10-Q 1 sif1231201910q2020.htm 10-Q Q1 2020
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 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 December 31, 2019 was 5,858,904.

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

| Three Months Ended December 31,
| 2019 |  | 2018
Net sales | $ | 26,207 |  |  | $ | 29,067 |
Cost of goods sold | 22,883 |  |  | 26,330 |
Gross profit | 3,324 |  |  | 2,737 |
Selling, general and administrative expenses | 4,208 |  |  | 4,111 |
Amortization of intangible assets | 409 |  |  | 414 |
Gain on disposal or impairment of operating assets | — |  |  | (282 | )
Operating loss | (1,293 | ) |  | (1,506 | )
Interest income | — |  |  | (1 | )
Interest expense | 251 |  |  | 292 |
Foreign currency exchange loss (gain), net | 1 |  |  | (1 | )
Other income, net | (108 | ) |  | — |
Loss before income tax benefit | (1,437 | ) |  | (1,796 | )
Income tax benefit | (95 | ) |  | (514 | )
Net loss | $ | (1,342 | ) |  | $ | (1,282 | )
Net loss per share |  |  |
Basic | $ | (0.24 | ) |  | $ | (0.23 | )
Diluted | $ | (0.24 | ) |  | $ | (0.23 | )
Weighted-average number of common shares (basic) | 5,612 |  |  | 5,535 |
Weighted-average number of common shares (diluted) | 5,612 |  |  | 5,535 |

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 December 31,
| 2019 |  | 2018
Net loss | $ | (1,342 | ) |  | $ | (1,282 | )
Other comprehensive income (loss): |  |  |
Foreign currency translation adjustment | 192 |  |  | (428 | )
Retirement plan liability adjustment | 189 |  |  | 107 |
Comprehensive loss | $ | (961 | ) |  | $ | (1,603 | )

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)

| December 31, 2019 |  | September 30, 2019
| (unaudited) |  |
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 429 |  |  | $ | 341 |
Receivables, net of allowance for doubtful accounts of $350 and $521, respectively | 20,610 |  |  | 23,159 |
Other receivables | 170 |  |  | 3,500 |
Contract asset | 10,501 |  |  | 10,349 |
Inventories, net | 12,246 |  |  | 10,509 |
Refundable income taxes | 131 |  |  | 141 |
Prepaid expenses and other current assets | 1,556 |  |  | 1,459 |
Total current assets | 45,643 |  |  | 49,458 |
Property, plant and equipment, net | 41,449 |  |  | 39,610 |
Operating lease right-of-use assets, net | 17,746 |  |  | — |
Intangible assets, net | 2,948 |  |  | 3,320 |
Goodwill | 3,493 |  |  | 3,493 |
Other assets | 205 |  |  | 218 |
Total assets | $ | 111,484 |  |  | $ | 96,099 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Current maturities of long-term debt | $ | 4,795 |  |  | $ | 5,786 |
Revolver | 16,630 |  |  | 15,542 |
Short-term operating lease liabilities | 1,145 |  |  | — |
Accounts payable | 17,280 |  |  | 19,799 |
Accrued liabilities | 6,089 |  |  | 5,557 |
Total current liabilities | 45,939 |  |  | 46,684 |
Long-term debt, net of current maturities | 1,980 |  |  | 2,052 |
Long-term operating lease liabilities, net of short-term | 16,634 |  |  | — |
Deferred income taxes | 1,669 |  |  | 1,718 |
Pension liability | 9,236 |  |  | 9,528 |
Other long-term liabilities | 782 |  |  | 63 |
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 5,863 at December 31, 2019 and 5,777 at September 30, 2019 | 5,863 |  |  | 5,777 |
Additional paid-in capital | 10,503 |  |  | 10,438 |
Retained earnings | 31,806 |  |  | 33,148 |
Accumulated other comprehensive loss | (12,928 | ) |  | (13,309 | )
Total shareholders’ equity | 35,244 |  |  | 36,054 |
Total liabilities and shareholders’ equity | $ | 111,484 |  |  | $ | 96,099 |

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)

| Three Months Ended December 31,
| 2019 |  | 2018
Cash flows from operating activities: |  |  |
Net loss | $ | (1,342 | ) |  | $ | (1,282 | )
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
Depreciation and amortization | 1,856 |  |  | 1,930 |
Amortization and write-off of debt issuance cost | 26 |  |  | 11 |
Gain on disposal of operating assets or impairment of operating assets | — |  |  | (282 | )
LIFO effect | 22 |  |  | (36 | )
Share transactions under company stock plan | 150 |  |  | 236 |
Other long-term liabilities | (114 | ) |  | (76 | )
Deferred income taxes | (95 | ) |  | (25 | )
Changes in operating assets and liabilities: |  |  |
Receivables | 2,664 |  |  | 2,015 |
Contract assets | (152 | ) |  | (122 | )
Inventories | (1,624 | ) |  | (150 | )
Refundable taxes | 10 |  |  | (438 | )
Prepaid expenses and other current assets | (284 | ) |  | 249 |
Other assets | (351 | ) |  | (7 | )
Accounts payable | (3,314 | ) |  | (1,729 | )
Other accrued liabilities | 1,592 |  |  | 76 |
Accrued income and other taxes | (9 | ) |  | 36 |
Net cash (used for) provided by operating activities | (965 | ) |  | 406 |
Cash flows from investing activities: |  |  |
Insurance proceeds received | 3,500 |  |  | — |
Proceeds from disposal of operating assets | — |  |  | 317 |
Capital expenditures | (2,303 | ) |  | (797 | )
Net cash (used for) provided by investing activities | 1,197 |  |  | (480 | )
Cash flows from financing activities: |  |  |
Proceeds from long-term debt | — |  |  | 133 |
Payments on long-term debt | (336 | ) |  | (409 | )
Proceeds from revolving credit agreement | 31,809 |  |  | 9,959 |
Repayments of revolving credit agreement | (30,714 | ) |  | (10,230 | )
Payment of debt issue costs | — |  |  | (105 | )
Short-term debt borrowings | 981 |  |  | 1,791 |
Short-term debt repayments | (1,891 | ) |  | (1,392 | )
Net cash used for financing activities | (151 | ) |  | (253 | )
Increase (Decrease) in cash and cash equivalents | 81 |  |  | (327 | )
Cash and cash equivalents at the beginning of the period | 341 |  |  | 1,252 |
Effect of exchange rate changes on cash and cash equivalents | 7 |  |  | (4 | )
Cash and cash equivalents at the end of the period | $ | 429 |  |  | $ | 921 |
Supplemental disclosure of cash flow information of operations: |  |  |
Cash paid for interest | $ | (181 | ) |  | $ | (287 | )
Cash paid for income taxes, net | $ | (10 | ) |  | $ | (21 | )
Non-cash investing activities: |  |  |
Additions to property, plant & equipment - incurred but not yet paid | $ | 689 |  |  | $ | 498 |

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

|  | Three Months Ended December 31, 2019
|  | Common |  |  |  |  |  |  |  |
|  | Shares |  | Amount |  | Additional Paid-In Capital |  | Retained Earnings |  | Accumulated Other Comprehensive Loss |  | Total Shareholders’ Equity
Balance - September 30, 2019 |  | 5,777 |  |  | $ | 5,777 |  |  | $ | 10,438 |  |  | $ | 33,148 |  |  | $ | (13,309 | ) |  | $ | 36,054 |
Comprehensive loss |  | — |  |  | — |  |  | — |  |  | (1,342 | ) |  | 381 |  |  | (961 | )
Performance and restricted share expense |  | — |  |  | — |  |  | 155 |  |  | — |  |  | — |  |  | 155 |
Share transactions under equity based plans |  | 86 |  |  | 86 |  |  | (90 | ) |  | — |  |  | — |  |  | (4 | )
Balance - December 31, 2019 |  | 5,863 |  |  | $ | 5,863 |  |  | $ | 10,503 |  |  | $ | 31,806 |  |  | $ | (12,928 | ) |  | $ | 35,244 |

|  | Three Months Ended December 31, 2018
|  | 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 |  |  | $ | 37,098 |  |  | $ | (8,629 | ) |  | $ | 44,190 |
Cumulative effect for the adoption of ASC 606 |  | — |  |  | — |  |  | — |  |  | 3,598 |  |  | — |  |  | 3,598 |
Comprehensive loss |  | — |  |  | — |  |  | — |  |  | (1,282 | ) |  | (321 | ) |  | (1,603 | )
Performance and restricted share expense |  | — |  |  | — |  |  | 236 |  |  | — |  |  | — |  |  | 236 |
Share transactions under equity based plans |  | 46 |  |  | 46 |  |  | (46 | ) |  | — |  |  | — |  |  | — |
Balance - December 31, 2018 |  | 5,736 |  |  | $ | 5,736 |  |  | $ | 10,221 |  |  | $ | 39,414 |  |  | $ | (8,950 | ) |  | $ | 46,421 |

See notes to unaudited consolidated condensed 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 non-operating subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange 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 2019 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 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 2019 Annual Report on Form 10-K. Since the Annual Report, the Company has implemented Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)" and ASU 2018-11, "Leases (Topic 842) Targeted Improvements," (collectively with ASU 2016-02, "Topic 842") which was adopted by the Company on October 1, 2019 using the cumulative-effect adjustment transition method. Significant changes to the Company's accounting policies as a result of adopting Topic 842 are referenced below within section E. Recently Adopted Accounting Standards and in Note 4, Leases.
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 diluted earnings per share because the effect would be anti-dilutive. The dilutive effect is as follows:

| Three Months Ended December 31,
| 2019 |  | 2018
Net loss | $ | (1,342 | ) |  | $ | (1,282 | )
Weighted-average common shares outstanding (basic and diluted) | 5,612 |  |  | 5,535 |
Net loss per share – basic and diluted: |  |  |
Net loss per share | $ | (0.24 | ) |  | $ | (0.23 | )
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share | 194 |  |  | 186 |

D. Impact of Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent updates. ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance 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
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(or pool of exposures). The estimate of expected credit losses should consider historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Financial instruments with similar risk characteristics should be grouped together when estimating expected credit losses. ASU 2016-13 does not prescribe a specific method to make the estimate, so its application will require significant judgment. ASU 2016-13 is effective for public companies in fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. However, in November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)," which defers the effective date for public filers that are considered smaller reporting companies ("SRC"), as defined by the Securities and Exchange Commission, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Because SIFCO is considered a SRC, the Company does not need to implement until October 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company's results within the consolidated condensed statements of operations and financial condition.
In December 2019, ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" was issued to (i) reduce the complexity of the standard by removing certain exceptions to the general principles in Topic 740 and (ii) improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently in the process of evaluating the impact of adoption of the rules on the Company's financial condition, results of operations and disclosure.
E. Recently Adopted Accounting Standards
The Company used the cumulative effect of changes made to the balance sheet as of October 1, 2019 for the adoption of Topic 842. Under the transition method selected by the Company, leases that are not short-term in nature existing at, or entered on October 1, 2019 were required to be recognized and measured. Prior period amounts were not adjusted and continue to be reflected with the Company's historical accounting. The adoption of Topic 842 resulted in the Company recording right of use ("ROU") assets and operating lease liabilities of approximately $18,059 to the consolidated condensed balance sheet as of October 1, 2019, with no related impact on the Company's consolidated condensed statement of comprehensive loss or consolidated condensed statement of cash flows.

2. | Inventories

Inventories consist of:

| December 31, 2019 |  | September 30, 2019
Raw materials and supplies | $ | 4,387 |  |  | $ | 4,512 |
Work-in-process | 3,617 |  |  | 2,721 |
Finished goods | 4,242 |  |  | 3,276 |
Total inventories | $ | 12,246 |  |  | $ | 10,509 |

For a portion of the Company's inventory, cost is determined using the last-in, first-out ("LIFO") method. Approximately 33% and 27% of the Company’s inventories at December 31, 2019 and September 30, 2019, respectively, use the LIFO method to value its inventories. An actual valuation of inventory under the LIFO method is made 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, which are stated at the lower of cost or net realizable value. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $8,318 and $8,296 higher than reported at December 31, 2019 and September 30, 2019, respectively.
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3. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:

| December 31, 2019 |  | September 30, 2019
Foreign currency translation adjustment | $ | (5,475 | ) |  | $ | (5,667 | )
Retirement plan liability adjustment, net of tax | (7,453 | ) |  | (7,642 | )
Total accumulated other comprehensive loss | $ | (12,928 | ) |  | $ | (13,309 | )

4. Leases
The adoption of Topic 842 requires lessees to recognize a ROU asset and a lease liability on the consolidated condensed balance sheet, with the exception of short-term leases. The Company primarily leases its manufacturing buildings, specifically at its Orange location, office equipment and forklifts. The Company determines if a contract contains a lease when the contract conveys the right to control the use of identified assets for a period in exchange for consideration. Upon identification and commencement of a lease, the Company establishes a ROU asset and a lease liability. Operating leases are included in ROU assets, short-term operating lease liabilities, and long-term operating lease liabilities on the consolidated condensed balance sheets. Finance leases are included in property, plant, and equipment, current maturities of long-term debt and long-term debt on the consolidated condensed balance sheets.
The Company has remaining lease terms ranging from one to 17 years, some of these include options to renew the lease. The total lease term is determined by considering the initial lease term per the lease agreement, which is adjusted to include any renewal options that the Company is reasonably certain to exercise as well as any period that the Company has control before the stated initial term of the agreement. If the Company determines there exists a reasonable certainty of exercising termination or early buyout options, then the lease terms are adjusted to account for these facts. A portion of our real estate leases are generally subject to annual changes in the Consumer Price Index (CPI). The changes to the CPI are treated as variable lease payments.
The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classification.
The Company has made an accounting policy election to not separate non-lease components from lease components when allocating consideration for the buildings and machinery and equipment ROU asset classes. The election was made to reduce the administrative burden that would be imposed on the Company.
ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date and duration of the lease term in determining the present value of the future payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. A lease asset and lease liability are not recorded for leases with an initial term of 12 months or less and the lease expense related to these leases is recognized as incurred over the lease term.
The components of lease expense was as follows:

| Three Months Ended December 31,
| 2019
Lease expense |
Finance lease expense: |
Amortization of right-of use assets on finance leases | $ | 14 |
Interest on lease liabilities | 2 |
Operating lease expense: | 537 |
Variable lease cost: | 39 |
Total lease expense | 592 |

The following table presents the impact of leasing on the consolidated condensed balance sheet.
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| Classification to the consolidated condensed balance sheets |  | December 31, 2019
Assets: |  |  |
Finance lease assets | Property, plant and equipment, net |  | $ | 130 |
Operating lease assets | Operating lease right-of-use assets, net |  | 17,746 |
Total lease assets |  |  | 17,876 |
Current liabilities: |  |  |
Finance lease liabilities | Current maturities of long-term debt |  | 57 |
Operating lease liabilities | Short-term operating lease liabilities |  | 1,145 |
Non-current liabilities: |  |  |
Finance lease liabilities | Long-term debt, net of current maturities |  | 65 |
Operating lease liabilities | Long-term operating lease liabilities, net of short-term |  | 16,634 |
Total lease liabilities |  |  | $ | 17,901 |

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

| December 31, 2019
Other Information |
Cash paid for amounts included in measurement of liabilities: |
Operating cash flows from operating leases | $ | 537 |
Operating cash flows from finance leases | 2 |
Financing cash flows from finance leases | 14 |

| December 31 2019
Weighted-average remaining lease term (years): |
Finance leases | 2.3 |
Operating leases | 15.6 |
Weighted-average discount rate: |
Finance leases | 5.17 | %
Operating leases | 5.93 | %

Future minimum lease under non-cancellable leases at December 31, 2019 were as follows:

| Finance Leases | Operating Leases
Year ending September 30, |  |
2020 | 62 |  | 2,132 |
2021 | 53 |  | 1,754 |
2022 | 10 |  | 1,604 |
2023 | 3 |  | 1,564 |
2024 | — |  | 1,584 |
Thereafter | — |  | 18,722 |
Total lease payments | $ | 128 |  | $ | 27,360 |
Less: Interest | (6 | ) | (9,581 | )
Present value of lease liabilities | $ | 122 |  | $ | 17,779 |

As previously disclosed in the 2019 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments initial or remaining non-cancellable lease terms in excess of one year would have been as follows:
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| Finance Leases | Operating Leases
Year ending September 30, |  |
2020 | $ | 61 |  | $ | 2,172 |
2021 | 61 |  | 1,865 |
2022 | 21 |  | 1,583 |
2023 | 6 |  | 1,502 |
2024 | — |  | 1,498 |
Thereafter | — |  | 16,711 |
Total lease payments | $ | 149 |  | $ | 25,331 |
Less: Interest | (6 | ) |
Present value of lease liabilities | $ | 143 |  |

5. Debt
Debt consists of:

| December 31, 2019 |  | September 30, 2019
Revolving credit agreement | $ | 16,630 |  |  | $ | 15,542 |
Foreign subsidiary borrowings | 5,602 |  |  | 6,592 |
Finance lease obligations | 122 |  |  | 138 |
Other, net of unamortized debt issuance costs ($24) and ($25), respectively | 1,051 |  |  | 1,108 |
Total debt | 23,405 |  |  | 23,380 |
Less – current maturities | (21,425 | ) |  | (21,328 | )
Total long-term debt | $ | 1,980 |  |  | $ | 2,052 |

Credit Agreement and Security Agreement of 2018
On August 8, 2018, the Company entered into an asset-based Credit Agreement ("Credit Agreement") and a Security Agreement (“Security Agreement”) with its current lender. The 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. The proceeds from the Credit Agreement were used to pay fees and expenses incurred in connection with the Credit Agreement and continue to be used for working capital purposes and general corporate purposes.
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 Fourth Amendment to the Credit Agreement and Security Agreement which revises the provision related to availability and 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.
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 Prime or LIBOR Rate, plus the applicable margin
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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.
On March 29, 2019, the Company entered into a Third Amendment with its Lender. This amendment extended the time frame for when certain post-closing requirements would be satisfied by March 31, 2019 to June 30, 2019. These post-closing requirements were completed by June 30, 2019.
On September 20, 2019, the Company entered into a Fourth Amendment with its Lender. As previously stated, 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; however, the Fourth Amendment to the Credit Agreement resulted in the reduction of its availability from 12.5% of the revolving commitment to the 10% of the lessor of collateral or total revolving commitment, with a $2,000 floor through June 30, 2020. In determining the availability, the lender looks at the total collateral. If the total collateral is less than $20,000, then the $2,000 floor will apply; however, if the total collateral is greater than or equal to $20,000, but less than the $35,000 (revolving commitment); then 10% of the total collateral is used, but if the collateral exceeds $35,000, then 10% of the total commitment is used as lending will not exceed the $35,000 revolving commitment unless the accordion feature is enacted. This will reset back to previous requirements prior to the Fourth Amendment, commencing July 1, 2020. As of December 31, 2019 and September 30, 2019, the total collateral was $24,496 and $24,000, respectively and the revolving commitment was $35,000 for both periods. The measurement at 10% was $2,400 and $3,500, respectively. Total availability at December 31, 2019 and September 30, 2019 was $7,049 and $7,709, respectively, which exceed both the collateral and total commitment threshold. If availability had fallen short, the Company would be required to meet the FCCR covenant, which must not be less than 1.1 to 1.0. Because the availability was greater than the 10.0% of the revolving commitment as of December 31, 2019 and September 30, 2019, the FCCR calculation was not required.
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 1.50% spread, which was 3.9% and 3.6% at December 31, 2019 and September 30, 2019, respectively and the Export Credit Agreement has a rate based on LIBOR plus 1.25% spread, which was 3.7% and 3.4% at December 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:

| December 31, 2019 |  | September 30, 2019
Term loan | $ | 2,101 |  |  | $ | 2,318 |
Short-term borrowings | 2,794 |  |  | 3,744 |
Factor | 707 |  |  | 530 |
Total debt | $ | 5,602 |  |  | $ | 6,592 |
Less – current maturities | (4,553 | ) |  | (5,501 | )
Total long-term debt | $ | 1,049 |  |  | $ | 1,091 |
Receivables pledged as collateral | $ | 629 |  |  | $ | 672 |

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 purposes, which was subsequently repaid in fiscal 2019. In September 2019, Maniago modified its repayment schedule for one tranche of its existing term debt by reducing its next two payments by approximately $96 and extending the loan for an additional six months in which the final payment will be made at that time (to be paid by October 2020). The Company continues to have discussions with its lenders and other potential partners to refinance certain debt obligations at its Maniago location to provide Maniago with sufficient future liquidity. If Maniago is unsuccessful in obtaining additional financing, it may experience challenges in meeting certain current
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loan obligations. This foreign debt is collateralized by Maniago’s assets. The Company has not pledged any assets as collateral or guaranteed Maniago’s debt. The consolidated condensed financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of the Maniago assets or the amounts and classifications of the Maniago liabilities that may result from the outcome of this uncertainty. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan will provide adequate liquidity to finance its Maniago operations.
The Company factors receivables from one of its customers. 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 incurred additional costs in fiscal 2019 of $75 related to the First and Second Amendments, which is included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $131 and $106 at December 31, 2019 and September 30, 2019, respectively.
6. Income Taxes
For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its operations. This estimated effective rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate through the first three months of fiscal 2020 was 7%, compared with 29% for the same period of fiscal 2019. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2020 compared with the same period of fiscal 2019 and discrete tax benefits in the first quarter of fiscal 2019 applied against a year-to-date loss. 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.
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.

7. | 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 December 31,
| 2019 |  | 2018
Service cost | $ | 85 |  |  | $ | 75 |
Interest cost | 208 |  |  | 264 |
Expected return on plan assets | (376 | ) |  | (393 | )
Amortization of net loss | 188 |  |  | 107 |
Net periodic cost | $ | 105 |  |  | $ | 53 |

During the three months ended December 31, 2019 and 2018, the Company made $188 and $22 in contributions, respectively, to its defined benefit pension plans. The Company anticipates making $332 of additional cash contributions to fund its defined benefit pension plans during the balance of fiscal 2020 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 2020. 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 2020.
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On November 26, 2019, the Company ratified a new collective bargaining agreement with one of its bargaining units. Included within the agreement was a provision to withdraw from its existing multi-employer plan resulting in the imposition of a withdrawal liability. The withdrawal liability of $739 was recorded within the cost of goods sold line of the consolidated condensed statement of operations and is included in other long-term liabilities and the current portion (next four quarterly installments) in accrued liabilities of the consolidated condensed balance sheets, payable in quarterly installments over the next 20 years.

8. | 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 SIFCO Industries, Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (the "2016 Plan"). The aggregate number of shares that may be awarded by the Company was increased to 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% (for awards granted in fiscal 2020 maximum is 150%) 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. The Company is currently recognizing compensation expense for two tranches of awards as it has concluded it is probable it will meet the performance criteria for that award, while the Company is not currently recognizing compensation expense for one tranche of awards as it had concluded that it is not probable it will meet the performance criteria for those awards. 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 three months of fiscal 2020, the Company granted 134 shares under the 2016 Plan to certain key employees. The award was split into two tranches, 47 performance shares and 87 shares of time-based restricted shares, with a grant date fair value of $2.50 per share. The award vests over three years.
The Company has awarded restricted shares to its directors, officers, and other employees of the Company. The restricted shares were valued at the closing market price of the Company’s common shares on the date of the grant, and such value was recorded as unearned compensation. The unearned compensation is being amortized ratably over the restricted stock vesting period of one year or three years.
If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 31 shares that remain available for award at December 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% (decreased to 150% for awards starting in fiscal 2020) of such target, then a fewer number of shares would be available for award.
Stock-based compensation under the 2016 Plan was $155 and $236 during the first three months of fiscal 2020 and 2019, respectively. As of December 31, 2019, there was $750 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 1.7 years.
At the Annual Meeting of shareholders held on January 30, 2020, the shareholders of the Company approved the first amendment (the “Amendment”) to the 2016 Plan. The Amendment increased the number of shares available for award under the 2016 by 550 shares.

9. | 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.
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The following table represents a breakout of total revenue by customer type:

| Three Months Ended December 31,
| 2019 |  | 2018
Commercial revenue | $ | 10,191 |  |  | $ | 12,067 |
Military revenue | 16,016 |  |  | 17,000 |
Total | $ | 26,207 |  |  | $ | 29,067 |

The following table represents revenue by the various components:

| Three Months Ended December 31,
Net Sales | 2019 |  | 2018
Aerospace components for: |  |  |
Fixed wing aircraft | $ | 11,335 |  |  | $ | 13,304 |
Rotorcraft | 6,848 |  |  | 5,130 |
Energy components for power generation units | 2,658 |  |  | 3,732 |
Commercial product and other revenue | 5,366 |  |  | 6,901 |
Total | $ | 26,207 |  |  | $ | 29,067 |

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

| Three Months Ended December 31,
Net Sales | 2019 |  | 2018
North America | 23,776 |  |  | 25,721 |
Europe | 2,431 |  |  | 3,346 |
Total | $ | 26,207 |  |  | $ | 29,067 |

In addition to the disaggregating revenue information provided above, approximately 61% of total net sales as of December 31, 2019 is recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time.
Contract Balances
Generally, payment is due 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 period ended December 31, 2019:

Contract assets - Beginning balance, October 1, 2019 |  | $ | 10,349 |
Additional revenue recognized over-time |  | 17,446 |
Less amounts billed to the customers |  | $ | (17,294 | )
Contract assets - Ending balance, December 31, 2019 |  | $ | 10,501 |

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Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2019 |  | $ | (382 | )
Payments received in advance of performance obligations |  | — |
Performance obligations satisfied |  | 382 |
Contract liabilities (included within Accrued liabilities) - Ending balance, December 31, 2019 |  | $ | — |

There were no impairment losses recorded on contract assets as of December 31, 2019.
Remaining performance obligations
As of December 31, 2019, the Company has $119,513 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

10. | 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.
A subsidiary of the Company, Quality Aluminum Forge, LLC ("Orange"), is currently a defendant in a lawsuit filed by Avco Corporation (“Avco”) in the Pennsylvania State Court, which was filed in August 2019, alleging that certain forged pistons delivered by the Orange plant failed to meet material specifications required by Avco. No specific amount of damages was claimed by Avco and no discovery has occurred at this time and Orange disagrees with the allegations made by Avco. Previously, Orange was a defendant with respect to the same action in the United States District Court for the District of Rhode Island, which action was dismissed in connection with the movement of the matter to Pennsylvania State Court. 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.
The Company is a defendant in a purported class action lawsuit filed in the Superior Court of California, County of Orange, which was filed in August 2017, arising from employee wage-and-hour claims under California law for alleged meal period, rest break, hourly and overtime wage calculation, timely wage payment and necessary expenditure indemnification violations; failure to maintain required wage records and furnish accurate wage statements; and unfair competition, which is similar to the one previously settled in fiscal 2018. As mentioned previously, 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 recorded an estimated loss of $250 as of September 30, 2019 and an additional loss of $65 was recorded as of December 31, 2019.
Recovery on the insurance claim related to the fire on December 26, 2018 at to the Orange location continues in fiscal 2020. The Company continues to work diligently to restore the site back to full service as safely and quickly as possible. The 2500 ton press from storage that was placed in service in fiscal 2019 continues to run and the press located in Michigan was taken off-line at the end of November 2019 and was relocated to Orange at the end of December. Restoration is nearly complete for the structure of the manufacturing building and two additional presses damaged in the fire. The Company began running one of the restored presses at the end of December 2019, while the second is expected to be in use starting March 2020. During the first quarter of fiscal 2020, the Company received cash proceeds from insurance of $4,500. The table below reflects the receipt of proceeds and how they were expended as of December 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. The Company also maintains business interruption insurance coverage and continues to work with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses, which none were realized in the first quarter of fiscal 2020.
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Balance sheet (Other receivables): |
September 30, 2019 | $ | 3,500 |
| Cash proceeds | (4,500 | )
| Capital expenditures (equipment) | — |
| Other expenses | 1,170 |
| Business interruption | — |
December 31, 2019 | $ | 170 |

The tables below reflect how the proceeds received impacted the consolidated condensed statements of operations for the three months December 31,2019.

| Three Months Ended December 31, 2019
| Balance without insurance proceeds | Insurance recoveries | Balance with insurance proceeds
Cost of goods sold | 24,053 |  | (1,170 | ) | 22,883 |
Net loss | $ | (2,512 | ) | $ | (1,170 | ) | $ | (1,342 | )

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; (10) the ability to successfully integrate businesses that may be acquired into the Company’s operations; and (11) extraordinary or force majeure events affecting the business or operations of our business.
The Company is engaged in the production of forgings and machined components primarily for the A&E markets. The processes and services provided by the Company include forging, heat-treating, machining, subassembly, and test. The Company operates under one business segment.
The Company endeavors to plan and evaluate its business operations while taking into consideration certain factors including the following: (i) the projected build rate for commercial, business and military aircraft, as well as the engines that power such aircraft; (ii) the projected maintenance, repair and overhaul schedules for commercial, business and military aircraft, as well as the engines that power such aircraft; and (iii) the projected build rate and repair for industrial turbines.
The Company operates within a cost structure that includes a significant fixed component. Therefore, higher net sales volumes are expected to result in greater operating income because such higher volumes allow the business operations to better leverage the fixed component of their respective cost structures. Conversely, the opposite effect is expected to occur at lower net sales and related production volumes.
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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.
Recovery on the insurance claim related to the fire on December 26, 2018 at to the Orange location continues in fiscal 2020. The Company continues to work diligently to restore the site back to full service as safely and quickly as possible. The 2500 ton press from storage that was placed in service in fiscal 2019 continues to run and the press located in Michigan was taken off-line at the end of November 2019 and was relocated to Orange at the end of December. Restoration is nearly complete for the structure of the manufacturing building and two additional presses damaged in the fire. The Company began running one of the restored presses at the end of December 2019, while the second is expected to be in use starting March 2020. During the first quarter of fiscal 2020, the Company received cash proceeds from insurance of $4.5 million. The table below reflects the receipt of proceeds and how they were expended as of December 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. The Company also maintains business interruption insurance coverage and continues to work with the insurance company to reach an agreement on the recoverable amounts of business interruption expenses, which none were realized in the first quarter of fiscal 2020.

Balance sheet (Other receivables - dollars in millions): |
September 30, 2019 | $ | 3.5 |
| Cash proceeds | (4.5 | )
| Other expenses | 1.2 |
December 31, 2019 | $ | 0.2 |

For further detail of how the consolidated condensed statements of operations were impacted for the three months ended, refer to Note 10, Commitments and Contingencies.
Three Months Ended December 31, 2019 compared with Three Months Ended December 31, 2018
Net Sales
Net sales for the first three months of fiscal 2020 decreased 9.8% to $26.2 million, compared with $29.1 million in the comparable period of fiscal 2019. Net sales comparative information for the first three months of fiscal 2020 and 2019 is as follows:

(Dollars in millions) | Three Months Ended December 31, |  | Increase/ (Decrease)
Net Sales | 2019 |  | 2018 |
Aerospace components for: |  |  |  |  |
Fixed wing aircraft | $ | 11.3 |  |  | $ | 13.3 |  |  | $ | (2.0 | )
Rotorcraft | 6.8 |  |  | 5.1 |  |  | 1.7 |
Energy components for power generation units | 2.7 |  |  | 3.8 |  |  | (1.1 | )
Commercial product and other revenue | 5.4 |  |  | 6.9 |  |  | (1.5 | )
Total | $ | 26.2 |  |  | $ | 29.1 |  |  | $ | (2.9 | )

Fixed wing aircraft sales decreased $2.0 million to $11.3 million in the first three months ended December 31, 2019 compared with $13.3 million in the comparable period of fiscal 2019. The decrease is primarily attributed to continued delays in production/delivery at the Orange location due to the fire along with reduced production of the Boeing 737 and production timing in the C-130J program. The increase of $1.7 million in rotorcraft sales in the first quarter of fiscal 2020 compared to the same period in fiscal 2019, is primarily due to increased shipments related to the Black Hawk program. Commercial products and other revenue decreased $1.5 million in the first quarter of fiscal 2020 compared to the same period in fiscal 2019, primarily due to timing of shipments for the Hellfire II missile program. Net sales in energy components for power generation units decreased by $1.1 million compared with the same period last year due to the continued softening of the energy market.
Commercial net sales were 38.9% of total net sales and military net sales were 61.1% of total net sales in the first three months of fiscal 2020, compared with 41.5% and 58.5%, respectively, in the comparable period in fiscal 2019. A shift in mix between commercial versus military sales between comparable periods is due to an increase in military programs, such as, the Black Hawk program, offset by the decline in energy sales and continued delays in production due to the ongoing recovery efforts at the Orange location resulting in reduced commercial sales. Military net sales decreased by $1.0 million to $16.0 million in the first three
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months of fiscal 2020, compared with $17.0 million in the comparable period of fiscal 2019, primarily due to the timing of shipments for the Hellfire II missile program. Commercial net sales decreased $1.9 million to $10.2 million in the first three months of fiscal 2020, compared with $12.1 million in the comparable period of fiscal 2019 primarily due to the continued business interruption created by the fire at the Orange location, production timing on certain programs and the soft energy market.
Cost of Goods Sold
Cost of goods sold decreased by $3.4 million, or 13.1%, to $22.9 million, or 87.3% of net sales, during the first three months of fiscal 2020, compared with $26.3 million or 90.6% of net sales, in the comparable period of fiscal 2019. The decrease was due primarily to decreased volumes and product mix, partially offset by unabsorbed costs related to the Orange location due to the fire and the one-time pension withdrawal liability charge of $0.8 million incurred for exiting its multi-employer plan as further explained in Note 7, Retirement Benefit Plans.
Gross Profit
Gross profit increased $0.6 million to $3.3 million during the first three months of fiscal 2020, compared with $2.7 million in the comparable period of fiscal 2019. Gross margin percent of sales was 12.7% during the first three months of fiscal 2020, compared with 9.4% in the comparable period in fiscal 2019. The increase in gross profit was primarily due to product mix, along with $1.1 million of costs related to the fire that were partially offset by the insurance proceeds received.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $4.2 million, or 16.1% of net sales during the first three months of fiscal 2020, compared with $4.1 million, or 14.1% of net sales in the comparable period of fiscal 2019. The Company incurred higher legal and professional expenses along with salaries and benefits of $0.2 million, which was partially offset by lower commissions of $0.1 million.
Amortization of Intangibles
Amortization of intangibles was $0.4 million in the first three months of fiscal 2020 and fiscal 2019, respectively.
Other/General
The Company recorded an operating loss of $1.3 million in the first three months of fiscal 2020, compared to a loss of $1.5 million in the first three months of fiscal 2019.
In the first three months ended December 31, 2018, results included a $0.3 million gain on disposal of assets which relates to the sale of the Alliance building.
Interest expense was $0.3 million in the first three months of fiscal 2020 and fiscal 2019, respectively.
The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first three months of both fiscal 2020 and 2019:

| Weighted Average Interest Rate Three Months Ended December 31, |  | Weighted Average Outstanding Balance Three Months Ended December 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Revolving credit agreement | 3.6 | % |  | 4.1 | % |  | $ 15.8 million |  | $ 22.8 million
Foreign term debt | 2.4 | % |  | 2.3 | % |  | $ 5.9 million |  | $ 7.5 million
Other debt | 0.9 | % |  | — | % |  | $ 1.0 million |  | $ 0.0 million

Other income, net, increased to $0.1 million in the first three months of fiscal 2020, compared with zero in the same period fiscal 2019.
Income Taxes
The Company’s effective tax rate through the first three months of fiscal 2020 was 7%, compared with 29% for the same period of fiscal 2019. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in the first three months of fiscal 2020 compared with the same period of fiscal 2019 and discrete tax benefits in the first quarter of fiscal 2019 applied against a year-to-date loss. 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.
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Net Loss
Net loss was $1.3 million during the first three months of fiscal 2020 and fiscal 2019, respectively.
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 loss to EBITDA and Adjusted EBITDA:

Dollars in thousands | Three Months Ended
| December 31,
| 2019 |  | 2018
Net loss | $ | (1,342 | ) |  | $ | (1,282 | )
Adjustments: |  |  |
Depreciation and amortization expense | 1,856 |  |  | 1,930 |
Interest expense, net | 251 |  |  | 291 |
Income tax (benefit) | (95 | ) |  | (514 | )
EBITDA | 670 |  |  | 425 |
Adjustments: |  |  |
Foreign currency exchange loss (gain), net (1) | 1 |  |  | (1 | )
Other income, net (2) | (108 | ) |  | — |
Gain on disposal and impairment of assets (3) | — |  |  | (282 | )
Equity compensation (4) | 155 |  |  | 236 |
LIFO impact (5) | 22 |  |  | (36 | )
Adjusted EBITDA | $ | 740 |  |  | $ | 342 |

(1) | Represents the gain or loss from changes in the exchange rates between the functional currency and the foreign currency in which the transaction is denominated.

(2) | Represents miscellaneous non-operating income or expense, such as pension costs or grant income.

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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 of long-lived assets.

(4) | 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.

(5) | 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 was $0.4 million at December 31, 2019 compared with $0.3 million at September 30, 2019. At December 31, 2019, all of the $0.4 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 used $1.0 million of cash in the first three months of fiscal 2020, compared with providing cash of $0.4 million in the first three months of fiscal 2019. The cash used by operating activities in the first three months of fiscal 2020 was primarily due to an increase in working capital of $1.4 million and net loss of $1.3 million, partially offset by $1.8 million of non-cash items such as depreciation and amortization of $1.9 million, and other non-cash items, such as equity based compensation, deferred income taxes and LIFO effect. The use of cash from working capital was primarily due to increase in inventories and payments to suppliers, partially offset by decreased receivables resulting from collections.
The Company's operating activities provided $0.4 million of cash in the first three months of fiscal 2019. The cash provided by operating activities in the first three months of fiscal 2019 was primarily due to, depreciation and amortization of $1.9 million, a net use of working capital of $0.1 million, the net gain on sale of the 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 $1.3 million. The cash used for working capital was primarily due to decreased receivables due to collections offset by timing of payments to suppliers.
Investing Activities
Cash provided by investing activities was $1.2 million in the first three months of fiscal 2020, which includes $3.5 million of insurance proceeds received due to the Orange location fire, compared with cash used by investing activities of $0.5 million in the first three months of fiscal 2019. In addition to the $2.3 million expended for capital expenditures during the first three months of fiscal 2020, $3.5 million was committed for future capital expenditures as of December 31, 2019. The Company anticipates that the total fiscal 2020 capital expenditures will be within the range of $4.5 million to $6.5 million (exclusive of fire related expenditures) 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 2020 of approximately $5.0 million to $7.0 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 $4.5 million of insurance proceeds have been received as of December 31, 2019. Of the proceeds received, $3.5 million have been used towards capital expenditures and the remaining $1.0 million received is offsetting operating costs.
Financing Activities
Cash used by financing activities was $0.2 million in the first three months of fiscal 2020, compared with cash used by financing activities of $0.3 million in the first three months of fiscal 2019.
The Company had made repayments of $0.3 million of long-term debt, which were from the Company's foreign term loan, compared with repayments of $0.4 million in the comparable period.
In August 2018 entered into an asset-based Credit Agreement ("Credit Agreement") and Security Agreement ("Security Agreement") with a lender. See Note 5, Debt, of the consolidated condensed statements for further discussion related to the Credit Agreement and the First, Second, Third and Fourth Amendment to the Credit Agreement.
The Company had net borrowings from the revolver under the Credit Agreement of $1.1 million in the first three months of fiscal 2020, compared with net repayments of $0.3 million in the first three months of fiscal 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 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 3.9% at December 31, 2019 and the Export Credit Agreement as discussed in Note 5, Debt, has a
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rate based on LIBOR plus 1.25% spread, which was 3.7% at December 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 regarding availability as discussed in Note 5, Debt. The availability at December 31, 2019 was $7.0 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 10% of the Revolving Commitment as of December 31, 2019, the FCCR calculation was not required.
Future cash flows from the Company’s operations may be used to pay down amounts outstanding under the Credit Agreement and its foreign related debts. The Company believes it has adequate cash/liquidity available to finance its operations from the combination of (i) the Company’s expected cash flows from operations and (ii) funds available under the Credit Agreement for its domestic locations. The Company is currently in negotiations with its lenders and other potential partners to refinance certain debt obligations at its Maniago location to provide Maniago with sufficient future liquidity. If Maniago is unsuccessful in obtaining additional financing, it may experience certain challenges in meeting certain obligations. This foreign debt is collateralized by Maniago’s assets. The U.S. operations of the Company have not pledged any assets as collateral or guaranteed Maniago’s debt. The consolidated condensed financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of the Maniago assets or the amounts and classifications of the Maniago liabilities that may result from the outcome of this uncertainty. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan will provide adequate liquidity to finance Maniago operations.
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, 2019 have not materially changed since that report was filed, except for the following:
Effective October 1, 2019, the Company adopted ASC 842 Leases ("Topic 842"). Prior to the adoption of Topic 842, operating leases were maintained as off balance sheet arrangements. Under the transition method selected by the Company, leases that are not short-term in nature existing at, or entered on October 1, 2019 were required to be recognized and measured. Prior period amounts were not adjusted and continue to be reflected with the Company's historical accounting.
The Company determines if a contract contains a lease when the contract conveys the right to control the use of identified assets for a period in exchange for consideration. Upon identification and commencement of a lease, the Company establishes a right of use ("ROU") asset and a lease liability. Operating leases are included in ROU assets, short-term operating lease liabilities, and long-term operating lease liabilities on the consolidated condensed balance sheets. Finance leases are included in property, plant, and equipment, current maturities of long-term debt and long-term debt on the consolidated condensed balance sheets.
The total lease term is determined by considering the initial lease term per the lease agreement, which is adjusted to include any renewal options that the Company is reasonably certain to exercise as well as any period that the Company has control before the stated initial term of the agreement. If the Company determines there exists a reasonable certainty of exercising termination or early buyout options, then the lease terms are adjusted to account for these facts.
The Company elected the package of practical expedients permitted under the transition guidance within the new standard which, among other things, allowed the Company to carry forward the historical lease classification.
The Company has made an accounting policy election to not separate non-lease components from lease components when allocating consideration for the buildings and machinery and equipment ROU asset classes. The election was made to reduce the administrative burden that would be imposed on the Company.
ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of the future payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. A lease asset and lease liability are not recorded for leases with an initial term of 12 months or less and the lease expense related to these leases is recognized as incurred over the lease term.
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D. Impact of Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent updates. ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The new guidance 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. However, in November 2019, the FASB issued ASU 2019-10, "Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)," which defers the effective date for public filers that are considered smaller reporting companies ("SRC"), as defined by the Securities and Exchange Commission, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Because SIFCO is considered a SRC, the Company does not need to implement until October 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company's results within the consolidated condensed statements of operations and financial condition.
In December 2019, ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" was issued to (i) reduce the complexity of the standard by removing certain exceptions to the general principles in Topic 740 and (ii) improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently in the process of evaluating the impact of adoption of the rules on the Company's financial condition, results of operations and disclosure.
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 December 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 weakness in the Company's internal controls over financial reporting described in Item 9A of the Company's 2019 Annual Report on Form 10-K.
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 weakness related to our control environment existed as of December 31, 2019.

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

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 weakness,
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management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
Remediation Plan for Material Weakness in Internal Control over Financial Reporting
Management and the Company's Board of Directors are committed to improving the Company's overall system of internal controls over financial reporting.
To address the material weakness identified in our control environment, the Company is taking the following actions to remediate the material weakness:

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

With the oversight of senior management and the Company's Board of Directors, the Company continues to take steps and additional measures to remediate the underlying causes of the identified material weakness, 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 continue to make meaningful progress on our remediation plan during fiscal year 2020, we cannot estimate how long it will take to complete the process or the costs of actions required. There is no assurance that the aforementioned plans will be sufficient and that additional steps may not be necessary.
Changes in Internal Control over Financial Reporting and other Remediation
Beginning October 1, 2019, the Company implemented ASC 842, “Leases” ("Topic 842"). In connection with our adoption of Topic 842 the Company did implement changes to our internal controls relating to leases. These changes included the development of new policies, enhanced contract review requirements and other ongoing monitoring activities along with manual changes to accommodate presentation and disclosure requirements. Except for the changes noted regarding the adoption of Topic 842, no other material changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) occurred during the period covered by this Quarterly Report on Form 10‑Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Items 1A, 2, 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 10, Commitments and Contingencies.
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

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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 December 31, 2016 and incorporated herein by reference
9.4 |  | Voting Trust Extension Agreement dated January 18, 2019, filed as Exhibit 9.4 to the Company's Form 10-Q dated February 14, 2019, and incorporated herein by reference
10.1 |  | SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2008 Annual Meeting to Shareholders dated December 14, 2007, and incorporated herein by reference
10.2 |  | Letter Agreement between the Company and Jeffrey P. Gotschall, dated August 12, 2009 filed as Exhibit 10.1 of the Company’s Form 8-K dated August 12, 2009 and incorporated herein by reference
10.3 |  | Amendment No. 1 to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan, filed as Exhibit A of the Company’s Proxy and Notice of 2011 Annual Meeting to Shareholders dated December 15, 2010, and incorporated herein by reference
10.4 |  | Change in control Agreement and Separation Agreement between the Company and Peter W. Knapper, effective June 29, 2019, filed as Exhibit 10.1 to the Company's Form 8-K dated July 1, 2019 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, dated June 16, 2016, effective 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
10.18 |  | Change in Control Agreement and Separation Agreement between the Company and Thomas R. Kubera, effective June 29, 2019, filed as Exhibit 10.2 to the Company's Form 8-K dated July 1, 2019 and incorporated herein by reference
10.19 |  | 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

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10.20 |  | 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
10.21 |  | 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
10.22 |  | 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
10.23 |  | Third Amendment to Credit Agreement, dated March 29, 2019, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.19 to the Company's Form 10-Q dated May 10, 2019
10.24 |  | Fourth Amendment to Credit Agreement, dated March 29, 2019, by and among SIFCO Industries, Inc., Quality Aluminum Forge, LLC., and JPMorgan Chase Bank, N.A., a national banking association, filed as exhibit 10.1 to the Company's Form 8-K dated September 24, 2019
10.25 |  | First Amendment to the SIFCO Industries, Inc. 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) filed as Exhibit A of the Company’s Definitive Proxy Statement dated December 16, 2019, and incorporated herein by reference.
14.1 |  | Code of Ethics, filed as Exhibit 14.1 of the Company’s Form 8-K dated February 6, 2018, and incorporated herein by reference
*31.1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*31.2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a)
*32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
*32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
*101 |  | The following financial information from SIFCO Industries, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2019 filed with the SEC on February 18, 2020, formatted in XBRL includes: (i) Consolidated Condensed Statements of Operations for the fiscal periods ended December 31, 2019 and 2018, (ii) Consolidated Condensed Statements of Comprehensive Income for the fiscal periods ended December 31, 2019 and 2018, (iii) Consolidated Condensed Balance Sheets at December 31, 2019 and September 30, 2019, (iv) Consolidated Condensed Statements of Cash Flow for the fiscal periods ended December 31, 2019 and 2018, (iv) Consolidated Condensed Statements of Shareholders' Equity for the periods December 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: February 18, 2020 |  | /s/ Peter W. Knapper
|  | Peter W. Knapper
|  | President and Chief Executive Officer
|  | (Principal Executive Officer)
Date: February 18, 2020 |  | /s/ Thomas R. Kubera
|  | Thomas R. Kubera
|  | Chief Financial Officer
|  | (Principal Financial Officer)

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