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 regulatory compliance, and trade measures such as significant tariffs - including recently announced U.S. tariffs on aluminum and steel; (13) the ability to maintain a qualified workforce; (14) the adequacy and availability of our insurance coverage; (15) our ability to develop new products and technologies and maintain technologies, facilities, and equipment to win new competitions and meet the needs of our customers; (16) our ability to realize amounts in our backlog; (17) investigations, claims, disputes, enforcement actions, litigation and/or other legal proceedings; and (18) extraordinary or force majeure events affecting the business or operations of our business.

Previous wording

As a result of the sale transaction, the Company’s financial statements have been prepared with the net assets of CBlade presented as held for sale as of September 30, 2024, and the results of operations and cash flows of CBlade have been presented as discontinued operations for the six months ended March 31, 2025 and 2024. All historical statements, amounts and related disclosures have been retrospectively adjusted to conform to this presentation. Refer to Note 2 —Discontinued Operationsof the Notes to Unaudited Consolidated Condensed Financial Statements.

Current wording

As a result of the sale transaction, the Company’s financial statements have been prepared with the net assets of CBlade presented as held for sale as of September 30, 2024, and the results of operations and cash flows of CBlade have been presented as discontinued operations for the nine months ended June 30, 2025 and 2024. All historical statements, amounts and related disclosures have been retrospectively adjusted to conform to this presentation. Refer to Note 2 —Discontinued Operationsof the notes to unaudited consolidated condensed financial statements.

Previous wording

SIFCO’s total backlog as of March 31, 2025 was $129.2 million, of which $98.9 million are anticipated to be complete within the next 12 months, compared with total backlog of $122.9 million as of March 31, 2024. Orders may be subject to modification or cancellation by the customer with limited charges. Recovery in the aerospace markets was the primary contributor to the increased bookings. Backlog information may not be indicative of future sales.

Current wording

SIFCO’s total backlog as of June 30, 2025 was $130.4 million, of which $92.5 million are anticipated to be complete within the next 12 months, compared with total backlog of $123.2 million as of June 30, 2024. Orders may be subject to modification or cancellation by the customer with limited charges. Recovery in the aerospace markets was the primary contributor to the increased bookings. Backlog information may not be indicative of future sales.

Previous wording

Net sales comparative information for the second quarter of fiscal 2025 and 2024 is as follows:

Current wording

Net sales comparative information for the third quarter of fiscal 2025 and 2024 is as follows:

Previous wording

Net sales for the second quarter of fiscal 2025 decreased $1.5 million to $19.0 million, compared with $20.5 million in the comparable period of fiscal 2024. Fixed wing sales increased $4.3 million compared with the same period last year, primarily due to higher demand across most programs. Rotorcraft sales declined compared with the same period last year primarily due to the timing of orders in the H60 and Osprey V22 programs. Commercial space products decreased by $3.4 million year-over-year due to delays in commercial launch programs. Net sales for the energy components for power generation units increased slightly by $0.3 million. Commercial products and other revenue decreased $1.4 million compared with the same period last year mostly due to the timing of orders related to munitions programs.

Current wording

Net sales for the third quarter of fiscal 2025 increased $0.1 million to $22.1 million, compared with $22.0 million in the comparable period of fiscal 2024. Fixed wing sales increased $2.6 million compared with the same period last year, primarily due to higher demand across most programs. Rotorcraft sales declined compared with the same period last year primarily due to the timing of orders in the H60 program. Commercial space products decreased by $2.7 million year-over-year due to reduced procurement activity in the commercial space market. One key customer, significantly scaled back orders as they manage excess inventory. Net sales for the energy components for power generation units decreased slightly by $0.2 million. Commercial products and other revenue increased $0.7 million compared with the same period last year mostly due to the timing of orders related to munitions programs.

Previous wording

Commercial net sales and military net sales were 43.7% and 56.3%, respectively, of total net sales in the second quarter of fiscal 2025, compared with 55.3% and 44.7%, respectively, in the comparable period in fiscal 2024. Commercial net sales decreased $3.0 million to $8.3 million in the second quarter of fiscal 2025, compared with $11.3 million in the comparable period of fiscal 2024, primarily due to delays in the commercial space market, partially offset by higher demand in the commercial aerospace market. Military net sales increased by $1.5 million to $10.7 million in the second quarter of fiscal 2025, compared with $9.2 million in the comparable period of fiscal 2024, primarily due to increased demand across multiple programs.

Current wording

Commercial net sales and military net sales were 39.3% and 60.7%, respectively, of total net sales in the third quarter of fiscal 2025, compared with 53.9% and 46.1%, respectively, in the comparable period in fiscal 2024. Commercial net sales decreased $3.2 million to $8.7 million in the third quarter of fiscal 2025, compared with $11.9 million in the comparable period of fiscal 2024, primarily due to reduced procurement activity in the commercial space market, partially offset by higher demand in the commercial aerospace market. Military net sales increased by $3.3 million to $13.4 million in the third quarter of fiscal 2025, compared with $10.1 million in the comparable period of fiscal 2024, primarily due to increased demand across multiple programs.

Previous wording

Cost of goods sold (“COGS”) decreased by $1.6 million, or (8.2)%, to $17.5 million, or 91.7% of net sales, during the second quarter of fiscal 2025, compared with $19.0 million, or 92.7% of net sales, in the comparable period of fiscal 2024. The decrease is primarily due to lower sales in the commercial space market and munitions programs, partially offset by higher sales volume and favorable mix of products sold in our fixed wing aircraft sector.

Current wording

Cost of goods sold (“COGS”) decreased by $3.1 million, or 16.2%, to $16.2 million, or 73.3% of net sales, during the third quarter of fiscal 2025, compared with $19.3 million, or 87.7% of net sales, in the comparable period of fiscal 2024. The decrease is primarily due to the Employee Retention Credit (“ERC”) benefit of $2.4 million recognized and favorable mix of products sold in our fixed wing aircraft sector, partially offset by sales volume.

Previous wording

Gross profit increased slightly by $0.1 million to $1.6 million in the second quarter of fiscal 2025, compared with $1.5 million gross profit in the comparable period of fiscal 2024, primarily due to the decreases in sales volume and COGS discussed above and the impact of favorable mix of products sold.

Current wording

Gross profit increased by $3.2 million to $5.9 million in the third quarter of fiscal 2025, compared with $2.7 million gross profit in the comparable period of fiscal 2024, primarily due to the ERC benefit of $2.4 million.

Previous wording

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreements in the second quarter of fiscal 2025 and 2024:

Current wording

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s debt agreements in the third quarter of fiscal 2025 and 2024:

Previous wording

The Company’s effective tax rate through the second quarter of fiscal 2025 was (5.9)%, compared with (0.2)% for the same period of fiscal 2024. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2025 compared with the same period of fiscal 2024. 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 2025 was 1.2%, compared with 0.0% for the same period of fiscal 2024. The increase in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2025 compared with the same period of fiscal 2024. 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

Loss from continuing operations was $1.2 million during the second quarter of fiscal 2025, compared with $2.2 million in the comparable period of fiscal 2024 due to gross margins improvements and lower SG&A expenses discussed above, as well as lower interest expense due to lower average debt outstanding.

Current wording

Income from continuing operations was $3.3 million during the third quarter of fiscal 2025, compared with a loss from continuing operations of $0.9 million in the comparable period of fiscal 2024. The improvement was primarily driven by a net benefit recognized of $2.7 million related to the ERC, as well as higher gross margins, lower SG&A expenses discussed above, and reduced interest expense due to lower average debt outstanding.

Previous wording

Net sales comparative information for the first six months of fiscal 2025 and 2024 is as follows:

Current wording

Net sales comparative information for the first nine months of fiscal 2025 and 2024 is as follows:

Previous wording

Net sales for the first six months of fiscal 2025 increased $3.9 million to $39.9 million, compared with $36.0 million in the comparable period of fiscal 2024. Fixed wing sales increased $7.2 million compared with the same period last year, primarily due to higher demand across most programs. Rotorcraft sales declined $1.0 million compared with the same period last year primarily due to the timing of orders in the H60 and Osprey V22 programs. Commercial space products decreased by $2.3 million year-over-year due to delays in commercial launch programs. Net sales for the energy components for power generation units increased by $0.6 million due to growth in the steam turbine markets. Commercial products and other revenue decreased $0.6 million compared with the same period last year mostly due to the timing of orders related to munitions programs.

Current wording

Net sales for the first nine months of fiscal 2025 increased $4.0 million to $62.0 million, compared with $58.0 million in the comparable period of fiscal 2024. Fixed wing sales increased $9.7 million compared with the same period last year, primarily due to higher demand across most programs. Rotorcraft sales declined $1.3 million compared with the same period last year primarily due to the timing of orders in the H60 program. Commercial space products decreased by $5.0 million year-over-year due to reduced procurement activity in the commercial space market. One key customer, significantly scaled back orders as they manage excess inventory. Net sales for the energy components for power generation units increased by $0.4 million due to growth in the steam turbine markets. Commercial products and other revenue increased $0.2 million compared with the same period last year mostly due to the timing of orders related to munitions programs.

Previous wording

Commercial net sales were 48.8% of total net sales and military net sales were 51.2% of total net sales in the first six months of fiscal 2025, compared with 52.8% and 47.2%, respectively, in the comparable period in fiscal 2024. Commercial net sales increased $0.5 million to $19.5 million in the first six months of fiscal 2025, compared with $19.0 million in the comparable period of fiscal 2024, primarily due to the continued rebound in the aerospace market. Military net sales increased by $3.4 million to $20.4 million in the first six months of fiscal 2025, compared with $17.0 million in the comparable period of fiscal 2024, primarily due to increased demand across most programs.

Current wording

Commercial net sales and military net sales were 45.4% and 54.6%, respectively, of total net sales in the first nine months of fiscal 2025, compared with 53.2% and 46.8%, respectively, in the comparable period in fiscal 2024. Commercial net sales decreased $2.7 million to $28.2 million in the first nine months of fiscal 2025, compared with $30.9 million in the comparable period of fiscal 2024, primarily due to reduced procurement activity in the commercial space market due to the reasons noted above. Military net sales increased by $6.7 million to $33.8 million in the first nine months of fiscal 2025, compared with $27.1 million in the comparable period of fiscal 2024, primarily due to increased demand across most programs.

Previous wording

COGS increased by $2.4 million, or 6.8%, to $37.4 million, or 93.7% of net sales, during the first six months of fiscal 2025, compared with $35.0 million, or 97.4% of net sales, in the comparable period of fiscal 2024. The increase is primarily due to higher sales volume and favorable mix of products sold.

Current wording

COGS decreased by $0.7 million, or (1.3)%, to $53.6 million, or 86.5% of net sales, during the first nine months of fiscal 2025, compared with $54.3 million, or 93.7% of net sales, in the comparable period of fiscal 2024. The increase is primarily due to higher sales volume, partially offset by a $2.4 million ERC benefit recognized.

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 2025 and 2024:

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 2025 and 2024:

Previous wording

The Company’s effective tax rate through the first six months of fiscal 2025 was (2.2)%, compared with (0.2)% for the same period of fiscal 2024. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2025 compared with the same period of fiscal 2024. 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 2025 was (37.2)%, compared with (0.2)% for the same period of fiscal 2024. The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2025 compared with the same period of fiscal 2024. 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

Loss from continuing operations was $3.7 million during the first six months of fiscal 2025, compared with $6.3 million in the comparable period of fiscal 2024 due to higher sales volumes and gross margins improvements coupled with lower SG&A expenses and lower interest expense attributable to lower average debt outstanding during the period.

Current wording

Loss from continuing operations was $0.4 million during the first nine months of fiscal 2025, compared with $7.2 million in the comparable period of fiscal 2024 due to higher sales volumes and gross margins improvements coupled with lower SG&A expenses, lower interest expense attributable to lower average debt outstanding during the period and the net benefit recognized of $2.7 million related to ERC.

Previous wording

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

Current wording

(2)Represents miscellaneous non-operating income or expense, such as pension costs or other income from ERC.

Previous wording

(5)Represents credits related to transaction-related legal fees incurred primarily in connection with the unsuccessful attempt in which the Company was the acquisition target.

Current wording

(6)Represents credits related to transaction-related legal fees incurred primarily in connection with the unsuccessful attempt in which the Company was the acquisition target.

Previous wording

(6)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

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

Current wording

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

Previous wording

(8)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 were $1.9 million and $1.7 million as of March 31, 2025 and September 30, 2024, respectively. A nominal amount of the Company’s cash and cash equivalents were in the possession of its non-U.S. holding company subsidiary, and certain distributions from which to the Company may be subject to adverse tax consequences.

Current wording

Cash and cash equivalents were $2.0 million and $1.7 million as of June 30, 2025 and September 30, 2024, respectively. A nominal amount of the Company’s cash and cash equivalents were in the possession of its non-U.S. holding company subsidiary, and certain distributions from which to the Company may be subject to adverse tax consequences.

Previous wording

We believe that our existing cash will be sufficient to finance our continued operations, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months. In order to support and achieve our future growth plans, we may need or advantageously seek to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next 12 months. If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to borrow under our loan agreement or seek additional financing. The Company’s liquidity could be negatively affected if the Company is unable to obtain capital, by customers extending payment terms to the Company and/or the decrease in demand for our products. The Company and management will continue to assess and actively manage liquidity needs. For details regarding our debt agreements, see Note 6 —Debtof the notes to unaudited consolidated condensed financial statements.

Current wording

We believe that our existing cash and available credit lines will be sufficient to finance our continued operations, planned capital expenditures and the additional expenses that we expect to incur during the next 12 months. In order to support and achieve our future growth plans, we may need or advantageously seek to obtain additional funding through equity or debt financing. We believe that our current operating structure will facilitate sufficient cash flows from operations to satisfy our expected long-term liquidity requirements beyond the next 12 months. If these resources are not sufficient to satisfy our liquidity requirements due to changes in circumstances, we may be required to borrow under our loan agreement or seek additional financing. The Company’s liquidity could be negatively affected if the Company is unable to obtain capital, by customers extending payment terms to the Company and/or the decrease in demand for our products. The Company and management will continue to assess and actively manage liquidity needs. For details regarding our debt agreements, see Note 6 —Debtof the notes to unaudited consolidated condensed financial statements.

Previous wording

The Company’s operating activities used $1.0 million of cash in the first six months of fiscal 2025, primarily due to net operating loss from continuing operations of $3.7 million partially offset by depreciation and amortization of $2.4 million and change in inventory valuation accounts of $0.3 million and LIFO effect of $0.1 million. The uses of cash from working capital of $0.1 million was primarily due to higher prepaid expenses attributable to deferred financing costs related to the refinanced revolver and customer deposits, and decreases in accrued liabilities and accounts payable due to timing of payments, partially offset by decreases in accounts receivable.

Current wording

The Company’s operating activities used $0.6 million of cash in the first nine months of fiscal 2025, primarily due to net operating loss from continuing operations of $0.4 million partially offset by depreciation and amortization of $3.9 million and change in inventory valuation accounts of $0.5 million and LIFO effect of $0.6 million. The uses of cash from working capital of $4.3 million was primarily due to decreases in accrued liabilities and accounts payable due to timing of payments, partially offset by decreases in accounts receivable.

Previous wording

The Company’s operating activities used $2.9 million of cash in the first six months of fiscal 2024, primarily due to net operating loss of $6.3 million partially offset by depreciation and amortization of $2.4 million and change in inventory valuation accounts of $0.5 million and LIFO effect of $0.4 million. The uses of cash from working capital of $0.4 million was primarily due to increases in inventory of $4.4 million, partially offset by accounts receivable and prepaid expense reductions of $1.0 million and $0.4 million, respectively, and an increase in accounts payable of $2.9 million. The increase in inventory was primarily due to increase in raw material and work in process to meet heightened customer demand. The increase in accounts receivable was due to increases in customer shipments. The increase in accounts payable was due to increases in raw material purchases and outside processing fees related to inventory build.

Current wording

The Company’s operating activities used $3.5 million of cash in the first nine months of fiscal 2024, primarily due to net operating loss of $7.2 million partially offset by depreciation and amortization of $3.6 million and change in inventory valuation accounts of $0.3 million and LIFO effect of $0.8 million. The uses of cash from working capital of $2.3 million was primarily due to increases in inventory of $4.5 million and account receivables of $2.3 million, partially offset by prepaid expense reductions and $0.8 million, and an increase in accounts payable of $0.9 million. The increase in inventory was primarily due to increase in raw material and work in process to meet heightened customer demand. The increase in accounts receivable was due to increases in customer shipments. The increase in accounts payable was due to increases in raw material purchases and outside processing fees related to inventory build.

Previous wording

During the first six months of fiscal 2025 and 2024, cash used for investing activities was $0.3 million and $1.2 million, respectively, attributable to capital expenditures. Capital commitments as of March 31, 2025 were $0.2 million. The Company anticipates that the remaining total fiscal 2025 capital expenditures will be within the range of $1.5 million to $2.0 million and will relate principally to the further enhancement of production and product offering capabilities and drive operating cost reductions.

Current wording

During the first nine months of fiscal 2025 and 2024, cash used for investing activities was $0.3 million and $1.7 million, respectively, attributable to capital expenditures. Capital commitments as of June 30, 2025 were $0.1 million. The Company anticipates that the remaining total fiscal 2025 capital expenditures will be within the range of $0.5 million to $1.0 million and will relate principally to the further enhancement of production and product offering capabilities and drive operating cost reductions.

Previous wording

Cash used in financing activities was $13.1 million in the first six months of fiscal 2025, compared with $4.0 million provided by financing activities in the first six months of fiscal 2024. The year-over-year decrease was primarily related to higher repayments on our revolving credit line and the debt refinancing during fiscal 2025.

Current wording

Cash used in financing activities was $13.4 million in the first nine months of fiscal 2025, compared with $6.2 million provided by financing activities in the first nine months of fiscal 2024. The year-over-year decrease in cash from financing was primarily related to higher repayments on our revolving credit line and the debt refinancing during fiscal 2025.

Previous wording

Refer to Note 6 —Debtof the notes to unaudited consolidated condensed financial statements for details regarding our financing activities during the six months ended March 31, 2025.

Current wording

Refer to Note 6 —Debtof the notes to unaudited consolidated condensed financial statements for details regarding our financing activities during the nine months ended June 30, 2025.

Previous wording

No recent accounting standards were adopted during thesix months ended March 31, 2025. Refer to Note 1 —Summary of Significant Accounting Policiesfor further detail. Additionally, the Company’s significant accounting policies and procedures are explained in the Management’s Discussion and Analysis section of the Company’s 2024 Annual Report.

Current wording

No recent accounting standards were adopted during thenine months ended June 30, 2025. Refer to Note 1 —Summary of Significant Accounting Policiesfor further detail. Additionally, the Company’s significant accounting policies and procedures are explained in the Management’s Discussion and Analysis section of the Company’s 2024 Annual Report.