What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2022-02-04 · 107 added, 56 removed, 322 unchanged (34% of the section changed)

5 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2022 2021 2022 2021

Net sales $ 24,568 $ 24,866 $ 43,815 $ 49,944

3 unchanged sentences

Amortization of intangible assets 65 248 190 517

Gain on disposal of operating assets ( 2 ) — ( 2 ) —

Gain on insurance recoveries — — — ( 2,495 )

Operating (loss) income ( 1,284 ) ( 1,101 ) ( 4,936 ) 1,221

Interest expense 115 165

Interest expense, net 193 169 307 335

Gain on debt extinguishment ( 5,106 ) — ( 5,106 ) —

Foreign currency exchange loss, net 3 14 9 21

Other loss (income), net ( 36 ) 42 ( 68 ) 103

(Loss) income before income tax benefit ( 3,740 ) 2,088

Income tax benefit ( 49 ) ( 905 )

(Loss) income before income tax expense (benefit) 3,662 ( 1,326 ) ( 78 ) 762

Income tax expense (benefit) 23 165 ( 26 ) ( 740 )

Net (loss) income $ 3,639 $ ( 1,491 ) $ ( 52 ) $ 1,502

10 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2022 2021 2022 2021

Net (loss) income $ 3,639 $ ( 1,491 ) $ ( 52 ) $ 1,502

Other comprehensive (loss) income:

Foreign currency translation adjustment, net of tax $ 0 and $ 0 for the three months ended, respectively

Retirement plan liability adjustment, net of tax $ 0 and $ 0 for the three months ended, respectively

Other ( 6 ) —

Foreign currency translation adjustment, net of tax $ 0 and $ 0 for the three months ended and net of tax $ 0 and $ 0 for the six months ended, respectively

( 136 ) ( 303 ) ( 259 ) ( 17 )

Retirement plan liability adjustment, net of tax $ 0 and $ 0 for the three months ended, net of tax $ 0 and $ 0 for the six months ended, respectively

119 211 238 423

Comprehensive (loss) income $ 3,622 $ ( 1,583 ) $ ( 73 ) $ 1,908

36 unchanged sentences

Common shares, par value $ 1 per share, authorized 10,000 shares;

issued and outstanding shares 6,003 at December 31, 2021 and 5,987 at September 30, 2021

issued and outstanding shares 6,040 at March 31, 2022 and 5,987 at September 30, 2021

Additional paid-in capital 11,264 11,118

8 unchanged sentences

(Unaudited, Amounts in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net (loss) income $ ( 52 ) $ 1,502

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net (loss) income to net cash (used for) provided by operating activities:

Depreciation and amortization 3,210 3,730

Amortization of debt issuance costs 20 52

Gain on disposal of operating assets ( 2 ) —

Gain on insurance proceeds received for damaged property — ( 2,495 )

1 unchanged sentence

Share transactions under company stock plan 199 277

Gain on extinguishment of debt ( 5,106 ) —

Other long-term liabilities ( 107 ) ( 2 )

9 unchanged sentences

Accrued income and other taxes ( 20 ) 182

Net cash provided by operating activities 1,239 3,123

Net cash (used for) provided by operating activities ( 3,196 ) 5,789

Cash flows from investing activities:

Insurance proceeds received for damaged property — 4,101

Proceeds from disposal of operating assets 2 —

Capital expenditures ( 1,493 ) ( 5,416 )

5 unchanged sentences

Repayments of revolving credit agreement ( 38,004 ) ( 49,794 )

Payment of debt issuance costs — ( 45 )

Short-term debt borrowings 1,623 2,471

Short-term debt repayments ( 1,755 ) ( 1,631 )

Net cash used for financing activities ( 358 ) ( 2,137 )

Increase in cash and cash equivalents 415 728

Net cash (used for) provided by financing activities 4,482 ( 4,597 )

Decrease in cash and cash equivalents ( 205 ) ( 123 )

Cash and cash equivalents at the beginning of the period 346 427

9 unchanged sentences

(Unaudited, Amounts in thousands )

Three Months Ended

December 31, 2021

Six Months Ended

March 31, 2022

Common Additional

8 unchanged sentences

Share transactions under equity based plans 53 53 ( 160 ) — — ( 107 )

Balance - December 31, 2021 6,003 $ 6,003 $ 11,156 $ 37,905 $ ( 9,083 ) $ 45,981

Balance - March 31, 2022 6,040 $ 6,040 $ 11,264 $ 41,544 $ ( 9,100 ) $ 49,748

Three Months Ended

December 31, 2020

March 31, 2022

Common Additional

4 unchanged sentences

Shares Amount

Balance - December 31, 2021 6,003 $ 6,003 $ 11,156 $ 37,905 $ ( 9,083 ) $ 45,981

Comprehensive income — — — 3,639 ( 17 ) 3,622

Performance and restricted share expense — — 145 — — 145

Share transactions under equity based plans 37 37 ( 37 ) — — —

Balance - March 31, 2022 6,040 $ 6,040 $ 11,264 $ 41,544 $ ( 9,100 ) $ 49,748

Six Months Ended

March 31, 2021

Common Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

Balance - September 30, 2020 5,916 $ 5,916 $ 10,736 $ 42,339 $ ( 13,468 ) $ 45,523

2 unchanged sentences

Share transactions under equity based plans 73 73 ( 89 ) — — ( 16 )

Balance - March 31, 2021 5,989 $ 5,989 $ 10,940 $ 43,841 $ ( 13,062 ) $ 47,708

Three Months Ended

March 31, 2021

Common Additional

Capital Retained

Earnings Accumulated

Comprehensive

Shareholders’

Shares Amount

Balance - December 31, 2020 5,959 $ 5,959 $ 10,820 $ 45,332 $ ( 12,970 ) $ 49,141

Comprehensive income — — — ( 1,491 ) ( 92 ) ( 1,583 )

Performance and restricted share expense — — 150 — — 150

Share transactions under equity based plans 30 30 ( 30 ) — — —

Balance - March 31, 2021 5,989 $ 5,989 $ 10,940 $ 43,841 $ ( 13,062 ) $ 47,708

See notes to unaudited consolidated condensed financial statements.

19 unchanged sentences

Accounting Policies

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's fiscal 2021 Annual Report on Form 10-K.

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's Annual Report on From 10-K for the year ended September 30, 2021.

Net (Loss)/Income per Share

The Company’s net loss and net income per basic share has been computed based on the weighted-average number of common shares outstanding.

Due to the net loss in the current period, zero restricted 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 income per diluted share reflects the effect of the Company's outstanding restricted shares and performance shares under the treasury method.

During a period of net loss, zero restricted and performance shares are included in the calculation of diluted earnings per share because the effect would be anti-dilutive.

In a period of net income, the net income 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:

Three Months Ended

March 31, Six Months Ended

2022 2021 2022 2021

Net (loss) income $ 3,639 $ ( 1,491 ) $ ( 52 ) $ 1,502

21 unchanged sentences

For a portion of the Company's inventory, cost is determined using the last-in, first-out ("LIFO") method.

Approximately 44 % and 39 % of the Company’s inventories at December 31, 2021 and September 30, 2021, respectively, use the LIFO method.

Approximately 43 % and 39 % of the Company’s inventories at March 31, 2022 and September 30, 2021, respectively, use the LIFO method.

An actual valuation of inventory under the LIFO method is made at the end of each fiscal year based on the inventory levels and costs existing at that time.

2 unchanged sentences

The first-in, first-out (“FIFO”) method is used for the remainder of the inventories, which are stated at the lower of cost or net realizable value.

If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $ 9,386 and $ 9,210 higher than reported at December 31, 2021 and September 30, 2021, respectively.

If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $ 9,593 and $ 9,210 higher than reported at March 31, 2022 and September 30, 2021, respectively.

Accumulated Other Comprehensive Loss

3 unchanged sentences

Retirement plan liability adjustment, net of tax ( 3,482 ) ( 3,720 )

Other ( 6 ) —

Total accumulated other comprehensive loss $ ( 9,100 ) $ ( 9,079 )

1 unchanged sentence

Three Months Ended

March 31, Six Months Ended

2022 2021 2022 2021

Finance lease expense:

5 unchanged sentences

The following table presents the impact of leasing on the consolidated condensed balance sheet.

Classification in the consolidated condensed balance sheets December 31,

Classification in the consolidated condensed balance sheets March 31,

2022 September 30,

10 unchanged sentences

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

2021 December 31,

2022 March 31,

Other Information

3 unchanged sentences

Financing cash flows from finance leases 15 29

Right-of-use assets obtained in exchange for new lease liabilities:

Operating leases — 43

2022 September 30,

5 unchanged sentences

Operating leases 5.9 % 5.9 %

Future minimum lease under non-cancellable leases at December 31, 2021 were as follows:

Future minimum lease under non-cancellable leases at March 31, 2022 were as follows:

Finance Leases Operating Leases

Year ending September 30,

2022 (excluding the three months ended December 31, 2021) $ 8 $ 1,263

2022 (excluding the six months ended March 31, 2022) $ 5 $ 829

Thereafter — 15,912

13 unchanged sentences

The Credit Agreement (as amended, the "Credit Agreement") contains affirmative and negative covenants and events of default.

The total collateral at December 31, 2021 and September 30, 2021 was $ 23,328 and $ 25,370 , respectively and the revolving commitment was $ 35,000 for both periods.

Total availability at December 31, 2021 and September 30, 2021 was $ 12,157 and $ 14,570 , respectively, which exceed both the collateral and total commitment threshold.

Since the availability was greater than the 10.0 % of the revolving commitment as of December 31, 2021 and September 30, 2021, no covenant calculations were required.

The revolver has a rate based on LIBOR plus 2.25 % spread, which was 2.3 % at December 31, 2021 and a rate based on LIBOR plus 1.75 % spread, which was 1.8 % at September 30, 2021.

The Export Credit Agreement as amended has a rate based on LIBOR plus 1.25 % spread, which was 1.3 % at December 31, 2021 and a rate based on LIBOR plus 1.25 % spread, which was 1.3 % at September 30, 2021, respectively.

On March 23, 2022, the Company entered into the Sixth Amendment (the "Sixth Amendment") to the Credit Agreement (as previously amended, the "Credit Agreement") and the Second Amendment (the "Second Amendment") to the Export Credit Agreement (the "Export Credit Agreement"), with its lender.

The total collateral at March 31, 2022 and September 30, 2021 was $ 26,126 and $ 25,370 , respectively, and the revolving commitment was $ 35,000 for both periods.

Total availability at March 31, 2022 and September 30, 2021 was $ 12,759 and $ 14,570 , respectively, which exceed both the collateral and total commitment threshold.

Since the availability was greater than the 10.0 % of the revolving commitment as of March 31, 2022 and September 30, 2021, no covenant calculations were required.

The Company has letter of credit balance of $ 1,800 as of March 31, 2022 and September 30, 2021, respectively.

The Sixth Amendment amends the Credit Agreement to, among other things, (i) revise the fixed coverage ratio to exclude the first $ 1,500 of unfunded capital expenditures through April 20, 2023, (ii) increase the letter of credit sub-limit from $ 2,000 to $ 3,000 , (iii) modify the reference rate from the London interbank offered rate ("LIBOR") to the secured overnight financing rate ("SOFR") under the Credit Agreement, and (iv) revise the property, plant and equipment component of the borrowing base under the Credit Agreement.

The Second Amendment amends the Export Credit Agreement to replace the reference rate from LIBOR to SOFR under the Export Credit Agreement.

The revolver has a rate based on SOFR plus 2.0 % spread, which was 2.3 % at March 31, 2022 and a rate based on LIBOR plus 1.75 % spread, which was 1.8 % at September 30, 2021.

The Export Credit Agreement as amended has a rate based on SOFR plus 1.5 % spread, which was 1.8 % at March 31, 2022 and a rate based on LIBOR plus 1.25 % spread, which was 1.3 % at September 30, 2021, respectively.

The Company also has a commitment fee of 0.25 % under the Credit Agreement as amended to be incurred on the unused balance of the revolver.

10 unchanged sentences

Interest rates on foreign borrowings are based on Euribor rates which range from 1.0 % to 4.2 %.

The Maniago, Italy ("Maniago") location obtained borrowings from one lender in the first quarter of fiscal 2022.

The Maniago, Italy ("Maniago") location obtained borrowings from one lender in the first six months of fiscal 2022.

The loan was for $ 1,141 with repayment terms of six years .

Under the terms of the borrowing, repayments are made quarterly in the amount of $ 56 , beginning December 31, 2022.

Under the terms of the borrowing, repayments are made quarterly in the amount of $ 56 , beginning on December 31, 2022.

The Company factors receivables from one of its customers.

1 unchanged sentence

Debt issuance costs

The Company had debt issuance costs of $ 86 , which is included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $ 24 and $ 17 at December 31, 2021 and September 30, 2021, respectively.

As of December 31, 2021 and September 30, 2021, the Paycheck Protection Program loan (the "PPP Loan") balance was $ 4,764 .

The Company has submitted the application for forgiveness of the full amount of the PPP Loan to the Small Business Administration ("SBA").

The Company was notified in January 2022 of the approval for the forgiveness of the PPP Loan (including the amounts previously paid and all accrued interest).

See Note 10, Subsequent Events , for further discussion related to the status of loan forgiveness.

The Company had debt issuance costs of $ 86 , which is included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $ 31 and $ 17 at March 31, 2022 and September 30, 2021, respectively.

As of March 31, 2022 and September 30, 2021, the Paycheck Protection Program loan (the "PPP Loan") balance was $ 0 and $ 4,764 , respectively.

The Company applied for forgiveness of the full amount of the PPP Loan to the Small Business Administration ("SBA") and was notified by the SBA in January 2022 that the full PPP Loan originating amount of $ 5,025 was forgiven.

All accrued interest was forgiven and the amount previously repaid by the Company of $ 261 was reimbursed to the Company by its lender.

The Company elected to treat the PPP Loan as debt under FASB Topic 470.

As such, the Company derecognized the liability in the second quarter of fiscal 2022 when the loan was forgiven and the Company was legally released from the loan.

The gain on extinguishment of loan is included in the consolidated condensed statements of operations in the amount of $ 5,106 (includes $ 81 of interest forgiven).

For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its operations.

This estimated effective rate is used in providing for income taxes on a year-to-date basis.

The Company’s effective tax rate through the first three months of fiscal 2022 was 1.3 %, compared with ( 43 )% for the same period of fiscal 2021.

The Company’s effective tax rate through the first six months of fiscal 2022 was 33 %, compared with ( 97 )% for the same period of fiscal 2021.

The increase in the effective rate was primarily attributable to tax benefits from adjusting deferred taxes recorded in Italy recognized on a discrete basis in fiscal 2021, which were non-recurring in fiscal 2022.

9 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2022 2021 2022 2021

Service cost $ 11 $ 26 $ 21 $ 52

3 unchanged sentences

Net periodic cost $ ( 32 ) $ 57 $ ( 65 ) $ 114

During the three months ended December 31, 2021 and 2020, the Company made $ 0 in contributions to its defined benefit pension plans.

During the six months ended March 31, 2022 and 2021, the Company made $ 0 and $ 56 in contributions, respectively to its defined benefit pension plans.

The Company anticipates making $ 3 in cash contributions to fund its defined benefit pension plans for the balance of fiscal 2022 and will use carryover balances from previous periods that have been available for use as a credit to reduce the amount of cash contributions that the Company is required to make to certain defined benefit plans in fiscal 2022.

3 unchanged sentences

The Company awards performance and restricted shares under the Company's 2007 Long-Term Incentive Plan ("2007 Plan") and the Company's 2007 Long-Term Incentive Plan (Amended and Restated as of November 16, 2016) (as further amended, the "2016 Plan").

Through the end of the first quarter of 2022, the Company granted 74 shares under the 2016 Plan to certain key employees.

In fiscal 2022, the Company granted 74 shares under the 2016 Plan to certain key employees.

The awards were split into two tranches, 44 performance shares and 30 shares of time-based restricted shares, with a grant date fair value of $ 8.00 per share.

The awards vest over three years .

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 456 shares that remain available for award at December 31, 2021.

There were 5 shares forfeited during the period.

In fiscal 2022, the Company granted its non-employee directors 42 restricted shares under the 2016 Plan, with a grant date fair value of $ 6.59 per share, which vests over one year .

One award for 30 restricted shares vested in January 2022.

If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 433 shares that remain available for award at March 31, 2022.

If any of the outstanding share awards are ultimately earned and vest at greater than the target number of shares, up to a maximum of 200 % or 150 % of such target, then a fewer number of shares would be available for award.

Stock-based compensation under the 2016 Plan was $ 161 and $ 143 during the first three months of fiscal 2022 and 2021, respectively.

As of December 31, 2021, there was $ 779 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan.

Stock-based compensation under the 2016 Plan was $ 306 and $ 293 during the first six months of fiscal 2022 and 2021, respectively and $ 145 and $ 150 during the three months ended of fiscal 2022 and 2021, respectively.

As of March 31, 2022, there was $ 847 of total unrecognized compensation cost related to the performance shares and restricted shares awarded under the 2016 Plan.

The Company expects to recognize this cost over the next 1.4 years.

5 unchanged sentences

Three Months Ended

March 31, Six Months Ended

2022 2021 2022 2021

Commercial revenue $ 9,506 $ 9,247 $ 17,866 $ 20,000

3 unchanged sentences

Three Months Ended

March 31, Six Months Ended

Net Sales 2022 2021 2022 2021

7 unchanged sentences

Three Months Ended

March 31, Six Months Ended

Net Sales 2022 2021 2022 2021

2 unchanged sentences

Total $ 24,568 $ 24,866 $ 43,815 $ 49,944

In addition to the disaggregated revenue information provided above, approximately 57 % and 58 % of total net sales as of December 31, 2021 and 2020, respectively, was recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time.

In addition to the disaggregated revenue information provided above, approximately 62 % and 61 % of total net sales as of March 31, 2022 and 2021, respectively, was recognized on an over-time basis because of the continuous transfer of control to the customer, with the remainder recognized at a point in time.

Contract Balances

The following table contains a roll forward of contract assets and contract liabilities for the period ended December 31, 2021:

The following table contains a roll forward of contract assets and contract liabilities for the period ended March 31, 2022:

Contract assets - Beginning balance, October 1, 2021 $ 12,874

1 unchanged sentence

Less amounts billed to the customers ( 27,136 )

Contract assets - Ending balance, December 31, 2021 $ 13,307

Contract assets - Ending balance, March 31, 2022 $ 13,113

Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2021 $ ( 236 )

1 unchanged sentence

Performance obligations satisfied 1,169

Contract liabilities (included within Accrued liabilities) - Ending balance, December 31, 2021 $ ( 1,216 )

There were no impairment losses recorded on contract assets as of December 31, 2021 and September 30, 2021.

Contract liabilities (included within Accrued liabilities) - Ending balance, March 31, 2022 $ ( 276 )

There were no impairment losses recorded on contract assets as of March 31, 2022 and September 30, 2021.

Remaining performance obligations

As of December 31, 2021, the Company has $ 75,730 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

Subsequent Events

As referenced in Note 5, Debt, the PPP Loan application for forgiveness was in review with the SBA as of December 31, 2021.

In January 2022, the Company was notified by the SBA that the full PPP Loan originating amount of $ 5,025 was forgiven.

All accrued interest was forgiven and the amount previously repaid by the Company of $ 261 was reimbursed to the Company by its lender.

The Company elected to treat the PPP Loan as debt under FASB Topic 470.

As such, the Company will derecognize the liability in the second quarter of fiscal 2022 when the loan was forgiven and the Company is legally released from the loan.

As of March 31, 2022, the Company has $ 72,045 of remaining performance obligations, the majority of which are anticipated to be completed within the next twelve months.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements