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Summary of Significant Accounting Policies | 12 Months Ended
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Sep. 30, 2023
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies A. DESCRIPTION OF BUSINESS SIFCO Industries, Inc. and its subsidiaries are engaged in the production of forgings and machined components primarily in the Aerospace and Energy ("A&E"), Defense and Commercial Space markets. The Company’s operations are conducted in a single business segment, "SIFCO" or the "Company." SIFCO operates from multiple locations. SIFCO manufacturing facilities are located in Cleveland, Ohio ("Cleveland"); Orange, California ("Orange"); and Maniago, Italy ("Maniago"). Cybersecurity Incident During fiscal 2023, the Company’s domestic operations were impacted by the Cybersecurity Incident ("Cyber Incident") which resulted in production delays and delayed shipments due to information access limitations. The Company has since completed data recovery and restoration from the cyber incident. See Note 11, Commitments and Contingencies. B. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The U.S. dollar is the functional currency for all the Company’s U.S. operations and its non-operating non-U.S. subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange which approximate the rates in effect at the date of the transaction. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the consolidated statements of shareholders’ equity. C. CASH EQUIVALENTS The Company considers all highly liquid short-term investments with original maturities of three months or less to be cash equivalents. A substantial majority of the Company’s cash and cash equivalent bank balances exceed federally insured limits as of September 30, 2023 and 2022. D. CONCENTRATIONS OF CREDIT RISK Receivables are presented net of allowance for doubtful accounts of $242 and $111 at September 30, 2023 and 2022, respectively. Accounts receivable outstanding longer than the contractual payment terms are considered past due. The Company writes off accounts receivable when they become uncollectible. In fiscal 2023 $16 of accounts receivable were written off against the allowance for doubtful accounts, while $53 were written off in fiscal 2022. Bad debt expense totaled $143 in fiscal 2023 and was a $3 benefit in fiscal 2022. Most of the Company’s receivables represent trade receivables due from manufacturers of turbine engines and aircraft components as well as turbine engine overhaul companies located throughout the world, including a significant concentration of U.S. based companies. In fiscal 2023, 12% of the Company’s consolidated net sales were from one of its largest customers; and 32% of the Company's consolidated net sales were from the three largest customers and their direct subcontractors, which individually accounted for 12%, 10% and 10%, of consolidated net sales, respectively. In fiscal 2022, 11% of the Company’s consolidated net sales were from one of its largest customers; and 23% of the Company's consolidated net sales were from two of the largest customers and their direct subcontractors which individually accounted for 12%, and 11%, of consolidated net sales, respectively. Other than what has been disclosed, no other single customer or group represented greater than 10% of total net sales in fiscal 2023 and 2022. At September 30, 2023, one of the Company’s largest customers had an outstanding net accounts receivable balance of 11% of the total net accounts receivable; and one of the largest customers and their direct subcontractors collectively had an outstanding net accounts receivable which accounted for 13% of total net accounts receivable. At September 30, 2022, three of the Company’s largest customers had outstanding net accounts receivable that were 15%, 11% and 10%, respectively of the total net accounts receivable; and four of the largest customers and their direct subcontractors collectively had outstanding net accounts receivable which accounted for 15%, 11%, 11% and 10%, respectively of total net accounts receivable. The Company performs ongoing credit evaluations of its customers’ financial conditions. The Company believes its allowance for doubtful accounts is sufficient based on the credit exposures outstanding at September 30, 2023. E. INVENTORY VALUATION For a portion of the Company's inventory, cost is determined using the last-in, first-out (“LIFO”) method. For approximately 19% and 42% of the Company’s inventories at September 30, 2023 and 2022, respectively, the LIFO method is used to value the Company’s inventories. The first-in, first-out (“FIFO”) method is used to value the remainder of the Company’s inventories, which are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion. In order to accurately reflect inventory, the Company wrote down inventory to realizable value, and accrued reserves of $669 and $1,538 as of September 30, 2023 and 2022, respectively. The Company writes down inventory for obsolete and excess inventory each quarter and requires at a minimum that the write down be established based on an analysis of the age of the inventory. In addition, if the Company identifies specific obsolescence, other than that identified by the aging criteria, an additional write down will be recognized. Specific obsolescence and excess write down requirements may arise due to technological or market changes or based on cancellation of an order. In order to accurately reflect the value of inventory, the Company wrote down inventory for obsolete and excess inventory, and accrued reserves of $3,380 and $3,546 as of September 30, 2023 and 2022. F. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost net of accumulated depreciation. Depreciation is generally computed using the straight-line method. Depreciation is provided in amounts sufficient to amortize the cost of the assets over their estimated useful lives. Depreciation provisions are based on estimated useful lives: (i) buildings, including building improvements - 5 to 40 years; (ii) machinery and equipment, including office and computer equipment - 3 to 20 years; (iii) software - 3 to 7 years (included in machinery and equipment); and (iv) leasehold improvements - 6 to 15 years range represent the remaining life or length of the lease, whichever is less (included in buildings). The Company's property, plant and equipment assets by major asset class at September 30 consist of:
|  | 2023 |  | 2022
Property, plant and equipment: |  |  |  |
Land |  | $ | 949 |  |  | $ | 913 |
Buildings |  | 17,016 |  |  | 16,553 |
Machinery and equipment |  | 96,874 |  |  | 93,510 |
Total property, plant and equipment |  | 114,839 |  |  | 110,976 |
Less: Accumulated depreciation |  | 78,552 |  |  | 71,704 |
Property, plant and equipment, net |  | $ | 36,287 |  |  | $ | 39,272 |
Depreciation expense was $6,170 and $6,035 in fiscal 2023 and 2022, respectively. G. LONG-LIVED ASSET IMPAIRMENT The Company reviews the carrying value of its long-lived assets ("asset groups"), when events and circumstances indicate a triggering event has occurred. A triggering event is a change in circumstances that indicates the carrying value of the asset group may not be recoverable. This review is performed using estimates of future undiscounted cash flows, which include proceeds from disposal of assets. Under the Accounting Standard Codification ("ASC") 360 ("Topic 360"), if the carrying value of a long-lived asset is greater than the estimated undiscounted future cash flows, then the long-lived asset is considered impaired and an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value. Fiscal 2023 The Company continuously monitors potential triggering events to determine if further testing is necessary. In the first, second, third and fourth quarters, the Company evaluated triggering events and did not identify any indicators that the asset groups might be impaired. Fiscal 2022 The Company continuously monitors triggers to determine if further testing is necessary. In the third and fourth quarters, further assessment was necessary as certain qualitative factors, such as, operating results, historical and forecasted market conditions and projected undiscounted future cash flows triggered a recoverability test on its Orange, California ("Orange") location. The results indicated that the long-lived assets, right-of-use assets and definite lived intangible assets were recoverable and did not require further review for impairment. H. GOODWILL AND INTANGIBLE ASSETS Goodwill represents the excess of the purchase price paid over the fair value of the net assets of an acquired business. Goodwill is subject to impairment testing if triggered in the interim, and if not, on an annual basis. The Company has selected July 31 as the annual impairment testing date. The first step of the goodwill impairment test compares the fair value of a reporting unit (as defined) with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired. However, if the carrying amount exceeds the fair value, the Company should recognize an impairment charge for the amount by which the carrying amount exceeds the fair value, not to exceed the total amount of goodwill allocated to that reporting unit. See Note 3, Goodwill and Intangibles Assets, for further discussion of the July 31, 2023 and 2022 annual impairment test results. The Company monitors for triggering events outside of the annual impairment assessment date and no potential triggers were identified through September 30, 2023. Intangible assets consist of identifiable intangibles acquired or recognized in the accounting for the acquisition of a business and include such items as a trade name, a non-compete agreement, below market lease, customer relationships and order backlog. Intangible assets are amortized over their useful lives ranging from one year to ten years. Identifiable intangible assets assessment for impairment is evaluated when events and circumstances warrant such a review, as noted within Note 1, Summary of Significant Accounting Policies - Long-Lived Asset Impairment for further discussion. I. NET LOSS PER SHARE The Company’s net loss per basic share has been computed based on the weighted-average number of common shares outstanding. Due to the net loss in the reporting period, zero restricted shares and performance shares are included in the calculation of diluted earnings per share because the effect would be anti-dilutive. In the prior period, net loss per diluted share reflects the effect of the Company's outstanding restricted shares and performance shares under the treasury method. The dilutive effect is as follows:
|  | September 30, |  |
|  | 2023 |  | 2022 |  |
Net loss |  | $ | (8,692) |  |  | $ | (9,640) |  |  |
Weighted-average common shares outstanding (basic and diluted) |  | 5,929 |  |  | 5,830 |  |  |
Net loss per share – basic and diluted: |  | $ | (1.47) |  |  | $ | (1.65) |  |  |
Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share |  | 202 |  |  | 270 |  |  |
J. REVENUE RECOGNITION The Company recognizes revenue using the five-step revenue recognition model in which it depicts the transfer of goods to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. The revenue standard also requires disclosure sufficient to enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments and assets recognized from the cost to obtain or fulfill a contract. The Company recognizes revenue in the following manner using the five-step revenue recognition model. A contract exists when there is approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when performance obligations under the terms of the contract with a customer of the Company are satisfied. A portion of the Company's contracts are from purchase orders ("PO's"), which continue to be recognized as of a point in time when products are shipped from the Company's manufacturing facilities or at a later time when control of the products transfers to the customer. Under the revenue standard, the Company recognizes certain revenue over time as it satisfies the performance obligations because the conditions of transfer of control to the applicable customer are as follows: •Certain military contracts, which relate to the provisions of specialized or unique goods to the U.S. government with no alternative use, include provisions within the contract that are subject to the Federal Acquisition Regulation ("FAR"). The FAR provision allows the customer to unilaterally terminate the contract for convenience and requires the customer to pay the Company for costs incurred plus reasonable profit margin and take control of any work in process. •For certain commercial contracts involving customer-specific products with no alternative use, the contract may fall under the FAR clause provisions noted above for military contracts or may include certain provisions within their contract that the customer controls the work in process based on contractual termination clauses or restrictions of the Company's use of the product and the Company possesses a right to payment for work performed to date plus reasonable profit margin. As a result of control transferring over time for these products, revenue is recognized based on progress toward completion of the performance obligation. The determination of the method to measure progress towards completion requires judgment and is based on the nature of the products to be provided. The Company elected to use the cost to cost input method of progress based on costs incurred for these contracts because it best depicts the transfer of goods to the customer based on incurring costs on the contracts. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. When the criteria to recognize revenue over time are not met, revenue is recognized at point in time. Under this method, transferring control of the good or service to the customer satisfies the performance obligation to recognize revenue at a point in time. Transfer of control is satisfied when the Company has the right to present for payment and/or the customer has legal title, physical possession, significant risks and rewards of ownership and/or accepted the asset. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. An accounting policy election to exclude from transaction price was made for sales, value add, and other taxes the Company collects concurrent with revenue-producing activities when applicable. The Company has elected to recognize incremental costs incurred to obtain contracts, which primarily represent commissions paid to third party sales agents where the amortization period would be less than one year, as selling, general and administrative expenses in the consolidated statements of operations as incurred. The Company elected a practical expedient under Topic 606 to not adjust the promised amount of consideration for the effects of any significant financing component where the Company expects, at contract inception, that the period between when the Company transfers a promised good to a customer and when the customer pays for that good will be one year or less. Finally, the Company's policy is to exclude performance obligations resulting from contracts with a duration of one year or less from its disclosures related to remaining performance obligations. The amount of consideration to which the Company expects to be entitled in exchange for the goods is not generally subject to significant variations. The Company elected to recognize the cost of freight and shipping after control of the products has transferred to the customer as an expense in cost of goods sold on the consolidated statements of operations, because those are costs incurred to fulfill the promise recognized, not a separate performance obligation. To the extent certain freight and shipping fees are charged to customers, the Company recognizes the amounts charged to customers as revenues and the related costs as an expense in cost of goods sold when control of the related products has transferred to the customer. Contracts are occasionally modified to account for changes in contract specifications, requirements, and pricing. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Substantially all of the Company's contract modifications are for goods that are distinct from the existing contract. Therefore, the effect of a contract modification on the transaction price and the Company's measure of progress for the performance obligation to which it relates is generally recognized on a prospective basis. Contract Balances Contract assets on the consolidated balance sheets are recognized when control is transferred to the customer over-time and the Company does not have the contractual right to bill for the related performance obligations. In these instances, revenue recognized exceeds the amount billed to the customer and the right to payment is not solely subject to the passage of time. Amounts do not exceed their net realizable value. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Payments from customers are received based on the terms established in the contract with the customer. K. LEASES The leasing standard requires lessees to recognize a Right-of-Use ("ROU") asset and a lease liability on the consolidated balance sheet, with the exception of short-term leases. The Company primarily leases its manufacturing buildings, specifically at its Orange location, as well as certain machinery and office equipment. The Company determines if a contract contains a lease based on whether the contract conveys the right to control the use of identified assets for a period in exchange for consideration. Upon identification and commencement of a lease, the Company establishes a ROU asset and a lease liability. Operating leases are included in ROU assets, short-term operating lease liabilities, and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property, plant, and equipment, current maturities of long-term debt and long-term debt on the consolidated balance sheets. ROU assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date and duration of the lease term in determining the present value of the future payments. Lease expense for operating leases is recognized on a straight-line basis over the lease term, while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition. L. EMPLOYEE RETENTION CREDIT Under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the Employee Retention Credit ("ERC") is a refundable payroll tax credit for businesses and tax-exempt organizations that were affected during the COVID-19 pandemic. Eligible businesses, both for-profit and not-for-profit, that experienced a full or partial government-ordered suspension of operations or a "significant" decline in gross receipts in any quarter (more than 50% decrease in 2020 from 2019, and more than 20% in 2021) could receive a quarterly refundable payroll tax credit. The Company, with reasonably assured qualification, submitted and received approval for refunds under the ERC program. As no authoritative guidance exists under U.S. GAAP for reporting ERCs, the Company adopted International Accounting Standards (“IAS”) 20 – Accounting for Government Grants and Disclosure of Government Assistance which permits the recording and presentation of either the gross amount as other income or netting the credit against related expense. The Company recorded a gross benefit of $1,772, which represented $1,688 claimed as refund and $84 in interest income. The ERC was recognized as a reduction in other manufacturing and selling, general and administrative expenses and allocated to the financial statement categories from which the payroll taxes were originally incurred. The Company recorded benefits to cost of goods sold of $1,452, selling, general and administrative expense of $236 and interest income $84, respectively and recorded selling, general and administrative expense of $354 for professional fees related to the tax credit in the consolidated condensed statements of operations during the twelve months ended September 30, 2023. M. IMPACT OF RECENTLY ADOPTED ACCOUNTING STANDARDS None. N. IMPACT OF NEWLY 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 qualify as a smaller reporting company ("SRC"), as defined by the Securities and Exchange Commission, to fiscal years after December 15, 2022, including interim periods within those fiscal years. Because SIFCO is considered a SRC, this ASU is effective for the Company beginning October 1, 2023. The effect of adopting this ASU is not expected to have a material impact to the Company's results within the consolidated statements of operations and financial condition. In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statement (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)”, to amend various SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 120, among other things. The ASU does not provide any new guidance so there is no transition or effective date associated with it. The Company is currently assessing the impact of adopting ASU 2023-03 on the consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", that would enhance disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280. ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (“CODM”) uses to assess segment performance and to make decisions about resource allocations. The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more useful financial analyses. Currently, Topic 280 requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required to report a measure of segment profit or loss that the CODM uses to assess segment performance and make decisions about allocating resources. ASC 280 also requires other specified segment items and amounts such as depreciation, amortization and depletion expense to be disclosed under certain circumstances. The amendments in ASU 2023-07 do not change or remove those disclosure requirements. The amendments in ASU 2023-07 also do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-07 retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact of adopting ASU 2023-07 on the consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. O. USE OF ESTIMATES Accounting principles generally accepted in the U.S. require management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent liabilities, at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the period in preparing these financial statements. Actual results could differ from those estimates. P. RESEARCH AND DEVELOPMENT Research and development costs are expensed as they are incurred. Research and development expenses were nominal in fiscal 2023 and 2022. Q. DEBT ISSUANCE COSTS Debt issuance costs are capitalized and amortized over the life of the related debt. Amortization of debt issuance costs is included in interest expense in the consolidated statements of operations. R. ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss as shown on the consolidated balance sheets at September 30 are as follows:
| 2023 |  | 2022 |  |
Foreign currency translation adjustment, net of income tax | $ | (5,928) |  |  | $ | (6,196) |  |  |
Net retirement plan liability adjustment, net of income tax | (741) |  |  | (2,509) |  |  |
Interest rate swap agreement, net of income tax | 9 |  |  | 12 |  |  |
Total accumulated other comprehensive loss | $ | (6,660) |  |  | $ | (8,693) |  |  |
The following table provides additional details of the amounts recognized into net earnings from accumulated other comprehensive loss, net of tax:
| Foreign Currency Translation Adjustment |  | Retirement Plan Liability Adjustment |  | Interest Rates Swap Adjustment |  | Accumulated Other Comprehensive Loss
Balance at September 30, 2021 | (5,359) |  |  | (3,720) |  |  | — |  |  | (9,079) |
Other comprehensive (loss) income before reclassifications | (837) |  |  | 527 |  |  | 12 |  |  | (298) |
Amounts reclassified from accumulated other comprehensive loss | — |  |  | 684 |  |  |  |  | 684 |
Net current-period other comprehensive (loss) income | (837) |  |  | 1,211 |  |  | 12 |  |  | 386 |
Balance at September 30, 2022 | (6,196) |  |  | (2,509) |  |  | 12 |  |  | (8,693) |
Other comprehensive income (loss) before reclassifications | 268 |  |  | 1,341 |  |  | (3) |  |  | 1,606 |
Amounts reclassified from accumulated other comprehensive loss | — |  |  | 427 |  |  |  |  | 427 |
Net current-period other comprehensive income (loss) | 268 |  |  | 1,768 |  |  | (3) |  |  | 2,033 |
Balance at September 30, 2023 | $ | (5,928) |  |  | $ | (741) |  |  | $ | 9 |  |  | $ | (6,660) |
The following table reflects the changes in accumulated other comprehensive loss related to the Company for September 30, 2023 and 2022:
|  | Amount reclassified from accumulated other comprehensive loss |  |  |  |  |  |
Details about accumulated other comprehensive loss components |  | 2023 |  | 2022 |  |  |  |  |  | Affected line item in the Consolidated Statement of Operations
Amortization of Retirement plan liability: |  |  |  |  |  |  |  |  |  |
Net actuarial gain |  | 1,659 |  |  | 1,003 |  |  |  |  |  |  | (1)
Settlements/curtailments |  | 108 |  |  | 208 |  |  |  |  |  |  | (1)
|  | 1,767 |  |  | 1,211 |  |  |  |  |  |  | Total before taxes
|  | — |  |  | — |  |  |  |  |  |  | Income tax expense
|  | $ | 1,767 |  |  | $ | 1,211 |  |  |  |  |  |  | Net of taxes
(1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. See Note 8, Retirement Benefit Plans for further discussion. S. INCOME TAXES The Company files a consolidated U.S. federal income tax return and tax returns in various state and local jurisdictions. The Company’s Irish and Italian subsidiaries also file tax returns in their respective jurisdictions. The Company provides deferred income taxes for the temporary difference between the financial reporting basis and tax basis of the Company’s assets and liabilities. Such taxes are measured using the enacted tax rates that are assumed to be in effect when the differences reverse. Deductible temporary differences result principally from recording certain expenses in the financial statements in excess of amounts currently deductible for tax purposes. Taxable temporary differences result principally from tax depreciation in excess of book depreciation. The Company evaluates for uncertain tax positions taken at each balance sheet date. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest cumulative benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company's policy for interest and/or penalties related to underpayments of income taxes is to include interest and penalties in tax expenses. The Company maintains a valuation allowance against its deferred tax assets when management believes it is more likely than not that all or a portion of a deferred tax asset may not be realized. Changes in valuation allowances are recorded in the period of change. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future earnings, carry-back and carry-forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The Tax Cut and Jobs Act (the "Act") includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein minimum taxes are imposed on foreign income in excess of a deemed return on the tangible assets of foreign corporations. This income will effectively be taxed at a 10.5% tax rate. GILTI was effective for the Company starting in fiscal 2019. The Company has elected to account for GILTI as a component of tax expense in the period in which the Company is subject to the rules. T. FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. In determining fair value, the Company utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. Based on the examination of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1 - Quoted market prices in active markets for identical assets or liabilities Level 2 - Observable market based inputs or unobservable inputs that are corroborated by market data Level 3 - Unobservable inputs that are not corroborated by market data A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The book value of cash equivalents, accounts receivable, and accounts payable are considered to be representative of their fair values because of their short maturities. The carrying value of debt is considered to approximate the fair value based on the borrowing rates currently available to us for loans with similar terms and maturities. Fair value measurements of non-financial assets and non-financial liabilities are primarily used in goodwill, other intangible assets and long-lived assets impairment analysis, the valuation of acquired intangibles and in the valuation of assets held for sale. Goodwill and intangible assets are valued using Level 3 inputs. Defined benefit plans can be valued using Level 1, Level 2, Level 3 or a combination of Level 1, 2 and 3 inputs. See Note 8, Retirement Benefit Plans for further discussion. U. SHARE-BASED COMPENSATION Share-based compensation is measured at the grant date, based on the calculated fair value of the award and the probability of meeting its performance condition, and is recognized as expense when it is probable that the performance conditions will be met over the requisite service period (generally the vesting period). Share-based expense includes expense related to restricted shares and performance shares issued under the Company's 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (as further amended, the "2016 Plan"). The Company recognizes share-based expense within selling, general, and administrative expense and adjusts for any forfeitures as they occur. V. GOING CONCERN In accordance with ASU 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40) ("ASC 205-40")", the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether its plans that are not yet fully implemented are probable of both being implemented and effective in alleviating that doubt. In the event substantial doubt is raised, disclosures in the notes to the consolidated financial statements of management’s plans and management’s conclusion as to whether the substantial doubt exists or has been alleviated are required. The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty. This step shall not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. The Company has debt maturing in October 2024. As a result of this condition, there is substantial doubt about the Company’s ability to continue as a going concern. The Company is evaluating available financial alternatives, including obtaining acceptable alternative financing. The Company cannot provide assurances that it will be successful in restructuring the existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements. See Note 5, Debt and Subsequent Event and Note 14, Subsequent Events. W. RECLASSIFICATIONS None.

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