SIFCO INDUSTRIES INC 10-Q

Item 1. Financial Statements SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Operations (Unaudited) (Amounts in thousands, except per share data) Three Months Ended March 31, Six Months Ended March 31, 2022 2021 2022 2021 Net sales $ 24,568 $ 24,866 $ 43,815 $ 49,944 Cost of goods sold 23,109 22,123 42,347 43,278 Gross profit 1,459 2,743 1,468 6,666 Selling, general and administrative expenses 2,680 3,596 6,216 7,423 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, 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 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 Net (loss) income per share Basic $ 0.62 $ ( 0.26 ) $ ( 0.01 ) $ 0.26 Diluted $ 0.61 $ ( 0.26 ) $ ( 0.01 ) $ 0.25 Weighted-average number of common shares (basic) 5,840 5,777 5,819 5,735 Weighted-average number of common shares (diluted) 5,961 5,777 5,819 5,932 See notes to unaudited consolidated condensed financial statements. 2 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Comprehensive (Loss) Income (Unaudited) (Amounts in thousands) Three Months Ended March 31, Six Months Ended March 31, 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 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 See notes to unaudited consolidated condensed financial statements. 3 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Balance Sheets (Amounts in thousands, except per share data) March 31, 2022 September 30, 2021 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 124 $ 346 Receivables, net of allowance for doubtful accounts of $ 99 and $ 167 , respectively 18,284 19,914 Contract assets 13,113 12,874 Inventories, net 14,535 12,546 Refundable income taxes 101 101 Prepaid expenses and other current assets 1,279 1,792 Total current assets 47,436 47,573 Property, plant and equipment, net 41,342 42,708 Operating lease right-of-use assets, net 15,477 15,943 Intangible assets, net 659 874 Goodwill 3,493 3,493 Other assets 72 77 Total assets $ 108,479 $ 110,668 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt $ 4,259 $ 9,566 Revolver 12,838 8,930 Short-term operating lease liabilities 773 788 Accounts payable 10,522 9,811 Accrued liabilities 5,429 6,871 Total current liabilities 33,821 35,966 Long-term debt, net of current maturities 3,266 2,669 Long-term operating lease liabilities, net of short-term 15,050 15,439 Deferred income taxes 148 158 Pension liability 5,716 6,073 Other long-term liabilities 730 741 Shareholders’ equity: Serial preferred shares, no par value, authorized 1,000 shares — — Common shares, par value $ 1 per share, authorized 10,000 shares; issued and outstanding shares 6,040 at March 31, 2022 and 5,987 at September 30, 2021 6,040 5,987 Additional paid-in capital 11,264 11,118 Retained earnings 41,544 41,596 Accumulated other comprehensive loss ( 9,100 ) ( 9,079 ) Total shareholders’ equity 49,748 49,622 Total liabilities and shareholders’ equity $ 108,479 $ 110,668 See notes to unaudited consolidated condensed financial statements. 4 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Cash Flows (Unaudited, Amounts in thousands) Six Months Ended March 31, 2022 2021 Cash flows from operating activities: Net (loss) income $ ( 52 ) $ 1,502 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 ) LIFO effect 383 335 Share transactions under company stock plan 199 277 Gain on extinguishment of debt ( 5,106 ) — Other long-term liabilities ( 107 ) ( 2 ) Deferred income taxes ( 15 ) ( 830 ) Changes in operating assets and liabilities: Receivables 1,441 4,149 Contract assets ( 239 ) ( 1,569 ) Inventories ( 2,598 ) ( 301 ) Prepaid expenses and other current assets 490 40 Other assets 4 47 Accounts payable 387 2,749 Other accrued liabilities ( 1,191 ) ( 2,077 ) Accrued income and other taxes ( 20 ) 182 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 ) Net cash used for investing activities ( 1,491 ) ( 1,315 ) Cash flows from financing activities: Proceeds from long-term debt 1,402 — Payments on long-term debt ( 696 ) ( 264 ) Proceeds from revolving credit agreement 41,912 44,666 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) 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 Effect of exchange rate changes on cash and cash equivalents ( 17 ) 7 Cash and cash equivalents at the end of the period $ 124 $ 311 Supplemental disclosure of cash flow information of operations: Cash paid for interest $ ( 249 ) $ ( 203 ) Cash paid for income taxes, net $ ( 15 ) $ ( 22 ) See notes to unaudited consolidated condensed financial statements. 5 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Shareholders’ Equity (Unaudited, Amounts in thousands ) Six Months Ended March 31, 2022 Common Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Amount Balance - September 30, 2021 5,987 $ 5,987 $ 11,118 $ 41,596 $ ( 9,079 ) $ 49,622 Comprehensive loss — — — ( 52 ) ( 21 ) ( 73 ) Performance and restricted share expense — — 306 — — 306 Share transactions under equity based plans 53 53 ( 160 ) — — ( 107 ) Balance - March 31, 2022 6,040 $ 6,040 $ 11,264 $ 41,544 $ ( 9,100 ) $ 49,748 Three Months Ended March 31, 2022 Common Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity 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 Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Shares Amount Balance - September 30, 2020 5,916 $ 5,916 $ 10,736 $ 42,339 $ ( 13,468 ) $ 45,523 Comprehensive income — — — 1,502 406 1,908 Performance and restricted share expense — — 293 — — 293 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 Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity 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. 6 SIFCO Industries, Inc. and Subsidiaries Notes to Unaudited Consolidated Condensed Financial Statements (Amounts in thousands, except per share data) 1. Summary of Significant Accounting Policies A. Principles of Consolidation The accompanying unaudited consolidated condensed financial statements include the accounts of SIFCO Industries, Inc. and its wholly-owned subsidiaries (the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The U.S. dollar is the functional currency for all of the Company’s operations in the United States ("U.S.") and its non-operating subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income. The functional currency for the Company's other non-U.S. subsidiaries is the Euro. Assets and liabilities are translated into U.S. dollars at the rates of exchange at the end of the period, and revenues and expenses are translated using average rates of exchange for the period. Foreign currency translation adjustments are reported as a component of accumulated other comprehensive loss in the unaudited consolidated condensed financial statements. These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s fiscal 2021 Annual Report on Form 10-K. The year-end consolidated balance sheet data was derived from the audited financial statements and disclosures required by accounting principles generally accepted in the U.S. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. B. Accounting Policies A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company's Annual Report on From 10-K for the year ended September 30, 2021. C. 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. 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 March 31, 2022 2021 2022 2021 Net (loss) income $ 3,639 $ ( 1,491 ) $ ( 52 ) $ 1,502 Weighted-average common shares outstanding (basic) 5,840 5,777 5,819 5,735 Effect of dilutive securities: Restricted shares 100 — — 144 Performance shares 21 — — 53 Weighted-average common shares outstanding (diluted) 5,961 5,777 5,819 5,932 Net (loss) income per share – basic: $ 0.62 $ ( 0.26 ) $ ( 0.01 ) $ 0.26 Net (loss) income per share – diluted: $ 0.61 $ ( 0.26 ) $ ( 0.01 ) $ 0.25 Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 196 411 307 217 7 D. Recently Adopted Accounting Standards In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12, " Income Taxes (ASC 740) – Simplifying the Accounting for Income Taxes ," which is intended to reduce complexity in the accounting for income taxes while maintaining or improving the usefulness of information provided to financial statement users. The guidance amends certain existing provisions under ASC 740 to address a number of distinct items. The Company adopted ASU 2019-12 effective October 1, 2021. Adoption of the amendments in this ASU did not have an impact to the Company's results of operations and financial condition. 2. Inventories Inventories consist of: March 31, 2022 September 30, 2021 Raw materials and supplies $ 5,099 $ 4,111 Work-in-process 5,046 3,560 Finished goods 4,390 4,875 Total inventories $ 14,535 $ 12,546 For a portion of the Company's inventory, cost is determined using the last-in, first-out ("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. Accordingly, interim LIFO calculations must be based on management’s estimates of expected year-end inventory levels and costs. Because the actual results may vary from these estimates, calculations are subject to many factors beyond management’s control, and annual results may differ from interim results as they are subject to adjustments based on the differences between the estimates and the actual results. The first-in, first-out (“FIFO”) method is used for the remainder of the inventories, which are stated at the lower of cost or net realizable value. If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $ 9,593 and $ 9,210 higher than reported at March 31, 2022 and September 30, 2021, respectively. 3. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows: March 31, 2022 September 30, 2021 Foreign currency translation adjustment $ ( 5,618 ) $ ( 5,359 ) Retirement plan liability adjustment, net of tax ( 3,482 ) ( 3,720 ) Total accumulated other comprehensive loss $ ( 9,100 ) $ ( 9,079 ) 4. Leases The components of lease expense were as follows: Three Months Ended March 31, Six Months Ended March 31, 2022 2021 2022 2021 Finance lease expense: Amortization of right-of use assets on finance leases $ 2 $ 13 $ 14 $ 27 Interest on lease liabilities — 1 — 2 Operating lease expense 429 540 828 1,092 Variable lease cost 30 35 60 69 Total lease expense $ 461 $ 589 $ 902 $ 1,190 8 The following table presents the impact of leasing on the consolidated condensed balance sheet. Classification in the consolidated condensed balance sheets March 31, 2022 September 30, 2021 Assets: Finance lease assets Property, plant and equipment, net $ 20 $ 34 Operating lease assets Operating lease right-of-use assets, net 15,477 15,943 Total lease assets $ 15,497 $ 15,977 Current liabilities: Finance lease liabilities Current maturities of long-term debt $ 10 $ 17 Operating lease liabilities Short-term operating lease liabilities 773 788 Non-current liabilities: Finance lease liabilities Long-term debt, net of current maturities — 5 Operating lease liabilities Long-term operating lease liabilities, net of short-term 15,050 15,439 Total lease liabilities $ 15,833 $ 16,249 Supplemental cash flow and other information related to leases were as follows: March 31, 2022 March 31, 2021 Other Information Cash paid for amounts included in measurement of liabilities: Operating cash flows from operating leases $ 834 $ 1,097 Operating cash flows from finance leases — 2 Financing cash flows from finance leases 15 29 Right-of-use assets obtained in exchange for new lease liabilities: Operating leases — 43 March 31, 2022 September 30, 2021 Weighted-average remaining lease term (years): Finance leases 1.1 1.1 Operating leases 13.9 14.4 Weighted-average discount rate: Finance leases — % 2.8 % Operating leases 5.9 % 5.9 % 9 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 six months ended March 31, 2022) $ 5 $ 829 2023 5 1,632 2024 — 1,647 2025 — 1,644 2026 — 1,620 Thereafter — 15,912 Total lease payments $ 10 $ 23,284 Less: Imputed interest — ( 7,461 ) Present value of lease liabilities $ 10 $ 15,823 5. Debt Debt consists of: March 31, 2022 September 30, 2021 Revolving credit agreement $ 12,838 $ 8,930 Foreign subsidiary borrowings 6,809 6,632 Finance lease obligations 10 22 Other, net of unamortized debt issuance costs $( 26 ) and $( 32 ), respectively 706 5,581 Total debt 20,363 21,165 Less – current maturities ( 17,097 ) ( 18,496 ) Total long-term debt $ 3,266 $ 2,669 Credit Agreement and Security Agreement The Credit Agreement (as amended, the "Credit Agreement") contains affirmative and negative covenants and events of default. 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 Foreign subsidiary borrowings Foreign debt consists of: March 31, 2022 September 30, 2021 Term loan $ 3,545 $ 3,127 Short-term borrowings 2,553 1,867 Factor 711 1,638 Total debt $ 6,809 $ 6,632 Less – current maturities ( 4,012 ) ( 4,551 ) Total long-term debt $ 2,797 $ 2,081 Receivables pledged as collateral $ 594 $ 485 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 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 on December 31, 2022. The Company factors receivables from one of its customers. The Company accounts for the pledge of receivables under this agreement as short-term debt and continues to carry the receivables on its consolidated condensed balance sheets. Debt issuance costs The Company 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. Other 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). 6. Income Taxes For each interim reporting period, the Company makes an estimate of the effective tax rate it expects to be applicable for the full fiscal year for its operations. This estimated effective rate is used in providing for income taxes on a year-to-date basis. The Company’s effective tax rate through the first 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. The effective tax rate differs from the U.S. federal statutory rate due primarily to the valuation allowance against the Company’s U.S. deferred tax assets and income in foreign jurisdictions that are taxed at different rates than the U.S. statutory tax rate. The Company is subject to income taxes in the U.S. federal jurisdiction, Ireland, Italy, and various state and local jurisdictions. 11 7. Retirement Benefit Plans The Company and certain of its subsidiaries sponsor defined benefit pension plans covering some of its employees. The components of net periodic benefit cost of the Company’s defined benefit plans are as follows: Three Months Ended March 31, Six Months Ended March 31, 2022 2021 2022 2021 Service cost $ 11 $ 26 $ 21 $ 52 Interest cost 178 175 357 350 Expected return on plan assets ( 340 ) ( 355 ) ( 681 ) ( 711 ) Amortization of net loss 119 211 238 423 Net periodic cost $ ( 32 ) $ 57 $ ( 65 ) $ 114 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. The Company's ability to elect to use such carryover balance will be determined based on the actual funded status of each defined benefit pension plan relative to the plan's minimum regulatory funding requirements. The Company does not anticipate making cash contributions above the minimum funding requirement to fund its defined benefit pension plans during the balance of fiscal 2022. 8. Stock-Based Compensation 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"). 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 . 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 $ 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. 9. Revenue The Company produces forged components for (i) turbine engines that power commercial, business and regional aircraft as well as military aircraft and other military applications; (ii) airframe applications for a variety of aircraft; (iii) industrial gas and steam turbine engines for power generation units; and (iv) other commercial applications. The following table represents a breakout of total revenue by customer type: Three Months Ended March 31, Six Months Ended March 31, 2022 2021 2022 2021 Commercial revenue $ 9,506 $ 9,247 $ 17,866 $ 20,000 Military revenue 15,062 15,619 25,949 29,944 Total $ 24,568 $ 24,866 $ 43,815 $ 49,944 12 The following table represents revenue by the various components: Three Months Ended March 31, Six Months Ended March 31, Net Sales 2022 2021 2022 2021 Aerospace components for: Fixed wing aircraft $ 10,071 $ 10,176 $ 19,960 $ 19,966 Rotorcraft 4,371 7,872 7,914 15,603 Energy components for power generation units 4,346 5,102 8,003 11,565 Commercial product and other revenue 5,780 1,716 7,938 2,810 Total $ 24,568 $ 24,866 $ 43,815 $ 49,944 The following table represents revenue by geographic region based on the Company's selling operation locations: Three Months Ended March 31, Six Months Ended March 31, Net Sales 2022 2021 2022 2021 North America $ 20,426 $ 20,019 $ 36,288 $ 39,784 Europe 4,142 4,847 7,527 10,160 Total $ 24,568 $ 24,866 $ 43,815 $ 49,944 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 March 31, 2022: Contract assets - Beginning balance, October 1, 2021 $ 12,874 Additional revenue recognized over-time 27,375 Less amounts billed to the customers ( 27,136 ) Contract assets - Ending balance, March 31, 2022 $ 13,113 Contract liabilities (included within Accrued liabilities) - Beginning balance, October 1, 2021 $ ( 236 ) Payments received in advance of performance obligations ( 1,209 ) Performance obligations satisfied 1,169 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 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.