10-Q 1 sif0331201910q2019.htm 10-Q SIFCO Q2 2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2019
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)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer | ¨ | Accelerated filer | ¨
Non-accelerated filer | ¨ | Smaller reporting company | ý
|  | Emerging growth company | ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Shares |  | SIF |  | NYSE American

The number of the Registrant’s Common Shares, par value $1.00, outstanding at April 30, 2019 was 5,773,318.

Part I. Financial Information
Item 1. Financial Statements
SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
(Amounts in thousands, except per share data)

| Three Months Ended March 31, |  | Six Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Net sales | $ | 27,392 |  |  | $ | 27,794 |  |  | $ | 56,458 |  |  | $ | 52,044 |
Cost of goods sold | 25,304 |  |  | 25,265 |  |  | 51,633 |  |  | 47,487 |
Gross profit | 2,088 |  |  | 2,529 |  |  | 4,825 |  |  | 4,557 |
Selling, general and administrative expenses | 3,784 |  |  | 3,861 |  |  | 7,894 |  |  | 7,933 |
Amortization of intangible assets | 413 |  |  | 433 |  |  | 828 |  |  | 858 |
Gain on disposal or impairment of operating assets | — |  |  | (29 | ) |  | (282 | ) |  | (1,429 | )
Gain on insurance proceeds received for damaged property | (1,164 | ) |  | — |  |  | (1,164 | ) |  | — |
Operating loss | (945 | ) |  | (1,736 | ) |  | (2,451 | ) |  | (2,805 | )
Interest income | (1 | ) |  | (14 | ) |  | (2 | ) |  | (29 | )
Interest expense | 315 |  |  | 436 |  |  | 607 |  |  | 886 |
Foreign currency exchange gain, net | (1 | ) |  | (43 | ) |  | (1 | ) |  | (80 | )
Other income, net | (34 | ) |  | (80 | ) |  | (35 | ) |  | (396 | )
Loss before income tax expense (benefit) | (1,224 | ) |  | (2,035 | ) |  | (3,020 | ) |  | (3,186 | )
Income tax expense (benefit) | 34 |  |  | 3 |  |  | (480 | ) |  | (237 | )
Net loss | $ | (1,258 | ) |  | $ | (2,038 | ) |  | $ | (2,540 | ) |  | $ | (2,949 | )
Net loss per share |  |  |  |  |  |  |
Basic | $ | (0.23 | ) |  | $ | (0.37 | ) |  | $ | (0.46 | ) |  | $ | (0.53 | )
Diluted | $ | (0.23 | ) |  | $ | (0.37 | ) |  | $ | (0.46 | ) |  | $ | (0.53 | )
Weighted-average number of common shares (basic) | 5,561 |  |  | 5,535 |  |  | 5,548 |  |  | 5,519 |
Weighted-average number of common shares (diluted) | 5,561 |  |  | 5,535 |  |  | 5,548 |  |  | 5,519 |

See notes to unaudited consolidated condensed financial statements.
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SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Comprehensive Loss
(Unaudited)
(Amounts in thousands)

| Three Months Ended March 31, |  | Six Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Net loss | $ | (1,258 | ) |  | $ | (2,038 | ) |  | $ | (2,540 | ) |  | $ | (2,949 | )
Other comprehensive income (loss): |  |  |  |  |  |  |
Foreign currency translation adjustment | (159 | ) |  | 534 |  |  | (587 | ) |  | 831 |
Retirement plan liability adjustment | 107 |  |  | 161 |  |  | 215 |  |  | 323 |
Interest rate swap agreement adjustment | — |  |  | — |  |  | — |  |  | 19 |
Comprehensive loss | $ | (1,310 | ) |  | $ | (1,343 | ) |  | $ | (2,912 | ) |  | $ | (1,776 | )

See notes to unaudited consolidated condensed financial statements.
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SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(Amounts in thousands, except per share data)

| March 31, 2019 |  | September 30, 2018
| (unaudited) |  |
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 1,903 |  |  | $ | 1,252 |
Receivables, net of allowance for doubtful accounts of $537 and $520, respectively | 22,555 |  |  | 28,001 |
Contract asset | 8,761 |  |  | — |
Other receivables | 366 |  |  | — |
Inventories, net | 10,342 |  |  | 18,269 |
Refundable income taxes | 425 |  |  | 126 |
Prepaid expenses and other current assets | 1,499 |  |  | 1,900 |
Assets held for sale | — |  |  | 35 |
Total current assets | 45,851 |  |  | 49,583 |
Property, plant and equipment, net | 35,338 |  |  | 35,390 |
Intangible assets, net | 4,181 |  |  | 5,076 |
Goodwill | 11,733 |  |  | 12,020 |
Other assets | 342 |  |  | 168 |
Total assets | $ | 97,445 |  |  | $ | 102,237 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Current maturities of long-term debt | $ | 5,921 |  |  | $ | 5,944 |
Revolver | 18,630 |  |  | 21,253 |
Accounts payable | 13,119 |  |  | 15,513 |
Accrued liabilities | 5,485 |  |  | 5,107 |
Total current liabilities | 43,155 |  |  | 47,817 |
Long-term debt, net of current maturities | 1,679 |  |  | 2,332 |
Deferred income taxes | 2,193 |  |  | 2,413 |
Pension liability | 5,112 |  |  | 5,339 |
Other long-term liabilities | 67 |  |  | 147 |
Shareholders’ equity: |  |  |
Serial preferred shares, no par value, authorized 1,000 shares | — |  |  | — |
Common shares, par value $1 per share, authorized 10,000 shares; issued and outstanding shares –5,773 at March 31, 2019 and 5,690 at September 30, 2018 | 5,773 |  |  | 5,690 |
Additional paid-in capital | 10,353 |  |  | 10,031 |
Retained earnings | 38,114 |  |  | 37,097 |
Accumulated other comprehensive loss | (9,001 | ) |  | (8,629 | )
Total shareholders’ equity | 45,239 |  |  | 44,189 |
Total liabilities and shareholders’ equity | $ | 97,445 |  |  | $ | 102,237 |

See notes to unaudited consolidated condensed financial statements.
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SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited, Amounts in thousands)

| Six Months Ended March 31,
| 2019 |  | 2018
Cash flows from operating activities: |  |  |
Net loss | $ | (2,540 | ) |  | $ | (2,949 | )
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
Depreciation and amortization | 3,840 |  |  | 4,319 |
Amortization and write-off of debt issuance cost | 45 |  |  | 110 |
Gain on disposal of operating assets or impairment of operating assets | (282 | ) |  | (1,429 | )
Gain on insurance proceeds received for damaged property | (1,164 | ) |  | — |
LIFO expense | (57 | ) |  | 115 |
Share transactions under company stock plan | 426 |  |  | 242 |
Other long-term liabilities | (78 | ) |  | (203 | )
Deferred income taxes | (143 | ) |  | (896 | )
Changes in operating assets and liabilities: |  |  |
Receivables | 5,247 |  |  | (10 | )
Contract assets | 1,380 |  |  | — |
Inventories | 1,291 |  |  | 1,606 |
Refundable taxes | (299 | ) |  | 194 |
Prepaid expenses and other current assets | 60 |  |  | (382 | )
Other assets | (174 | ) |  | 73 |
Accounts payable | (3,007 | ) |  | 451 |
Other accrued liabilities | 425 |  |  | (445 | )
Accrued income and other taxes | 25 |  |  | 592 |
Net cash provided by operating activities | 4,995 |  |  | 1,388 |
Cash flows from investing activities: |  |  |
Insurance proceeds received for damaged property | 2,270 |  |  | — |
Proceeds from disposal of operating assets | 317 |  |  | 3,023 |
Capital expenditures | (3,752 | ) |  | (1,561 | )
Net cash (used in) provided by investing activities | (1,165 | ) |  | 1,462 |
Cash flows from financing activities: |  |  |
Proceeds from long-term debt | 227 |  |  | — |
Payments on long-term debt | (701 | ) |  | (1,936 | )
Proceeds from revolving credit agreement | 25,469 |  |  | 34,243 |
Repayments of revolving credit agreement | (28,092 | ) |  | (35,993 | )
Payment of debt issue costs | (105 | ) |  | (100 | )
Short-term debt borrowings | 3,335 |  |  | 3,093 |
Short-term debt repayments | (3,247 | ) |  | (2,705 | )
Share retirement | (62 | ) |  | — |
Net cash used for financing activities | (3,176 | ) |  | (3,398 | )
Increase (Decrease) in cash and cash equivalents | 654 |  |  | (548 | )
Cash and cash equivalents at the beginning of the period | 1,252 |  |  | 1,399 |
Effect of exchange rate changes on cash and cash equivalents | (3 | ) |  | 34 |
Cash and cash equivalents at the end of the period | $ | 1,903 |  |  | $ | 885 |
Supplemental disclosure of cash flow information of operations: |  |  |
Cash paid for interest | $ | (551 | ) |  | $ | (702 | )
Cash (paid) refund for income taxes, net | $ | (57 | ) |  | $ | 159 |

See notes to unaudited consolidated condensed financial statements.
5

SIFCO Industries, Inc. and Subsidiaries
Consolidated Condensed Statements of Shareholders’ Equity
(Unaudited, Amounts in thousands)

|  | Six Months Ended March 31, 2019
|  | Common |  |  |  |  |  |  |  |
|  | Shares |  | Amount |  | Additional Paid-In Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Loss |  | Total Shareholders’ Equity
Balance - September 30, 2018 |  | 5,690 |  |  | $ | 5,690 |  |  | $ | 10,031 |  |  | $ | 37,097 |  |  | $ | (8,629 | ) |  | $ | 44,189 |
Cumulative effect of the new revenue standard |  | — |  |  | — |  |  | — |  |  | 3,598 |  |  | — |  |  | 3,598 |
Comprehensive loss |  | — |  |  | — |  |  | — |  |  | (2,540 | ) |  | (372 | ) |  | (2,912 | )
Share retirement |  | (21 | ) |  | (21 | ) |  | — |  |  | (41 | ) |  | — |  |  | (62 | )
Performance and restricted share expense |  | — |  |  | — |  |  | 446 |  |  | — |  |  | — |  |  | 446 |
Share transactions under equity based plans |  | 104 |  |  | 104 |  |  | (124 | ) |  | — |  |  | — |  |  | (20 | )
Balance - March 31, 2019 |  | 5,773 |  |  | $ | 5,773 |  |  | $ | 10,353 |  |  | $ | 38,114 |  |  | $ | (9,001 | ) |  | $ | 45,239 |

|  | Three Months Ended March 31, 2019
Balance - December 31, 2018 |  | 5,736 |  |  | $ | 5,736 |  |  | $ | 10,221 |  |  | $ | 39,413 |  |  | $ | (8,949 | ) |  | $ | 46,421 |
Comprehensive loss |  | — |  |  | — |  |  | — |  |  | (1,258 | ) |  | (52 | ) |  | (1,310 | )
Share retirement |  | (21 | ) |  | (21 | ) |  | — |  |  | (41 | ) |  | — |  |  | (62 | )
Performance and restricted share expense |  | — |  |  | — |  |  | 208 |  |  | — |  |  | — |  |  | 208 |
Share transactions under equity based plans |  | 58 |  |  | 58 |  |  | (76 | ) |  | — |  |  | — |  |  | (18 | )
Balance - March 31, 2019 |  | 5,773 |  |  | $ | 5,773 |  |  | $ | 10,353 |  |  | $ | 38,114 |  |  | $ | (9,001 | ) |  | $ | 45,239 |

|  | Six Months Ended March 31, 2018
Balance - September 30, 2017 |  | 5,596 |  |  | $ | 5,596 |  |  | $ | 9,519 |  |  | $ | 44,267 |  |  | $ | (9,251 | ) |  | $ | 50,131 |
Comprehensive loss |  | — |  |  | — |  |  | — |  |  | (2,949 | ) |  | 1,173 |  |  | (1,776 | )
Performance and restricted share expense |  | — |  |  | — |  |  | 249 |  |  | — |  |  | — |  |  | 249 |
Share transactions under equity based plans |  | 95 |  |  | 95 |  |  | (104 | ) |  | — |  |  | — |  |  | (9 | )
Balance - March 31, 2018 |  | 5,691 |  |  | $ | 5,691 |  |  | $ | 9,664 |  |  | $ | 41,318 |  |  | $ | (8,078 | ) |  | $ | 48,595 |

|  | Three Months Ended March 31, 2018
Balance - December 31, 2017 |  | 5,644 |  |  | $ | 5,644 |  |  | $ | 9,664 |  |  | $ | 43,356 |  |  | $ | (8,773 | ) |  | $ | 49,891 |
Comprehensive loss |  | — |  |  | — |  |  | — |  |  | (2,038 | ) |  | 695 |  |  | (1,343 | )
Performance and restricted share expense |  | — |  |  | — |  |  | 47 |  |  | — |  |  | — |  |  | 47 |
Share transactions under equity based plans |  | 47 |  |  | 47 |  |  | (47 | ) |  | — |  |  | — |  |  | — |
Balance - March 31, 2018 |  | 5,691 |  |  | $ | 5,691 |  |  | $ | 9,664 |  |  | $ | 41,318 |  |  | $ | (8,078 | ) |  | $ | 48,595 |

See notes to consolidated financial statements.
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SIFCO Industries, Inc. and Subsidiaries
Notes to Unaudited Consolidated Condensed Financial Statements
(Amounts in thousands, except per share data)

1. | Summary of Significant Accounting Policies

A. Principles of Consolidation
The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation.
The U.S. dollar is the functional currency for all of the Company’s U.S. operations and its Irish subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income currently. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange for the period. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the unaudited consolidated condensed financial statements.
These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s fiscal 2018 Annual Report on Form 10-K. The year-end consolidated balance sheet data was derived from the audited financial statements and disclosures required by accounting principles generally accepted accounting in the United States ("U.S."). The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year.
B. Accounting Policies
A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's fiscal 2018 Annual Report on Form 10-K. In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)" and in March 2017, the FASB issued AUS 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of the Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which were adopted by the Company on October 1, 2018. Significant changes to the Company's accounting policies as a result of adopting ASU 2014-09 (the "new revenue standard") and ASU 2017-07 are discussed below:
Revenue
A contract exists when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectibility of consideration is probable.
Revenue is recognized when performance obligations under the terms of the contract with a customer of the Company are satisfied. A portion of the Company's revenue is from purchase orders ("PO's"), which continue to be recognized as of a point in time when products are shipped from the Company's manufacturing facilities or at a later time when control of the products transfers to the customer. Revenue was previously recognized for certain long-term agreements ("LTA's"), firm fixed pricing agreements, and PO's at the point in time when the shipping terms were satisfied. Under the new revenue standard, the Company now recognizes certain revenue over time as it satisfies the performance obligations because the conditions of transfer of control to the applicable customer are as follows:

• | Certain military contracts, which support providing goods to the U.S. government, 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, 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 selection of the method to measure progress towards completion requires judgment and is based on the nature of the products to be provided. The Company has elected to use the cost to cost input method of progress based on costs
7

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.
Revenue is measured at the amount of consideration the Company expects to receive in exchange for transferring goods. An accounting policy election to exclude from transaction price was made for sales, value add, and other taxes the Company collects concurrent with revenue-producing activities when applicable. The Company has elected to recognize incremental costs incurred to obtain contracts, which primarily represent commissions paid to third party sales agents where the amortization period would be less than one year, as selling, general and administrative expenses in the consolidated condensed statements of operations as incurred.
The Company elected a practical expedient under Topic 606 to not adjust the promised amount of consideration for the effects of any significant financing component where the Company expects, at contract inception, that the period between when the Company transfers a promised good to a customer and when the customer pays for that good will be one year or less. Finally, the Company's policy is to exclude performance obligations resulting from contracts with a duration of one year or less from its disclosures related to remaining performance obligations.
The amount of consideration to which the Company expects to be entitled in exchange for the goods is not generally subject to significant variations.
The Company has elected to recognize the cost of freight and shipping when control of the products has transferred to the customer as an expense in cost of goods sold on the consolidated condensed statements of operations, because those are costs incurred to fulfill the promise recognized, not a separate performance obligation. To the extent certain freight and shipping fees are charged to customers, the Company recognizes the amounts charged to customers as revenues and the related costs as an expense in cost of goods sold when control of the related products has transferred to the customer.
Contracts are occasionally modified to account for changes in contract specifications, requirements, and pricing. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Substantially all of the Company's contract modifications are for goods that are distinct from the existing contract. Therefore, the effect of a contract modification on the transaction price and the Company's measure of progress for the performance obligation to which it relates is generally recognized on a prospective basis.
Contract Balances
Contract assets on the consolidated condensed balance sheets is recognized when a good is transferred to the 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.
Pension Benefits
With the adoption of ASU 2017-07 on October 1, 2018, service cost is included in other employee compensation costs within operating income and is the only component that may be capitalized when applicable. The other components of net periodic benefit cost are presented separately outside of operating income. The Company retrospectively adopted ASU 2017-07 and reclassified prior-year amounts using a practical expedient that permits the usage of amounts disclosed below in Note 6, Retirement Benefit Plans. Results showed expense for both the three months and six months ended of fiscal 2019 and 2018 were reclassified from cost of sales and selling, general and administrative expenses, respectively, to other (income) expense, net and were not material to the consolidated condensed statement of operations.
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C. 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 for each reporting period, zero restricted shares are included in the calculation of basic or diluted earnings per share because the effect would be anti-dilutive. The dilutive effect of the Company’s restricted shares and performance shares were as follows:

| Three Months Ended March 31, |  | Six Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Net loss | $ | (1,258 | ) |  | $ | (2,038 | ) |  | $ | (2,540 | ) |  | $ | (2,949 | )
Weighted-average common shares outstanding (basic and diluted) | 5,561 |  |  | 5,535 |  |  | 5,548 |  |  | 5,519 |
Net loss per share – basic and diluted: |  |  |  |  |  |  |
Net loss per share | $ | (0.23 | ) |  | $ | (0.37 | ) |  | $ | (0.46 | ) |  | $ | (0.53 | )
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share | 214 |  |  | 140 |  |  | 200 |  |  | 125 |

D. Impact of Recently Issued Accounting Standards
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and subsequent updates. The ASU's require lessees to recognize a lease liability and a right-of-use asset on the balance sheet by those leases with a lease term of more than twelve months. The standard allows for a modified retrospective transition for finance and operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial adoption. Alternatively, the Company can elect the optional transition method to the adoption for lessees related to finance and operating leases existing at, or entered into after October 1, 2019, and the Company will record a cumulative effect adjustment to retained earnings on the same date, if necessary. This optional transition method will not require any restatements prior to the Company's 2020 fiscal year. The Company will adopt the new guidance on October 1, 2019 and is in the process of putting together a project plan and assembling a project team to execute over the next months. As the implementation progresses, the Company will determine the extent of the impact on its consolidated condensed financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in 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. The Company is in the process of evaluating the effect that the adoption of ASU 2016-13 will have on the Company's results within the consolidated condensed statements of operations and financial condition.
E. Recently Adopted Accounting Standards
The new revenue standard introduces a five-step revenue recognition model in which a company should recognize revenue to depict the transfer of goods or services 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 new 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. For further discussion, see Note 8, Revenue.
On October 1, 2018, the Company adopted the new revenue standard and all related amendments using the modified retrospective method and applied those provisions to all open contracts. The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
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The cumulative effect of changes made to the balance sheet as of October 1, 2018 for the adoption of the new revenue standard was as follows:

|  | Balance at September 30, 2018 |  | Effect of Accounting Change |  | Balance at October 1, 2018
Assets |  |  |  |  |  |
Contract asset |  | $ | — |  |  | $ | 10,140 |  |  | $ | 10,140 |
Inventory, net |  | 18,269 |  |  | (6,542 | ) |  | 11,727 |
Liabilities & Shareholders' Equity |  |  |  |  |  |
Retained earnings |  | 37,097 |  |  | 3,598 |  |  | 40,695 |

As part of the cumulative effect of the accounting change made as it pertains to the inventory, net line, the impact includes a reduction to the Company's last-in, first-out (“LIFO”) reserve in the amount of $508 and excess and obsolete reserve of $366. As noted in Note 2, Inventories, a portion of the Company's inventory is on LIFO.
The following tables reflect the changes to the financial statements line items as a result to the new revenue standard. The adoption of the new standard did not have an impact on "net cash provided by operating activities" on the consolidated condensed statement of cash flows for the six months ended March 31, 2019.
Consolidated condensed statement of operations for the six months ended March 31, 2019:

|  | Previous Accounting Method |  | Effect of Accounting Change |  | As Reported
Net Sales |  | $ | 57,838 |  |  | $ | (1,380 | ) |  | $ | 56,458 |
Cost of Goods Sold |  | 53,586 |  |  | (1,953 | ) |  | 51,633 |
Loss before income tax benefit |  | (3,593 | ) |  | 573 |  |  | (3,020 | )
Net loss |  | $ | (3,113 | ) |  | $ | 573 |  |  | $ | (2,540 | )
Basic net loss per share |  | $ | (0.56 | ) |  | $ | 0.10 |  |  | $ | (0.46 | )
Diluted net loss per share |  | $ | (0.56 | ) |  | $ | 0.10 |  |  | $ | (0.46 | )

Consolidated condensed statement of operations for the three months ended March 31, 2019:

|  | Previous Accounting Method |  | Effect of Accounting Change |  | As Reported
Net Sales |  | $ | 29,452 |  |  | $ | (2,060 | ) |  | $ | 27,392 |
Cost of Goods Sold |  | 27,622 |  |  | (2,318 | ) |  | 25,304 |
Loss before income tax expense |  | (1,482 | ) |  | 258 |  |  | (1,224 | )
Net loss |  | $ | (1,516 | ) |  | $ | 258 |  |  | $ | (1,258 | )
Basic net loss per share |  | $ | (0.27 | ) |  | $ | 0.04 |  |  | $ | (0.23 | )
Diluted net loss per share |  | $ | (0.27 | ) |  | $ | 0.04 |  |  | $ | (0.23 | )

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Consolidated condensed balance sheet as of March 31, 2019:

|  | Previous Accounting Method |  | Effect of Accounting Change |  | As Reported
Assets |  |  |  |  |  |
Contract asset |  | $ | — |  |  | $ | 8,761 |  |  | $ | 8,761 |
Inventory, net |  | 14,931 |  |  | (4,589 | ) |  | 10,342 |
Liabilities & Shareholders' Equity |  |  |  |  |  |
Contract liabilities (included within accrued liabilities) |  | — |  |  | — |  |  | — |
Deferred income taxes |  | 2,193 |  |  | — |  |  | 2,193 |
Retained earnings |  | 33,942 |  |  | 4,172 |  |  | 38,114 |

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," which amends certain cash flow issues which apply to all entities required to present a statement of cash flows. On October 1, 2018, the Company implemented provisions of ASU 2016-15 on a retrospective basis, which did not impact the consolidated condensed statements of cash flows for the periods presented.

2. | Inventories

Inventories consist of:

| March 31, 2019 |  | September 30, 2018
Raw materials and supplies | $ | 3,773 |  |  | $ | 6,202 |
Work-in-process | 3,669 |  |  | 6,626 |
Finished goods | 2,900 |  |  | 5,441 |
Total inventories | $ | 10,342 |  |  | $ | 18,269 |

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the LIFO method for 27% and 54% of the Company’s inventories at March 31, 2019 and September 30, 2018, respectively. As noted in Note 1, Summary of Significant Accounting Policies - Recently Adopted Accounting Standards, the LIFO reserve was impacted by the adoption of the new revenue standard. An actual valuation of inventory under the LIFO method can be made only at the end of each fiscal year based on the inventory levels and costs existing at that time. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because the actual results may vary from these estimates, calculations are subject to many factors beyond management’s control, annual results may differ from interim results as they are subject to adjustments based on the differences between the estimates and the actual results. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $8,314 and $8,879 higher than reported at March 31, 2019 and September 30, 2018, respectively.
Since adopting the new revenue standard, interim results show a reduction of inventory resulting in liquidations of LIFO inventory quantities. The estimated liquidation of LIFO inventory quantities results in a projected increase in cost of goods sold by approximately $333 for the six months ended March 31,2019. 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.
3. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:

| March 31, 2019 |  | September 30, 2018
Foreign currency translation adjustment | $ | (5,542 | ) |  | $ | (4,955 | )
Retirement plan liability adjustment, net of tax | (3,459 | ) |  | (3,674 | )
Total accumulated other comprehensive loss | $ | (9,001 | ) |  | $ | (8,629 | )

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4. Debt
Debt consists of:

| March 31, 2019 |  | September 30, 2018
Revolving credit agreement | $ | 18,630 |  |  | $ | 21,253 |
Foreign subsidiary borrowings | 7,224 |  |  | 7,949 |
Capital lease obligations | 185 |  |  | 327 |
Other | 192 |  |  | — |
Total debt | 26,231 |  |  | 29,529 |
Less – current maturities | (24,552 | ) |  | (27,197 | )
Total long-term debt | $ | 1,679 |  |  | $ | 2,332 |

Credit Agreement and Security Agreement of 2018
On August 8, 2018, the Company entered into a new asset-based Credit Agreement ("Credit Agreement") and a Security Agreement (“Security Agreement”) with a new lender. The new Credit Agreement matures on August 6, 2021 and is comprised of a senior secured revolving credit facility with a maximum borrowing of $30,000. The Credit Agreement also has an accordion feature, which allows the Company to increase maximum borrowings by up to $10,000 upon consent of the existing lender or upon additional lenders joining the Credit Agreement. The terms of the Credit Agreement contain both a lock box arrangement and subjective acceleration clause. As a result, the amount outstanding on the revolving credit facility is classified as a short-term liability and the availability at March 31, 2019 and September 30, 2018 was $9,134 and $8,437, respectively. The proceeds from the Credit Agreement were used to repay the indebtedness and extinguishment of the Company's November 9, 2016 Amended and Restated Credit and Security Agreement ("2016 Credit Agreement"), for working capital purposes, for general corporate purposes and to pay fees and expenses incurred in connections with entering into the Credit Agreement.
The Credit Agreement contains affirmative and negative covenants and events of defaults. As set forth in the Credit Agreement, the Company is required to maintain a fixed charge coverage ratio ("FCCR") of 1.1:1.0 any time the availability is equal to or less than 12.5% of the revolving commitment. In the event of a default, the Company may not be able to access the revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities. See discussion below under the First Amendment (the "First Amendment") to the Credit Agreement and Security Agreement discussion which revises the provision related to the FCCR.
On November 5, 2018, the Company entered into the First Amendment (the "First Amendment") to the Credit Agreement and Security Agreement with its lender. The First Amendment retroactively amended certain definitions and provisions effective as of the original closing date to clarify the parties original understanding regarding, among other things: (i) the permitted liens securing certain indebtedness of the Company to the City of Cleveland (noted as other debt within the above debt table), (ii) the timeframes for which certain post-closing requirements would be satisfied, and (iii) the conditions under which the Company will be required to meet the minimum FCCR, which is as follows: the borrowers will not permit the FCCR to be less than: (a) 1.1 to 1.0 as of August 31, 2018 or as of September 30, 2018; or (b) 1.1 to 1.0 at any month end on or after October 31, 2018; provided that the FCCR will not be tested under this clause (b) unless (i) a Default has occurred and is continuing or (ii) availability was less than or equal to 12.5% of the Revolving Commitment for three or more business days in any consecutive 30 day period (with the FCCR calculated as of the end of the month for which the lender has most recently received financial statements). SIFCO met the FCCR requirements at August 31, 2018, after obtaining a waiver, and the FCCR requirements at September 30, 2018. The availability was greater than the 12.5% of the Revolving Commitment as of March 31, 2019, and, as such, FCCR calculation was not required.
On December 17, 2018, the Company entered into an Export Credit Agreement (the “Export Credit Agreement”) with its Lender. Pursuant to the terms of the Export Credit Agreement, the Lender will lend amounts to the Company on foreign receivables that are guaranteed by the Export-Import Bank of the United States of America. The Export Credit Agreement provides for a revolving commitment of $5,000, therefore increasing the maximum borrowing of the revolver to $35,000. The borrowings under the Export Credit Agreement will bear interest at (depending on the type of borrowing) the CBFR or LIBOR Rate, plus the applicable margin as set forth in the Export Credit Agreement. The maturity date under the Export Credit Agreement is August 6, 2021 (or such earlier date as the revolving commitments under the Export Credit Agreement are reduced to zero or otherwise terminated). The Export Credit Agreement contains customary representations, warranties, covenants and events of default, including, without limitation, the affirmative covenants under the Company’s Credit Agreement dated August 8, 2018, as amended with the Lender. In connection with entering into the Export Credit Agreement, the Company also entered into the Second Amendment (the “Second Amendment”) to its Credit Agreement. The Second Amendment amends certain definitions and provisions to provide for the Company’s entrance into the Export Credit Agreement.
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On March 29, 2019, the Company entered into a Third Amendment with its Lender. This amendment extends the timeframes for when certain post-closing requirements would be satisfied as of March 31, 2019.
Amounts borrowed under the Credit Agreement are secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 66.67% of the stock of its first-tier non-U.S. subsidiaries. Borrowings will bear interest at the lender's established domestic rate or LIBOR, plus the applicable margin as set forth in the Credit Agreement. The revolver has a rate based on LIBOR plus 1.75% spread, which was 4.24% and 3.85% at March 31, 2019 and September 30, 2018, respectively and the Export Credit Agreement has a rate based on LIBOR plus 1.25% spread, which was 3.74% at March 31, 2019. The Company also has a commitment fee of 0.25% under the Credit Agreement to be incurred on the unused balance of the revolver.
Foreign subsidiary borrowings
Foreign debt consists of:

| March 31, 2019 |  | September 30, 2018
Term loan | $ | 2,745 |  |  | $ | 3,548 |
Short-term borrowings | 4,145 |  |  | 3,472 |
Factor | 334 |  |  | 929 |
Total debt | $ | 7,224 |  |  | $ | 7,949 |
Less – current maturities | (5,779 | ) |  | (5,822 | )
Total long-term debt | $ | 1,445 |  |  | $ | 2,127 |
Receivables pledged as collateral | $ | 878 |  |  | $ | 2,007 |

Interest rates on foreign borrowings are based on Euribor rates which range from 1.0% to 4.0%. In December 2018, the Company entered into a six month short-term debt arrangement of $1,137 to be used for working capital purpose. The factoring programs are uncommitted, whereby the Company offers receivables for sale to an unaffiliated financial institution, which are then subject to acceptance by the unaffiliated financial institution. Following the sale and transfer of the receivables to the unaffiliated financial institution, the receivables are not isolated from the Company, and effective control of the receivables is not passed to the unaffiliated financial institution, which does not have the right to pledge or sell the receivables. The Company accounts for the pledge of receivables under this agreement as short-term debt and continues to carry the receivables on its consolidated condensed balance sheets.
Debt issuance costs
The Company incurred debt issuance costs as it pertains to the Credit Agreement in the amount of $212, and during the six months of fiscal 2019, additional costs of $75 were incurred that related to the First and Second Amendment, of which are included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $47 and $12 at March 31, 2019 and September 30, 2018, respectively.
5. Income Taxes
For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its operations. This estimated effective rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate through the first six months of fiscal 2019 was 16%, compared with 7% for the same period of fiscal 2018. The increase in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2019 compared with the same period of fiscal 2018, partially offset by discrete tax benefits in the second quarter of fiscal 2018 applied against a year-to-date loss related to tax legislation enacted which were non-recurring in fiscal 2019. 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.
On December 22, 2017, the Tax Cut and Jobs Act (the "Act") was enacted which, among other items, reduced the U.S. corporate tax rate effective January 1, 2018 from 35% to 21%, imposed a one-time transition tax on accumulated foreign earnings not previously subject to U.S. taxation, provides a U.S. federal tax exemption on future distributions of foreign earnings, and beginning in fiscal 2019, creates a new minimum tax on certain foreign-sourced earnings.
As required, during the first quarter of fiscal 2019, the Company has completed its accounting for items previously considered provisional during fiscal 2018. At September 30, 2018, the Company's provisional estimate with respect to the one-time transition
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tax was $240, net of applicable foreign tax credits generated. As a result of the valuation allowance in the U.S. on tax attribute carryforwards available to offset the one-time transition tax, no charge to tax expense was recorded related to the one-time transition tax. The Company completed its calculation of the one-time transition tax in the first quarter of fiscal 2019 based on all available guidance. No measurement period adjustment was recorded. All other items of the Act were considered complete at September 30, 2018.
The Act also 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 is 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.
The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy, and various state and local jurisdictions. The Company believes it has appropriate support for its federal income tax returns.

6. | Retirement Benefit Plans

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

| Three Months Ended March 31, |  | Six Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Service cost | $ | 75 |  |  | $ | 63 |  |  | $ | 149 |  |  | $ | 126 |
Interest cost | 264 |  |  | 239 |  |  | 528 |  |  | 479 |
Expected return on plan assets | (393 | ) |  | (401 | ) |  | (787 | ) |  | (803 | )
Amortization of net loss | 107 |  |  | 161 |  |  | 215 |  |  | 323 |
Net periodic cost | $ | 53 |  |  | $ | 62 |  |  | $ | 105 |  |  | $ | 125 |

During the six months ended March 31, 2019 and 2018, the Company made $48 and $0 in contributions, respectively, to its defined benefit pension plans. The Company anticipates making $103 of additional cash contributions to fund its defined benefit pension plans during the balance of fiscal 2019 and will use carryover balances from previous periods that have been available for use as a credit to reduce the amount of cash contributions that the Company is required to make to certain defined benefit plans in fiscal 2019. The Company's ability to elect to use such carryover balance will be determined based on the actual funded status of each defined benefit pension plan relative to the plan's minimum regulatory funding requirements. The Company does not anticipate making cash contributions above the minimum funding requirement to fund its defined benefit pension plans during the balance of fiscal 2019.

7. | Stock-Based Compensation

The Company has awarded performance and restricted shares under its shareholder-approved amended and restated 2007 Long-Term Incentive Plan ("2007 Plan"), which was further amended and restated under the 2016 Long-Term Incentive Plan ("2016 Plan"). The aggregate number of shares that may be awarded by the Company was increased by 646 shares, less any shares previously awarded and subject to an adjustment for the forfeiture of any unvested shares, pursuant to the 2016 Plan. In addition, shares that may be awarded are subject to individual recipient award limitations. The shares awarded under the 2016 Plan may be made in multiple forms, including stock options, stock appreciation rights, restricted or unrestricted stock, and performance related shares. Any such award is exercisable no later than ten years from the date of the grant.
The performance shares that have been awarded under both plans generally provide for the vesting of the Company’s common shares upon the Company achieving certain defined financial performance objectives during a period up to three years following the making of such award. The ultimate number of common shares of the Company that may be earned pursuant to an award ranges from a minimum of no shares to a maximum of 200% of the initial target number of performance shares awarded, depending on the level of the Company’s achievement of its financial performance objectives.
With respect to such performance shares, compensation expense is being accrued based on the probability of meeting the performance target. During each future reporting period, such expense may be subject to adjustment based upon the Company's financial performance, which impacts the number of common shares that it expects to vest upon the completion of the performance period. The performance shares were valued at the closing market price of the Company’s common shares on the date of the grant. The vesting of such shares is determined at the end of the performance period.
During the first six months of fiscal 2019, the Company granted 134 shares under the 2016 Plan to certain key employees. The award was split into two tranches, 87 performance shares and 47 shares of time-based restricted shares, with a grant date fair value
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of $4.73 per share. The award vests over three years. During the first six months of the fiscal year, there were approximately 7 performance shares and time-based restricted shares that were forfeited.
The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years.
During the first six months of fiscal 2019, the Company granted its non-employee directors 61 restricted shares under the 2016 Plan, with a grant date fair value of $3.15, which vest over one year. One award for 47 restricted shares vested and approximately 4 restricted shares were forfeited.
If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 118 shares that remain available for award at March 31, 2019. If any of the outstanding share awards are ultimately earned and vest at greater than the target number of shares, up to a maximum of 200% of such target, then a fewer number of shares would be available for award.
Stock-based compensation under the 2016 Plan was $426 and $242 during the first six months of fiscal 2019 and 2018, respectively and $190 and $47 during the three months of fiscal 2019 and 2018, respectively. As of March 31, 2019, there was $1,091 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan. The Company expects to recognize this cost over the next 1.5 years.

8. | 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.
The following table represents a breakout of total revenue by customer type for the three and six months ended March 31, 2019 and 2019, respectively.

| Three Months Ended March 31, |  | Six Months Ended March 31,
| 2019 |  | 2018 ¹ |  | 2019 |  | 2018 ¹
Commercial revenue | $ | 14,435 |  |  | $ | 15,393 |  |  | $ | 26,500 |  |  | $ | 29,033 |
Military revenue | 12,957 |  |  | 12,401 |  |  | 29,958 |  |  | 23,011 |
Total | $ | 27,392 |  |  | $ | 27,794 |  |  | $ | 56,458 |  |  | $ | 52,044 |

¹ Prior period amounts have not been adjusted under the modified retrospective adoption method.
The following table represents revenue by the various components for the three and six months ended March 31, 2019 and 2018, respectively.

| Three Months Ended March 31, |  | Six Months Ended March 31,
Net Sales | 2019 |  | 2018 ¹ |  | 2019 |  | 2018 ¹
Aerospace components for: |  |  |  |  |  |  |
Fixed wing aircraft | $ | 13,088 |  |  | $ | 15,092 |  |  | $ | 26,392 |  |  | $ | 27,623 |
Rotorcraft | 7,043 |  |  | 5,332 |  |  | 12,173 |  |  | 10,813 |
Energy components for power generation units | 4,730 |  |  | 6,132 |  |  | 8,460 |  |  | 11,640 |
Commercial product and other revenue | 2,531 |  |  | 1,238 |  |  | 9,433 |  |  | 1,968 |
Total | $ | 27,392 |  |  | $ | 27,794 |  |  | $ | 56,458 |  |  | $ | 52,044 |

¹ Prior period amounts have not been adjusted under the modified retrospective adoption method.
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The following table represents revenue by geographic region based on the Company's selling operation locations for the three and six months ended March 31, 2019 and 2018, respectively:

| Three Months Ended March 31, |  | Six Months Ended March 31,
Net Sales | 2019 |  | 2018 ¹ |  | 2019 |  | 2018 ¹
North America | 22,721 |  |  | 22,081 |  |  | 48,443 |  |  | 41,323 |
Europe | 4,671 |  |  | 5,713 |  |  | 8,015 |  |  | 10,721 |
Total | $ | 27,392 |  |  | $ | 27,794 |  |  | $ | 56,458 |  |  | $ | 52,044 |

¹ Prior period amounts have not been adjusted under the modified retrospective adoption method.
In addition to the disaggregating revenue information provided above, approximately 60% of total net sales as of March 31, 2019 is recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized as a point in time.
Contract Balances
Generally, payment is due shortly after the shipment of goods. For performance obligations recognized at a point in time, a contract asset is not established as the billing and revenue recognition occur at the same time. For performance obligations recognized over time, a contract asset is established as revenue is recognized prior to billing and shipment. Upon shipment and billing, the value of the contract asset is reversed and accounts receivable is recorded. In circumstances where prepayments are required and payment is made prior to satisfaction of performance obligations, a contract liability is established. If the performance obligation occurs over time, the contract liability is reversed over the course of production. If the performance obligation is point in time, the contract liability reverses upon shipment.
The following table contains a roll forward of contract assets and contract liabilities for the six months ended March 31, 2019:

Contract assets - Beginning balance, October 1, 2018 |  | $ | 10,140 |
Additional revenue recognized over-time |  | 32,348 |
Less amounts billed to the customers |  | $ | (33,727 | )
Contract assets - Ending balance, March 31, 2019 |  | $ | 8,761 |

Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2018 |  | $ | — |
Payments received in advance of performance obligations |  | (1,000 | )
Performance obligations satisfied |  | 1,000 |
Contract liabilities (included within Accrued liabilities) - Ending balance, March 31, 2019 |  | $ | — |

There were no impairment losses recorded on contract assets as of March 31, 2019.
Remaining performance obligations
As of March 31, 2019, the Company has $94,079 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

9. | 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 26, 2018, a subsidiary of the Company, Quality Aluminum Forge, LLC ("Orange") experienced a fire at its manufacturing facility, causing damage to one of three manufacturing buildings. The building that was damaged housed six of the eight presses on site. The Company is fully insured and actively working with its insurance carrier to restore the site to full service as safely and quickly as possible. As of March 31, 2019, the Company has received insurance proceeds of $3,500. Of the
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insurance proceeds received, $2,270 was related to property damaged in the fire. These $2,270 in proceeds result in a net gain of $1,164 when netted against the $1,106 estimated loss on these specific assets recorded in the first quarter of fiscal 2019, as restoration work has been initiated. The balance of $1,230 in proceeds received from insurance offset other period/fire remediation costs incurred. An additional $366 of recoverable costs related to the fire were incurred in the seconded quarter of fiscal 2019. This amount is an insurance receivable and is included within other receivables in the consolidated condensed balance sheets as of March 31, 2019. Any additional recoveries in excess of recognized losses are treated as gain contingencies and will be recognized when the gain is realized or realizable. Subsequent to March 31, 2019, the Company received an additional $4.1 million in insurance proceeds. The Company also maintains business interruption insurance coverage and is still working with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses. Therefore no recovery has been recorded in the consolidated condensed financial statements as of March 31, 2019.
For the long-lived assets that were not damaged as a result of the fire, the Company performed a separate evaluation for these assets. In accordance to Accounting Standard Codification 360 ("Topic 360"), the fire resulted in a triggering event as of December 31, 2018, requiring an interim assessment to determine if the carrying amount of long-lived assets are recoverable. As noted within Topic 360, an impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of long-lived assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The results of management's analysis indicated that the remaining long-lived assets as of December 31, 2018 were recoverable and continue to be as of March 31, 2019.
Orange is currently a defendant in a lawsuit filed by Avco Corporation (“Avco”) in the United States District Court for the District of Rhode Island, alleging that certain forged pistons delivered by the Orange plant failed to meet material specifications required by Avco. Orange disagrees with the allegations made by Avco. No specific amount of damages was claimed by Avco and no discovery has occurred at this time. Although the Company records reserves for legal disputes and other matters in accordance with GAAP, the ultimate outcomes of these types of matters are inherently uncertain. Actual results may differ significantly from current estimates. Given the current status of this matter, the Company has not recorded a loss as the Company does not have a reasonable basis on which to establish an estimate.
10. Assets Held for Sale and Disposal
The assets held for sale at March 31, 2019 and September 30, 2018, were $0 and $35, respectively. The balance at September 30, 2018 related to the Alliance building and certain machinery and equipment, which the Company sold during the first quarter of fiscal 2019 for a gain on sale of asset within the consolidated condensed statements of operations of $282. On November 1, 2018 the Company executed a purchase agreement and finalized the sale transaction with a buyer for the Alliance building and land. The Company received cash proceeds for both the building and machinery and equipment, less cost to sell, of approximately $317, which is recorded as part of a gain on sale of asset within the consolidated condensed statements of operations.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain various forward-looking statements and includes assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides this cautionary statement identifying important economic, political and technological factors, among others, the absence or effect of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the following: (1) the impact on business conditions in general, and on the demand for products in the Aerospace and Energy ("A&E") industries in particular, of the global economic outlook, including the continuation of military spending at or near current levels and the availability of capital and liquidity from banks and other providers of credit; (2) the future business environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business that may be lost; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turbine engines; (7) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; and (10) the ability to successfully integrate businesses that may be acquired into the Company’s operations.
The Company is engaged in the production of forgings and machined components primarily for the A&E markets. The processes and services provided by the Company include forging, heat-treating, machining, subassembly, and test. The Company operates under one business segment.
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The Company endeavors to plan and evaluate its business operations while taking into consideration certain factors including the following: (i) the projected build rate for commercial, business and military aircraft, as well as the engines that power such aircraft; (ii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft; and (iii) the projected build rate and repair for industrial turbines.
The Company operates within a cost structure that includes a significant fixed component. Therefore, higher net sales volumes are expected to result in greater operating income because such higher volumes allow the business operations to better leverage the fixed component of their respective cost structures. Conversely, the opposite effect is expected to occur at lower net sales and related production volumes.
A. Results of Operations
Overview
The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and armored military vehicles; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) other commercial applications. The Company completed the sale of the building and land at its Alliance, Ohio ("Alliance") location in November 2018. As a result of the sale, the Company generated cash proceeds of $0.3 million, net of cost to sell.
On December 26, 2018, the Orange, California ("Orange") manufacturing facility experienced a fire, which caused damage to one of its three manufacturing buildings. The building that was damaged housed six of the eight presses on site. The Company is fully insured and actively working with its insurance carrier to restore the site to full service as safely and quickly as possible. As of March 31, 2019, the Company has received insurance proceeds of $3.5 million. Of the insurance proceeds received, $2.3 million was related to property damaged in the fire. These $2.3 million in proceeds result in a net gain of $1.2 million when netted against the $1.1 million estimated loss on specific assets recorded in the first quarter of 2019, as restoration has been initiated. An additional $0.4 million of recoverable costs related to the fire damage were incurred in the current quarter. This amount is an insurance receivable and is included within other receivables in the consolidated condensed balance sheets as of March 31, 2019. The consolidated condensed statements of operations includes a gain on insurance proceeds received for property damaged, which has been recovered as of March 31, 2019. However, there is no off-setting insurance recovery included in the current consolidated condensed financial statements related to losses incurred due to the reduction in sales and profitability. These losses fall under the business interruption portion of the Company's insurance policies. The Company is still working with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses and therefore no recovery has been recorded in the consolidated condensed financial statements as of March 31, 2019. Any additional recoveries in excess of recognized losses are treated as gain contingencies and will be recognized when the gain is realized or realizable. Subsequent to March 31, 2019, the Company received an additional $4.1 million in insurance proceeds.
For the long-lived assets that were not damaged as a result of the fire, the Company performed a separate evaluation for these assets. In accordance to Accounting Standard Codification 360 ("Topic 360"), the fire resulted in a triggering event, requiring an interim assessment to determine if the carrying amount of long-lived assets are recoverable. As noted within Topic 360, an impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of long-lived assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The results of management's analysis indicated that the remaining long-lived assets as of December 31, 2018 are recoverable and continue to be as of March 31, 2019.
In fiscal 2019, the Company adopted Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)" as discussed in Note 1, Summary of Significant Accounting Policies - Accounting Policies, Revenue. Note 1 demonstrates the impact Topic 606 had to the Company. As such, the comparability in sales and cost of goods sold for the six and three months end are impacted due to the new ASU.
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Six Months Ended March 31, 2019 compared with Six Months Ended March 31, 2018
Net Sales
Net sales for the first six months of fiscal 2019 increased 8.5% to $56.5 million, compared with $52.0 million in the comparable period of fiscal 2018. Net sales comparative information for the first six months of fiscal 2019 and 2018 is as follows:

(Dollars in millions) | Six Months Ended March 31, |  | Increase/(Decrease)
Net Sales | 2019 |  | 2018 ¹ |
Aerospace components for: |  |  |  |  |
Fixed wing aircraft | $ | 26.4 |  |  | $ | 27.6 |  |  | $ | (1.2 | )
Rotorcraft | 12.2 |  |  | 10.8 |  |  | 1.4 |
Energy components for power generation units | 8.5 |  |  | 11.6 |  |  | (3.1 | )
Commercial product and other revenue | 9.4 |  |  | 2.0 |  |  | 7.4 |
Total | $ | 56.5 |  |  | $ | 52.0 |  |  | $ | 4.5 |

¹ Prior period amounts have not been adjusted under Topic 606 as the Company adopted the modified retrospective adoption method.
Commercial products and other revenue increased $7.4 million primarily due to the market share and timing of the Hellfire II missile program. Net sales in energy components for power generation units decreased by $3.1 million compared with the same period last year due to the continued softening of the energy market. The decrease in fixed wing aircraft sales of $1.2 million is primarily attributed to delay in production/delivery at the Orange location due to the fire and reduced production of the Boeing 737 and Airbus A320 offset by increased production in the Boeing 767, Boeing 777 and the C-130J programs.
Commercial net sales were 46.9% of total net sales and military net sales were 53.1% of total net sales in the first six months of fiscal 2019, compared with 55.9% and 44.1%, respectively, in the comparable period in fiscal 2018. Military net sales increased by $7.0 million to $30.0 million in the first six months of fiscal 2019, compared with $23.0 million in the comparable period of fiscal 2018, primarily due to the timing of the Hellfire II missile program. Commercial net sales decreased $2.5 million to $26.5 million in the first six months of fiscal 2019, compared with $29.0 million in the comparable period of fiscal 2018 primarily due to business interruption created by the fire at the Orange location and the soft energy market.
Cost of Goods Sold
Cost of goods sold increased by $4.1 million, or 8.7%, to $51.6 million, or 91.5% of net sales, during the first six months of fiscal 2019, compared with $47.5 million or 91.2% of net sales, in the comparable period of fiscal 2018. The increase was due primarily to increased volumes and unabsorbed costs related to the Orange location due to the fire, partially offset by product mix.
Gross Profit
Gross profit increased $0.2 million to $4.8 million during the first six months of fiscal 2019, compared with $4.6 million in the comparable period of fiscal 2018. Gross margin percent of sales was 8.6% during the first six months of fiscal 2019, compared with 8.8% in the comparable period in fiscal 2018. The increase in gross profit was primarily due to higher sales volume, partially offset by higher costs incurred at the Orange location due to the fire. The Company has not recorded business interruption insurance recoveries with respect to the fire at the Orange location as it is working with its insurer to reach agreement on the recoverable amount of business interruption related expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $7.9 million, or 14.0% of net sales during the first six months of fiscal 2019, compared with $7.9 million, or 15.2% of net sales in the comparable period of fiscal 2018. The Company benefited from lower bad debt expense of $0.3 million, partially offset by higher equity compensation costs of $0.2 million, driven by prior year forfeitures.
Amortization of Intangibles
Amortization of intangibles was $0.8 million for both the first six months of fiscal 2019 and fiscal 2018, respectively.
Other/General
The Company recorded a gain of $1.4 million in the first six months of fiscal 2019, compared to $1.4 million in the first six months of fiscal 2018. The current period gain relates to the sale of the Alliance building for $0.3 million and $1.2 million related to a net gain on insurance proceeds for property damaged in the fire at the Orange location compared to the prior year gain related to the sale of the Company's Cork, Ireland ("Irish building") facility.
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Interest expense decreased $0.3 million to $0.6 million in the first six months of fiscal 2019, compared with $0.9 million in the same period in fiscal 2018. The decrease is primarily due to lower average borrowing in the current period and reduction of interest rates. See Note 4, Debt for further information.
The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first six months of both fiscal 2019 and 2018:

| Weighted Average Interest Rate Six Months Ended March 31, |  | Weighted Average Outstanding Balance Six Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Revolving credit agreement | 4.1 | % |  | 5.5 | % |  | $ 20.7 million |  | $ 18.1 million
Term note | — | % |  | 5.8 | % |  | $ 0.0 million |  | $ 3.5 million
Foreign term debt | 2.6 | % |  | 3.1 | % |  | $ 7.5 million |  | $ 8.1 million

Other income, net, decreased $0.4 million to a nominal amount in the first six months of fiscal 2019, compared with $0.4 million in the same period fiscal 2018. No further rental income has been received since the sale of the Irish building was finalized in the first quarter of fiscal 2018. The prior year amount of other income, net was $0.3 million for first six months, which included rental income earned from the lease of the Irish building and grant income realized due to the sale of the Irish building.
Income Taxes
The Company’s effective tax rate through the first six months of fiscal 2019 was 16%, compared with 7% for the same period of fiscal 2018. The increase in the effective rate was primarily attributable to changes in jurisdictional mix of income during the six months ended 2019 compared with the same period of fiscal 2018, partially offset by discrete tax benefits in the second quarter of fiscal 2018 applied against a year-to-date loss related to tax legislation enacted which were non-recurring in fiscal 2019. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.
Net Loss
Net loss was $2.5 million during the first six months of fiscal 2019, compared with a net loss of $2.9 million in the comparable period of fiscal 2018. Net loss decreased due to higher sales, partially offset by the $3.5 million in insurance proceeds received for the disruption due to the fire at the Orange location.
Three Months Ended March 31, 2019 compared with Three Months Ended March 31, 2018
Net Sales
Net sales for the second quarter of fiscal 2019 decreased 1.5% to $27.4 million, compared with $27.8 million in the comparable period of fiscal 2018. Net sales comparative information for the second quarter of fiscal 2019 and 2018 is as follows:

(Dollars in millions) | Three Months Ended March 31, |  | Increase (Decrease)
Net Sales | 2019 |  | 2018 ¹ |
Aerospace components for: |  |  |  |  |
Fixed wing aircraft | $ | 13.1 |  |  | $ | 15.1 |  |  | $ | (2.0 | )
Rotorcraft | 7.1 |  |  | 5.3 |  |  | 1.8 |
Energy components for power generation units | 4.7 |  |  | 6.1 |  |  | (1.4 | )
Commercial product and other revenue | 2.5 |  |  | 1.3 |  |  | 1.2 |
Total | $ | 27.4 |  |  | $ | 27.8 |  |  | $ | (0.4 | )

¹ Prior period amounts have not been adjusted under Topic 606 as the Company adopted the modified retrospective adoption method.
Total net sales for the Company decreased $0.4 million in the second quarter of fiscal 2019 compared with the comparable period of fiscal 2018. The $2.0 million decrease in fixed wing aircraft sales is primarily attributed to delay in production/delivery due to the Orange location fire and reduced production of the Boeing 737 and Airbus A320. Energy components for power generation units decreased by $1.4 million compared to the same period last year, primarily due to overall softening in the energy market. The increase in rotorcraft sales is due to timing of deliveries for the V-22 Osprey and UH-60 Black Hawk.
Commercial net sales were 52.7% of total net sales and military net sales were 47.3% of total net sales in the second quarter of fiscal 2019, compared with 55.4% and 44.6%, respectively, in the comparable period of fiscal 2018. Military net sales increased
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by $0.6 million to $13.0 million in the second quarter of fiscal 2019, compared with $12.4 million in the comparable period of fiscal 2018. Commercial net sales decreased $1.0 million to $14.4 million in the second quarter of fiscal 2019, compared with $15.4 million in the comparable period of fiscal 2018 primarily due to delays in deliveries from the Orange location as a result of damage from the fire and the soft energy market.
Cost of Goods Sold
Cost of goods sold was $25.3 million, or 92.3% of net sales, during the second quarter of fiscal 2019, compared with $25.3 million or 90.9% of net sales, in the comparable period of fiscal 2018.
Gross Profit
Gross profit decreased $0.4 million to $2.1 million during the second quarter of fiscal 2019, compared with $2.5 million in the comparable period of fiscal 2018. Gross margin was 7.6% during the second quarter of fiscal 2019, compared with 9.1% in the comparable period in fiscal 2018. The decrease in gross margin was primarily due to higher costs incurred at the Orange location as a result of the fire. The Company has not recorded business interruption insurance proceeds as it is still working with the insurance company to reach agreement on the recoverable amount of business interruption expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $3.8 million, or 13.8% of net sales, during the second quarter of fiscal 2019, compared with $3.9 million, or 13.9% of net sales, in the comparable period of fiscal 2018.
Amortization of Intangibles
Amortization of intangibles was $0.4 million for both the second quarter of fiscal 2019 and fiscal 2018, respectively.
Other/General
The Company recorded a gain of $1.2 million in the second quarter of fiscal 2019, compared to a nominal amount in the second quarter of fiscal 2018. The current period gain relates to the insurance recovery for property damage in the fire at the Orange location.
Interest expense was $0.3 million in the second quarter of fiscal 2019, compared with $0.4 million in the same period of fiscal 2018. The decrease in interest expense was due to lower interest rates.
The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s Credit Agreement in the second quarter of both fiscal 2019 and 2018:

| Weighted Average Interest Rate Three Months Ended March 31, |  | Weighted Average Outstanding Balance Three Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Revolving credit agreement | 4.2 | % |  | 5.7 | % |  | $ 19.8 million |  | $ 16.6 million
Term note | — | % |  | 5.8 | % |  | $ 0.0 million |  | $ 3.1 million
Foreign term debt | 3.0 | % |  | 3.4 | % |  | $ 7.5 million |  | $ 8.1 million

Other income, net was nominal in the second quarter of fiscal 2019 compared to the $0.1 million in the second quarter of fiscal 2018.
Income Taxes
The Company's effective tax rate in the second quarter of fiscal 2019 of (3%), compared with less than (1%) for the same period of fiscal 2018. The decrease in the effective tax rate was primarily driven attributable to the change in non-U.S. income in the second quarter of fiscal 2019 compared with the second quarter of fiscal 2018. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.
Net Loss
Net loss was $1.3 million during the second quarter of fiscal 2019, compared with net loss of $2.0 million in the comparable period of fiscal 2018. Net loss decreased primarily due to the items noted above.
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Non-GAAP Financial Measures
Presented below is certain financial information based on the Company's EBITDA and Adjusted EBITDA. References to “EBITDA” mean earnings (losses) from continuing operations before interest, taxes, depreciation and amortization, and references to “Adjusted EBITDA” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and Adjusted EBITDA.
Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in the United States of America (“GAAP”). The Company presents EBITDA and Adjusted EBITDA because management believes that they are useful indicators for evaluating operating performance and liquidity, including the Company’s ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions. Although the Company uses EBITDA and Adjusted EBITDA for the reasons noted above, the use of these non-GAAP financial measures as analytical tools has limitations. Therefore, reviewers of the Company’s financial information should not consider them in isolation, or as a substitute for analysis of the Company's results of operations as reported in accordance with GAAP. Some of these limitations include:

• | Neither EBITDA nor Adjusted EBITDA reflects the interest expense, or the cash requirements necessary to service interest payments on indebtedness;

• | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such replacements;

• | The omission of the substantial amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA; and

• | Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to the Company to invest in the growth of its businesses. Management compensates for these limitations by not viewing EBITDA or Adjusted EBITDA in isolation and specifically by using other GAAP measures, such as net income (loss), net sales, and operating income (loss), to measure operating performance. Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under GAAP, and neither should be considered as an alternative to net loss or cash flow from operations determined in accordance with GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.
The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA:

Dollars in thousands | Three Months Ended |  | Six Months Ended
| March 31, |  | March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Net loss | $ | (1,258 | ) |  | $ | (2,038 | ) |  | $ | (2,540 | ) |  | $ | (2,949 | )
Adjustments: |  |  |  |  |  |  |
Depreciation and amortization expense | 1,910 |  |  | 2,128 |  |  | 3,840 |  |  | 4,319 |
Interest expense, net | 314 |  |  | 422 |  |  | 605 |  |  | 857 |
Income tax expense (benefit) | 34 |  |  | 3 |  |  | (480 | ) |  | (237 | )
EBITDA | 1,000 |  |  | 515 |  |  | 1,425 |  |  | 1,990 |
Adjustments: |  |  |  |  |  |  |
Foreign currency exchange (gain), net (1) | (1 | ) |  | (43 | ) |  | (1 | ) |  | (80 | )
Other income, net (2) | (34 | ) |  | (80 | ) |  | (35 | ) |  | (396 | )
Gain on disposal and impairment of assets (3) | — |  |  | (29 | ) |  | (282 | ) |  | (1,429 | )
Gain on insurance proceeds received for damaged property (4) | (1,164 | ) |  | — |  |  | (1,164 | ) |  | — |
Equity compensation (5) | 190 |  |  | 47 |  |  | 426 |  |  | 242 |
LIFO impact (6) | (19 | ) |  | 63 |  |  | (57 | ) |  | 115 |
Adjusted EBITDA | $ | (28 | ) |  | $ | 473 |  |  | $ | 312 |  |  | $ | 442 |

(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, which previously consisted of rental income from the Company's Irish subsidiary (through first quarter 2018 when the building was sold). Included in fiscal 2018 was grant income that was realized that relates to the Company's Irish subsidiary.

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

(4) | Represents the difference between the insurance proceeds received for the damaged property and the carrying values shown on the Company's books for the assets that were damaged in the fire at the Orange location.

(5) | Represents the equity-based compensation expense recognized by the Company under its 2016 Long-Term Incentive Plan (as the amendment and restatement of, and successor to, the 2007 Long-Term Incentive Plan) due to granting of awards, awards not vesting and/or forfeitures.

(6) | Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out (“LIFO”) method.

B. Liquidity and Capital Resources
Cash and cash equivalents were $1.9 million at March 31, 2019 compared with $1.3 million at September 30, 2018. At March 31, 2019, approximately $0.3 million of the Company’s cash and cash equivalents were in the possession of its non-U.S. subsidiaries. Distributions from the Company's non-U.S. subsidiaries to the Company may be subject to adverse tax consequences.
Operating Activities
The Company’s operating activities provided $4.5 million of cash in the first six months of fiscal 2019, compared with $1.4 million of cash provided by operating activities in the first six months of fiscal 2018. The cash provided by operating activities in the first six months of fiscal 2019 was primarily due to depreciation and amortization of $3.8 million, a net source of working capital of $4.5 million, a gain on insurance proceeds received for damaged property of $1.2 million, a net gain on sale of Alliance building and other assets of $0.3 million and other non-cash items, such as equity based compensation, deferred income taxes and LIFO effect, partially offset by a net loss of $2.5 million. The increase in cash from working capital was primarily due to decreased receivables due to collections, partially offset by timing of payments to suppliers.
The Company's operating activities provided $1.4 million of cash in the first six months of fiscal 2018. The cash provided by operating activities in the first six months of fiscal 2018 was primarily due to a net source of working capital of $2.1 million, depreciation and amortization of $4.3 million, offset by a gain on sale of Irish building and other assets of $1.4 million and other non-cash items, such as equity based compensation, deferred income taxes and LIFO, partially offset by a net loss of $2.9 million. The increase in cash from working capital was primarily due to a $1.6 million reduction in inventory.
Investing Activities
Cash used by investing activities was $0.7 million in the first six months of fiscal 2019, which includes cash proceeds of $0.3 million for the sale of the Company's Alliance building and machinery and equipment that had previously been held for sale as of September 30, 2018 and $2.3 million of insurance proceeds received for damaged property due to the Orange location fire, compared with cash provided by investing activities of $1.5 million in the first six months of fiscal 2018. In addition to the $3.3 million expended during the first six months of fiscal 2019, $2.4 million was committed for future capital expenditures as of March 31, 2019. The Company anticipates that the total fiscal 2019 capital expenditures will be within the range of $3.1 million to $5.1 million and will relate principally to the further enhancement of production and product offering capabilities and operating cost reductions. Separate from the range provided, the Company anticipates incurring additional costs in fiscal 2019 of approximately $13.6 million to $15.6 million in capital expenditures at the Orange location as the result of the fire and resulting damage that took place. These costs are expected to be offset by insurance proceeds, approximately $4.1 million of insurance proceeds have been received after March 31, 2019 (of which $2.4 million received related to property insurance proceeds and the remainder related to extra expense incurred in the period).
Financing Activities
Cash used by financing activities was $3.2 million in the first six months of fiscal 2019, compared with cash used by financing activities of $3.4 million in the first six months of fiscal 2018.
The Company had repayments of $0.7 million of long-term debt, which were from the Company's foreign long-term loan, compared to $1.9 million in repayments in the comparable prior period, of which $1.2 million of repayments related to the term loan under the Amended and Restated Credit and Security Agreement ("2016 Credit Agreement") and $0.7 million of repayments were to its foreign long-term loan in fiscal 2018.
In August 2018, the company extinguished its 2016 Credit Agreement and entered into an asset-based Credit Agreement ("Credit Agreement") and Security Agreement ("Security Agreement") with a lender. See Note 4, Debt, of the consolidated condensed statements for further discussion related to the Credit Agreement and the First, Second, and Third Amendment to the Credit Agreement.
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The Company had net repayments from the revolver under the Credit Agreement of $2.6 million in the first six months of fiscal 2019, compared with net repayments of $1.8 million in the first six months of fiscal 2018.
Amounts borrowed under the Credit Agreement are secured by substantially all the assets of the Company and its U.S. subsidiaries and a pledge of 66.67% of the stock of its first-tier non-U.S. subsidiaries. Borrowings will bear interest at the lender's established domestic rates or LIBOR, plus the applicable margin as set forth in the Credit Agreement. The revolver has a rate based on LIBOR plus 1.75% spread, which was 4.24% at March 31, 2019 and the Export Credit Agreement as discussed in Note 4, Debt, has a rate based on LIBOR plus 1.25% spread, which was 3.74% at March 31, 2019. The Company also has a commitment fee of 0.25% under the Credit Agreement to be incurred on the unused balance of the revolver.
Under the Company's Credit Agreement, the Company is subject to certain customary loan covenants if availability is less than or equal to 12.5% of the Revolving Commitment for three or more business days in any consecutive 30 day period. The availability at March 31, 2019 was $9.1 million. If availability had fallen short, the Company would be required to meet the fixed charge coverage ratio ("FCCR") covenant, which must not be less than 1.1 to 1.0. In the event of a default, we may not be able to access our revolver, which could impact the ability to fund working capital needs, capital expenditures and invest in new business opportunities. Because the availability was greater than the 12.5% of the Revolving Commitment as of March 31, 2019, the FCCR calculation was not required.
The Company incurred debt issuance costs related to the above Credit Agreements and amendments in fiscal 2019 and 2018. See Note 4, Debt for further discussion.
Future cash flows from the Company’s operations will be used to pay down amounts outstanding under the Credit Agreement. The Company believes it has adequate cash/liquidity available to finance its operations from the combination of (i) the Company’s expected cash flows from operations and (ii) funds available under the Credit Agreement.
C. Critical Accounting Policies and Estimates
The Company's disclosures of critical accounting policies in its Annual Report on Form 10-K for the year ended September 30, 2018 have not materially changed since that report was filed, except for the following:
Effective October 1, 2018, the Company adopted the new revenue standard. Prior to the adoption of the new revenue standard, the Company generally recognized revenue when title and risk of loss passed to the customer, which generally occurred at the time of shipment or when title passed when the goods reached their destination.
Under the new revenue standard, the Company recognizes revenue when performance obligations are satisfied under the terms of a contract with the customer. This has resulted in control transferring over time for certain customer products, in which revenue is recognized based on progress toward completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products to be provided. The Company has elected to use the cost to cost input method of progress based on costs 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. The remaining customer contracts continue to be recognized as of a point in time when products are shipped from the Company's manufacturing facilities or at a later point in time when control of the products transfers to the customer.
Contract Balances
Contract assets on the consolidated condensed balance sheets is recognized when a good is transferred to a customer and the Company does not have the contractual right to bill for the related performance obligations. In these instances, revenue recognized exceeds the amount billed to the customer and the right to payment is not just 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.
D. Impact of Recently Issued Accounting Standards
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and subsequent updates. The ASU's require lessees to recognize a lease liability and a right-of-use asset on the balance sheet by those leases with a lease term of more than twelve months. The standard allows for a modified retrospective transition for finance and operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transition accounting for leases that expire prior to the date of initial adoption. Alternatively, the Company can elect the optional transition method to the adoption for lessees related to finance and operating leases existing at, or entered into after October 1, 2019, and
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the Company will record a cumulative effect adjustment to retained earnings on the same date, if necessary. This optional transition method will not require any restatements prior to the Company's 2020 fiscal year. The Company will adopt the new guidance on October 1, 2019 and is in the process of putting together a project plan and assembling a project team to execute over the next few months. As the implementation progresses, the Company will determine the extent of the impact on its consolidated condensed financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance will replace the current incurred loss approach with an expected loss model. The new expected credit loss impairment model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt instruments, net investments in 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. The Company is in the process of evaluating the effect that the adoption of ASU 2016-13 will have on the Company's results within the consolidated condensed statements of operations and financial condition.
E. Recently Adopted Accounting Standards
For recently adopted accounting standards refer to Note 1, Summary of Significant Accounting Policies - Recently Adopted Accounting Standards for further detail.
Item 4. Controls and Procedures
As defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s disclosure controls and procedures include components of the Company’s internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) as of March 31, 2019 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were not effective, as a result of the continuing existence of the material weaknesses in the Company's internal controls over financial reporting described in Item 9A of the Company's 2018 Annual Report and in Item 4 of the Company's first quarter 2019.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis. The following material weaknesses related to our control environment existed as of March 31, 2019.

• | Key controls around segregation of duties and periodic access reviews within IT general and application controls for domestic operations were not designed or operating effectively.

• | Key controls within IT processes were not designed and operating effectively at Maniago.

• | Review controls related to certain accounting matters with manual calculations and financial statement disclosures related to a recently adopted accounting pronouncement were not sufficiently precise in detecting material errors.

The control environment deficiencies described above could have resulted in a failure to prevent or detect a material misstatement in our financial statements due to the omission of information or inappropriate conclusions regarding information required to be recorded, processed, summarized, and reported in the Company’s SEC reports. Notwithstanding the identified material weaknesses, management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly
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represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Remediation Plan for Material Weakness in Internal Control over Financial Reporting
Management and the Company's Board of Directors are committed to improving the Company's overall system of internal controls over financial reporting.
To address the material weakness identified in our control environment, the Company is taking the following actions to remediate the material weaknesses:

• | Implement a robust security and access reviews at a level of precision necessary to ensure they are timely and appropriate, including monitoring activities for users with privileged access. The Company is making progress and will seek external assistance as needed. Using a risk-based approach, management will implement detective and monitoring business process controls to further mitigate IT risks over financial reporting.

• | To prevent future recurrence of errors surrounding accounting matters with manual calculations and financial statement disclosures, management will take appropriate measures to enhance the precision of controls surrounding completeness and accuracy of key spreadsheets and financial statement disclosures and add additional layers of review by having additional accounting personnel ensure the accuracy of the calculations and financial statement disclosures. This includes improving documentation of controls, training, and enhanced communication within the organization.

With the oversight of senior management and the Company's Board of Directors, the Company continues to take steps and additional measures to remediate the underlying causes of the identified material weaknesses, including but not limited to (i) evaluating our information technology systems or invest in improvements to our technology sufficient to generate accurate, transparent, and timely financial information, and (ii) continue to strengthen organizational structure by holding individuals accountable for their internal control responsibilities.
Although we expect to make meaningful progress on our remediation plan during fiscal year 2019, our efforts may extend past the end of fiscal year 2019. There is no assurance that the aforementioned plans will be sufficient and that additional steps may not be necessary.
Changes in Internal Control over Financial Reporting and other Remediation
Beginning October 1, 2018, the Company implemented ASC 606, “Revenue from Contracts with Customers” ("Topic 606") For its adoption, the Company implemented changes to its revenue recognition process and control activities within them, such as development of new entity-wide policies, ongoing contract reviews and manual changes to accommodate presentation and disclosure requirements.
Except for the remediation items described in Item 4 related to prior year findings and Topic 606 and a newly identified material weakness in the first quarter of fiscal 2019, there have been no changes in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
Part II. Other Information
Items 1A, 3, 4 and 5 are not applicable or the answer to such items is negative; therefore, the items have been omitted and no reference is required in this Quarterly Report.
Item 1. Legal Proceedings
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. For a more information regarding our outstanding material legal proceedings, see Note 9, Commitments and Contingencies.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As discussed in the Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, the Board of Directors of the Company authorized the repurchase of unregistered restricted shares that were privately issued to Wyman-Gordon Company pursuant to an agreement between the parties in 1995. The shares were not repurchased as part of a share repurchase program but were repurchased by the Company pursuant to a privately negotiated agreement between the Company and Wyman-Gordon Company. The repurchases are reflected below:

Period | Total number of shares purchased | Average price paid per share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (in millions)
January 1, 2019 through January 30, 2019 | 20,636 | $3.00 | N/A | N/A
February 1, 2019 through February 28, 2019 | -- | -- | -- | --
March 1, 2019 through March 31, 2019 | -- | -- | -- | --
Total | 20,636 | $3.00 | N/A | N/A

Item 6. (a) Exhibits
The following exhibits are filed with this report or are incorporated herein by reference to a prior filing in accordance with Rule 12b-32 under the Securities and Exchange Act of 1934 (Asterisk denotes exhibits filed with this report.)

Exhibit No. |  | Description
2.1 |  | Stock Purchase Agreement between Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated March 16, 2015 filed as Exhibit 2.1 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference
2.2 |  | Amendment to the Stock Purchase Agreement Riello Investimenti Partners SGR S.p.A., Giorgio Visentini, Giorgio Frassini, Giancarlo Sclabi and Matteo Talmassons and SIFCO Italy Holdings S.R.L (a wholly-owned subsidiary of SIFCO Industries Inc.) dated June 30, 2015 filed as Exhibit 2.2 to the Company’s Form 8-K dated July 2, 2015, and incorporated herein by reference
3.1 |  | Third Amended Articles of Incorporation of SIFCO Industries, Inc., filed as Exhibit 3(a) of the Company’s Form 10-Q dated March 31, 2002, and incorporated herein by reference
3.2 |  | SIFCO Industries, Inc. Amended and Restated Code of Regulations dated January 28, 2016, filed as Exhibit 3.2 of the Company’s Form 10-K dated September 30, 2015, and incorporated herein by reference
9.1 |  | Voting Trust Agreement dated January 31, 2013, filed as Exhibit 9.1 to the Company’s Form 10-Q dated February 11, 2013 and incorporated herein by reference
9.2 |  | Voting Trust Extension Agreement dated January 15, 2015, filed as Exhibit 9.2 to the Company's Form 10-Q dated February 3, 2015 and incorporated herein by reference
9.3 |  | Voting Trust Agreement dated January 31, 2017, filed as Exhibit 9.3 to the Company's Form 10-Q dated January 31, 2017 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 |  | Letter Agreement between the Company and Jeffrey P. Gotschall, dated August 12, 2009 filed as Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2009 and incorporated herein by reference

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10.3 |  | Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and incorporated herein by reference
10.4 |  | Change in Control Agreement and Separation Agreement between the Company and Peter W. Knapper, effective June 29, 2016, filed as Exhibit 10.2 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference
10.5 |  | Form of SIFCO Industries, Inc. Long-term incentive plan performance share award, filed as Exhibit 10.6 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference
10.6 |  | Form of SIFCO Industries, Inc. Long-term incentive plan restricted share award, filed as Exhibit 10.7 to the Company's Form 10-Q dated May 16, 2016, and incorporated herein by reference
10.7 |  | Award agreement between the Company and Peter W. Knapper, granted June 29, 2016, filed as Exhibit 10.1 to the Company's Form 8-K dated June 17, 2016, and incorporated herein by reference
10.8 |  | 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
10.9 |  | 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
10.10 |  | 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
10.11 |  | 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
10.12 |  | 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
10.13 |  | Amended and Restated Relocation Agreement, dated February 15, 2018, by and between SIFCO Industries, Inc. and Peter Knapper, filed as Exhibit 10.1 to the Company's Form 8-K dated February 15, 2018, and incorporated herein by reference
10.14 |  | Change in Control Agreement and Separation Agreement between the Company and Thomas R. Kubera, effective May 4, 2018, filed as Exhibit 10.17 to the Company's Form 10-Q dated May 4, 2018 and incorporated herein by reference
10.15 |  | 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
10.16 |  | Economic Development Administration Title IX Loan Agreement, dated November 8, 2018, by and between the City of Cleveland and SIFCO Industries, Inc., filed as exhibit 10.2 to the Company's Form 8-K dated November 8, 2018, and incorporated herein by reference
10.17 |  | 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
10.18 |  | 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
*10.19 |  | 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
14.1 |  | Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 8-K dated February 6, 2018, and incorporated herein by reference
*31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

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*101 |  | The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed with the SEC on May 10, 2019, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended March 31, 2019 and 2018, (ii) Consolidated Condensed Statements of Comprehensive Income for the fiscal periods ended March 31, 2019 and 2018, (iii) Consolidated Condensed Balance Sheets at March 31, 2019 and September 30, 2018, (iv) Consolidated Condensed Statements of Cash Flow for the fiscal periods ended March 31, 2019 and 2018, (iv) Consolidated Condensed Statements of Shareholders' Equity for the periods March 31, 2019 and 2018, and (v) the Notes to the Consolidated Condensed Financial Statements.

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

|  | SIFCO Industries, Inc.
|  | (Registrant)
Date: May 10, 2019 |  | /s/ Peter W. Knapper
|  | Peter W. Knapper
|  | President and Chief Executive Officer
|  | (Principal Executive Officer)
Date: May 10, 2019 |  | /s/ Thomas R. Kubera
|  | Thomas R. Kubera
|  | Chief Financial Officer
|  | (Principal Financial Officer)

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