work, vacation, or holiday hour, up to a maximum of 40 hours per week. The Company’s non-elective
contribution expense was $228 in fiscal 2024 and $222 in fiscal 2023.
10.
Stock-Based Compensation
The Company has awarded performance and restricted shares under the Company’s 2007 Long-Term Incentive Plan (“2007
Plan”) and the Company’s 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (as further
amended, the "2016 Plan”). The aggregate number of shares that may be awarded by the Company under the 2016 Plan is 1,196
shares, less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested shares. In addition,
shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2016 Plan may
be made in multiple forms including stock options, stock appreciation rights, restricted or unrestricted stock, and performance
related shares. Any such awards are exercisable no later than ten years from the date of grant.
The performance shares that have been awarded under both plans generally provide for the vesting of the Company’s common
shares upon the Company achieving certain defined financial performance objectives during a period up to three years
following the granting of such award. The ultimate number of common shares of the Company that may be earned pursuant to
an award ranges from a minimum of no shares to a maximum of 200% of the initial target number of performance shares
awarded, depending on the level of the Company’s achievement of its financial performance objectives. Beginning in fiscal
2020, the maximum shares that may be achieved was reduced to 150% of target.
With respect to such performance shares, compensation expense is being accrued based on the probability of meeting the
performance target. The Company is not recognizing compensation expense for three tranches of awards as it has concluded it
is not probable that the performance criteria for those awards will be met. During each future reporting period, such expense
may be subject to adjustment based upon the Company’s financial performance, which impacts the number of shares that it
expects to vest upon the completion of a performance period. The performance shares were valued at the closing market price
of the Company’s common shares on the date of grant. The vesting of such shares is determined at the end of the performance
period.
The Company has awarded restricted shares to certain of its directors, officers and other employees of the Company. The
restricted shares were valued at the closing market price of the Company’s common shares on the date of grant, and such value
was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock
vesting period of one (1) year or three (3) years.
If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 385 shares
that remain available for award at September 30, 2024. If any of the outstanding share awards are ultimately earned and vest at
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
59
greater than the target number of shares, up to the maximum of 200% or 150% of such target, then a fewer number of shares
would be available for award.
Stock-based compensation under the 2016 Plan was expense of $250 and $375 for fiscal 2024 and 2023, respectively. As of
September 30, 2024, there was $179 of total unrecognized compensation cost related to the performance and restricted shares
awarded under the 2016 Plan. The Company expects to recognize this cost over the next year.
The following is a summary of activity related to performance and restricted shares:
2024
2023
Number of
Shares
Weighted Average
Fair Value at Date
of Grant
Number of
Shares
Weighted Average
Fair Value at Date
of Grant
Outstanding at beginning of year
233 $
4.65
305 $
4.75
Restricted shares awarded
113
3.42
97
3.08
Restricted shares earned
(82)
3.62
(126)
3.85
Performance shares awarded
46
3.60
27
2.84
Awards forfeited
(125)
5.07
(70)
3.67
Outstanding at end of year
185 $
3.81
233 $
4.65
11.
Leases
The components of lease expense were as follows:
Years Ended September 30,
2024
2023
Lease expense
Finance lease expense:
Amortization of right-of use assets on finance leases
$
7
$
7
Operating lease expense
1,639
1,619
Variable lease cost
78
98
Total lease expense
$
1,724
$
1,724
The following table presents the impact of leasing on the consolidated balance sheet at September 30:
Classification to the consolidated balance sheets
2024
2023
Assets:
Finance lease assets
Property, plant and equipment, net
$
4
$
10
Operating lease assets
Operating lease right-of-use assets, net
13,326
14,221
Total lease assets
$
13,330
$
14,231
Current liabilities:
Operating lease liabilities
Short-term operating lease liabilities
879
818
Non-current liabilities:
Operating lease liabilities
Long-term operating lease liabilities, net of short-term
13,035
13,915
Total lease liabilities
$
13,914
$
14,733
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
60
Supplemental cash flow and other information related to leases were as follows:
September 30, 2024
September 30, 2023
Other Information
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases
$
1,639
$
1,619
Financing cash flows from finance leases
—
5
September 30, 2024
September 30, 2023
Weighted-average remaining lease term (years):
Operating leases
11.7
12.6
Weighted-average discount rate:
Operating leases
5.93 %
5.93 %
Future minimum lease payments under non-cancellable leases as of September 30, 2024 were as follows:
Year ending September 30,
Operating Leases
2025
$
1,652
2026
1,659
2027
1,680
2028
1,545
2029
1,488
Thereafter
11,247
Total lease payments
$
19,271
Less: Imputed interest
(5,357)
Present value of lease liabilities
$
13,914
12.
Commitments and Contingencies
In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot
reasonably estimate future costs, if any, related to these matters; however, it does not believe any such matters are material to its
financial condition or results of operations. The Company maintains various liability insurance coverages to protect its assets
from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is
possible that the Company’s future operating results could be affected by future costs of litigation.
On December 30, 2022, the Company became aware of a cyber security issue involving unauthorized access to the Company’s
system. The Company immediately began an investigation and engaged cyber security experts to assist with the assessment of
the incident and to help determine what data was impacted. The Company’s investigation uncovered that the threat actor had
gained access to certain areas of the Company’s systems on or about December 27, 2022. With the assistance of outside cyber
security experts, the Company located and closed the unauthorized access to our systems and identified compromised
information, and notified those impacted in accordance with state and federal requirements. The Company undertook a number
of other measures to demonstrate our continued support and commitment to data privacy and protection and coordinated with
law enforcement.
The Company maintains $3,000 of cybersecurity insurance coverage to limit our exposure to losses such as those related to the
Cyber Incident. The Company recorded costs of $60 to other expense, net of $3,000 insurance recovery and $1,215 to selling,
general and administrative expense during the year ended September 30, 2023, resulting in net IT incident costs of $1,275
during the year ended September 30, 2023. The Company received the $3,000 of insurance proceeds on February 20, 2023. The
Company received credits totaling $627 of recoveries from a service provider during fiscal 2024. As of September 30, 2024 and
2023, the Company had $197 and $965, respectively, related to the Cyber Incident in accounts payable on the consolidated
condensed balance sheets.
The Company has incurred, and may continue to incur, certain expenses related to this attack, including expenses associated
with additional remediation measures. The Company will accrue these costs as incurred.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
61
13.
Business Information
The Company identifies itself as one operating segment, SIFCO, which is a manufacturer of forgings and machined
components for the A&E markets.
Geographic net sales are based on location of customer. The United States of America is the single largest country for
unaffiliated customer sales, accounting for 77% and 74% of consolidated net sales in fiscal 2024 and 2023, respectively. No
other single country represents greater than 10% of consolidated net sales in fiscal 2024 and 2023. Net sales to unaffiliated
customers located in various European countries accounted for 8% and 9% of consolidated net sales in fiscal 2024 and 2023,
respectively. Net sales to unaffiliated customers located in various Asian countries accounted for 8% and 9% of consolidated
net sales in fiscal 2024 and 2023, respectively. Other North American countries represent 6% and 8% of consolidated net sales
in fiscal 2024 and 2023, respectively.
All of the Company’s continuing operations and identifiable assets not held for sale are located within the United States.
2024
2023
Long-Lived Assets
United States
$
43,437 $
47,549
At September 30, 2024, approximately 90 of the hourly plant personnel are represented by two separate collective bargaining
agreements. The table below shows the expiration dates of the collective bargaining agreements.
Plant locations
Expiration date
Cleveland, Ohio (unit 1)
May 15, 2025
Cleveland, Ohio (unit 2)
March 31, 2025
The Company is a party to collective bargaining agreements (“CBA”) with certain employees located in Cleveland, which has
two bargaining units. The Company’s Cleveland bargaining unit 1 ratified its CBA in fiscal 2020. The second bargaining unit,
under its new representative the International Brotherhood of Boilermakers, was ratified in fiscal 2022.
14.
Related Party Transactions
On December 21, 2023, the Company entered into the Ninth Amendment to the Credit Agreement and Fourth Amendment to
the Export Credit agreement with its lender incurring a secured subordinated loan from GHI, a California corporation owned
and controlled by Mark J. Silk (Mr. Silk is a member of the Board of Directors of the Company and considered a related party),
in the original principal amount of $3,000, and Mr. Silk delivered a personal guaranty in favor of the Company’s senior lender
of certain Company indebtedness under the Credit Agreement and the Export Credit Agreement. As part of the Guaranty and
Subordinated Promissory Note, the Company will pay GHI fees of $880 and $150, respectively. See Note 6 — Debt for further
information.
15.
Subsequent Events
The Company has evaluated subsequent events through December 23, 2024, the date the financial statements were available to
be issued, and has determined that the following subsequent events require disclosure in the financial statements.
CBlade Sale
On October 15, 2024, the Company completed the sale of CBlade. Refer to Note 1 — Summary of Significant Accounting
Policies and Note 2 — Assets Held for Sale and Discontinued Operations for more information.
Loan and Security Agreement
On October 17, 2024, Company and Quality Aluminum Forge, LLC, a wholly-owned subsidiary of the Company (“QAF”, and
together with the Company, the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) among the
Company and QAF, as borrowers, Siena Lending Group LLC, as Lender (“Siena”), and each of the affiliates of the borrowers
signatory to the Loan Agreement from time to time as guarantors.
The Loan Agreement provided for a three-year, senior secured revolving credit facility in an aggregate principal amount not to
exceed $20,000 (the “Revolver”) and a term loan in the original principal amount of $3,000 (the “Term Loan”). The Loan
Agreement also provided for a $2,500 letter of credit sub-facility (the “Letter of Credit Sub-facility,” and collectively with the
Revolver and the Term Loan, the “New Credit Facility”). Proceeds of borrowings under the New Credit Facility were used to
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
62
refinance the Company’s Credit Agreement, Security Agreement, and Export Credit Agreement and was also available for
working capital, capital expenditures and other general corporate purposes. As of the closing date, $12,578 was outstanding
under the New Credit Facility.
In consideration of the execution and delivery by Siena of the Loan Agreement, the Company agreed pursuant to the fee letter
to pay a closing fee in the amount of $230 (of which $115 is payable on the closing date and $115 is payable on the first
anniversary of the closing date, with the remaining amount (if any) of the closing fee to be paid in full on the Maturity Date).
Borrowings under the Revolver and the Letter of Credit Sub-facility will bear interest at an annual rate of 4.5% plus the
Adjusted Term SOFR (or, if the base rate is applicable, an annual rate of 3.5% plus the Base Rate). Borrowings under the Term
Loan will bear interest at an annual rate of 5.5% plus the Adjusted Term SOFR (or, if the base rate is applicable, 4.5% plus the
Base Rate). Letters of credit issued under the Letter of Credit Sub-facility will have a fee equal to 4.5% plus adjusted term
SOFR per annum of the face amount of such letter of credit.
The fee letter provides for a collateral monitoring fee in the amount of $126, which fee shall be paid in installments as follows:
(a) equal payments of approximately $4 shall be payable on the closing date and on the first day of each month thereafter and
(b) the remaining amount of such fee (if any) shall be paid in full on the maturity date. In addition, an unused line fee accrues
with respect to the unused amount of the Revolver at an annual rate of 0.5%.
Borrowings under the New Credit Facility are secured by (a) a continuing first priority lien on and security interest in and to
substantially all of the assets of the Company and other loan parties identified therein; and (b) a continuing first priority pledge
of the pledged equity. The obligations of the Borrowers are guaranteed by each guarantor on the terms set forth in the Loan
Agreement.
The Loan Agreement provides that the Company must maintain compliance with a minimum fixed charge coverage ratio,
determined in accordance with the Loan Agreement. The Loan Agreement also contains affirmative, negative and financial
covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, loans
and investment, liens, mergers, asset sales, and transactions with affiliates, as well as customary events of default for financings
of this type.
On October 17, 2024, proceeds from the Loan Agreement were used to repay the outstanding principal, including accrued PIK
interest, and fees under the Guaranty and Subordinated Promissory Note with GHI.
16.
Summarized Quarterly Results (unaudited)
Fiscal 2024 Quarter Ended
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Net sales
$
15,474 $
20,514 $
21,987 $
21,658
Gross profit
(545)
1,494
2,712
2,321
Loss from continuing operations
$
(4,039) $
(2,030) $
(679) $
(1,878)
Income from discontinued operations, net of tax
617
440
751
1,435
Net (loss) income
$
(3,422) $
(1,590) $
72 $
(443)
Basic earnings (loss) per share:
Basic loss per share from continuing operations
$
(0.67) $
(0.33) $
(0.11) $
(0.33)
Basic earnings per share from discontinued operations
0.10
0.07
0.12
0.25
Basic (loss) earnings per share
$
(0.57) $
(0.26) $
0.01 $
(0.08)
Diluted earnings (loss) per share:
Diluted loss per share from continuing operations
$
(0.67) $
(0.33) $
(0.11) $
(0.33)
Diluted earnings per share from discontinued operations
0.10
0.07
0.12
0.25
Diluted (loss) earnings per share
$
(0.57) $
(0.26) $
0.01 $
(0.08)
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
63
Fiscal 2023 Quarter Ended
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Net sales
$
17,294 $ 14,353 $ 15,391 $ 19,029
Gross profit
385
587
2,210
163
Loss from continuing operations
$
(3,055) $
(3,237) $
(1,009) $
(3,218)
Income from discontinued operations, net of tax
466
870
375
116
Net loss
$
(2,589) $
(2,367) $
(634) $
(3,102)
Basic earnings (loss) per share:
Basic loss per share from continuing operations
$
(0.52) $
(0.55) $
(0.17) $
(0.53)
Basic earnings per share from discontinued operations
0.08
0.15
0.06
0.01
Basic (loss) earnings per share
$
(0.44) $
(0.40) $
(0.11) $
(0.52)
Diluted earnings (loss) per share:
Diluted loss per share from continuing operations
$
(0.52) $
(0.55) $
(0.17) $
(0.53)
Diluted earnings per share from discontinued operations
0.08
0.15
0.06
0.01
Diluted (loss) earnings per share
$
(0.44) $
(0.40) $
(0.11) $
(0.52)
The unaudited summarized quarterly results represent the retrospective impact of discontinued operations presentation related
to the sale of CBlade in October 2024.
The quarterly net income per share amounts will not necessarily add to the net income per share computed for the year because
of the method used in calculating per share data.
SIFCO Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
64
Schedule II
SIFCO Industries, Inc. and Subsidiaries
Valuation and Qualifying Accounts
Years Ended September 30, 2024 and 2023
(Amounts in thousands)
Balance at
Beginning
of Period
Additions
(Reductions)
Charged to
Expense
Additions
(Reductions)
Charged to
Other
Accounts
Deductions
Balance at
End of
Period
Year Ended September 30, 2024
Deducted from asset accounts
Allowance for credit losses
$
237 $
(90) $
— $
(30) (a)
$
117
Inventory valuation accounts ¹
2,164
489
—
80 (b)
2,733
Inventory LIFO reserve
9,634
862
—
—
10,496
Deferred tax valuation allowance
9,112
2,000
(212)
—
10,900
Accrual for estimated liability
Workers’ compensation reserve
559
(49)
—
(207) (c)
303
Year Ended September 30, 2023
Deducted from asset accounts
Allowance for credit losses
59
194
—
(16) (a)
237
Inventory valuation accounts ¹
3,337
(304)
—
(869) (b)
2,164
Inventory LIFO reserve
9,940
(306)
—
—
9,634
Deferred tax valuation allowance
6,977
2,534
(399)
—
9,112
Accrual for estimated liability
Workers’ compensation reserve
912
285
—
(638) (c)
559
Note: all historical amounts have been retrospectively adjusted to represent balances and activity from continuing operations.
¹
Inventory valuation accounts reflect the impact of excess and obsolete and net realizable value inventory write downs.
(a)
Accounts determined to be uncollectible, net of recoveries
(b)
Inventory sold or otherwise disposed
(c)
Payment of workers’ compensation claims
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s management,
including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining effective
disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Our disclosure controls and procedures are
designed to ensure that information required to be disclosed in the Company’s SEC reports was recorded, processed,
summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms and that
such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Company’s internal control over financial reporting may not prevent or detect misstatements because of its inherent
limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Our disclosure
controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving
the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated,
is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or
that all control issues and instances of fraud, if any, have been detected. If the Company fails to maintain the adequacy of its
65
internal controls, including any failure to implement required new or improved controls, or if the Company experiences
difficulties in their implementation, the Company’s business and financial results could be harmed, and the Company could fail
to meet its financial reporting obligations.
Management’s Report on Internal Control over Financial Reporting
Management, including our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal
control over financial reporting as of September 30, 2024. In making this assessment, our management used the criteria for
effective internal control over financial reporting described in the 2013 “Internal Control-Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation of our disclosure controls and
procedures as of September 30, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date,
our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting and other Remediation
As of September 30, 2024, no material changes in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the Company’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
During fiscal year 2024, none of our officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-
Rule 10b5-1 trading arrangement” (each as defined in Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information about the Executive Officers of the Company appears in Part I of this Report.
The Company incorporates herein by reference the information required by this Item as to the Directors, procedures for
recommending Director nominees and the Audit Committee appearing under the captions “Proposal 1 — To Elect Four
(4) Directors,” and “Corporate Governance and Board of Director Matters” of the Company’s definitive Proxy Statement to be
filed with the SEC on or about December 23, 2024.
The Directors of the Company are elected annually to serve for one-year terms or until their successors are elected and
qualified.
The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K under the Securities
Exchange Act of 1934, as amended. The Code of Ethics is applicable to, among other people, the Company’s Chief Executive
Officer, Chief Financial Officer, who is the Company’s Principal Financial Officer, and Principal Accounting Officer. The
Company’s Code of Ethics (including any amendments to, or related waivers from, the Code of Ethics) is available on its
website: www.sifco.com.
The Company has adopted an insider trading policy which governs the purchase, sale and/or any other dispositions of our
securities by the Company and its directors, officers and employees and is designed to promote compliance with insider trading
laws, rules and regulations, and listing standards applicable to the Company. A copy of our insider trading policy is filed with
this Annual Report on Form 10-K as Exhibit 19.1.
Item 11. Executive Compensation
The Company incorporates herein by reference the information appearing under the captions “Executive Compensation” and
“Director Compensation” of the Company’s definitive Proxy Statement to be filed with the SEC on or about December 23,
2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The following table sets forth information regarding Common Shares to be issued under the Company’s equity compensation
plans as of September 30, 2024.
66
Plan category
Number of
securities to
be issued
upon
exercise of
outstanding
options, warrants and
rights
Weighted-
average
exercise
price of
outstanding
options, warrants and
rights
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
Equity compensation plans approved by security holders:
2016 Plan (1)
184,686
N/A
385,192
(1)
Under the 2016 Plan, the aggregate number of common shares that are available to be granted is 1,196,401 shares, with a further limit of no more than
50,000 shares to any one person in any twelve-month period. For additional information concerning the Company’s equity compensation plans, refer to
the discussion in Note 10 — Stock-Based Compensation of the Notes to Consolidated Financial Statements. These securities are issued under time based
vesting for retention and/or upon meeting performance objectives.
The Company incorporates herein by reference the beneficial ownership information appearing under the captions “Stock
Ownership of Certain Beneficial Owners” and “Stock Ownership of Executive Officers, Director and Nominees” of the
Company’s definitive Proxy Statement to be filed with the SEC on or about December 23, 2024.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Company incorporates herein by reference the information required by this item appearing under the captions “Corporate
Governance and Board of Director Matters” of the Company’s definitive Proxy Statement to be filed with the SEC on or about
December 23, 2024.
Item 14. Principal Accounting Fees and Services
The Company incorporates herein by reference the information required by this item appearing under the caption “Principal
Accounting Fees and Services” of the Company’s definitive Proxy Statement to be filed with the SEC on or about
December 23, 2024.
Part IV
Item 15. Exhibits, Financial Statement Schedules
(a) (1) Financial Statements:
The following Consolidated Financial Statements; Notes to the Consolidated Financial Statements and the Report of
Independent Registered Public Accounting Firm are included in Part II, Item 8 of the Annual Report on Form 10-K.
(a) (2) Financial Statement Schedules:
The following financial statement schedule is included in Item 8:
Schedule II – Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange
Commission are not required under the related regulations, are inapplicable, or the information has been included in the
Notes to the Consolidated Financial Statements.
(a) (3) Exhibits:
The following exhibits are filed with this report or are incorporated herein by reference to a prior filing in accordance with
Rule 12b-32 under the Securities and Exchange Act of 1934. (Asterisk denotes exhibits filed with this report)
*Filed herewith.
**Management contract or compensatory plan or arrangement.
Exhibit
No.
Description
2.1
Stock Purchase Agreement between Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini,
Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO
Industries Inc.) dated March 16, 2015 filed as Exhibit 2.1 to the Company’s Form 8-K dated July 2, 2015, and
incorporated herein by reference.
67
2.2
Amendment to the Stock Purchase Agreement Riello Investimenti Partners SGR S.p.A., Giorgio Visentini,
Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned
subsidiary of SIFCO Industries Inc.) dated June 30, 2015 filed as Exhibit 2.2 to the Company’s Form 8-K dated
July 2, 2015, and incorporated herein by reference.
2.3
Share Purchase Agreement, dated as of August 1, 2024 by and among SIFCO Irish Holdings, Ltd (a wholly-owned
subsidiary of SIFCO Industries Inc.) and TB2 S.r.l. dated August 1, 2024 filed as Exhibit 10.1 to the Company's
Form 8-K dated August 6, 2024, and incorporated herein by reference.
2.4
Amendment to Share Purchase Agreement, dated September 27, 2024, by and between SIFCO Irish Holdings Ltd.
(a wholly-owned subsidiary of SIFCO Industries Inc.) and TB2 S.r.l. dated September 27, 2024 filed as Exhibit
10.1 to the Company's Form 8-K dated October 3, 2024, and incorporated herein by reference.
3.1
Third Amended Articles of Incorporation of SIFCO Industries, Inc., filed as Exhibit 3(a) of the Company’s Form
10-Q dated March 31, 2002, and incorporated herein by reference.
*3.2
SIFCO Industries, Inc. Amended and Restated Code of Regulations dated November 13, 2024.
*4.1
Description of securities.
9.1
Voting Trust Agreement dated January 31, 2013, filed as Exhibit 9.1 to the Company’s Form 10-Q dated February
11, 2013 and incorporated herein by reference.
9.2
Voting Trust Extension Agreement dated January 15, 2015, filed as Exhibit 9.2 to the Company’s Form 10-Q
dated February 3, 2015 and incorporated herein by reference.
9.3
Voting Trust Agreement dated January 31, 2017, filed as Exhibit 9.3 to the Company’s Form 10-Q dated
December 31, 2016 and incorporated herein by reference.
9.4
Voting Trust Extension Agreement dated January 18, 2019, filed as Exhibit 9.4 to the Company’s Form 10-Q
dated February 14, 2019, and incorporated herein by reference.
10.1**
SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of
2008 Annual Meeting to Shareholders dated December 14, 2007, and incorporated herein by reference.
10.2**
Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the
Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and
incorporated herein by reference.
10.3**
Change in control Agreement and Separation Agreement between the Company and Peter W. Knapper, effective
June 29, 2022, filed as Exhibit 10.1 to the Company’s Form 8-K dated June 29, 2022 and incorporated herein by
reference.
10.4**
Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.6 to the
Company’s Form 10-Q dated May 16, 2016, and incorporated herein by reference.
10.5**
Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.7 to the
Company’s Form 10-Q dated May 16, 2016, and incorporated herein by reference.
10.6
Credit Agreement, dated August 8, 2018, by and among SIFCO Industries, Inc. and Lender named therein and J.P.
Morgan Chase Bank, N.A., filed as Exhibit 10.12 to the Company’s Form 10-Q dated August 9, 2018, and
incorporated herein by reference.
10.7**
Amendment and Restatement to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of
the Company’s Proxy and Notice of 2017 Annual Meeting to Shareholders dated December 6, 2016, and
incorporated herein by reference.
10.8**
Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.14 to the
Company’s Form 10-Q dated January 31, 2017, and incorporated herein by reference.
10.9**
Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.15 to the
Company’s Form 10-Q dated January 31, 2017, and incorporated herein by reference.
10.10**
Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.16 to the
Company’s Form 10-Q dated January 31, 2017, and incorporated herein by reference.
10.11**
Change in Control Agreement and Separation Agreement between the Company and Thomas R. Kubera, effective
June 29, 2019, filed as Exhibit 10.2 to the Company’s Form 10-Q dated July 1, 2019, and incorporated herein by
reference.
10.12
First Amendment to Credit Agreement, dated November 5, 2018, by and among SIFCO Industries, Inc., T & W
Forge, LLC, Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association,
filed as Exhibit 10.1 to the Company’s Form 8-K dated November 8, 2018, and incorporated herein by reference.
10.13
Economic Development Administration Title IX Loan Agreement, dated November 8, 2018, by and between the
City of Cleveland and SIFCO Industries, Inc., filed as Exhibit 10.2 to the Company’s Form 8-K dated November
8, 2018, and incorporated herein by reference.
68
10.14
Second Amendment to Credit Agreement, dated December 17, 2018, by and among SIFCO Industries, Inc., T&W
Forge, LLC., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association,
filed as Exhibit 10.2 to the Company’s Form 8-K dated December 19, 2018, and incorporated herein by reference.
10.15
Export Credit Agreement, dated December 17, 2018, by and among SIFCO Industries, Inc., T & W Forge, LLC,
Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit
10.1 to the Company’s Form 8-K dated December 19, 2018 and incorporated herein by reference.
10.16
Third Amendment to Credit Agreement, dated March 29, 2019, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.19 to
the Company’s Form 10-Q dated May 10, 2019.
10.17
Fourth Amendment to Credit Agreement, dated March 29, 2019, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to
the Company’s Form 8-K dated September 24, 2019.
10.18
First Amendment to the SIFCO Industries, Inc. 2007 Long-term Incentive Plan (Amended and Restated as of
November 16, 2016) filed as Exhibit A of the Company’s Definitive Proxy Statement dated December 16, 2019,
and incorporated herein by reference.
10.19**
Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.21 to the
Company’s Form 10-K dated December 23, 2020, and incorporated herein by reference.
10.20
Fifth Amendment to the Credit Agreement, dated February 19, 2021, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.1 to the Company’s Form 8-K dated February 22, 2021, and incorporated herein by reference.
10.21
First Amendment to the Export Credit Agreement, dated February 19, 2021, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.2 to the Company’s Form 8-K dated February 22, 2021, and incorporated herein by reference.
10.22
Sixth Amendment to the Credit Agreement, dated March 23, 2022, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit 10.1 to
the Company’s Form 8-K dated March 24, 2022, and incorporated herein by reference.
10.23
Second Amendment to the Export Credit Agreement, dated March 23, 2022, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association filed as Exhibit
10.2 to the Company’s Form 8-K dated March 24, 2022, and incorporated herein by reference.
10.24
Forbearance Agreement, dated April 28, 2023, by and among JPMorgan Chase Bank, N.A., SIFCO Industries,
Inc., T&W Forge LLC, and Quality Aluminum Forge, LLC filed as Exhibit 10.1 to the Company's Form 8-K dated
April 28, 2023, and incorporated herein by reference.
10.25
Seventh Amendment to Credit Agreement, dated August 9, 2023, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.1 to
the Company’s Form 8-K dated August 10, 2023, and incorporated herein by reference.
10.26
Third Amendment to Export Credit Agreement, dated August 9, 2023, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.2 to the Company’s Form 8-K dated August 10, 2023, and incorporated herein by reference.
10.27
Eighth Amendment to Credit Agreement, dated November 8, 2023, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.1 to
the Company’s Form 8-K dated November 13, 2023, and incorporated herein by reference.
10.28
Ninth Amendment to Credit Agreement, dated December 21, 2023, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.1 to
the Company’s Form 8-K dated December 28, 2023, and incorporated herein by reference.
10.29
Fourth Amendment to Export Credit Agreement, dated December 21, 2023, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.2 to the Company’s Form 8-K dated December 28, 2023, and incorporated herein by reference.
10.30
Subordinated Promissory Note - Garnet Holdings (M. Silk), dated December 21, 2023, by and among SIFCO
Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association,
filed as Exhibit 10.2 to the Company’s Form 8-K dated December 28, 2023, and incorporated herein by reference.
10.31
Silk Subordination and Intercreditor Agreement, dated December 21, 2023, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.2 to the Company’s Form 8-K dated December 28, 2023, and incorporated herein by reference.
10.32
Side Letter - MS Guaranty, dated December 21, 2023, by and among SIFCO Industries, Inc., Quality Aluminum
Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.2 to the
Company’s Form 8-K dated December 28, 2023, and incorporated herein by reference.
10.33
Tenth Amendment to Credit Agreement, dated May 21, 2024, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.1 to
the Company's Form 8-K dated May 23, 2024, and incorporated herein by reference.
69
10.34
Fifth Amendment to Export Credit Agreement, dated May 21, 2024, by and among SIFCO Industries, Inc., Quality
Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit 10.2 to
the Company's Form 8-K dated May 23, 2023, and incorporated herein by reference.
10.35
Eleventh Amendment to Credit Agreement, dated September 30, 2024, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.2 to the Company's Form 8-K dated September 27, 2024, and incorporated herein by reference.
10.36
Sixth Amendment to Export Credit Agreement, dated September 30, 2024, by and among SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC, and JPMorgan Chase Bank, N.A., a national banking association, filed as Exhibit
10.3 to the Company's Form 8-K dated September 27, 2024, and incorporated herein by reference.
10.37
First Amendment to Subordination and Intercreditor Agreement, dated September 30, 2024, by and among SIFCO
Industries, Inc., Quality Aluminum Forge, LLC, JPMorgan Chase Bank, N.A., and Garnet Holdings Inc. filed as
Exhibit 10.4 to the Company's Form 8-K dated September 27, 2024, and incorporated herein by reference.
10.38
First Amendment to Subordinated Secured Promissory Note, dated September 30, 2024, by and among SIFCO
Industries, Inc., Quality Aluminum Forge, LLC and Garnet Holdings Inc., filed as Exhibit 10.5 to the Company's
Form 8-K dated September 27, 2024, and incorporated herein by reference.
10.39
Loan and Security Agreement dated October 17, 2024 among Siena Lending Group LLC, SIFCO Industries, Inc.,
Quality Aluminum Forge, LLC and each of the Affiliates of the Borrowers signatory thereto from time to time as
guarantors, filed as Exhibit 10.1 to the Company's Form 8-K dated October 17, 2024, and incorporated herein by
reference.
14.1
Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 8-K dated February 6, 2018, and incorporated herein
by reference.
*19.1
Insider Trading Policy.
*21.1
Subsidiaries of Company.
*23.1
Consent of Independent Registered Public Accounting Firm.
*31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a).
*31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a).
*32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
*32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
97.1
Policy for the Recovery of Erroneously Awarded Compensation filed as Exhibit 97.1 of the Company's Form 10-K
dated January 2, 2024, and incorporated herein by reference.
*101
The following financial information from SIFCO Industries, Inc. Report on Form 10-K for the year ended
September 30, 2024 filed with the SEC on December 23, 2024, formatted in XBRL includes: (i) Consolidated
Statements of Operations for the years ended September 30, 2024 and 2023 (ii) Consolidated Statements of
Comprehensive Income for the years ended September 30, 2024 and 2023, (iii) Consolidated Balance Sheets at
September 30, 2024 and 2023, (iv) Consolidated Statements of Cash Flow for the years ended September 30, 2024
and 2023, (vi) Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2024 and 2023
and (v) the Notes to the Consolidated Financial Statements.
*104
Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and
are contained with Exhibit 101
70
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIFCO Industries, Inc.
By: /s/ Jennifer Wilson
Jennifer Wilson
Chief Financial Officer
(Principal Financial Officer)
Date: December 23, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on December 23, 2024
by the following persons on behalf of the Registrant in the capacities indicated.
/s/ Alayne Reitman
/s/ George Scherff
Alayne Reitman
George Scherff
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
/s/ Jeffrey P. Gotschall
/s/ Robert D. Johnson
Jeffrey P. Gotschall
Robert D. Johnson
Director
Director
/s/ Donald C. Molten, Jr.
/s/ Mark J. Silk
Donald C. Molten, Jr.
Mark J. Silk
Director
Director
/s/ Hudson D. Smith
/s/ Jennifer Wilson
Hudson D. Smith
Jennifer Wilson
Director
Chief Financial Officer
(Principal Financial Officer)
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
(THIS PAGE INTENTIONALLY LEFT BLANK)
DIRECTORS
AUDITORS
Jeffrey P. Gotschall
Chairman Emeritus
Alayne L. Reitman
Formerly Vice President – Finance and
Chief Financial Officer
The Tranzonic Companies, Inc.
Chairman of the Board
Robert D. Johnson
Chairman of the Board of Directors
Spirit Aerosystems Holdings, Inc.
Board Member
Spirit Airlines, Inc., Roper Industries, Inc.,
and Elbit Systems of America, LLC
Donald C. Molten, Jr.
Formerly Managing Partner of
Dimensional Analytics, LLC
Mark J. Silk
President
ThinKom Solutions, Inc.
Partner
Blue Sea Capital, LLC
Hudson D. Smith
President
Forged Aerospace Sales, LLC
OFFICERS
George Scherff
Chief Executive Officer
Jennifer Wilson
Chief Financial Officer
RSM US LLP
Certified Public Accountants
127 Public Square Suite 2300
Cleveland, Ohio 44114
GENERAL COUNSEL
Benesch Friedlander Coplan & Aronoff LLP
127 Public Square, Suite 4900
Cleveland, Ohio 44114
COMPANY INFORMATION
Included with this Annual Report is a copy of
SIFCO Industries, Inc.’s Form 10-K filed with
the Securities and Exchange Commission for
the year ended September 30, 2024. Additional
copies of the Company’s Form 10-K and other
information
are
available
to
shareholders
upon written request to:
Investor Relations
SIFCO Industries, Inc.
970 East 64th Street
Cleveland, Ohio 44103
We also invite you to visit our website:
www.sifco.com.
ANNUAL MEETING
The
annual
meeting
of
shareholders
of
SIFCO Industries, Inc. will be held virtually at
9:30 a.m. EST on January 29, 2025.
970 East 64th Street • Cleveland, Ohio 44103-1694
Phone: (216) 881-8600 • www.sifco.com