SIFCO INDUSTRIES INC

Previous wording

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. The words "will," "may," "designed to," "outlook," "believes," "should," "anticipates," "plans," "expects," "intends," "estimates," "forecasts" and similar expressions identify certain of these forward-looking statements. These forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company provides this cautionary statement identifying important economic, political and technological factors, among others, the absence or effect of which could cause the actual results or events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the following: (1) the impact on business conditions in general, and on the demand for product in the aerospace and energy (or "A&E") industries in particular, of the global economic outlook, including the continuation of military spending at or near current levels and the availability of capital and liquidity from banks, the financial markets and other providers of credit; (2) the future business environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business that may be lost at comparable margins; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turboprop engines; (7) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; (10) the ability to successfully integrate businesses that may be acquired into the Company’s operations; (11) cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners; (12) our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations; (13) the ability to maintain a qualified workforce; (14) the adequacy and availability of our insurance coverage; (15) our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers; (16) our ability to …

Excerpt shortened here; the source contains the full paragraph.

Current wording

"A&E") industries in particular, of the global economic outlook, including the continuation of military spending at or near current levels and the availability of capital and liquidity from banks, the financial markets and other providers of credit; (2) the future business environment, including capital and consumer spending; (3) competitive factors, including the ability to replace business that may be lost at comparable margins; (4) metals and commodities price increases and the Company’s ability to recover such price increases; (5) successful development and market introduction of new products and services; (6) continued reliance on consumer acceptance of regional and business aircraft powered by more fuel efficient turboprop engines; (7) continued reliance on military spending, in general, and/or several major customers, in particular, for revenues; (8) the impact on future contributions to the Company’s defined benefit pension plans due to changes in actuarial assumptions, government regulations and the market value of plan assets; (9) stable governments, business conditions, laws, regulations and taxes in economies where business is conducted; (10) the ability to successfully integrate businesses that may be acquired into the Company’s operations; (11) cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners; (12) our exposure to additional risks as a result of our international business, including risks related to geopolitical and economic factors, suppliers, laws and regulations; (13) our ability to maintain a qualified workforce; (14) the adequacy and availability of our insurance coverage; (15) our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers; (16) our ability to realize future sales from amounts in our backlog; (17) investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings; (18) extraordinary or force majeure events affecting the business or operations of our business; and (19) the Company's ability to restructure existing debt obligations prior to their stated maturity date through the execution of a strategic alternative transaction or obtaining acceptable alternative financing.

Previous wording

The Company endeavors to continue 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; (iii) the projected build rate and repair for industrial turbines; and (iv) commercial space.

Current wording

The Company endeavors to continue 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; (iii) the projected build rate and repair for industrial turbines; and (iv) the market for commercial space.

Previous wording

SIFCO’s total backlog at March 31, 2024 was $137.8 million, of which $105.3 million are anticipated to be complete within the next 12 months, compared with total backlog of $96.7 million as of March 31, 2023. Orders may be subject to modification or cancellation by the customer with limited charges. Recovery in the A&E markets has resulted in increased bookings. Backlog information may not be indicative of future sales.

Current wording

SIFCO’s total backlog at June 30, 2024 was $139.2 million, of which $108.1 million are anticipated to be complete within the next 12 months, compared with total backlog of $122.8 million as of June 30, 2023. Orders may be subject to modification or cancellation by the customer with limited charges. Recovery in the A&E markets has resulted in increased bookings. Backlog information may not be indicative of future sales.

Previous wording

Six Months Ended March 31, 2024 compared with Six Months Ended March 31, 2023

Current wording

Nine Months Ended June 30, 2024 compared with Nine Months Ended June 30, 2023

Previous wording

Net sales comparative information for the first six months of fiscal 2024 and 2023 is as follows:

Current wording

Net sales comparative information for the first nine months of fiscal 2024 and 2023 is as follows:

Previous wording

Net sales for the first six months of fiscal 2024 increased $7.1 million to $47.6 million, compared with $40.5 million in the comparable period of fiscal 2023. In general, the production of the Company's products have lead times of varying lengths. Fixed wing sales were slightly higher compared with the same period last year. Rotorcraft sales were slightly lower compared with the same period last year due to demand reduction for the V22 program. The energy components for power generation units increased by $3.0 million due to growth in the steam turbine markets. Commercial products and other revenue increased by $4.3 million due to commercial space and the 787 program.

Current wording

Net sales for the first nine months of fiscal 2024 increased $14.5 million to $76.9 million, compared with $62.4 million in the comparable period of fiscal 2023. In general, the production of the Company's products have lead times of varying lengths. Fixed wing sales increased $2.4 million due to 737, 787, F15 and F16 programs. Rotorcraft sales increased $0.8 million due to H60 program partially offset by V22 demand reduction. The energy components for power generation sales increased by $3.8 million due to growth in the steam turbine markets. Commercial products and other revenue increased by $7.5 million due to commercial space and M1 tank program.

Previous wording

Commercial net sales were 64.3% of total net sales and military net sales were 35.7% of total net sales in the first six months of fiscal 2024, compared with 53.1% and 46.9%, respectively, in the comparable period in fiscal 2023. Military net sales decreased by $2.0 million to $17.0 million in the first six months of fiscal 2024, compared with $19.0 million in the comparable period of fiscal 2023, primarily due to F35 and V22 demand reduction. Commercial net sales increased $9.1 million to $30.6 million in the first six months of fiscal 2024, compared with $21.5 million in the comparable period of fiscal 2023, primarily due to an increase in the power generation steam turbine market and commercial space.

Current wording

Commercial net sales were 64.7% of total net sales and military net sales were 35.3% of total net sales in the first nine months of fiscal 2024, compared with 55.5% and 44.5%, respectively, in the comparable period in fiscal 2023. Military net sales decreased by $0.6 million to $27.1 million in the first nine months of fiscal 2024, compared with $27.8 million in the comparable period of fiscal 2023, primarily due to F35 program and V22 demand reduction. Commercial net sales increased $15.1 million to $49.7 million in the first nine months of fiscal 2024, compared with $34.6 million in the comparable period of fiscal 2023, primarily due to an increase in the power generation steam turbine market, commercial space and 737 and 787 programs.

Previous wording

Cost of goods sold increased by $6.3 million, or 35.9%, to $23.8 million, or 89.7% of net sales, during the second quarter of fiscal 2024, compared with $17.5 million or 91.1% of net sales, in the comparable period of fiscal 2023. The increase is primarily due to higher volume, higher labor costs of $0.5 million and outside services of $0.2 million as the Company increased production to meet customer demands.

Current wording

Cost of goods sold increased by $12.9 million, or 23.1%, to $68.8 million, or 89.6% of net sales, during the first nine months of fiscal 2024, compared with $55.9 million or 89.7% of net sales, in the comparable period of fiscal 2023. The increase is primarily due to higher sales volume, higher labor costs of $1.7 million, higher utility cost of $0.4 million and $0.1 million of hiring costs as the Company increased production to meet customer demands, partially offset by lower idle expense of $1.0 million. Prior year results included $1.5 million of ERC benefit and reduction of NRV reserve of $1.4 million.

Previous wording

Gross profit increase $0.5 million to $3.5 million in the first six months of fiscal 2024, compared with $3.0 million gross profit in the comparable period of fiscal 2023. Gross profit percent of sales was 7.3% during the first six months of fiscal 2024 and fiscal 2023. The increase in gross profit compared to prior fiscal year was primarily due to higher volume and reduction of idle expense and outside services $0.2 million, partially offset by higher labor costs of $1.4 million and $0.2 million of hiring costs.

Current wording

Gross profit increased $1.5 million to $8.0 million in the first nine months of fiscal 2024, compared with $6.5 million gross profit in the comparable period of fiscal 2023. Gross profit percent of sales was 10.4% during the first nine months of fiscal 2024 compared with 10.3% in fiscal 2023. The increase in gross profit compared to prior fiscal year was primarily due to higher volume, lower idle expense and lower outside services of $0.3 million, partially offset by higher labor costs of $1.7 million, utility costs of $0.4 million and hiring costs. Prior year results included $1.5 million of ERC benefit and reduction of NRV reserve of $1.4 million.

Previous wording

Selling, general and administrative expenses were $6.8 million, or 14.3%, of net sales during the first six months of fiscal 2024, compared with $7.1 million, or 17.6%, of net sales in the comparable period of fiscal 2023. The decrease in selling, general and administrative expenses is primarily due to prior year nonrecurring Cyber incident costs of $1.0 million, partially offset by higher wages, benefits and incentive costs of $0.3 million and higher expenses related to the evaluation of strategic alternatives of $0.3 million.

Current wording

Selling, general and administrative expenses were $9.9 million, or 12.9%, of net sales during the first nine months of fiscal 2024, compared with $10.5 million, or 16.9%, of net sales in the comparable period of fiscal 2023. The decrease in selling, general and administrative expenses is primarily due to benefit of $0.6 million for reversal of third party restoration fees related to the cybersecurity incident and lower commissions of $0.2 million, partially offset by higher wages, benefits and severance costs of $0.4 million and higher expenses related to the evaluation of strategic alternatives of $0.5 million. Prior year results included $1.2 million of costs related the cybersecurity incident and ERC net expense of $0.2 million.

Previous wording

Amortization of intangibles was $0.1 million in the first six months of fiscal 2024 and fiscal 2023.

Current wording

Amortization of intangibles was $0.1 million in the first nine months of fiscal 2024 compared with $0.2 million in fiscal 2023.

Previous wording

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first six months of both fiscal 2024 and 2023:

Current wording

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the first nine months of both fiscal 2024 and 2023:

Previous wording

The Company’s effective tax rate through the first six months of fiscal 2024 was (2.0)%, compared with (1.9)% for the same period of fiscal 2023. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2024 compared with the same period of fiscal 2023. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

Current wording

The Company’s effective tax rate through the first nine months of fiscal 2024 was (3.2)%, compared with (2.3)% for the same period of fiscal 2023. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2024 compared with the same period of fiscal 2023. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

Previous wording

Net loss was $5.0 million during the first six months of fiscal 2024 and fiscal 2023. Net loss is due to higher sales volume and gross margin, offset by higher interest expense as the Company invests to meet increased demand.

Current wording

Net loss was $4.9 million during the first nine months of fiscal 2024 compared with net loss of $5.6 million in the comparable period of fiscal 2023. The decrease in net loss is due to higher sales volume and gross margin, offset by higher labor and interest expense as the Company invests to meet increased demand.

Previous wording

Net sales comparative information for the second quarter of fiscal 2024 and 2023 is as follows:

Current wording

Net sales comparative information for the third quarter of fiscal 2024 and 2023 is as follows:

Previous wording

Net sales for the second quarter of fiscal 2024 increased $7.4 million to $26.6 million, compared with $19.2 million in the comparable period of fiscal 2023. Fixed wing sales increased $1.3 million compared with the same period last year primarily due to 787, 767 and other programs. Rotorcraft sales increased $0.7 million compared with the same period last year primarily due to the H60 program. The energy components for power generation units increased by $1.4 million due to growth in the steam turbine markets. Commercial products and other revenue increased $4.0 million compared with the same period last year primarily due to commercial space.

Current wording

Net sales for the third quarter of fiscal 2024 increased $7.4 million to $29.3 million, compared with $21.9 million in the comparable period of fiscal 2023. Fixed wing sales increased $2.0 million compared with the same period last year primarily due to 767, 787 A320, F15, F16, F18 and other programs. Rotorcraft sales increased $1.4 million compared with the same period last year primarily due to the H60 program. Net sales of the energy components for power generation units increased by $0.8 million due to growth in the steam turbine markets. Commercial products and other revenue increased $3.2 million compared with the same period last year primarily due to commercial space.

Previous wording

Commercial net sales were 65.5% of total net sales and military net sales were 34.5% of total net sales in the second quarter of fiscal 2024, compared with 59.0% and 41.0%, respectively, in the comparable period in fiscal 2023. Military net sales increased by $1.3 million to $9.2 million in the second quarter of fiscal 2024, compared with $7.9 million in the comparable period of fiscal 2023, primarily due to the H60 program. Commercial net sales increased $6.0 million to $17.4 million in the second quarter of fiscal 2024, compared with $11.4 million in the comparable period of fiscal 2023, primarily due to an increase in the power generation steam turbine market and commercial space.

Current wording

Commercial net sales were 65.3% of total net sales and military net sales were 34.7% of total net sales in the third quarter of fiscal 2024, compared with 59.9% and 40.1%, respectively, in the comparable period in fiscal 2023. Military net sales increased by $1.4 million to $10.1 million in the third quarter of fiscal 2024, compared with $8.8 million in the comparable period of fiscal 2023, primarily due to the H60, F15, F16 and F18 programs partially offset by V22 demand reduction. Commercial net sales increased $6.0 million to $19.1 million in the third quarter of fiscal 2024, compared with $13.1 million in the comparable period of fiscal 2023, primarily due to an increase in the power generation steam turbine market, commercial space and 767, 787 and A320 programs.

Previous wording

Cost of goods sold increased by $6.6 million, or 17.5%, to $44.1 million, or 92.7% of net sales, during the first six months of fiscal 2024, compared with $37.6 million or 92.7% of net sales, in the comparable period of fiscal 2023. The increase is primarily due to higher sales volume, higher labor costs of $1.4 million and $0.2 million of hiring costs as the Company increased production to meet customer demands, partially offset by lower idle expense of $0.7 million.

Current wording

Cost of goods sold increased by $6.4 million, or 34.6%, to $24.7 million, or 84.5% of net sales, during the third quarter of fiscal 2024, compared with $18.4 million or 84.1% of net sales, in the comparable period of fiscal 2023. The increase is primarily due to higher volume, higher labor costs of $0.7 million and utility costs of $0.4 million as the Company increased production to meet customer demands partially offset by lower idle expense $0.4 million. Prior year results included $1.5 million of ERC benefit.

Previous wording

Gross profit increased $1.0 million to $2.7 million in the second quarter of fiscal 2024, compared with $1.7 million gross profit in the comparable period of fiscal 2023. Gross profit percent of sales was 10.3% during the second quarter of fiscal 2024, compared with 8.9% in the comparable period in fiscal 2023. The increase in gross profit compared to prior fiscal year was primarily due to higher volume and reduction of idle expense $0.7 million.

Current wording

Gross profit increased $1.0 million to $4.5 million in the third quarter of fiscal 2024, compared with $3.5 million gross profit in the comparable period of fiscal 2023. Gross profit percent of sales was 15.5% during the third quarter of fiscal 2024, compared with 15.9% in the comparable period in fiscal 2023. The increase in gross profit compared to the prior fiscal year was primarily due to higher volume and reduction of idle expense. Prior year results included $1.5 million of ERC benefit.

Previous wording

Selling, general and administrative expenses were $3.2 million, or 12.1%, of net sales during the second quarter of fiscal 2024, compared with $3.8 million, or 20.0%, of net sales in the comparable period of fiscal 2023. The decrease in selling, general and administrative expenses is primarily due to prior year nonrecurring Cyber incident costs of $1.0 million, partially offset by legal expenses and costs related to the evaluation of strategic alternatives of $0.1 million.

Current wording

Selling, general and administrative expenses were $3.2 million, or 10.8%, of net sales, during the third quarter of fiscal 2024, compared with $3.4 million, or 15.5%, of net sales, in the comparable period of fiscal 2023. The decrease in selling, general and administrative expenses is primarily due to a credit due to last years cybersecurity incident of $0.6 million compared with expense of $0.2 million in 2023. The benefit was partially offset by $0.4 million of severance charges and higher costs related to the evaluation of strategic alternatives of $0.1 million.

Previous wording

Amortization of intangibles were negligible in the second quarter of fiscal 2024 and fiscal 2023.

Current wording

Amortization of intangibles were negligible in the third quarter of fiscal 2024 and fiscal 2023.

Previous wording

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the second quarter of both fiscal 2024 and 2023:

Current wording

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreement in the third quarter of both fiscal 2024 and 2023:

Previous wording

The Company’s effective tax rate through the second quarter of fiscal 2024 was (3.0)%, compared with (1.2)% for the same period of fiscal 2023. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2024 compared with the same period of fiscal 2023. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

Current wording

The Company’s effective tax rate through the third quarter of fiscal 2024 was 43.8%, compared with (5.8)% for the same period of fiscal 2023. The increase in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2024 compared with the same period of fiscal 2023. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate.

Previous wording

Net loss was $1.6 million during the second quarter of fiscal 2024, compared with net loss of $2.4 million in the comparable period of fiscal 2023. Reduction in net loss is primarily due to higher sales volume and gross margin, including reduction of Cyber incident costs and idle expense of $1.0 million and $0.7 million, respectively, partially offset by higher interest expense, labor costs and outside services as the Company increased production to meet customer demands.

Current wording

Net income was $0.1 million during the third quarter of fiscal 2024, compared with net loss of $0.6 million in the comparable period of fiscal 2023. Increase in net income is primarily due to higher sales volume and gross margin, including reduction of Cyber incident costs and idle expense of $0.8 million and $0.4 million, respectively, partially offset by higher severance, interest expense, and labor costs as the Company increased production to meet customer demands.

Previous wording

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.

Current wording

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 income (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.

Previous wording

(5)Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out ("LIFO") method.

Current wording

(7)Represents the change in the reserve for inventories for which cost is determined using the last-in, first-out ("LIFO") method.

Previous wording

(6)Represents incremental information technology costs as it relates to the cybersecurity incident and loss on insurance recovery (prior year balance includes reclassed amount of $0.1 million from footnote two above).

Current wording

(8)Represents incremental information technology costs as it relates to the cybersecurity incident and loss on insurance recovery.

Previous wording

(7)Represents expense related to evaluation of strategic alternatives.

Current wording

(9)Represents expense related to evaluation of strategic alternatives.

Previous wording

Cash and cash equivalents was $0.7 million at March 31, 2024 and $0.4 million at September 30, 2023. Short-term investments was $1.7 million at March 31, 2024 and zero at September 30, 2023. At March 31, 2024, the majority of the Company’s cash and cash equivalents and short-term investments were in the possession of its non-U.S. subsidiaries. See Note 7, Debt - Foreign subsidiary borrowings in USD. Distributions from the Company's non-U.S. subsidiaries to the Company may be subject to adverse tax consequences.

Current wording

Cash and cash equivalents was $1.7 million at June 30, 2024 and $0.4 million at September 30, 2023. At June 30, 2024, the majority of the Company’s cash and cash equivalents were in possession of its domestic subsidiaries. Short-term investments was $1.7 million at June 30, 2024 and zero at September 30, 2023. At June 30, 2024, the Company’s short-term investments were in the possession of its non-U.S. subsidiaries. See Note 7, Debt - Foreign subsidiary borrowings in USD. Distributions from the Company's non-U.S. subsidiaries to the Company may be subject to adverse tax consequences.

Previous wording

The Company’s operating activities used $5.3 million of cash in the first six months of fiscal 2024, primarily due to net operating loss of $5.0 million partially offset by non-cash adjustments for depreciation and amortization of $3.1 million and change in inventory valuation accounts of $0.7 million and LIFO effect of $0.4 million. The uses of cash for working capital of $5.0 million was primarily due to increases in inventory of $5.9 million and accounts receivable of $2.8 million, partially offset by increase in accounts payable $4.0 million. The increase in inventory is primarily due to increase in raw material and work in process to meet heightened customer demand. The increase in accounts receivable is due to increases in customer shipments. The increase in accounts payable is due to increases in raw material purchases and outside processing fees related to inventory build.

Current wording

The Company’s operating activities used $5.0 million of cash in the first nine months of fiscal 2024, primarily due to net loss of $4.9 million partially offset by non-cash adjustments for depreciation and amortization of $4.6 million, amortization of debt issuance costs of $0.8 million and change in inventory valuation accounts of $0.5 million and LIFO effect of $0.8 million. The uses of cash for working capital of $7.2 million was primarily due to increases in inventory of $5.6 million and accounts receivable of $6.6 million, partially offset by increases in contract liabilities of $2.7 million and accounts payable of $1.4 million. The increase in inventory is primarily due to increase in raw material and work in process to meet heightened customer demand. The increase in accounts receivable is due to increases in customer shipments. The increase in contract liabilities is due to advance raw material payments from customers. The increase in accounts payable is due to increases in raw material purchases and outside processing fees related to inventory build.

Previous wording

The Company’s operating activities for the first six months of fiscal 2023 used $0.4 million primarily due to operating results and an increase in accounts payable of $3.9 million.

Current wording

The Company’s operating activities for the first nine months of fiscal 2023 used $2.3 million primarily due to operating results and an increase in accounts receivable of $3.2 million partially offset by contract asset and inventory reductions of $1.2 million and $0.9 million, respectively.

Previous wording

Cash used for investing activities was $3.1 million in the first six months of fiscal 2024 primarily due to purchase of short-term investments of $1.7 million and capital expenditures of $1.3 million. Cash used for investing activities was $1.4 million in the first six months of fiscal 2023 due to capital expenditures. Capital commitments as of March 31, 2024 were $0.6 million. The Company anticipates that the remaining total fiscal 2024 capital expenditures will be within the range of $3.0 million to $3.5 million and will relate principally to the further enhancement of production and product offering capabilities and drive operating cost reductions.

Current wording

Cash used for investing activities was $3.8 million in the first nine months of fiscal 2024 primarily due to purchase of short-term investments, net of maturities, of $1.7 million and capital expenditures of $2.0 million. Cash used for investing activities was $1.9 million in the first nine months of fiscal 2023 due to capital expenditures. Capital commitments as of June 30, 2024 were $0.4 million. The Company anticipates that the remaining total fiscal 2024 capital expenditures will be within the range of $1.0 million to $1.5 million and will relate principally to the further enhancement of production and product offering capabilities and drive operating cost reductions.

Previous wording

Cash provided by financing activities was $8.8 million in the first six months of fiscal 2024, compared with $0.8 million in the first six months of fiscal 2023.

Current wording

Cash provided by financing activities was $10.1 million in the first nine months of fiscal 2024, compared with $3.5 million in the first nine months of fiscal 2023.

Previous wording

As discussed in Note 7, Debt, the Company's Maniago location obtained borrowings from two separate lending sources during the first six months of fiscal 2024. The first was a bond for approximately $2.2 million with a seven year term. The proceeds from this loan are shown within cash and cash equivalents and short-term investments on the consolidated condensed balance sheets and will be used for capital investment. A second loan for approximately $1.1 million with a term of eighteen months, will be for working capital purposes. The Company had $3.1 million of net short-term debt borrowings in the first six months of fiscal 2024 compared with $0.5 million of net short-term debt repayments in the first six months of fiscal 2023.

Current wording

As discussed in Note 7, Debt, the Company's Maniago location obtained borrowings from two separate lending sources and increased during the first nine months of fiscal 2024. The first was a bond for approximately $2.2 million with a seven year term. The proceeds from this loan are shown within cash and cash equivalents and short-term investments on the consolidated condensed balance sheets and will be used for capital investment. A second loan for approximately $1.1 million with a term of eighteen months, will be for working capital purposes. Additionally, the Company increased three of its credit and factoring lines with existing lenders to support working capital needs. The Company had $2.6 million of net short-term debt borrowings in the first nine months of fiscal 2024 compared with $0.5 million in the first nine months of fiscal 2023.

Previous wording

The Company had net borrowings from the revolver under the Credit Agreement of $1.2 million in the first six months of fiscal 2024 compared with net borrowings of $1.8 million in the first six months of fiscal 2023. Under the Company's Credit Agreement, the Company is subject to certain customary loan covenants regarding availability. The availability at March 31, 2024 was $3.7 million, which exceeds reserve minimum threshold as of March 31, 2024, as such, no covenant calculations were required.

Current wording

The Company had net borrowings from the revolver under the Credit Agreement of $1.2 million in the first nine months of fiscal 2024 compared with net borrowings of $3.4 million in the first nine months of fiscal 2023. Under the Company's Credit Agreement, the Company is subject to certain customary loan covenants regarding availability. The availability at June 30, 2024 was $2.9 million, which exceeds reserve minimum threshold as of June 30, 2024, as such, no covenant calculations were required.

Previous wording

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. In fiscal year 2024, the Company was able to obtain new financing at its Maniago location to provide Maniago with sufficient liquidity.

Current wording

Future cash flows from the Company’s operations may be used to pay down amounts outstanding under the Credit Agreement, the Export 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. In fiscal year 2024, the Company was able to obtain new financing at its Maniago location to provide Maniago with sufficient liquidity.

Previous wording

Additionally, the credit and capital markets saw significant volatility during the course of the pandemic. Tightening of the credit market and standards, as well as capital market volatility, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement. Capital market uncertainty and volatility, together with the Company’s market capitalization and status as a smaller reporting company, could also negatively impact our ability to obtain equity financing.

Current wording

Tightening of the credit market and standards, as well as capital market volatility, could negatively impact our ability to obtain additional debt financing on terms equivalent to our existing Credit Agreement. Capital market uncertainty and volatility, together with the Company’s market capitalization and status as a smaller reporting company, could also negatively impact our ability to obtain equity financing.