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 December 31, 2025 2024 Net sales $ 23,973 $ 20,883 Cost of goods sold 18,784 19,955 Gross profit 5,189 928 Selling, general and administrative expenses 2,646 2,840 Gain on disposal of operating assets ( 20 ) — Operating profit (loss) 2,563 ( 1,912 ) Interest expense, net 352 469 Foreign currency exchange gain, net — ( 2 ) Other expense, net 16 38 Income (loss) from continuing operations before income tax expense 2,195 ( 2,417 ) Income tax expense 405 5 Income (loss) from continuing operations 1,790 ( 2,422 ) Income from discontinued operations, net of tax — 106 Net income (loss) $ 1,790 $ ( 2,316 ) Basic earnings (loss) per share: Basic earnings (loss) per share from continuing operations $ 0.29 $ ( 0.40 ) Basic earnings per share from discontinued operations — 0.02 Basic earnings (loss) per share $ 0.29 $ ( 0.38 ) Diluted earnings (loss) per share: Diluted earnings (loss) per share from continuing operations $ 0.29 $ ( 0.40 ) Diluted earnings per share from discontinued operations $ — $ 0.02 Diluted earnings (loss) per share $ 0.29 $ ( 0.38 ) Weighted-average number of common shares (basic) 6,079 6,016 Weighted-average number of common shares (diluted) 6,159 6,016 See notes to unaudited consolidated condensed financial statements. 2 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Comprehensive Income (Unaudited) (Amounts in thousands) Three Months Ended December 31, 2025 2024 Net income (loss) $ 1,790 $ ( 2,316 ) Other comprehensive income (loss): Foreign currency translation adjustment, net of tax — 5,554 Retirement plan liability adjustment, net of tax 17 23 Other — ( 2 ) Comprehensive income $ 1,807 $ 3,259 See notes to unaudited consolidated condensed financial statements. 3 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Balance Sheets (Unaudited) (Amounts in thousands, except per share data) December 31, 2025 September 30, 2025 ASSETS Current assets: Cash and cash equivalents $ 1,106 $ 491 Restricted cash 1,081 1,553 Receivables, net of allowance for credit losses of $ 128 and $ 151 , respectively 15,634 16,103 Contract assets 11,045 10,560 Inventories, net 6,561 4,192 Prepaid expenses and other current assets 2,338 2,192 Total current assets 37,765 35,091 Property, plant and equipment, net 20,896 21,794 Operating lease right-of-use assets, net 12,299 12,543 Goodwill 3,493 3,493 Other assets 488 473 Total assets $ 74,941 $ 73,394 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Current maturities of long-term debt, net of unamortized debt issuance costs $ 2,461 $ 2,592 Revolver 386 7,969 Short-term operating lease liabilities 978 959 Accounts payable 7,296 5,796 Contract liabilities 7,486 1,784 Accrued liabilities 3,386 3,140 Total current liabilities 21,993 22,240 Long-term finance lease, net of short-term 39 51 Long-term operating lease liabilities, net of short-term 11,977 12,230 Deferred income taxes, net 519 163 Pension liability 1,104 1,206 Other long-term liabilities 611 619 Commitments and Contingencies (Note 1 0 ) Shareholders’ equity: Serial preferred shares, no par value, authorized 1,000 shares; zero shares issued and outstanding at December 31, 2025 and September 30, 2025 — — Common shares, par value $ 1 per share, authorized 10,000 shares; issued and outstanding shares 6,215 at December 31, 2025 and 6,180 at September 30, 2025 6,215 6,180 Additional paid-in capital 11,863 11,892 Retained earnings 18,942 17,152 Accumulated other comprehensive income 1,678 1,661 Total shareholders’ equity 38,698 36,885 Total liabilities and shareholders’ equity $ 74,941 $ 73,394 See notes to unaudited consolidated condensed financial statements. 4 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Cash Flows (Unaudited, Amounts in thousands) Three Months Ended December 31, 2025 2024 Cash flows from operating activities: Net income (loss) $ 1,790 $ ( 2,316 ) Income from discontinued operations, net of tax — 106 Income (loss) from continuing operations $ 1,790 $ ( 2,422 ) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 1,085 1,181 Amortization of debt issuance costs 54 37 Gain on disposal of operating assets ( 20 ) — LIFO effect 212 501 Share transactions under company stock plan, net 6 ( 7 ) Inventory valuation accounts 53 320 Deferred income taxes 356 65 Interest incurred but not yet paid 9 7 Other expenses 9 56 Changes in operating assets and liabilities: Receivables 469 424 Contract assets ( 485 ) 626 Inventories ( 2,634 ) ( 274 ) Prepaid expenses and other current assets ( 192 ) ( 543 ) Other assets — 265 Accounts payable 1,294 ( 2,772 ) Accrued liabilities 321 ( 778 ) Contract liabilities 5,702 ( 495 ) Accrued income tax 49 — Net cash provided by (used for) operating activities 8,078 ( 3,809 ) Cash flows from investing activities: Proceeds from disposal of operating assets 20 — Capital expenditures ( 96 ) ( 109 ) Net cash used for investing activities ( 76 ) ( 109 ) Cash flows from financing activities: Proceeds from term loan — 3,000 Payments on term loan ( 150 ) ( 100 ) Proceeds from revolving credit agreement 22,646 35,025 Repayments of revolving credit agreement ( 30,229 ) ( 42,534 ) Payment of debt issuance costs ( 115 ) ( 203 ) Principal payments on capital lease obligations ( 11 ) ( 10 ) Repayments of promissory note and related fees — related party — ( 4,417 ) Net cash used for financing activities ( 7,859 ) ( 9,239 ) Cash flows from discontinued operations: Net cash used for operating activities — ( 57 ) Net cash provided by investing activities — 13,313 Net cash provided by financing activities — 356 Effects of exchange rate changes on cash and cash equivalents — ( 35 ) Net cash provided by discontinued operations — 13,577 Increase in cash, cash equivalents and restricted cash 143 420 Cash, cash equivalents and restricted cash at the beginning of the period 2,044 2,723 Cash, cash equivalents and restricted cash from continuing operations at the end of the period $ 2,187 $ 3,143 See notes to unaudited consolidated condensed financial statements. 5 SIFCO Industries, Inc. and Subsidiaries Supplemental Disclosure of Cash Flow Information (Unaudited, Amounts in thousands) Three Months Ended December 31, 2025 2024 Cash paid during the year: Cash paid for interest $ ( 298 ) $ ( 389 ) Non-cash investing activities: Additions to property, plant & equipment — incurred but not yet paid $ 98 $ 19 Non-cash financing activities: Debt issuance costs — incurred but not yet paid — 115 Interest added to promissory note — related party (paid-in-kind) — 27 See notes to unaudited consolidated condensed financial statements. 6 SIFCO Industries, Inc. and Subsidiaries Consolidated Condensed Statements of Shareholders’ Equity (Unaudited, Amounts in thousands ) Three Months Ended December 31, 2025 Common Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Total Shareholders’ Equity Shares Amount Balance at October 1, 2025 6,180 $ 6,180 $ 11,892 $ 17,152 $ 1,661 $ 36,885 Comprehensive income — — — 1,790 17 1,807 Performance and restricted share expense — — 66 — — 66 Share transactions under equity-based plans 35 35 ( 95 ) — — ( 60 ) Balance at December 31, 2025 6,215 $ 6,215 $ 11,863 $ 18,942 $ 1,678 $ 38,698 Three Months Ended December 31, 2024 Common Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount Balance at October 1, 2024 6,158 $ 6,158 $ 11,775 $ 17,881 $ ( 5,389 ) $ 30,425 Comprehensive (loss) income — — — ( 2,316 ) 5,575 3,259 Performance and restricted share expense — — 20 — — 20 Share transactions under equity-based plans ( 11 ) ( 11 ) ( 17 ) — — ( 28 ) Balance at December 31, 2024 6,147 $ 6,147 $ 11,778 $ 15,565 $ 186 $ 33,676 See notes to unaudited consolidated condensed financial statements. 7 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 (collectively, the “Company”). All 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, non-U.S. subsidiaries. For these operations, all gains and losses from completed currency transactions are included in income (loss). These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2025 (the “2025 Annual Report”). The year-end consolidated condensed balance sheet contained in these financial statements was derived from the audited financial statements and disclosures required by accounting principles generally accepted in the U.S. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) and disclosures considered necessary for a fair presentation have been included. 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 2025 Annual Report. C. Net Earnings (Loss) per Share The Company’s net earnings (loss) 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 stock method. The dilutive effect is as follows: Three Months Ended December 31, 2025 2024 Income (loss) from continuing operations $ 1,790 ( 2,422 ) Income from discontinued operations, net of tax — 106 Net income (loss) $ 1,790 $ ( 2,316 ) Weighted-average common shares outstanding (basic) 6,079 6,016 Effect of dilutive securities: Restricted shares 76 — Performance shares 4 — Weighted-average common shares outstanding (diluted) 6,159 6,016 Net earnings (loss) per share – basic and diluted: Continuing operations $ 0.29 $ ( 0.40 ) Discontinued operations — 0.02 Net earnings (loss) per share $ 0.29 $ ( 0.38 ) Anti-dilutive weighted-average common shares excluded from calculation of diluted earnings per share 32 149 D. Recent Accounting Standards Adopted In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-01, “Compensation—Stock Compensation - Scope Application of Profits Interest and Similar Awards,” which provides illustrative 8 guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of Topic 718 or another accounting standard. The Company adopted the ASU during the first quarter of fiscal year 2026. This guidance did not have a material impact on the Company’s consolidated condensed financial statements. E. Impact of Newly Issued Accounting Standards Accounting Pronouncements - Issued and Not Effective In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements,” which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU No. 2025-11 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently assessing the impact of this standard on our consolidated condensed financial statements and related disclosures. In January 2025, the FASB issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date” (“ASU 2025-01”). ASU 2025-01 outlines the effective date of ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), as the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is still permitted. ASU 2024-03 requires both interim and annual disclosures pertaining to expense captions on the face of the income statement within continuing operations containing the following amounts: (i) purchases of inventory, (ii) employee compensation, (iii) depreciation, (iv) intangible asset amortization, and (v) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. This disaggregated information will be required to be disclosed with other disaggregated amounts under other U.S. GAAP guidance, such as revenue and income taxes. Additionally, a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and total selling expenses and a definition of such costs (in annual reporting periods only) should be disclosed. More granular information about cost of sales and selling, general, and administrative expenses (SG&A) would assist a reader of the Company's consolidated financial statements in better understanding an entity’s cost structure and forecasting future cash flows. The amendments in ASU 2024-03 should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently assessing the impact of this standard on our consolidated condensed financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity should apply the amendments in ASU 2023-09 prospectively to all annual periods beginning after December 15, 2024. The Company will first apply this guidance, on an annual basis, for the current fiscal year. This guidance will expand our annual income tax disclosures, but will not affect our consolidated condensed financial statements. 2. Discontinued Operations The Company committed to sell CBlade in August 2024 in order to streamline operations and refocus on its core aerospace forging entities. On August 1, 2024, the Company’s Board of Directors approved and authorized the execution of a share purchase agreement (the “SPA”), under which SIFCO Irish Holdings, Ltd., a wholly owned subsidiary of the Company, entered into an agreement to sell 100 % of the share capital of CBlade to TB2 S.r.l. (the “Buyer”) at an enterprise value of € 20,000 , less debt, for cash consideration of € 13,800 in net equity value at closing, subject to adjustments for changes in working capital and certain other items (the “CBlade Sale”). The Company determined that CBlade met the criteria for classification as assets held for sale and discontinued operations upon the aforementioned events, and, based on the significance of the disposed operations (i.e., strategic shift), CBlade represented discontinued operations upon classification of the CBlade assets and liabilities as held for sale. In October 2024, upon regulatory approval, the Company completed the CBlade Sale and received cash consideration of approximately $ 14,408 , net of transaction costs of $ 530 . The Company does not expect to have any significant continuing involvement with CBlade after the sale. All operating activities prior to the disposal date were included in the Company's financial statements separately as discontinued operations, including income before income tax provision, gain from the sale 9 CBlade (i.e., cash proceeds received less net assets transferred), and the release of accumulated other comprehensive income (loss) attributable to the Company's European operations. Due to the CBlade Sale, the Company ceased manufacturing operations within the European market, as CBlade represented the last remaining facility in this region. Prior to the transaction, CBlade was directly owned by SIFCO Irish Holdings Inc., a wholly-owned subsidiary of the Company incorporated in Ireland (“Irish Holdings”), which historically acted as the holding company for the Company's international operations. With the disposal of CBlade, the Company determined that its European operations represented a substantially complete liquidation. Therefore, $ 5,851 of cumulative translation adjustment loss attributable to these operations (related to Irish Holdings) was recognized in the statement of operations as a component of the gain on sale of discontinued operations upon the loss of a controlling financial interest in CBlade, which represented in excess of 90 % of the assets of the Company's European operations. A summary of the operating results for the discontinued operations is as follows: Three Months Ended December 31, 2025 2024 Net sales $ — $ 622 Cost of sales — 348 Interest expense, net — 15 Income from discontinued operations before income tax expense and gain on sale — 214 Gain on sale of discontinued operations before income tax expense — 58 Income tax expense from discontinued operations — 166 Income from discontinued operations, net of tax $ — $ 106 3. Inventories Inventories consist of: December 31, 2025 September 30, 2025 Raw materials and supplies $ 3,278 $ 1,416 Work-in-process 1,906 1,325 Finished goods 1,377 1,451 Total inventories, net $ 6,561 $ 4,192 For a portion of the Company’s inventory, cost is determined using the last-in, first-out (“LIFO”) method. Approximately 63 % and 40 % of the Company’s inventories as of December 31, 2025 and September 30, 2025, 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, the 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 (“NRV”). If the FIFO method had been used for the inventories for which cost is determined using the LIFO method, inventories would have been $ 11,109 and $ 10,897 higher than reported as of December 31, 2025 and September 30, 2025, respectively. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. The Company estimates net realizable value, excess and obsolescence and shrink reserves for its inventory based upon historical experience, historical and projected sales trends and the age of inventory on hand. As of December 31, 2025 and September 30, 2025, our inventory valuation allowances were $ 6,002 and $ 5,919 , respectively. 4. Accumulated Other Comprehensive Income The components of accumulated other comprehensive loss are as follows: December 31, 2025 September 30, 2025 Retirement plan liability adjustment, net of tax 1,678 1,661 Total accumulated other comprehensive income $ 1,678 $ 1,661 10 During the three months ended December 31, 2024, the Company reclassified $ 5,554 from foreign currency translation adjustment to income from discontinued operations in the consolidated condensed statements of operations concurrent with the disposition of the CBlade and the substantially complete liquidation of operations in Europe. 5. Debt Debt consists of: December 31, 2025 September 30, 2025 Revolving credit agreement $ 386 $ 7,969 Term loan, net of unamortized debt issuance costs of $ 42 and $ 50 , respectively 2,258 2,400 Finance lease obligations 85 97 Other 157 146 Total debt 2,886 10,612 Less — current maturities ( 2,847 ) ( 10,561 ) Total long-term debt $ 39 $ 51 Loan and Security Agreement On October 17, 2024, the Company and Quality Aluminum Forge, LLC, a wholly-owned subsidiary of the Company (“QAF”, and together with the Company, the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) among the Company and QAF, as borrowers, Siena Lending Group LLC, as Lender (“Siena”), and each of the affiliates of the borrowers signatory to the Loan Agreement from time to time as guarantors. The Loan Agreement provided for a senior secured revolving credit facility with a term of three years in an aggregate principal amount not to exceed $ 20,000 (the “Revolver”) and a term loan in the original principal amount of $ 3,000 (the “Term Loan”). The Loan Agreement also provided for a $ 2,500 letter of credit sub-facility (the “Letter of Credit Sub-facility,” and collectively with the Revolver and the Term Loan, the “Credit Facility”). The Credit Facility matures on October 17, 2027. Borrowings under the Revolver and the Letter of Credit Sub-facility will bear interest at an annual rate of 4.5 % plus the adjusted term SOFR (or, if the base rate is applicable, an annual rate of 3.5 % plus the base rate). Borrowings under the Term Loan will bear interest at an annual rate of 5.5 % plus the adjusted term SOFR (or, if the base rate is applicable, 4.5 % plus the base rate) and shall be repaid in equal consecutive monthly installments of $ 50 commencing November 1, 2024, with the entire unpaid balance due and payable on the maturity date. Letters of credit issued under the Letter of Credit Sub-facility will have an interest rate equal to 4.5 % plus adjusted term SOFR per annum of the face amount of such letter of credit. The Letter of Credit Sub-facility requires the Company to maintain compensating balances in a money market account in support of any issuances. The Company may withdraw funds from this account at its discretion; however, availability under the Letter of Credit Sub-facility will be dependent upon the maintenance of such compensating balances. As of December 31, 2025, the Company held $ 1,081 in compensating balances, which were included in restricted cash in the consolidated condensed balance sheets. In consideration of the execution and delivery by Siena of the Loan Agreement, the Company agreed pursuant to the fee letter to pay a closing fee in the amount of $ 230 (of which $ 115 was paid on the closing date and $ 115 was paid on the first anniversary of the closing date, with the remaining amount (if any) of the closing fee to be paid in full on the maturity date). The fee letter provides for a collateral monitoring fee in the amount of $ 126 , which fee shall be paid in installments as follows: (a) equal payments of approximately $ 4 shall be payable on the closing date and on the first day of each month thereafter and (b) the remaining amount of such fee (if any) shall be paid in full on the maturity date. In addition, an unused line fee accrues with respect to the unused amount of the Revolver at an annual rate of 0.5 %. All fees that are payable in future installments or in full at maturity were recognized within accrued liabilities in the consolidated condensed balance sheets as of December 31, 2025. Borrowings under the Credit Facility are secured by (a) a continuing first priority lien on and security interest in and to substantially all of the assets of the Company and other loan parties identified therein; and (b) a continuing first priority pledge of the pledged equity. The obligations of the Borrowers are guaranteed by each guarantor on the terms set forth in the Loan Agreement. The Loan Agreement includes a springing financial covenant requiring the Company to maintain a minimum fixed charge coverage ratio ("FCCR") of 1.0 to 1.0, in accordance with the Loan Agreement, once the availability block has been released. The Loan Agreement contains a $ 2,000 availability block that reduces the borrowing base until the later of the (i) the first anniversary date of the closing date and (ii) date on which the Company achieves a FCCR of at least 1.05 to 1.00, measure on a trailing twelve-month basis, at which point the availability block will be eliminated. The Loan Agreement also contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations 11 on certain other indebtedness, loans and investment, liens, mergers, asset sales, and transactions with affiliates, as well as customary events of default for financings of this type. Additionally, the Loan Agreement contains provisions for a lockbox arrangement and a subjective acceleration clause related to the appraised value of collateralized property, plant, and equipment; hence, the Term Loan and the Revolver were each classified as current maturities of long-term debt in the consolidated condensed balance sheet as of December 31, 2025. As of December 31, 2025, the Company was in compliance with its FCCR covenant. As of December 31, 2025, total availability under the Revolver was $ 16,063 , and no letters of credit were outstanding. As of December 31, 2025 and September 30, 2025, the Company had effective interest rates of 10.5 % and 9.8 %, respectively, under its revolving credit agreements. Debt issuance costs As of December 31, 2025 and September 30, 2025, the Company had debt issuance costs related to its outstanding revolving credit agreement of $ 556 , respectively, which is included in the consolidated condensed balance sheets as a deferred charge in other current assets, net of amortization of $ 216 and $ 170 , respectively. As of December 31, 2025 and September 30, 2025, the Company had debt issuance costs related to the Term Loan of $ 83 , which are included net of debt in the consolidated condensed balance sheets, net of amortization of $ 41 and $ 33 , respectively. First Energy In April 2019, the Company entered into an economic development loan in the amount of $ 864 with FirstEnergy Corporation (“FirstEnergy”) through its Ohio Electric Security Plan (“ESP”) in effect at that time (the “ED Loan”). The ED Loan matures in five years and requires quarterly payments at an interest rate of zero percent per annum for the first twenty-four months and 2.0 % per annum for the remainder of the term. Any unpaid balance after the initial term will convert to the U.S. Prime Rate plus 1.0 %. As of December 31, 2025 and September 30, 2025, the Company had outstanding balances under the ED Loan of $ 157 and $ 147 , respectively. Beginning on October 1, 2019, FirstEnergy invoiced the Company on a quarterly basis and payments were made accordingly. The Company has not received an invoice from First Energy since October 2023, and attempts to contact the lender have been unsuccessful. 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 three months of fiscal 2026 was 18.5 %, compared with ( 0.2 )% for the same period of fiscal 2025. The increase in the effective rate was primarily attributable to changes in jurisdictional mix of income in fiscal 2026 compared with the same period of fiscal 2025 along with the Company's transition from a pre-tax loss to a pre-tax income position. 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, and various state and local jurisdictions. 7. Retirement Benefit Plans The Company and certain of its subsidiaries sponsor defined benefit pension plans covering some of its employees. The components of the net periodic benefit cost of the Company’s defined benefit plans are as follows: Three Months Ended December 31, 2025 2024 Service cost $ 32 $ 43 Interest cost 232 236 Expected return on plan assets ( 265 ) ( 264 ) Amortization of net loss 17 23 Net periodic pension cost $ 16 $ 38 During the three months ended December 31, 2025 and 2024, the Company made $ 104 and $ 42 in cash contributions to its defined benefit pension plans. The Company anticipates making $ 297 in cash contributions to fund its defined benefit pension plans for the balance of fiscal 2026. 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 2026. 12 8. Stock-Based Compensation The Company has outstanding equity awards under the Company’s 2007 Long-Term Incentive Plan (the “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”), and awards performance and restricted shares under the 2016 Plan. In the first three months of fiscal 2026, the Company granted 50 time-based restricted shares under the 2016 Plan to certain key employees with a grant date fair value of $ 6.73 per share. The awards vest over three years . There were 17 shares forfeited during the three months ended December 31, 2025. No performance-based shares were granted during the three months ended December 31, 2025. If all outstanding share awards are ultimately earned and vest at the target number of shares, there are approximately 342 shares that remain available for award as of December 31, 2025. 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 150 % of such target, then a fewer number of shares would be available for award. Stock-based compensation expense under the 2016 Plan was $ 66 and $ 21 during the first three months of fiscal 2026 and 2025, respectively, within selling, general and administrative expense on the consolidated condensed statements of operations. As of December 31, 2025, there was $ 357 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) commercial space, semiconductor and other commercial applications. Revenue is recognized when performance obligations under the terms of the contract with a customer of the Company are satisfied. A portion of the Company’s contracts are from purchase orders (“PO’s”), which continue to be recognized as of a point in time when products are shipped from the Company’s manufacturing facilities or at a later time when control of the products transfers to the customer. Under the revenue standard, the Company recognizes certain revenue over time as it satisfies the performance obligations because the conditions of transfer of control to the applicable customer are as follows: • Certain military contracts, which relate to the provisions of specialized or unique goods to the U.S. government with no alternative use, include provisions within the contract that are subject to the Federal Acquisition Regulation (“FAR”). The FAR provision allows the customer to unilaterally terminate the contract for convenience and requires the customer to pay the Company for costs incurred plus reasonable profit margin and take control of any work in process. • For certain commercial contracts involving customer-specific products with no alternative use, the contract may fall under the FAR clause provisions noted above for military contracts or may include certain provisions within their contract that the customer controls the work in process based on contractual termination clauses or restrictions of the Company’s use of the product and the Company possesses a right to payment for work performed to date plus reasonable profit margin. As a result of control transferring over time for these products, revenue is recognized based on progress toward completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products to be provided. The Company elected to use the cost to cost input method of progress based on costs incurred for these contracts because it best depicts the transfer of goods to the customer based on incurring costs on the contracts. Under this method, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. The following table represents a breakout of total revenue by customer type: Three Months Ended December 31, 2025 2024 Commercial revenue $ 8,678 $ 11,157 Military revenue 15,295 9,726 Total $ 23,973 $ 20,883 13 The following table represents revenue by end market: Three Months Ended December 31, 2025 2024 Aerospace components for: Fixed wing aircraft $ 10,520 $ 12,845 Rotorcraft 9,234 3,394 Commercial space 1,147 2,448 Energy components for power generation units 284 1,028 Commercial product and other revenue 2,788 1,168 Total $ 23,973 $ 20,883 All revenue based on selling locations originated from the Company’s U.S. operations. In addition to the disaggregated revenue information provided above, approximately 66 % and 53 % of total net sales for the three months ended December 31, 2025 and 2024, 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 three months ended December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Contract assets — beginning balance $ 10,560 $ 10,745 Additional revenue recognized over-time 16,012 10,713 Less amounts billed to the customers ( 15,527 ) ( 11,339 ) Contract assets — ending balance $ 11,045 $ 10,119 December 31, 2025 December 31, 2024 Contract liabilities — beginning balance $ 1,784 $ 2,879 Payments received in advance of performance obligations 6,618 440 Performance obligations satisfied ( 916 ) ( 935 ) Contract liabilities — ending balance $ 7,486 $ 2,384 During the three months ended December 31, 2025, the Company recognized revenues of approximately $ 916 , that was included in contract liabilities at the beginning of fiscal year 2026. During the three months ended December 31, 2024, the Company recognized revenues of approximately $ 935 , that was included in contract liabilities at the beginning of fiscal year 2025. Accounts receivable were $ 17,272 and $ 16,848 as of September 30, 2024 and December 31, 2024, respectively. There were certain contracts that met the criteria for loss recognition, a loss contract reserve of $ 461 and $ 325 was recorded as of December 31, 2025 and September 30, 2025, respectively. Remaining performance obligations As of December 31, 2025, the Company has $ 139,454 of remaining performance obligations, of which $ 87,905 are anticipated to be complete within the next 12 months, and the remaining thereafter. 10. Commitments and Contingencies In the normal course of business, the Company may be involved in ordinary, routine legal actions. The Company cannot reasonably estimate future costs, if any, related to these matters; however, it does not anticipate any material impact on its financial condition or results of operations from these matters. The Company maintains various liability insurance coverages to protect its assets from losses arising out of or involving activities associated with ongoing and normal business operations; however, it is possible that the Company’s future operating results could be affected by future costs of litigation. On October 3, 2025, the Company received written notice of potential violations of the Clean Water Act and California’s General Industrial Storm Water Permit occurring at Quality Aluminum Forge, LLC’s facilities located at 820 North Cypress 14 Street & 794 North Cypress Street, Orange, California 92867. On December 23, 2025, the Company received written Notice of Violations and Intent to File Suit Under the Federal Water Pollution Control Act regarding potential violations of the Clean Water Act and California’s General Industrial Storm Water Permit occurring at Quality Aluminum Forge, LLC’s facilities located at 820 North Cypress Street & 794 North Cypress Street, Orange, California 92867. The Company is currently reviewing the aforementioned notices, validating the violations alleged therein, and, to the extent applicable, determining the extent of remediation efforts that may be required in connection therewith, and has engaged an environmental consultant to assist with analyzing fees, penalties and legal costs that could potentially be assessed. While the Company records reserves for legal disputes and regulatory matters in accordance to U.S. GAAP, the ultimate resolution of such matters are inherently uncertain, and actual results may differ significantly from current estimates. Based on the foregoing, the Company recorded an estimate for these contingent liabilities of $ 156 as of December 31, 2025. 11. Segment Information The Company identifies itself as one operating segment, SIFCO, which is a manufacturer of forgings and machined components for the A&E, defense, and commercial space markets. The Company's chief operating decision maker (“CODM”) is the Chief Executive Officer. The CODM has the ultimate decision-making authority for resource allocation and assessing the performance of the Company. As such, the CODM reviews the income (loss) from continuing operations as a measure of segment profit or loss, as well as segment expense included in the below table, to evaluate operating performance, generate future operating plans and make strategic decisions. The CODM also uses these measures in monitoring plan versus actual results. The CODM does not review segment assets at a different asset level or category than those disclosed in the consolidated balance sheets. Three Months Ended December 31, 2025 2024 Net sales $ 23,973 $ 20,883 Less: Cost of goods sold 18,784 19,955 Selling, general and administrative expenses 2,646 2,840 Other¹ 753 510 Income (Loss) from continuing operations $ 1,790 $ ( 2,422 ) ¹ Other items include gain on disposal of operating assets, interest expense, gain on forgiven loan, foreign currency exchange loss (gain), other (income) expense, and income tax expense.