Document

SIFCO Industries, Inc. (“SIFCO”) Announces

Second Quarter Fiscal 2022 Financial Results

Cleveland - SIFCO Industries, Inc. (NYSE American: SIF) today announced financial results for its second quarter of fiscal 2022, which ended March 31, 2022.

Second Quarter Results

•Net sales in the second quarter of fiscal 2022 decreased 1.2% to $24.6 million, compared with $24.9 million for the same period in fiscal 2021.

•Net income for the second quarter of fiscal 2022 was $3.6 million, or $0.61 per diluted share, compared with net loss of $1.5 million, or $(0.26) per diluted share, in the second quarter of fiscal 2021.

•EBITDA was $5.5 million in the second quarter of fiscal 2022, compared with $0.7 million in the second quarter of fiscal 2021.

•Adjusted EBITDA in the second quarter of fiscal 2022 was $0.7 million, compared with Adjusted EBITDA of $1.2 million in the second quarter of fiscal 2021.

Year to Date Results

•Net sales in the first six months of fiscal 2022 decreased 12.3% to $43.8 million, compared with $49.9 million for the same period in fiscal 2021.

•Net loss for the first six months of fiscal 2022 was $0.05 million, or $(0.01) per diluted share, compared with net income of $1.5 million, or $0.25 per diluted share, in the first six months of fiscal 2021.

•EBITDA was $3.4 million in the first six months of fiscal 2022, compared with $4.8 million in the first six months of fiscal 2021.

•Adjusted EBITDA in the first six months of fiscal 2022 was $(1.0) million, compared with Adjusted EBITDA of $3.1 million in the first six months of fiscal 2021.

Other Highlights

CEO Peter W. Knapper stated, “While the impact and after-effects of COVID-19 continue to impact the markets we serve, we were pleased with the 28% improvement in revenue over the first quarter of fiscal 2022, reflecting higher customer requirements. Our focus on continuing to manage our costs and delivering to and supporting our customers are positioning us well for the future as markets recover.”

Use of Non-GAAP Financial Measures

The Company uses certain non-GAAP measures in this release. EBITDA and Adjusted EBITDA are non-GAAP financial measures and are intended to serve as supplements to results provided in accordance with accounting principles generally accepted in the United States. SIFCO Industries, Inc. believes that such information provides an additional measurement and consistent historical comparison of the Company’s performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

Forward-Looking Language

Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, concerns with or threats of, or the consequences of, pandemics, contagious diseases or health epidemics, including COVID-19, competition and other uncertainties the Company, its customers, and the industry in which they operate have experienced and continue to experience, detailed from time to time in the Company’s Securities and Exchange Commission filings.

The Company's Annual Report on Form 10-K for the year ended September 30, 2021 and other reports filed with the Securities and Exchange Commission can be accessed through the Company's website: www.sifco.com, or on the Securities and Exchange Commission's website: www.sec.gov.

SIFCO Industries, Inc. is engaged in the production of forgings and machined components primarily for the aerospace and energy markets. The processes and services include forging, heat-treating, coating, and machining.

Second Quarter ended March 31,

(Amounts in thousands, except per share data)

(Unaudited)


	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

Consolidated Condensed Balance Sheets

(Amounts in thousands, except per share data)

(Unaudited)


	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

Non-GAAP Financial Measures

Presented below is certain financial information based on the Company's EBITDA and Adjusted EBITDA. References to “EBITDA” mean earnings (losses) from continuing operations before interest, taxes, depreciation and amortization, and references to “Adjusted EBITDA” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and Adjusted EBITDA.

Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under generally accepted accounting principles in the United States of America (“GAAP”). The Company presents EBITDA and Adjusted EBITDA because management believes that they are useful indicators for evaluating operating performance and liquidity, including the Company’s ability to incur and service debt and it uses EBITDA to evaluate prospective acquisitions. Although the Company uses EBITDA and Adjusted EBITDA for the reasons noted above, the use of these non-GAAP financial measures as analytical tools has limitations. Therefore, reviewers of the Company’s financial information should not consider them in isolation, or as a substitute for analysis of the Company's results of operations as reported in accordance with GAAP. Some of these limitations include:

•Neither EBITDA nor Adjusted EBITDA reflects the interest expense, or the cash requirements necessary to service interest payments on indebtedness;

•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor Adjusted EBITDA reflects any cash requirements for such replacements;

•The omission of the substantial amortization expense associated with the Company’s intangible assets further limits the usefulness of EBITDA and Adjusted EBITDA; and

•Neither EBITDA nor Adjusted EBITDA includes the payment of taxes, which is a necessary element of operations.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to the Company to invest in the growth of its businesses. Management compensates for these limitations by not viewing EBITDA or Adjusted EBITDA in isolation and specifically by using other GAAP measures, such as net income (loss), net sales, and operating income (loss), to measure operating performance. Neither EBITDA nor Adjusted EBITDA is a measurement of financial performance under GAAP, and neither should be considered as an alternative to net loss or cash flow from operations determined in accordance with GAAP. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.

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


Dollars in thousands	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Net (loss) income	$	3,639	$	(1,491)	$	(52)	$	1,502
Adjustments:
Depreciation and amortization expense	1,596		1,905		3,210		3,730
Interest expense, net	193		169		307		335
Income tax expense (benefit)	23		165		(26)		(740)
EBITDA	5,451		748		3,439		4,827
Adjustments:
Foreign currency exchange loss, net (1)	3		14		9		21
Other loss (income), net (2)	(36)		42		(68)		103
Gain on disposal of assets (3)	(2)		—		(2)		—
Gain on insurance recoveries (4)	—		—		—		(2,495)

Gain on extinguishment of debt (5)	(5,106)				(5,106)		—
Equity compensation (6)	145		150		306		293


LIFO impact (7)	207		207		383		335



Adjusted EBITDA	$	662	$	1,161	$	(1,039)	$	3,084

(1)Represents the gain or loss from changes in the exchange rates between the functional currency and the foreign currency in which the transaction is denominated.

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

(3)Represents the difference between the proceeds from the sale of operating equipment and the carrying value shown on the Company's books or asset impairment of long-lived assets.

(4)Represents the difference between the insurance proceeds received for the damaged property and the carrying values shown on the Company's books for the assets that were damaged in the fire at the Orange location that occurred in December 2018.

(5)Represents the gain on extinguishment of debt and interest for the amount forgiven by the SBA as it relates to the PPP loan.

(6)Represents the equity-based compensation expense recognized by the Company under the Company's long-term equity incentive plan due to granting of awards, awards not vesting and/or forfeitures.

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

Reference to the above activities can be found in the consolidated financial statements included in Item 8 of the Company's Annual Report on Form 10-K.

Contacts

SIFCO Industries, Inc.

Thomas R. Kubera, 216-881-8600