What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-09-28 compared with 2023-08-14 · 93 added, 94 removed, 176 unchanged (52% of the section changed)

23 unchanged sentences

(18) extraordinary or force majeure events affecting the business or operations of our business (19) the continued long term impact of the COVID-19 pandemic and related residual negative impact on the global economy, which may exacerbate the above factors and/or impact our results of operations and financial condition;

and (20) in connection with its entry into the Seventh

Amendment to its Credit Agreement and Third Amendment to its Export Credit Agreement, the Company is evaluating available financial alternatives, including obtaining acceptable alternative financing.

The Company has obtained lender waiver on Existing Defaults and concluded the forbearance period as described under the Forbearance Agreement dated April 28, 2023.

and (20) in connection with its entry into the Seventh Amendment to its Credit Agreement and Third Amendment to its Export Credit Agreement, the Company is evaluating available financial alternatives, including obtaining acceptable alternative financing.

The Company has obtained lender waiver

on Existing Defaults and concluded the forbearance period as described under the Forbearance Agreement dated April 28, 2023.

If the Company is unable to find alternative financing as contemplated by the terms of the Seventh Amendment, the lender under the Credit Agreement may choose to accelerate repayment.

The Company cannot provide assurances that it will be able to provide the post closing deliverables as established under the Seventh Amendment of the Credit Agreement or be successful in restructuring of existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements.

The Company cannot provide assurances that it will be able to provide the remaining post closing deliverable as established under the Seventh Amendment of the Credit Agreement or be successful in restructuring of existing debt obligations, obtaining capital or entering into a strategic alternative transaction which provides sufficient funding for the refinancing of its outstanding indebtedness prior to the maturity date of its obligations under the Credit Agreements.

The Company engages in the production of forgings and machined components primarily for the A&E and commercial space markets.

14 unchanged sentences

and (iv) commercial space, semiconductor and other commercial applications.

Impact of COVID-19 & Other Factors

The lingering impact and residual effects of the COVID-19 pandemic, along with other factors such as ongoing geopolitical tensions, strains on supply chains and inflationary impacts continue to impact the United States and other countries in which the Company operates.

During fiscal 2022, the ongoing impact of the COVID-19 pandemic continued to effect the Company’s results of operations.

Given the long lead times for certain of the Company's products, the Company has continued to see an impact related to the effects of COVID-19 on orders and deliveries in the first six months of fiscal 2023.

While the exact timing and pace of recovery in our markets continues to be indeterminable, commercial air travel is steadily recovering.

While the long-term outlook remains positive given the nature of the industry, there continues to be uncertainty with the respect to when commercial air traffic will return to pre-COVID-19 levels.

Additionally, our operations are subject to global economic and geopolitical risks.

For example, while the Company does not have a presence in these regions, the ongoing conflict between Russia and Ukraine has impacted economic activity as well as the availability and price of raw materials and energy.

The Company continues to actively monitor these factors and seeks to find ways to mitigate the impact on its operations.

In fiscal 2023, the Company continued to see an impact on its operations with respect to supply chain lead times and ongoing challenges in the labor market.

The Company’s domestic operations during this period were also impacted by the Cyber Incident which resulted in production delays and delayed shipments due to information access limitations.

The Company has since completed data recovery and restoration from the Cyber Incident.

See Note 12, Commitments and Contingencies.

In fiscal 2022, the residual impact of the COVID-19 pandemic (including a decrease in commercial air travel) and certain geopolitical factors impacting the availability of energy and raw materials continued to effect the Company’s results of operations.

While commercial air travel and energy prices began to stabilize beginning in the second quarter of fiscal 2023, the Company continues to monitor these factors and seeks to find ways to mitigate any future impact on its operations.

Backlog of Orders

SIFCO’s total backlog at March 31, 2023 was $96.7 million, compared with $72.0 million as of March 31, 2022.

SIFCO’s total backlog at June 30, 2023 was $122.8 million, compared with $69.4 million as of June 30, 2022.

Orders may be subject to modification or cancellation by the customer with limited charges.

Recovery in the A&E markets coupled with extended raw material lead times has resulted in increased bookings.

Recovery in the A&E markets has resulted in increased bookings.

Backlog information may not be indicative of future sales.

Six Months Ended March 31, 2023 compared with Six Months Ended March 31, 2022

Net sales comparative information for the first six months of fiscal 2023 and 2022 is as follows:

(Dollars in millions) Six Months Ended

March 31, Increase/ (Decrease)

Nine Months Ended June 30, 2023 compared with Nine Months Ended June 30, 2022

Net sales comparative information for the first nine months of fiscal 2023 and 2022 is as follows:

(Dollars in millions) Nine Months Ended

June 30, Increase/ (Decrease)

Net Sales 2023 2022

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Total $ 62.4 $ 65.3 $ (2.9)

Net sales for the first six months of fiscal 2023 decreased $3.3 million to $40.5 million, compared with $43.8 million in the comparable period of fiscal 2022.

Net sales for the first nine months of fiscal 2023 decreased $2.9 million to $62.4 million, compared with $65.3 million in the comparable period of fiscal 2022.

In general, the production of the Company's products have lead times of varying lengths.

The cybersecurity incident, due to information access limitations and system constraints, impacted domestic operations and the timing of shipments in the second quarter of fiscal 2023.

Year over year, the cybersecurity incident and extended raw material lead times largely drove the decrease in sales.

The Company's foreign operations were not impacted by the cybersecurity incident and is reflected in the sales to the power generation market that it primarily serves.

Fixed wing sales decreased $0.4 million compared with the same period last year primarily due to 767 and 737 programs.

Year over year, the Cyber Incident and extended raw material lead times have resulted in delayed shipments.

The delayed shipments, coupled with demand shift between military and commercial revenue, largely drove the decrease in sales.

The Company's foreign operations were not impacted by the Cyber Incident and is reflected in the sales to the power generation market that it primarily serves.

Fixed wing sales decreased $2.0 million compared with the same period last year primarily due to F18 demand reduction and timing of orders on the 767 and other programs.

Rotorcraft sales were flat compared with the same period last year.

The energy components for power generation units increased by $3.8 million due to growth in the steam turbine markets.

Commercial products and other revenue decreased $4.6 million in the first six months of fiscal 2023 compared to the same period in fiscal 2022, primarily due to the cybersecurity incident impact to domestic operations and timing of shipments, raw material lead times and the timing of orders related to a munitions program.

Commercial net sales were 53.1% of total net sales and military net sales were 46.9% of total net sales in the first six months of fiscal 2023, compared with 40.8% and 59.2%, respectively, in the comparable period in fiscal 2022.

Military net sales decreased by $6.9 million to $19.0 million in the first six months of fiscal 2023, compared with $25.9 million in the comparable period of fiscal 2022, primarily due to timing in order placement related to a munitions program and information access limitations and system constraints as a result of the cybersecurity incident.

Co mmercial net sales increased $3.7 million to $21.5 million in the first six months of fiscal 2023, compared with $17.9 million in the comparable period of fiscal 2022, primarily due to an increase in the power generation steam turbine market and commercial space.

Commercial products and other revenue decreased $4.7 million in the first nine months of fiscal 2023 compared to the same period in fiscal 2022, primarily due to timing of orders related to a munitions program.

Commercial net sales were 55.5% of total net sales and military net sales were 44.5% of total net sales in the first nine months of fiscal 2023, compared with 45.5% and 54.5%, respectively, in the comparable period in fiscal 2022.

Military net sales decreased by $7.8 million to $27.8 million in the first nine months of fiscal 2023, compared with $35.5 million in the comparable period of fiscal 2022, primarily due to F18 demand reduction and timing of a munitions program.

Co mmercial net sales increased $4.9 million to $34.6 million in the first nine months of fiscal 2023, compared with $29.7 million in the comparable period of fiscal 2022, primarily due to an increase in the power generation steam turbine market and commercial space.

Cost of Goods Sold

Cost of goods sold decreased by $4.8 million, or 11.3%, to $37.6 million, or 92.7% of net sales, during the first six months of fiscal 2023, compared with $42.3 million or 96.7% of net sales, in the comparable period of fiscal 2022.

The decrease is primarily due to lower volume, reduction of NRV reserve of $1.2 million and lower labor and idle expense of $0.6 million and $0.4 million, respectively partially offset by higher utility costs of $0.3 million.

Gross profit increased $1.5 million to $3.0 million in the first six months of fiscal 2023, compared with $1.5 million gross profit in the comparable period of fiscal 2022.

Gross profit percent of sales was 7.3% during the first six months of fiscal 2023, compared with 3.3% in the comparable period in fiscal 2022.

The increase in gross profit compared to prior fiscal year was primarily due to product mix, reduction of NRV reserve $1.2 million and lower labor and idle expense of $0.6 million and $0.4 million, respectively partially offset by higher utility costs of $0.3 million.

Cost of goods sold decreased by $7.5 million, or 11.8%, to $55.9 million, or 89.7% of net sales, during the first nine months of fiscal 2023, compared with $63.4 million or 97.2% of net sales, in the comparable period of fiscal 2022.

The decrease is primarily due to lower volume, ERC benefit of $1.5 million, reduction of NRV reserve of $1.4 million primarily resulting from operational improvements and lower idle and labor expense of $0.7 million and $0.2 million, respectively partially offset by higher outside service costs of $0.3 million.

Gross profit increased $4.6 million to $6.5 million in the first nine months of fiscal 2023, compared with $1.8 million gross profit in the comparable period of fiscal 2022.

Gross profit percent of sales was 10.3% during the first nine months of fiscal 2023, compared with 2.8% in the comparable period in fiscal 2022.

The increase in gross profit compared to prior fiscal year was primarily due to product mix, ERC benefit of $1.5 million, reduction of NRV reserve $1.4 million primarily resulting from operational improvements and lower idle and labor expense of $0.7 million and $0.2 million, respectively partially offset by higher outside service costs of $0.3 million.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $7.1 million, or 17.6%, of net sales during the first six months of fiscal 2023, compared with $6.2 million, or 14.2%, of net sales in the comparable period of fiscal 2022.

The increase in selling, general and administrative expenses is primarily due to incremental IT costs related to the cybersecurity incident of $1.0 million.

Selling, general and administrative expenses were $10.5 million, or 16.9%, of net sales during the first nine months of fiscal 2023, compared with $9.0 million, or 13.8%, of net sales in the comparable period of fiscal 2022.

The increase in selling, general and administrative expenses is primarily due to incremental IT costs related to the cybersecurity incident of $1.2 million and professional fees primarily related to the ERC credit of $0.4 million partially offset by ERC benefit of $0.2 million.

See Note 12, Commitments and Contingencies for further discussion.

Amortization of Intangibles

Amortization of intangibles was $0.1 million in the first six months of fiscal 2023, compared with $0.2 million in the comparable period of fiscal 2022.

Amortization of intangibles was $0.2 million in the first nine months of fiscal 2023, compared with $0.3 million in the comparable period of fiscal 2022.

Other/General

In the first six months of fiscal 2022, the Company recognized a gain on extinguishment of debt related to the PPP loan that was forgiven by the SBA for $5.1 million.

In the first nine months of fiscal 2022, the Company recognized a gain on extinguishment of debt related to the PPP loan that was forgiven by the SBA for $5.1 million.

See Note 5, Debt and Subsequent Event for further discussion.

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 2023 and 2022:

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 2023 and 2022:

Weighted Average

Interest Rate

Six Months Ended

March 31, Weighted Average

Nine Months Ended

June 30, Weighted Average

Outstanding Balance

Six Months Ended

Nine Months Ended

2023 2022 2023 2022

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Other debt 1.6 % 0.6 % $ 0.5 million $ 2.3 million

The Company’s effective tax rate through the first six months of fiscal 2023 was (1.9)%, compared with 33% for the same period of fiscal 2022.

The Company’s effective tax rate through the first nine months of fiscal 2023 was (2.3)%, compared with 1% for the same period of fiscal 2022.

The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2023 compared with the same period of fiscal 2022.

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statutory tax rate.

Net loss was $5.0 million during the first six months of fiscal 2023, compared with net loss of $0.1 million in the comparable period of fiscal 2022.

The decrease compared with prior year is primarily due to PPP forgiveness, lower volume and higher selling, general and administrative expenses.

Three Months Ended March 31, 2023 compared with Three Months Ended March 31, 2022

Net sales for the second quarter of fiscal 2023 decreased 21.7% to $19.2 million, compared with $24.6 million in the comparable period of fiscal 2022.

The cybersecurity incident, due to information access limitations and system constraints, impacted domestic operations and the timing of shipments in the second quarter of fiscal 2023.

Extended raw material lead times in fiscal 2023 also contributed to the decrease in sales.

Net sales comparative information for the second quarter of fiscal 2023 and 2022 is as follows:

Net loss was $5.6 million during the first nine months of fiscal 2023, compared with net loss of $2.7 million in the comparable period of fiscal 2022.

The decrease compared with prior year is primarily due to PPP forgiveness in fiscal 2022, lower volume and higher selling, general and administrative expenses partially offset by reduction of NRV reserve $1.4 million primarily resulting from operational improvements and net ERC benefit of $1.4 million.

Three Months Ended June 30, 2023 compared with Three Months Ended June 30, 2022

Net sales for the third quarter of fiscal 2023 increased 1.9% to $21.9 million, compared with $21.4 million in the comparable period of fiscal 2022.

Net sales comparative information for the third quarter of fiscal 2023 and 2022 is as follows:

(Dollars in millions) Three Months Ended

March 31, Increase (Decrease)

June 30, Increase (Decrease)

Net Sales 2023 2022

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Total $ 21.9 $ 21.4 $ 0.5

The reduction in commercial product and other revenues of $4.0 million was due to information access limitations and system constraints as a result of the cybersecurity impact to domestic operations and shipments, extended raw material lead times and timing of orders for a munitions program partially offset by an increase in sales related to the commercial space industry.

Fixed wing sales decreased $1.3 million compared with the same period last year primarily due to F18 and 737 programs.

Rotorcraft sales decreased $0.9 million compared with the same period last year primarily due to V22 and H60 programs and procurement delays caused by prolonged long term agreement negotiations with certain customers.

This was partially offset by an increase of $0.8 million in power generation sales driven by growth in the steam turbine market.

Commercial net sales were 59.0% of total net sales and military net sales were 41.0% of total net sales in the second quarter of fiscal 2023, compared with 38.7% and 61.3%, respectively, in the comparable period of fiscal 2022.

Rotorcraft and commercial product and other revenues sales were flat compared with the same period last year.

Fixed wing sales decreased $1.6 million compared with the same period last year primarily due to F18 demand reduction and timing of orders on 737 and 767 programs.

This was offset by an increase of $2.1 million in power generation sales driven by growth in the steam turbine market.

Commercial net sales were 59.9% of total net sales and military net sales were 40.1% of total net sales in the third quarter of fiscal 2023, compared with 55.3% and 44.7%, respectively, in the comparable period of fiscal 2022.

Military net sales

decreased by $7.2 million to $7.9 million in the second quarter of fiscal 2023, compared with $15.1 million in the comparable period of fiscal 2022, primarily due to the timing of orders for a munitions program and F18 and H60 programs.

Commercial net sales increased $1.9 million to $11.4 million in the second quarter of fiscal 2023, compared with $9.5 million in the comparable period of fiscal 2022 primarily due to increase in sales related the commercial space, 737, 767 and 787 programs.

decreased by $0.8 million to $8.8 million in the third quarter of fiscal 2023, compared with $9.6 million in the comparable period of fiscal 2022, primarily due to F18 demand reduction and timing of certain orders.

Commercial net sales increased $1.2 million to $13.1 million in the third quarter of fiscal 2023, compared with $11.9 million in the comparable period of fiscal 2022 primarily due to increase in sales related power generation steam blades.

Cost of Goods Sold

Cost of goods sold was $17.5 million, or 91.1% of net sales, during the second quarter of fiscal 2023, compared with $23.1 million or 94.1% of net sales, in the comparable period of fiscal 2022, primarily due to lower volume, reduction of NRV reserve of $0.4 million partially offset by higher idle expense and utility costs of $0.5 million and $0.2 million, respectively.

Gross profit increased $0.2 million to $1.7 million during the second quarter of fiscal 2023, compared with $1.5 million in the comparable period of fiscal 2022.

Gross margin was 8.9% during the second quarter of fiscal 2023, compared with 5.9% in the comparable period in fiscal 2022.

The increase in gross margin was primarily due to lower costs incurred as noted above.

Cost of goods sold was $18.4 million, or 84.1% of net sales, during the third quarter of fiscal 2023, compared with $21.1 million or 98.3% of net sales, in the comparable period of fiscal 2022, primarily due to ERC benefit of $1.5 million, reduction of idle expense $0.3 million and reduction of NRV reserve $0.2 million primarily resulting from operational improvements, partially offset by higher labor costs of $0.3 million.

Gross profit increased $3.1 million to $3.5 million during the third quarter of fiscal 2023, compared with $0.4 million in the comparable period of fiscal 2022.

Gross margin was 15.9% during the third quarter of fiscal 2023, compared with 1.7% in the comparable period in fiscal 2022.

The increase in gross margin was primarily due to ERC benefit of $1.5 million and lower costs incurred as noted above.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $3.8 million, or 20.0% of net sales, during the second quarter of fiscal 2023, compared with $2.7 million, or 10.9% of net sales, in the comparable period of fiscal 2022.

The increase is primarily due to IT incident costs of $1.0 million and higher salary and benefit costs of $0.1 million.

Selling, general and administrative expenses were $3.4 million, or 15.5% of net sales, during the third quarter of fiscal 2023, compared with $2.8 million, or 13.1% of net sales, in the comparable period of fiscal 2022.

The increase is primarily due to IT incident costs of $0.2 million and professional fees primarily related to the ERC credit of $0.4 million partially offset by ERC benefit of $0.2 million.

Amortization of Intangibles

Amortization of intangibles was $0.1 million in the second quarter of fiscal 2023 compared with $0.1 million in the second quarter of fiscal 2022.

Amortization of intangibles was $0.1 million in the third quarter of fiscal 2023 compared with $0.1 million in the third quarter of fiscal 2022.

Other/General

Included in other income, net, in the second quarter of fiscal 2022 is the PPP loan for forgiveness of $5.1 million.

See Note 5, Debt and Subsequent Event for further discussion.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s Credit Agreement in the second quarter of both fiscal 2023 and 2022:

Included in other expense, net, in the third quarter of fiscal 2023 is $0.2 million reclassification of utility rebates into cost of goods sold and $0.1 million of pension settlement expense.

The following table sets forth the weighted average interest rates and weighted average outstanding balances under the Company’s Credit Agreement in the third quarter of both fiscal 2023 and 2022:

Weighted Average

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Three Months Ended

March 31, Weighted Average

June 30, Weighted Average

Outstanding Balance

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Other debt 1.6 % 1.8 % $ 0.4 million $ 0.7 million

The Company's effective tax rate in the second quarter of fiscal 2023 was (1.2)%, compared with 1% for the same period of fiscal 2022.

The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income during the three months ended March 31, 2023 compared to the same period of fiscal 2022.

The Company's effective tax rate in the third quarter of fiscal 2023 was (5.8)%, compared with 0.1% for the same period of fiscal 2022.

The decrease in the effective rate was primarily attributable to changes in jurisdictional mix of income during the three months ended June 30, 2023 compared to the same period of fiscal 2022.

The effective tax rate differs from the U.S.

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statutory tax rate.

Net (Loss) Income

Net loss was $2.4 million during the second quarter of fiscal 2023, compared with net income of $3.6 million in the comparable period of fiscal 2022.

The net income in fiscal 2022 is primarily attributed to the gain on loan extinguishment related to the PPP loan noted above, partially offset by the higher costs noted above.

Net loss was $0.6 million during the third quarter of fiscal 2023, compared with $2.7 million in the comparable period of fiscal 2022.

The lower net loss in fiscal 2023 is primarily attributed to the higher volume, net ERC benefit of $1.4 million and lower costs noted above.

Non-GAAP Financial Measures

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The following table sets forth a reconciliation of net income to EBITDA and Adjusted EBITDA:

Dollars in thousands Three Months Ended Six Months Ended

March 31, March 31,

Dollars in thousands Three Months Ended Nine Months Ended

June 30, June 30,

2023 2022 2023 2022

Net (loss) income $ (2,367) $ 3,639 $ (4,956) $ (52)

Net loss $ (634) $ (2,668) $ (5,590) $ (2,720)

Depreciation and amortization expense 1,623 1,590 4,820 4,800

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EBITDA 1,329 (935) 277 2,504

Foreign currency exchange (gain) loss, net (1) 12 3 9 9

Other (income), net (2) (328) (36) (146) (68)

Loss (gain) on disposal of assets (3) 14 (2) 3 (2)

Foreign currency exchange loss (gain), net (1) 1 (7) 11 2

Other expense (income), net (2) 295 (46) 149 (114)

Gain on disposal of assets (3) (3) — — (2)

Gain on extinguishment of debt (4) — — — (5,106)

Equity compensation (5) 85 4 292 309

Pension settlement expense (6) 78 69 78 69

LIFO impact (7) (73) 202 (272) 586

IT incident costs (7) 1,086 — 1,087 —

IT incident costs, net (8) 182 — 1,269 —

Strategic alternative expense (9) 29 — 29 —

Adjusted EBITDA $ 1,923 $ (713) $ 1,833 $ (1,752)

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(5) Represents the equity-based compensation expense recognized by the Company under the 2016 Plan due to granting of awards, awards not vesting and/or forfeitures.

(6) Represents expense incurred by its defined benefit pension plans related to settlement of pension obligations.

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

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

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

Liquidity and Capital Resources

4 unchanged sentences

See Note 7, Debt and Subsequent Event .

Cash and cash equivalents was $0.3 million at March 31, 2023 and $1.2 million at September 30, 2022.

At March 31, 2023, the majority of the Company’s cash and cash equivalents were in the possession of its non-U.S.

Cash and cash equivalents was $0.6 million at June 30, 2023 and $1.2 million at September 30, 2022.

At June 30, 2023, the majority of the Company’s cash and cash equivalents were in the possession of its non-U.S.

subsidiaries.

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Operating Activities

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

The Company’s operating activities used $3.2 million of cash in the first six months of fiscal 2022, primarily due to operating results, an increase in inventory of $2.4 million, and a reduction of accrued liabilities of $1.2 million, partially offset by accounts receivable collections and a slight increase in accounts payable.

The Company’s operating activities used $2.3 million of cash in the first nine months of fiscal 2023, 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.

The increase in accounts receivable is primarily driven by timing of shipments and accrual of ERC refund of $0.5 million.

The decrease in inventory is primarily driven by timing of raw material receipts.

The Company’s operating activities provided $0.7 million of cash in the first nine months of fiscal 2022, primarily due to operating results, a decrease in accounts receivable of $2.7 million, partially offset by increases in inventory $1.4 million.

Investing Activities

Cash used for investing activities was $1.4 million in the first six months of fiscal 2023, compared with $1.5 million in the first six months of fiscal 2022.

Capital commitments as of March 31, 2023 were $0.5 million.

Cash used for investing activities was $1.9 million in the first nine months of fiscal 2023, compared with $2.5 million in the first nine months of fiscal 2022.

Capital commitments as of June 30, 2023 were $1.1 million.

The Company anticipates that the remaining total fiscal 2023 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.

Financing Activities

Cash provided by financing activities was $0.8 million in the first six months of fiscal 2023, compared with $4.5 million in the first six months of fiscal 2022.

As discussed in Note 7, Debt and Subsequent Event, the Company's Maniago location obtained borrowings from a lender during the first six months of fiscal 2022 for approximately $1.1 million with a six year term.

Cash provided by financing activities was $3.5 million in the first nine months of fiscal 2023, compared with $1.6 million in the first nine months of fiscal 2022.

As discussed in Note 7, Debt and Subsequent Event, the Company's Maniago location obtained borrowings from a lender during the first nine months of fiscal 2022 for approximately $1.1 million with a six year term.

The proceeds of this loan were to be used for working capital purposes.

The Company had $0.5 million of net short-term debt repayments in the first six months of fiscal 2023 compared with net short-term debt repayments of $0.1 million in the first six months of fiscal 2022.

The Company had net borrowings to the revolver under the Credit Agreement of $1.8 million in the first six months of fiscal 2023 compared with net borrowings of $3.9 million in the first six months of fiscal 2022.

The Company had $0.5 million of net short-term debt borrowings in the first nine months of fiscal 2023 compared with net short-term debt borrowings of $0.1 million in the first nine months of fiscal 2022.

The Company had net borrowings to the revolver under the Credit Agreement of $3.8 million in the first nine months of fiscal 2023 compared with net borrowings of $1.2 million in the first nine months of fiscal 2022.

Under the Company's Credit Agreement, the Company is subject to certain customary loan covenants regarding availability as discussed in Note 7, Debt and Subsequent Event.

The availability at March 31, 2023 was $2.5 million, which was greater than the 10.0% of the Revolving Commitment as of March 31, 2023.

If availability falls below the 10% level or an event of default occurs, the Company is required to meet the fixed charge coverage ratio covenant, which must not be less than 1.1 to 1.0.

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 availability at June 30, 2023 was $2.6 million, which exceeds both the collateral and total commitment threshold as of June 30, 2023.

As noted in Note 7, Debt and Subsequent Event, on March 23, 2022, the Company entered its Sixth Amendment which amends the Credit Agreement to, among other things, (i) revise the fixed coverage ratio to exclude the first $1.5 million of unfunded capital expenditures through April 20, 2023, (ii) increase the letter of credit sub-limit from $2.0 million to $3.0 million, (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.

Additionally, the Export Credit Agreement was amended by the Second Amendment, which replaces the reference rate from LIBOR to SOFR in the Export Credit Agreement.

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The Second Amendment amends the Export Credit Agreement to (i) modify the loan maturity date to December 31, 2023 and (ii) provides waiver of Existing Defaults and concludes the forbearance period as described under the Forbearance Agreement dated April 28, 2023.

As noted in Note 7, Debt and Subsequent Event, the Company provided to its lender one or more proposed term sheets which provide for the refinancing of all of the Obligations and a CIM on or before the requisite due dates as required under the terms of the Seventh Amendment.

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.

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For recent accounting standards not yet adopted refer to Note 1, Summary of Significant Accounting Policies - Recent Accounting Standards Not Yet Adopted for 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 Annual Report on Form 10-K for the year ended September 30, 2022.

Additionally, the Company's significant accounting policies and

procedures are explained in the Management's Discussion and Analysis section of the Company's Annual Report on Form 10-K for the year ended September 30, 2022.

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 2. Management’s Discussion and Analysis